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Holiday Pay to Include Workers’ Average Commission

Thinking of getting some winter sun? – Here’s why your holiday pay might be higher from now on.

On Friday, 7 October 2016 the Court of Appeal gave its judgment in the case of Lock v British Gas Trading Ltd confirming that commission payments must be taken into account when calculating a worker’s holiday pay.

In a long-awaited judgment in the latest in a string of holiday pay cases, the Court of Appeal has confirmed it agrees with the findings of the Employment Appeal Tribunal in the case of Lock. The Court of Appeal has confirmed that a worker’s holiday pay must include payment equal to the average commission that they would have otherwise received had they not been on holiday.

If commission payments make up a significant portion of a worker’s earnings then time off for holiday can mean they earn much less than normal when on holiday. This can often put workers off taking holiday, which is bad for the health and happiness of workers, as well as bad for business.

Employees whose earnings are significantly impacted by commission will now be financially better off when taking holiday in light of the Lock decision.

This is welcome news for those looking to take a break this half term or in the approaching festive period.

This also reinforces the importance of the legal right to holiday, which is to protect the health and safety of workers, in ensuring they have rest periods away from work.

Workers who have not been paid their holiday pay correctly in the past may have a claim for unlawful deduction from wages which can be brought in the Employment Tribunal. As much as two years back pay for holiday pay can be claimed. 

Employees also have the right to insist upon proper payment for holidays going forward in respect of the 20 days’ holiday entitlement provided for under the Working Time Directive.

It is important to take prompt action as a gap of more than three months between underpayments for holiday pay in any series of deductions will mean a worker loses the right to make a claim for the earlier holiday pay underpayments.

If a worker can establish there is no break in the series of underpayments for two years, or for a lesser period if their income is made up of commission payments, there could be some considerable back pay due to them.

Employers need to review how they deal with holiday pay going forward to make sure they are paying their workers in accordance with the law.

British Gas may appeal the ‘Lock decision’ to the Supreme Court; however, there has not been any confirmation of this to date.

The decision of the Court of Appeal is welcomed especially when considered alongside judgments in other holiday pay cases which confirm that overtime should also be considered when calculating holiday pay. You can read more about in our blog: UK Holiday Pay Ruling – Overtime Counts!

If you would like any advice holiday pay issues call our employment dispute solicitors on freephone 0800 916 9060 or contact us online and we will be happy to help.

Brogan Solomon is an employment solicitor at Slater and Gordon in London.

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