Employers in dark as tribunal rules holiday pay must account for commission

An employment tribunal ruling in the recent case of ‘Lock’ has held that employers must take commission payments into account when calculating four weeks’ holiday pay entitlement under Regulation 13 of the Working Time Regulations 1998 (WTR). Commission payments need not be considered for the additional 1.6 weeks provided for by Regulation 13A, which can remain remunerated at ‘basic’ pay.

Of comfort to employers is that from 1 July 2015 a two year cap on backdated claims will take effect. Furthermore, following Bear Scotland, claims for a series of unlawful deductions presented before 1 July 2015 will only be recoverable to the extent that no more than three months have elapsed between deductions.

However, despite the clarification of the position on commission, employers have been left without definitive guidance as to how to calculate such a provision.

In particular questions remain over how employers are to quantify the sum, over what reference period ‘normal’ pay is to be considered, and how it is to be proportioned.

Whether employers opt to pay the first four weeks’ leave at ‘normal’ rate and the remaining 1.6 weeks at ‘basic’, and whether a 12 or 52-week reference period is applied to quantify ‘normal’ remains to be determined.