LOCK - HOLIDAY PAY AND COMMISSION...

On Friday last the Court of Appeal handed down its judgment in British Gas v Lock which concerns the on-going question of whether holiday pay should include commission payments that the employee would have earned had they not been absent. The decision of the lower Tribunals in Lock held that commission should be part of the calculation of holiday pay.

Mr Lock was a salesman on a basic salary with variable commission paid in arrears. Mr Lock's commission was based on sales achieved, so (obviously) Mr Lock could not earn commission whilst on leave. He would lose money by taking leave and this might discourage him and others from taking legitimate rest. Remember, taking holiday is primarily a health & safety/well-being issue.

The Court of Appeal held that when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned had they not been absent. The law is, therefore, unchanged.

But, how do we calculate the commission element? Is this the average over the previous month or year? How do we work this out? The Court didn't answer that point...which is a little unhelpful.

However, based on the law associated with calculating a week's pay under the Employment Rights Act 1996 for those with fluctuating hours, this writer suggests that the previous 12 weeks earnings would be a sensible rule of thumb but, to be clear, there is no legal authority on this point.

Please see below link to a more detailed article from Clarke Willmott's Employment & HR Team. Website: https://www.clarkewillmott.com/news/locking-holiday-pay/