British Gas Trading Ltd v Lock and another [2016]

This is an important case in the evolving field of holiday pay and variable remuneration. The Court of Appeal confirmed the Employment Appeal Tribunal's position that holiday pay should include compensation for contractual results-based commission which the employee usually earns. 

The claimant was employed by British Gas Trading Ltd as a sales consultant. The claimant's salary was made up of two parts: a basic salary and a commission. The claimant's commission typically accounted for 60% of his salary and was a results-based commission which was not dependant on the number of hours worked. When the claimant was on holiday, he did not make any sales generating a commission. Consequently, the claimant's pay in the month after taking annual leave was always substantially lower due to a lack of commission. 

The case was referred to the European Court of Justice ("ECJ"), who considered that workers should receive their "normal remuneration" during their statutory holiday. The Court of Appeal interpreted the Working Time Regulations 1998 to make them comply with the ECJ's ruling and confirmed that the claimant's commission should be included in holiday pay calculations. 

Employers who operate commission-based businesses need to be aware that holiday pay should be calculated to include an element for commission so that employees are not financially disadvantaged by taking holiday. Note: it is understood that British Gas will appeal to the Supreme Court and so it may be some time before there is certainty on this point.