UK: Another Day Trip In The Holiday Pay Saga

The Employment Tribunal in Lock v British Gas Trading Ltd has decided that where a worker's pay includes commission, then 4 weeks of their statutory holiday entitlement should be calculated so as to include commission payments. Broadly, the calculation would involve taking an average of pay and commission over a 12 week reference period. Historically, workers with normal working hours have received holiday pay based on basic pay which has not included other forms of pay such as commission or overtime.

The decision follows on from last May's European Court of Justice (ECJ) decision in the case of Lock v British Gas (Case C-539/12) and is the latest in the continuing saga of holiday pay decisions.  Doubtless, it will not be the last.

Background to the decision

Mr Lock was employed by British Gas as an internal energy sales consultant. He was paid a fixed basic salary together with a variable commission calculated by reference to sales achieved, rather than the time worked. His commission made up approximately 60% of his total remuneration and was paid in arrears, several weeks or months after a sale. He took annual leave over the Christmas period in December 2011 and was paid his basic salary plus the commission from previous sales that fell due during the period. However, as he was unable to earn commission during his annual leave, his salary payments over the coming months suffered a reduction because he was unable to generate commission over the Christmas period. He brought a claim in the Employment Tribunal for lost holiday pay.

The European Working Time Directive gives workers the right to paid annual leave but does not specify how holiday pay should be calculated.  In the UK, these rules are laid down in the Working Time Regulations (WTRegs). These rules provide that commission is not included in the calculation of holiday pay.   In May 2014, the ECJ  ruled in Lock v British Gas that holiday pay should include sales based commission. However, the ECJ did not specify precisely how this should be done so the case was referred back to the Employment Tribunal to consider this.

The decision

The Tribunal therefore was asked to consider whether the UK rules could be interpreted to reflect EU law.  The UK courts have, on a number of previous occasions, done this by adding or deleting words of the UK legislation.  So the Tribunal, having considered carefully the guidelines of the previous decisions on this matter, decided that it was "permissible, indeed necessary" to add wording to regulation 16(3) WTRegs so that the UK rules can be interpreted in line with EU law.

The Tribunal preferred the suggestion of counsel for Mr Lock, which was to read and apply the legislation as if it contained a new Reg 16(3)(e). Thus, for the purposes of determining a week's pay, Ss.221-224 Employment Rights Act 1996 (ERA) shall apply "as if, in the case of the entitlement under Reg 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of section 221".

What do these additional words mean?

It follows from this additional wording that for workers whose remuneration includes commission or similar payments, their holiday pay is calculated by reference to an average hourly rate of remuneration payable over a 12 week reference period, and would take commission into account in that calculation (this reflects the wording set out in section 221(3) ERA which relates to workers with normal working hours whose remuneration varies with the amount of work done – traditionally referred to as "piece workers")).

But does this adequately reflect the ECJ's interpretation of the Directive on how holiday pay should be calculated?

The ECJ said that remuneration paid in respect of annual leave should be the "normal remuneration" received by the worker.  Mr Lock was unable to earn commission during his leave so there is a time lag between the actual work that triggers commission and payment (as, in common with many similar schemes, payment was triggered only when the customer contract went "live"). Therefore, the shortfall in pay does not occur whilst the worker is on holiday - it occurs later.  This brings into question whether the 12 week averaging out before someone goes on holiday actually would be compliant with the EU requirements in terms of "normal remuneration".  Also, bearing in mind commission is often variable, with peaks and troughs throughout the year, taking an average of only 12 weeks' remuneration just before each holiday is taken is not always going to be representative of "normal remuneration".

Whilst the issue of the appropriate reference period appears to have been set aside to be dealt with separately, the Judge's  conclusion to add this additional wording indicates that he was satisfied that a 12 week reference period does adequately reflect the EU principles set out in the ECJ's decision in Lock.  Further, the additional wording included was that suggested by Mr Lock's lawyers, so it seems safe to assume that the reference period worked to Mr Lock's satisfaction. Whether it will do so for all commission based workers, is of course open to question.  There will be another hearing to quantify Mr Lock's specific monetary claim and this will be determined as a separate issue, unless the parties are able to agree in the meantime.

There is no indication as to whether British Gas may seek to appeal/review the decision.

Decision confined to the 4 weeks' EU holiday

It is important to note that the decision only concerns the 4 weeks' statutory holiday entitlement derived from the EU Working Time Directive. It therefore does not impact on the calculation of holiday pay for the additional 1.6 weeks provided for in the WTRegs or any additional contractual holiday pay. For employers seeking to adopt a "basic compliance only" approach, the case offers further comfort that they may, technically, treat different tranches of leave separately. Whether the cash saving in so doing is worthwhile compared to the administrative, systems and employee relations/communications challenges of differential treatment, will need to be assessed.

A note of caution:

As the Judge was keen to clarify, this case deals only with commission "or similar" payments, and it does not deal with other payments such as discretionary bonuses, overtime payments, call out or standby allowances etc.  However, the case is further evidence that the UK Tribunals and Courts are prepared to adopt an "expansive" and broad approach to what should be included in holiday pay and use the 12 week reference period (which has for many years been applicable for employees with no normal working hours or shift workers). In practice, it may well be preferable, in terms of overall fairness and simplicity, to adopt a 52 week or annual reference period and to take a perhaps modest compliance risk where this does not "work" for particular workers in specific cases.

In summary...

Your strategy to deal with both legacy and the future position on holiday pay should reflect the specific circumstances of your organisation and be a holistic, commercial one – which, of course, takes into account the legal risks but is not driven solely by it. What is your risk and how are you going to deal with it?

For further reading on holiday pay, including the recent cases dealing with whether overtime should be included in the calculation of holiday pay, see our previous alerts:

Click here to view the Employment Tribunal decision

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.