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News…But No News…About Holiday Pay

19/10/2016

At a glance

Following on from our previous holiday pay updates https://www.memerycrystal.com/articles/earn-pay-taking-holiday/ and https://www.memerycrystal.com/articles/employees-receive-holiday-pay/ we have been avidly waiting (well maybe just waiting!) for the Court of Appeal’s judgement on the British Gas Trading Ltd v Lock case.

In detail

In British Gas Trading Ltd the Employment Appeal Tribunal held that the Working Time Regulations 1998 (WTR) could be interpreted compatibly with the EU Working Time Directive so as to include contractual results-based commission payments in the calculation of holiday pay for the basic 4 weeks’ annual leave.  However, there was a distinct lack of any guidance on how to actually calculate the additional payment.  For example, what happens when a worker receives an unusually large payment once a year and the employee happens to take WTR holiday immediately after it, or for commission payments received only when a particular level of turnover or profit is achieved?

We were hoping that the Court of Appeal would use the opportunity to provide more detail but sadly that was not to be – when looking at various questions arising from calculating how to factor in commissions the Court of Appeal says “nothing in this judgment is intended to answer them”.

So we are left with the same position we were in at our last update – workers are entitled to be paid an amount which reflects the contractual, obligatory, results-based commission they would have earned if not on holiday.  But we don’t have a clear decision on how to calculate this, nor do we have a decision on payments like annual bonuses and voluntary overtime.   If many employees take holiday over Christmas and New Year, it will be interesting to see how many employers decide to pay their “Christmas” bonus in the New Year once those holidays are over!

In relation to back pay, employers can rely on the current ruling in relation to a series, so if there is a gap of more than 3 months in any claim for a series of deductions, they can decide not to pay claims for the older deductions.

We don’t yet know if British Gas will appeal this decision to the Supreme Court and for now we recommend that employers should look at their systems to allow them to correctly calculate holiday pay going forward.

If you have any questions please contact a member of our Employment Team

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