Holiday pay to include commission according to the advocate-general

By Adele Hayfield

The rules surrounding the calculation of holiday pay are notoriously complex and have resulted in a number of claims before the Employment Tribunal. Given the advocate-general’s recent opinion, this situation is unlikely to change any time soon.

Under Regulation 16 of the Working Time Regulations 1998 (WTR), a worker is entitled to be paid during statutory annual leave at a rate of a week’s pay for each week of leave, calculated in accordance with sections 221–224 of the Employment Rights Act 1996. If the worker has normal working hours but his or her pay varies, he or she is entitled to holiday pay based on his or her average pay during those normal working hours over the previous 12 working weeks.

Until recently, only payments due under the employment contract for normal working hours were taken into account for these purposes. However, the Employment Tribunal in Neal v Freightliner Ltd ET/1315342/12 put that position in doubt, by deciding that holiday pay should take account of pay that is ‘intrinsically linked’ to the performance of tasks required to be carried out under the employment contract. Therefore, although Mr Neal’s contract only required him to work 35 hours a week, in reality he almost always worked overtime…

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