Holiday pay (again!)

Readers will be familiar with the long-running saga of what payments should and should not be included in the calculation of holiday pay, which we have covered in previous notes.

The Employment Appeal Tribunal has today affirmed its previous rulings that commission payments must be included under EU law, as the European Court of Justice determined in May 2014, and that the UK legislation in this area, the Working Time Regulations 1998 and the Employment Rights Act 1996, can be read consistently with that obligation. Most readers will not be surprised by that outcome, and may be questioning why British Gas thought it was worthwhile appealing at all.

The upshot of the various UK and European decisions are that, as things currently stand:

  • Workers taking holiday must receive "normal remuneration" (the ECJ in Lock v British Gas and in Williams v British Airways).
  • That phrase includes sales commission payments (the ECJ in Lock v British Gas).
    That phrase also includes compulsory non-guaranteed overtime (the EAT in Bear Scotland v Fulton).
  • It might also include voluntary overtime (the Northern Ireland Court of Appeal in Patterson v Castlereagh Borough Council).
  • UK law can be read consistently with our EU obligations (the EAT in Bear Scotland v Fulton and again in today's judgment in Lock v British Gas).

Some important issues remain outstanding, and employers with discretionary or target-based bonus schemes, or with overtime arrangements, should assess their specific schemes against the general rules set out by the courts. If you would like assistance in reviewing your schemes, please do not hesitate to contact us.