Updated BIS guidance on the NMW for employees who sleep between duties
The Department for Business, Innovation and Skills (BIS) has updated its guidance on calculating the National Minimum Wage (NMW) for employees who sleep between duties, in order to consider whether the individual’s “work” amounts to working time for the purpose of the NMW.
BIS has stated that "employers must ascertain whether a worker is still subject to certain work-related responsibilities whilst asleep, to the extent that they could be deemed to be 'working'."
BIS also stated that:
1. A worker may be found to be “working” even whilst asleep if, for example, they would face disciplinary action if they left the place of work.
2. This is different to when the worker is available for work, as opposed to having to be there for specific work–related obligations whilst asleep with facilities provided.
To make this clearer, the BIS has given the following examples of when the NMW is likely to apply and when it isn’t.
Example 1 – where the NMW is likely to apply:
“A person works in a care home and is required to work overnight shifts where they sleep on the premises. The person’s employer is required by statute to have someone on premises for health and safety purposes. The person would be disciplined if they left the premises at any stage during the night. It is likely that the person would be considered to be ‘working’ for the whole of the overnight shift even when they are sleeping.”
Example 2 – where the NMW is unlikely to apply:
“A person works in a pub and lives in a flat above the pub. The employer requires the person to sleep there. However the person can come and go as they please during the night as long as they do sleep there. There are no specific responsibilities during the evening rather the person sleeps there so the flat is occupied i.e to reduce the likelihood of the premises being burgled. The person is likely only to be entitled to the NMW when they are awake and dealing with any emergencies in the night.”
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Background to the case
Last year the ECJ ruled that Mr Lock should, as a matter of EU law, have commission included in his holiday pay. He was paid a basic salary of £14,670 per year plus commission which was linked to his performance as an ‘energy trader’ (his job was to obtain new customers for British Gas, and persuade existing ones to upgrade their accounts).
Mr Lock did receive the benefit of the commission he had already earned when he took annual leave, but he complained that he could not earn commission during his holiday which impacted on the salary he received in later months. He argued that his salary should have been enhanced to reflect the amount of commission he would have earned, otherwise this could deter workers like him from taking a holiday.
The ECJ agreed. To understand the reason for this, it is necessary to consider the rationale which underpins the Working Time Directive. The requirement to provide workers with paid holiday is a health and safety initiative – implemented to ensure that workers take a break from the demands and stresses of work. It is regarded as a particularly important principle of social law, from which there can be no derogations.
Workers must not be discouraged from taking leave. Therefore the pay they receive whilst absent, must generally correspond to what they would have received had they been at work.
In Mr Lock’s case commission amounted to 60% of his earnings, and he could not earn commission whilst on holiday – a clear deterrent from taking time off.
The case then returned to the Employment Tribunal, where the question for determination was whether the Working Time Regulations could be interpreted so as to give effect to EU law.
The Tribunal’s decision
The Tribunal found that UK legislation could be read so as to be consistent with the ECJ’s decision and it achieved this by adding new wording to the Regulations. In essence, this means that workers whose remuneration includes commission or similar payments, should have their holiday pay calculated in the same way as workers whose pay varies according to how much work they actually do. Commission will have to be included in the calculation.
What happens next?
As Mr Lock’s case has cleared this hurdle, the Tribunal will have to determine, at another hearing, what compensation should be paid by British Gas to ensure that workers like Mr Lock are not disadvantaged by taking a holiday. This is likely to be done by averaging his pay over a given reference period which it will have to determine.
No dates have been set down for this hearing, but we expect it to take place within the next few months.
Does this decision mean that employers have to include all commission payments made to staff in their holiday pay?
The Tribunal made it clear that they are bound by the earlier decision involving overtime in Wood and others v Hertel and Fulton and Bear Scotland Limited which found that the requirement to include (in that case overtime payments) in holiday pay only applies to the first 20 days of leave taken and not to any additional statutory or contractual leave.
It is also doubtful that all forms of commission payments will have to be included. It is important to bear in mind that this British Gas commission scheme was straightforward and Mr Lock was paid according to the outcome of his own work.
It was very clear that Mr Lock suffered a loss when he took a holiday. Ascertaining loss will not be as straightforward in other cases where, for example, commission is paid annually, or where the scheme involves discretionary assessments based on a worker’s broader contribution, or where this is in part based on individual performance as well as team performance.
We expect to see workers being encouraged to bring further cases and to try to ‘push the boundaries’ of what they expect to have included in their holiday pay. This issue is not limited to commission payments either, but might also include arguments about whether annual bonus payments and other performance related payments should also be included.