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employees entitled to holiday pay which takes account of commission

25 February 2016

The Employment Appeal Tribunal (EAT) has given judgment in the case of Lock & ors v British Gas Trading Limited, which looked at whether an employee’s holiday pay should take into account commission earned where pay is in part commission based. A considerable portion of Mr Lock’s wages (about 60%) were made up of sales commission. As a result, he would receive holiday pay based on his basic wage only, which was argued as being a considerable disincentive to take leave. In addition, his commission payments in following months would also be lower because he had been unable to generate sales while on holidays.

Having considered whether there was a conflict between domestic and European law, the EAT confirmed that commission payments should be taken into account when calculating the four weeks’ annual leave provided for by the EU Working Time Directive (as the further 1.6 weeks leave making up the statutory minimum leave entitlement is granted by our domestic legislation). This judgment is in line with the earlier case of Bear Scotland v Fulton which confirmed that non-guaranteed overtime should be taken into account when calculating holiday pay.

Unfortunately, this case hasn’t provided the much needed clarification employers will have wanted. An appeal is already pending on Bear Scotland and we are yet to see whether a similar appeal will be lodged in this case. Even if the case is not taken further, the judgment failed to clarify what would be an appropriate reference period for averaging pay when calculating holiday pay.

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