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Holiday pay: Supreme Court refuses to hear Lock v. British Gas appeal – implications for employers

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Summary: The Supreme Court has refused to hear British Gas’ appeal in the long-running Lock v. British Gas holiday pay litigation. This has various implications for employers and the way that they should calculate statutory holiday pay.

Results-based commission must be included

The Court of Appeal had decided that results-based commission should be taken into account when working out statutory holiday pay. The Court of Appeal emphasised that it had been hard to reach this view, which is why a Supreme Court ruling would have been welcome. However, the Supreme Court’s refusal to hear an appeal means it is now settled that employers must take into account results-based commission when calculating holiday pay for the core four weeks (but not the extra 1.6 weeks) of statutory holiday.

But various key holiday pay issues remain unanswered

The Lock decision is only about results-based commission

The Court of Appeal stressed that it was only focusing on results-based commission schemes. It refused to consider whether other types of remuneration, such as annual bonuses, should also be taken into account when calculating statutory holiday pay.

Should overtime be included?

Previous EAT case law has said that compulsory and non-guaranteed overtime must be taken into account when calculating statutory holiday. Recent employment tribunal cases suggest that voluntary overtime should also be included, which accords with the general direction of travel of case law in this area. However, there is as yet no appeal decision relating to voluntary overtime.

What is the appropriate reference period?

The Court of Appeal gave no guidance on the appropriate reference period that an employer should use when working out how much commission to take into account in holiday pay calculations. The appropriate reference period may well vary depending on the type of remuneration in question.

The impact of Brexit

EU law underpins statutory holiday pay rights, and requires UK courts and tribunals to adopt a strong purposive approach to the interpretation of the UK Working Time Regulations. It is unclear how Brexit will affect this, although the current UK government has indicated that it intends to guarantee existing EU employment rights.

Given these uncertainties, employers may wish to think carefully about how to take account of the latest holiday pay developments when making changes to employees’ holiday pay rights.

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