The Court of Appeal in British Gas Trading Ltd v Lock held that results-based commission should be taken into account when working out statutory holiday pay. The Supreme Court has now rejected British Gas’ application to appeal against the Court of Appeal’s judgment and this issue of principle is therefore finalised.
The case was originally brought to an employment tribunal by Mr. Lock, an ex-sales consultant for British Gas, who claimed that he was underpaid holiday pay as it was calculated according to his basic salary ignoring the commission he would usually earn.
The outcome of this decision is that British Gas will have to compensate Mr. Lock and approximately 1,000 other employees who have suffered similar losses. The employment tribunal will now have to determine what compensation should be paid by British gas to ensure that Mr. Lock and other workers are not disadvantaged by taking a holiday.
In the light of this case, more employees will be tempted to challenge the amount they are paid when they take a holiday. However, the decision in Lock does not mean that everyone who receives commission is automatically entitled to have this taken into account when calculating their holiday pay. The Court of Appeal’s decision made it very clear that the decision in Lock only applied to ‘results based’ commission schemes.
Employers will need to think carefully about how to take account of the latest holiday pay developments when making changes to employee’s holiday pay rights. If you would like to discuss holiday pay and results based commission, please contact a member of the Employment team.