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Holiday Pay - the final decision on commission...for now!

View profile for Gillian Markland
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The decision is in. The Supreme Court has refused permission for British Gas to appeal the holiday pay case brought by Mr Lock. What does that mean for employers?

Essentially it means that any employees who earn results-based commission must have that commission reflected in their holiday pay. The historically common practice of only paying employees basic salary during periods of annual leave is no longer acceptable and a payment must be added to reflect the average commission that would have been earned had the employee not been on holiday. This is usually calculated on the basis of a reference period which is reflective of average earning levels.

Mr Lock’s case will now go back to the Employment Tribunal to decide what the appropriate reference period is and just how much pay Mr Lock is owed. This will no doubt hit British Gas hard given the number of other employees who also earn results-based commission and are surely waiting in the wings.

Whilst this is currently the legal position on commission and holiday pay, there nonetheless remains a question mark over the impact that Brexit may have in due course, given that this is a right based on a European Directive.

However, as any changes resulting from Brexit are unlikely to happen overnight, employers would be well advised to ensure they are compliant with the present legal position. Consequently, if any of your employees earn results-based commission, have you incorporated such payments into your holiday pay calculations already? If not, we would urge you to review your practices as a priority.

The Employment Law Team at Harrowells would be more than happy to assist with any queries you may have around this decision or on any other aspect of employment law or day-to-day HR issues.

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