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Court of Appeal confirms holiday pay must take account of commission

10 October 2016

The long awaited judgment from the Court of Appeal (CA) in the case of British Gas Trading Limited v Lock & ors has now been published. The case considered whether an employee’s holiday pay should take into account commission earned where pay is in part commission based. As previously reported, about 60% of Mr Lock’s wages was made up of sales commission, but his holiday pay was based on his basic wage only. In addition, his commission payments in following months would also be reduced because he had been unable to generate sales while on annual leave. These were argued as a considerable disincentive to take leave.

The CA dismissed British Gas’s appeal, confirming the findings made by the original tribunal and the Employment Appeal Tribunal that Mr Lock’s commission payments should be taken into account when calculating holiday pay.

Questions remain. The judgment stresses that it could only deal with the question before it, namely, Mr Lock’s case. No indication is given as to how an employer might approach the calculation of the holiday pay itself or what an appropriate reference period might be. A further appeal is unlikely to clarify this issue so guidance from the government is needed on deciding how this should be handled, bearing in mind Theresa May’s recent statement that employment rights would be protected and enhanced during her premiership.

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