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Employment Law Update: Clarity at last! Supreme Court refuses appeal against Lock v British Gas

The Supreme Court has finally drawn a line under the ongoing debate on whether results-based commission payments should be included within holiday pay calculations by rejecting British Gas’ appeal against the Court of Appeal judgment of October 2016.

As a reminder, the Court of Appeal in October 2016, in the case of Lock and another v British Gas Trading, upheld the decision of European Court of Justice, followed by the decision of Employment Appeal Tribunal, and ruled that any holiday pay must include result-based commission payments that would ordinarily be earned by the worker in the course of business. Now, by refusing British Gas the right to appeal against this decision, employers will have some clarity on this ambiguous issue.

Dave Prentis, UNISON's general secretary, comments (2 March 2017)

“It’s taken nearly five years to get here, but now all employees who earn commission will see that reflected in their holiday pay. Until now, many whose wages included commission lost a lot of money whenever they took a holiday. Many simply couldn’t afford to go away. Today’s decision puts right that wrong.”

Nonetheless, the implications of this judgment will mean different things for each organisation and will depend upon the contractual nature of results-based commission schemes and how integrated such payments are to the individual’s work. Further, a number of practical questions remain outstanding along with the final outcome for Mr Lock.  What is the appropriate reference period for calculating holiday pay and commission payments? What is the correct approach if the commission scheme operates in such a way that it effectively compensated the individual for the period of annual leave? Only once these outstanding issues have been clarified will employers be able to confidently assess their own arrangements.

It has been reported that the Employment Tribunal will decide on these outstanding matters this month and, in the meantime, employers are advised to consider their own arrangements to assess  and plan for their potential liabilities.

If you need further advice or have any questions with regard to calculating holiday pay within your organisation, please contact us at or 029 2048 2288 and our employment specialists will be happy to help.

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