There has been focus on the calculation of holiday pay by employers since the decision of the Employment Tribunal in the case of Bear Scotland which dealt with the issue of overtime when calculating holiday pay.

The latest case on the topic, British Gas –v- Lock, dealt with the issue of commission when calculating holiday pay. The case was recently considered by the Employment Appeal Tribunal (“EAT”) following a reference to the Court of Justice of the European Union. The EAT has confirmed that commission should be included when calculating holiday pay for an employee whose normal remuneration includes the payment of commission.

The judgment provides confirmation of the principle established in recent decisions including Bear Scotland that where an employee’s normal pay varies through the working of overtime or payment of commission holiday pay should be calculated taking account of the variations whether those be caused by overtime working or commission payments.

Legislation was passed to limit the potential for “back dated” claims for underpayment of holiday pay but looking forward employers whose employees’ pay does vary would be well advised to consider what “normal” pay is when calculating holiday pay. The issue needs to be considered now in order to avoid a future build up of arrears and possible claims.

For help with holiday pay calculations and to see how this judgment affects your business please speak to one of our employment law team.