In Lock and others v British Gas Trading Ltd and another, an employment tribunal asked the ECJ whether commission payments had to be included in the calculation of holiday pay under the Working Time Directive. The ECJ held that, where remuneration includes contractual commission based on sales achieved, then EU law requires that the commission payments must be included in the calculation of statutory holiday pay because the payments are inherently linked to the performance of the tasks that the worker is required to carry out.

The case then went back to the employment tribunal who had to decide whether the UK’s Working Time Regulations (WTR) in their current format could be read to comply with the ECJ’s decision, or, if words needed to be added so that the calculation of a week’s pay would conform with EU law. The tribunal decided that the latter situation applied and could be achieved by adding the following paragraph (e) to regulation 16(3) of the WTR 1998: “(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payments shall be deemed to have remuneration which varies with the amount of work done for the purposes of section 221 [of the Employment Rights Act 1996].”

While in similar cases, tribunals are likely to follow this decision in determining statutory holiday pay, it is not a binding precedent and of course could be appealed. In addition, the tribunal confirmed that the two related crucial issues for employers would be decided in the second part of the judgment to be delivered later, i.e. (i) the question of the correct reference period over which to determine the relevant amount of holiday pay (S.221 ERA 1996 sets a 12 week reference period which may not meet EU law requirements); and (ii) how to actually calculate statutory holiday pay, particularly where rolled up holiday payments are operated.

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