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Holiday Pay and Commission

In this months Enews we consider whether holiday pay should be calculated to include commission, and whether a worker is entitled to receive the National Minimum Wage where he is not required to work, but is sleeping on shift. In the news we look at the guidance provided by the Home Office when employing migrant workers, the implication on the Queen’s Speech on employers and the changes to the Flexible Working Regulations.

Holiday Pay and Commission

The European Court of Justice (ECJ) has held in the case of Lock -v- British Gas that where a worker’s remuneration includes an element of contractual commission determined with reference to sales achieved; the commission payment should be taken into account when calculating holiday pay.

The Claimant, Mr Lock was employed by British Gas Trading Limited as an Energy Sales Consultant. His contract provided that he was entitled to basic salary plus commission on sales he achieved. Mr Lock’s commission makes up approximately 60% of his remuneration. When Mr Lock went on holiday he was paid his basic salary only. When he returned from holiday because he had not generated any sales, he had not earned any commission, he suffered a reduction in income.

The ECJ held that commission was intrinsically linked in his role as a Sales Consultant and therefore his statutory holiday pay should include an element of the commission he would have earned had he not taken annual leave.

The ECJ held that it would be for the Employment Tribunal to determine how this should be calculated, in accordance with the relevant national law.

The ECJ took the view that where remuneration is significantly linked to commission it may deter the worker from exercising his right to annual leave, which is contrary to the objective required by the Working Time Directive. Therefore, commission must be taken into account in the calculation of a worker’s statutory holiday pay.

This case will now return to the Employment Tribunal to determine whether the Working Time Regulations 1998 and the week’s pay provisions set out in the Employment Rights Act can be interpreted in line with the ECJ’s decision at least with regard to the four week statutory holiday requirement under the Working Time Directive.

For the moment employment practices do not need to change until the Employment Tribunal considers this further. Businesses, however, might want to start thinking about how to calculate payments for annual leave for those workers where contractual commission payments are intrinsically linked to their contracts of employment.

National Minimum Wage and Sleeping

In the case of Esperon t/a Middle West Residential Care Home -v- Slavkovska, the Claimant was employed as a care worker. She was required to work a number of sleeping night shifts and be available only when an emergency arises.

Statutory provisions that regulate the provision of care require the employer to ensure that at all times suitably qualified, competent persons are working at the care home to ensure the health and welfare of service users.

The Claimant maintained during the course of the proceedings that she was required to carry out certain duties during the night shift whereas the Respondent maintained she was not required to carry out any duties save in case of emergencies.

The Claimant received a lump sum for each sleeping shift, but this was at a rate substantially less than the National Minimum Wage.

The Claimant claimed that she was entitled to be paid the National Minimum Wage because she was carrying out work under the National Minimum Wage Regulations 1999.

The Employment Appeal Tribunal (EAT) held that she was entitled to be paid the National Minimum Wage even if it was just for sleeping in the Respondent’s premises.

In determining this issue the Judge considered why the employer required the employee to be on the premises. The Judge held that the requirement of the employee to be on the premises pursuant to a statutory requirement i.e. to have a suitable person the premises “just in case” would be a powerful indicator that the employee is being paid to be there regardless of whether the work is actually carried out.

In the circumstances, a worker will be deemed to be working and paid under the national minimum wage, particularly if the worker is required to be present pursuant to a statutory requirement.

Employers should review their contracts of employment for those employees who are required to undertake a sleeping shift and consider why they are required to be present as this will impact on the amount of remuneration they are required to receive.

Judicial Review of the introduction of fees in the Employment Tribunal is ongoing

The introduction of fees for claimants to bring Employment Tribunal claims on 29 July 2013 has been an extremely welcome change for employers. In March 2014, the Tribunal statistics for October to December 2013, the first full quarter since the introduction of fees showed a 79% drop in Employment Tribunal claims compared to the equivalent period in 2012. This, coupled with mandatory ACAS conciliation, has significantly reduced the number of tribunal claims being brought by employees.

Unison has argued that the introduction of fees has a discriminatory effect on protected groups such as women, minorities and the disabled. On the basis of this argument, Unison has now been granted permission to appeal the High Court’s decision to dismiss this application for Judicial Review. In doing so, Unison proposes to rely on the statistics recently published. Watch this space for further developments.

In the news
New guidance published on the UK immigration System

The Home Office has published guidance to assist employers to deal with recent changes to the UK immigration system. The changes include increasing the maximum penalty of legally employing a migrant to £20,000. The guides:

  • “An employer’s guide to the administration of civil penalty scheme”; and
  • “An employer’s guide to the right to work checks”

will be used by the Home Office when considering whether appropriate checks to establish the statutory excuse have been conducted by the employer.

Amendments to the Flexible Working Regulations

The Regulations amending the Flexible Working Regulations have now been published in advance of them coming into force on 30th June 2014. The new Regulations remove the eligibility criteria that the right to request flexible working is only available to parents of children under 17 (under 18 if the child is disabled) or to carers of adults. Therefore any employee who has 26 weeks continuous service has the right to request flexible working.

Sejal Raja
020 7227 7410
June 2014
© RadcliffesLeBrasseur


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.