Holiday pay includes commission, appeal court agrees

The long-running trail of judicial rulings dealing with the calculation of holiday pay has been added to by the Court of Appeal in its decision in the case of British Gas v Lock [2016] EWCA Civ 983. On October 7 the court held that Mr Lock, a salesman who was paid a basic salary and variable commission, depending on sales achieved, was entitled to be paid his average pay while on annual leave.

Lock started his claim in 2012, after taking holiday from December 2011 to January 2012. He was paid only his basic salary for the holiday period. In 2014, the European Court of Justice held that, when calculating holiday pay, EU member states must ensure that a worker taking leave is paid by reference to commission payments that the worker would have earned if at work.

The issue for the Court of Appeal was whether the UK Working Time Regulations 1998 can be interpreted as including holiday pay in respect of commission.

The court ruled that when calculating holiday pay, workers are entitled to be paid an amount which reflects the commission they would have earned if not on holiday. However, the court did not deal with the question of how the amount should be calculated. Given the impossibility of accurately forecasting what a sales person would have accomplished had he or she not been on holiday, the logical approach must be to use an average sales figure over a reasonably lengthy reference period.