The Employment Appeals Tribunal’s latest decision officially forces employers to review their holiday pay allowances for workers.

Judgment has been handed down in the Employment Appeals Tribunal case of Lock v British Gas, first brought to the Employment Tribunal in April 2012, with the final decision that employers have to pay commission as part of holiday pay.

An ex sales employee of British Gas, Joe Lock, had a remuneration package which included a basic salary plus commission based on the number and type of contracts to which customers agreed. When he took annual leave he would only receive basic pay which was less than his usual salary.

Lock claimed he suffered a financial disadvantage by taking annual leave and made a claim with an Employment Tribunal who referred the case to the European Court of Justice (ECJ), in order to clarify the relationship between holiday pay and commission for workers where commission was a regular part of payment.

The EJC held that because his commission was linked to the work he carried out, it must therefore be taken into account when calculating holiday pay. It was referred back to the Employment Appeals Tribunal so it could apply its ruling to UK law. British Gas appealed its decision unsuccessfully and the final decision is that employers do indeed have to pay commission as part of holiday pay. Commission and overtime both guaranteed and non-guaranteed will have to be included following this decision.

This is clearly a favourable decision for employees and not so favourable for employers! Employers need to be aware that a failure to include such payments will open the flood gates to a succession of unlawful deduction from wages claims.

The practicalities of how such payments should be calculated still remains to be determined and Tribunals will have to approach the issue on a case by case basis.

Those employers who have been waiting for the outcome of this case and who may have ignored the situation are under now more pressure to actually deal with this properly.

Employers need to review their holiday pay allowances for workers.

Farleys’ Employment Law & HR team can advise and assist you with this issue including reviewing and updating contracts of employment, commission structures, staff handbooks, employment policies and procedures, managing employment disputes and defence of Employment Tribunal proceedings.