News & Insights

The Employment Appeal Tribunal (EAT) has ruled that commission payments must be included when calculating holiday pay.

British Gas was seeking to prevent their employee, Mr Lock, taking account of his significant results-based commission and instead only pay him his basic salary during his holiday leave. The EAT approved the decision made by the Employment Tribunal who first heard Mr Lock’s claim. This comes after another recent EAT decision which held that overtime must also be included in the holiday pay calculation.

So what does this mean for Employers?

Although a further appeal by British Gas is likely, for now the obligation remains in most circumstances when calculating holiday pay, to include commission. There is a statutory reference period used to calculate an average weeks’ pay, but it remains to be seen if that period will be reviewed.

It is anticipated that Employment Tribunals will deal with this on a case by case basis in light of the rulings already made by the EAT. It is understood that British Gas alone has hundreds of claims against it relating to this issue, therefore employers must be aware to the risks of not reflecting commission in the holiday pay calculation.

Nationally there could be 1000’s of employee claims relating to holiday pay on hold  until this ruling was made. The view of Robin Watson and Ella Gould, both specialist employment solicitors at Laceys, is that Employers must get professional advice.

“The fact remains that whenever overtime or commission forms part of the remuneration received by an Employee, the calculation of holiday pay needs to be considered very carefully. The law is complex and advice is important to avoid exposure to claims” said Robin Watson.

Robin and Ella are able to advise Employers and Employees on holiday pay issues and all areas of employment law.

Please contact them on 01202 755980 or email r.watson@laceyssolicitors.co.uk.