Thousands of workers will now be able to claim holiday pay previously denied them thanks to a successful ruling in the Employment Appeal Tribunal last week.
The decision means that from now on, the amount employees get paid whilst on holiday must be based on both their basic pay and any commission they have been earning previously.
In the case, Mr Lock worked for British Gas as a sales consultant. Commission made up on average 60 per cent of his take home pay. He was paid all the commission he had earned during the year but when he was away from work on holiday, he missed out on the chance to generate any sales and so earn any commission. British Gas’s policy was to calculate holiday pay with reference only on basic salary - ignoring the sales commission payments completely.
Mr Lock claimed he was being underpaid because of this. After a long series of hearings, appeals and referrals to the European Court of Justice, it was decided that he should not lose out financially when taking his four weeks statutory holiday each year.
A tribunal has still to rule on what the appropriate reference period for commission should be and not all supplements to pay should be factored in to the calculation of holiday pay such as bonuses.
The decision must be followed by employment tribunals when considering similar issues and will offer great hope for the other 917 employees who, like Mr Lock, have also brought claims against British Gas – who are now likely to appeal the ruling. Many thousands of other ‘holiday pay’ claims which had been paused pending the decision will now resume.
Businesses which pay commission may now face claims for back pay from their employees. Employers should therefore assess if this ruling applies to their particular scheme and if so, consider their current and future commission schemes structures, to reduce exposure to possible disputes and claims.
This could be a costly change for businesses and so it is important to assess the new landscape and make decisions that will protect the best interests of both employer and employee – and thus the stability of the company.