In December 2016, the Court of Appeal in British Gas Trading Ltd v Lock decided that contractual results-based commission must be included in the calculation of holiday pay. As the Supreme Court has refused to hear an appeal against this decision, the position remains then that when employees take the ‘European’ element of their holiday (that is the first 4 weeks out of the UK 5.6 weeks of statutory allowance), he/she should not be placed in a worse position in terms of the pay that they receive.
The decision arose out of a case brought by Mr Lock, a British Gas salesman, whose remuneration package included basic salary and commission. When he took annual leave, he received basic pay (excluding his commission), which was considerably less than his usual salary. He complained and argued that he should receive his usual salary whilst taking holiday.
As the case involved consideration of EU law (the Working Time Directive), Lock’s case was referred to the Court of Justice of the European Union, which held that commission should be taken into account when calculating holiday pay.
Now that the Supreme Court has refused to grant an appeal of this decision, the case will return to the employment tribunal to consider a number of outstanding issues, including what losses Mr Lock suffered, but the reference period employers must use to calculate holiday pay is yet to be clarified, and this has been held as a matter for national courts. The Employment Tribunal will now decide how such calculations are to be made and whether claims can be backdated.
This is significant for employers in sectors such as retail where employees tend to receive sales-based commission.