British Gas v. Lock holiday pay update

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Thousands of working people, whose wages include an element of commission, will benefit from the Supreme Court decision to refuse British Gas the right to appeal in the Joe Lock holiday pay case.  The case has now been referred back to the Employment Tribunal for them to reach a decision based on the specific facts of Mr Lock’s case.

Mr Lock, a sales consultant with British Gas, brought a claim in an Employment Tribunal for outstanding holiday pay on the basis that it did not include what he would have earned from commission had he been at work. Mr Lock was paid commission, in addition to his monthly basic pay, which varied based upon his sales each month.  Whilst on holiday, he lost the ability to earn commission and, therefore felt he was disadvantaged during periods of holiday.

The appeals made by British Gas were on the basis that the earlier Employment Tribunals incorrectly inserted wording into the Working Time Directive to require commission and similar payments to be included in holiday pay calculations. British Gas argued that payments referred to in earlier case law were concerned with overtime payments and this was different to commission. This was unsuccessful.

This means that anyone whose wages include an element of personal commission may no longer be paid less when they are on annual leave.  The amount workers get for their holiday should be based upon their usual earnings (which in Mr Lock’s case covered both his basic pay and any commission he earned).  However, employers need to be careful about how this applies in practice as much will vary depending upon the nature of the commission structure in place.

We’re happy to advise on how your commission, bonus or overtime structure is impacted by the recent holiday pay cases.  We can work to find a way to ensure compliance with the Working Time Directive – without causing too many headaches for your staff, managers and payroll administrators.