Lock v British Gas – holiday pay update

Posted on: July 23rd, 2015

There have been two items on the news recently about bears which have caught our attention.

Firstly it’s been reported that a man in China recently discovered after caring for a pair of puppies for two years that he had in fact been inadvertently raising two bear cubs. Apparently the owner, a banana farmer, noticed something was not quite right when his chickens started disappearing and the “puppies” grew to 100 pounds each. The bears have now been rescued and are waiting to be found a safe home.  

It’s difficult to see how you could fail to notice you have two bears in your back garden; however, many employers are equally bemused (and understandably so) with the recent reports of changes to holiday pay calculations, which have changed everything we previously thought we knew about how holiday pay should be calculated.

Many of you will be aware of the November 2014 Employment Appeal Tribunal decision in the case of Bear Scotland Limited and Others, setting out new rules on how holiday pay should be calculated for employees that receive overtime payments.

The second piece of news is that since that fateful day, a further case of Lock v British Gas has followed hotly on its heels and followed the Bear principle. Sadly, despite its name, the Lock case has not locked up the rules on holiday pay. Instead, it’s complicated the rules even further by looking at how holiday pay should be calculated for employees that receive commission payments.

What will forever now be known as the “Bear” and “Lock” cases have important implications for how holiday pay will be calculated going forward.

With the headlines describing the cases as an important victory for employees’ rights which is likely to come at a significant cost to employers, the question on most employers’ minds remains what the decisions mean for their business and, more importantly, what they need to do next.

If you heard the hype in the media at the time the Bear case was initially announced, you could have been forgiven for thinking that the business world was going to come to a shuddering halt. Whilst the cases are bad news for employers, various decisions in the cases have limited the potential back pay bill and therefore it’s not as bad as it could be.

From 1 July 2015 the UK government has also introduced safeguards which should significantly limit the expense of back pay claims and make it more difficult for employees to issue claims going forward.

Sadly, with the Lock case currently being appealed it’s likely that the position will remain in flux for some time, and this therefore won’t be the last change that you’ll have to grin and Bear.

If you have any questions regarding holiday pay, please contact any of the Employment Team and we’d be happy to guide you through your options.