This week the Employment Appeal Tribunal delivered the latest judgment in the long-running holiday pay case of British Gas v Lock concerning commission payments and whether these must be included in the calculation of employees’ holiday pay.
British Gas’ appeal to the EAT was dismissed and the law remains unchanged. The position is that employers must account for commission payments in employees’ holiday pay.
The EAT’s decision in Lock followed the previous EAT decision in Bear Scotland v Fulton. In Bear Scotland the EAT ruled that domestic UK legislation must be interpreted in a way that conforms with EU law on holiday pay. The result of this in Bear Scotland was that employers must account for non-guaranteed but compulsory overtime when calculating employees’ holiday pay (but did not deal with the position regarding voluntary overtime).
In Lock British Gas argued that Bear Scotland had been wrongly decided, and in any case did not apply to commission payments. The EAT rejected both these arguments and decided Lock in line with Bear Scotland.
Whilst this case confirms that employers must account for commission payments in calculating holiday pay, it does not address the practicalities of implementing such a system. In particular, the reference period is yet to be determined, so unfortunately much remains uncertain.
Meanwhile, the holiday pay saga is set to continue. British Gas has now requested permission to appeal to the Court of Appeal. Bear Scotland is also due to return to the EAT later this year for a further determination in that case. We will continue to update you on further developments.