The Court of Appeal in British Gas v Lock has upheld the Employment Appeal Tribunal’s decision that results-based commission should be included when calculating holiday pay for the purposes of the Working Time Regulations 1998.

Mr Lock worked for British Gas as a salesman.  He earned a basic salary with variable commission, which was based on sales achieved.  Mr Lock could not earn commission whilst on holiday and therefore would lose income by taking it.  Mr Lock brought a claim for “lost” holiday pay.

The case was referred to the European Court of Justice, which held that when calculating holiday pay, Member States must ensure that a worker taking holiday is paid by reference to commission payments that the worker would have earned if he had been at work.  The EAT subsequently held that when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned if they had not been on holiday.  The EAT’s decision was upheld by the CA.

Unfortunately for employers, neither the ECJ, the EAT or the CA have addressed the question of how holiday pay should be calculated in circumstances where a commission element needs to be taken into account.  It is likely that British Gas will appeal to the Supreme Court, which may take the opportunity to provide some guidance for employers on this tricky issue.

Holiday pay update