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Millions set to benefit from holiday pay ruling

Many industries in the UK pay their employees with a low basic salary that is then topped up with large amounts of commission. To achieve this improved rate of pay, the staff have to hit their sales quotas and targets.
As is common in these industries, when employees are on holiday, they are not achieving any targets, therefore are not eligible to receive any commission payments, so their holiday pay is based on their basic salary only.
However, a ruling in the European Court in the case of Lock v British Gas Trading may mean a significant change to this practice and may also expose some industries to significant liabilities that they had not accounted for.
In Lock v British Gas Trading, Mr Lock was being paid a low basic salary. Commission made up around 60% of his salary in a normal month. This clearly made a significant difference to Mr Lock’s salary in the months after he had taken annual leave. As a result, he took his employer to an Employment Tribunal, who then referred the matter to the European Court.
The European Court of Justice ruled in Mr Lock’s favour, commenting that employees would be less likely to want to take their annual leave if they were financially penalised for doing so, and that as a result, they should be paid what they would normally receive when they were at work.
If your business is paying annual leave based on basic salary only, it is crucial that you take legal advice as soon as possible to calculate what your potential liabilities are; there is the possibility that employees could claim for ‘lost pay’ right back to 1998.
One glimmer of hope for businesses in this ruling is that the EU has a statutory minimum of only 20 days holiday, which is 8 days shorter than the UK. This means that any claims will probably be limited to only 20 days.If you are concerned that this ruling may affect you, speak to us. We are employment solicitors and can give you the legal guidance and clarity you need at this sensitive time. call us on 01302 320621 or email

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