Commission and Holiday Pay
Natalie Ruane explains the outcome of a Court of Appeal case on holiday pay and commission.
British Gas v Lock
In October 2016, the Court of Appeal handed down its decision in British Gas v Lock. Whilst this has been an important case on the calculation of holiday pay and whether that includes commission in the past, this latest edition of the proceedings does not say anything new.
Mr Lock was a salesman who was paid variable compensation in arrears along with his basic salary. His commission was based on the outcome of his work i.e. sales achieved. As he could not earn commission whilst he was on annual leave, he lost income by taking it.
In 2014 the European Court of Justice stated that Member States must ensure that a worker taking leave is paid holiday pay by reference to commission payments if the worker would have earned such at work. The question that was left for the UK Court to decide was “how much should that be?”
The Court of Appeal used a statutory interpretation of the Working Time Regulations to decide that when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned if they had not been on holiday.
The other question of how to actually calculate it was specifically not answered by the Court. Not helpful to those employers wishing to ensure they are compliant. It looks like we will have to wait longer for the answer to that question.
About the author
Natalie leads the Employment Law & HR team and specialises in education.