Holiday pay update

Louise Walker
Louise Walker
Legal Director
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Many of our readers will already have read in the press that the Employment Appeal Tribunal (EAT) dismissed the appeal of British Gas in the well-publicised Lock case.

The EAT, entirely unsurprisingly, held that results-based commission payments should be included in the calculation of holiday pay for the basic four weeks’ annual leave provided by Regulation 13 of the Working Time Regulations 1998.

This judgment followed the approach taken by the EAT in an earlier case that dealt with the specific issue of overtime payments. We commented on that case in detail in Update 174.

Leave to appeal has been granted, so it is likely that there will be further litigation concerning this issue. For the moment, employers who do not currently include results-based commission in their holiday pay calculations would be well advised to obtain specialist legal advice on their options for managing any potential liabilities that might be accruing in respect of their current approach.

Also, it remains unclear what different averaging periods may be lawful in respect of the calculation of average earnings. The 12 weeks averaging period that the Working Time Regulations already apply in respect of workers without normal working hours is almost certain to be lawful, but in other cases, particularly where there is the potential for large fluctuations in commission earned, a longer period may be appropriate in order to be representative.

Just Employment Law will report on further developments as and when they happen. In the meantime, you can read the EAT’s latest judgment here:

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