Since our article "Sales commission and holiday pay - are you paying twice?" was released in December 2015, the original decision has been appealed by British Gas. This was heard by the Court of Appeal on Friday 7 October 2016.
In summary, the Court of Appeal upheld the Employment Appeal Tribunal's decision that statutory holiday pay must include a representative element of sales-based commission. This means that the employee who is on holiday should be paid his normal salary, commissions earned (as if they were at work) plus an element added for commission which was not earned because the employee was on holiday.
The rationale behind the decision originates from EU Law - anything which deterred an employee from taking holiday when it came to pay was not allowed. In this case, Mr Lock argued that he had suffered a financial disadvantage after the holiday as a result of not having earned commission during the holiday.
However, certain questions were left unanswered by the Court. For example, how should the holiday pay be calculated for an employee who only receives commission at the point in the year when a particular level of turnover, profit or another threshold is reached, meaning they do not receive commission at all for some months of the year?
The calculation of the commission element has been left up in the air. Most employers since the first decision was released decided that they would take a 12 week reference period and average the normal pay and overtime over that period. The Court of Appeal declined to give a view on how these principles could apply to different types of cases, and opted out of addressing the question of the appropriate reference period to calculate the commission element of statutory holiday pay.
British Gas have applied for permission to appeal again to the Supreme Court, so the final outcome of this case is still not known.
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