May 31, 2016

Update on Holiday Pay: Commission and Overtime

In the continuing litigation on holiday pay, the Employment Appeal Tribunal (EAT) in British Gas Trading Ltd v Lock UKEAT/0189/15 has confirmed that U.K. law should be interpreted in line with EU law which requires commission to be included in the calculation of holiday pay. However, this decision has failed to provide the much needed guidance on the practical calculation of holiday payment, particularly the appropriate reference period for commission. The appeal in this case is set to be heard by the Court of Appeal in July, with judgment expected in the autumn. However, unless and until the Court of Appeal overturns the EAT’s decision, it remains good law and employers should ensure that they take commission payments into account when calculating holiday pay. For our previous updates on this litigation, see “U.K. Employment Tribunal Confirms That Holiday Pay Should Include Commission.”

In the very recent case of White & Others v Dudley Metropolitan Borough Council [2016] 1300537/2015, the Employment Tribunal has held that employers must include payments for purely voluntary overtime when calculating holiday pay, provided that the work is “sufficiently regular” to become part of a worker’s ‘normal’ pay. This decision goes beyond what was established by the EAT in Bear Scotland v Fulton in 2014 (see our previous update, “Non-Guaranteed Overtime to be Included in Holiday Pay”) which suggested that only “non-guaranteed” overtime needed to be included in the calculation of holiday pay. Although this is a first instance decision (and so not binding on other courts and tribunals), it does suggest an increasing trend from the U.K. judiciary to expand the types of payments that should be included in holiday pay. We will keep you updated on developments.

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