The tribunal had asked the European Court of Justice (ECJ) to clarify the relationship between holiday pay and commission.
The ECJ concluded that the Mr Lock’s commission must be taken in to account when calculating holiday pay as it was directly linked to the work he carried out. However, the ECJ left the tribunal to apply its ruling to UK law.
The Judge’s decision, which was published on 25 March 2015, applied an extra subsection to the Working Time Regulations 1998 to make them comply with the Working Time Directive.
The new wording considers a worker with normal working hours, whose pay includes commission, to have pay, that “changes with the amount of work done.”
What does this mean for employers?
The decision is likely to increase costs for employers that use commission schemes regularly. Sectors such as retail are likely to be affected. However, there is very little detail as to how to calculate the amount of commission to include in holiday pay.
The decision has left a number of questions on commission unanswered.
However, it is clear that employers must take account of commission in holiday pay calculations. However, there is no legally binding guidance on how the calculation should be made.
The tribunal’s judgement may suggest that employers should use an average over a 12 week reference period.
It is important to note that the decision is not about reference periods and how to quantify a claim for the commission element of holiday pay. These issues will be reserved for another stage in the litigation.
An appeal has been lodged and it is likely that the EAT will hear the case towards the end of 2015 or even early 2016.