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Holiday Pay Must Include Results–Based Commission

19/10/2016

A judgement by the Court of Appeal has underlined a ruling that employees who are paid by commission are entitled to holiday pay based on what they might have earned during their time off.

The court confirmed its decision in the Lock v British Gas case that means workers should be paid an amount that reflects the commission they would have earned if they had not been on holiday.

The salesman, Mr Lock, brought a claim for his “lost holiday pay” when he took leave in December 2011 to January 2012. He was on a basic salary with variable commission paid on the number of sales he achieved. 

His case centred on the fact he could not earn commission while he was on annual leave and therefore he would lose income by taking holiday.

Unfortunately the Court of Appeal left the question on how to calculate the correct holiday pay unanswered which has left a degree of uncertainty for employers. 

The judgement does not tell us anything new but employers should continue to keep their pay structure under review and take legal advice in order to assess their holiday pay at regular intervals.

In the long term, once Britain has left the EU, it will be for the UK Government to decide what pay employees are entitled to when taking annual leave. 

But in the Prime Minister’s keynote speech at the recent Conservative Party Conference she said “existing workers’ legal rights will continue to be guaranteed in law” and indicated that worker’s rights would be enhanced, indicating that a reform of employment law may be a low priority for Theresa May.

If you’d like advice on your responsibilities with regards to holiday pay or any employment-related issue, please contact our specialist Employment Team based in the Black Country and Shropshire.

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