Holiday Pay on Commission in the UK: What Lock v British Gas Actually Means for Your Comp Plan

Ask a UK finance director what their reps get paid when they take a week off and you'll usually get one of two answers. Either "their basic salary, obviously" or — slightly more sheepishly — "we top up their basic salary, but I'm not sure exactly how we land on the number". Both answers usually point to the same underlying problem: a payroll process that pre-dates Lock v British Gas, has never been retro-fitted, and is quietly building a backdated liability on the balance sheet.

This piece walks through what the law actually requires, how to compute it without breaking your monthly payroll cycle, and why the "we'll deal with it if someone complains" approach is one of the more expensive risks a UK sales org can carry.

TL;DR

UK employers must pay results-based commission as part of holiday pay for at least four of the 5.6 statutory weeks per year. This was settled by Lock v British Gas, and codified into the Working Time Regulations from 1 January 2024, which now define "normal remuneration" to expressly include commission "intrinsically linked" to contractual duties (GOV.UK reforms guidance). The standard mechanic is a 52-week look-back: average commission earned over the previous 52 paid weeks, divide by 52, and add that weekly figure on top of base salary for each week of Regulation 13 leave taken. Underpayments can be backdated up to two years in England, Scotland and Wales (Deductions from Wages (Limitation) Regulations 2014), so a 30-rep team paying holiday at base only is sitting on roughly two years' worth of underpaid commission, plus the cost of dealing with the inevitable tribunal claim when one rep leaves badly.

What did Lock v British Gas actually decide?

Lock v British Gas started in 2012 when Mr Lock, a residential energy sales rep, took two weeks' holiday over Christmas. British Gas paid his basic salary and the commission already earned and due in that period — but nothing to reflect the new commission he could have been earning, had he been at his desk selling. Because his commission made up roughly 60% of his total pay, his next few months' income fell off a cliff.

The Court of Justice of the European Union ruled in 2014 that this breached the Working Time Directive: a worker should not be financially disincentivised from taking the holiday they are legally required to take. The case bounced back through the UK Employment Tribunal, the Employment Appeal Tribunal (UKEAT/0189/15/BA, decided 22 February 2016) and the Court of Appeal, with the principle upheld at every stage (EAT judgment summary on GOV.UK). British Gas's final appeal to the Supreme Court was refused in 2017. The point is settled UK law — and survived the post-Brexit retained EU law regime, because the government legislated to keep it.

From 1 January 2024, the Working Time Regulations 1998 were amended to spell this out directly. Holiday pay at the "normal" rate must now include, among other things, "payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out" (Holiday pay and entitlement reforms guidance, GOV.UK). If you've ever heard your in-house counsel say "Lock is now in the regs," that's what they mean.

Does this apply to my sales reps?

Almost certainly yes. The test from Lock and the 2024 amendments is whether commission is "intrinsically linked" to tasks the rep is contractually obliged to perform. For a quota-carrying salesperson whose job description is "sell things" and whose comp plan pays a percentage of bookings, ARR, or gross profit, the link is direct. There is no realistic reading of the regulation that excludes them.

The rule applies regardless of whether the rep is paid weekly, monthly, or quarterly, and regardless of whether commission is described as discretionary in the contract. Tribunals have consistently looked through "discretionary" labels where the actual pattern is that commission is paid whenever targets are hit. If a reasonable rep expects to earn commission as a consequence of doing their job properly, it is normal remuneration.

A few edge cases are worth flagging. A pure one-off SPIFF for hitting an unusual milestone may not qualify if it is genuinely exceptional and not linked to ordinary contractual duties — but a recurring monthly accelerator clearly does. Bonuses tied to company performance rather than individual sales (think profit-share or EBITDA bonuses) sit in a greyer zone; Acas's guidance is that "whether bonuses are included in normal holiday pay depends on the nature of the bonus" (Acas: calculating holiday pay). For commission specifically, there is no grey zone.

How much of the 5.6 weeks does this apply to?

This is where it gets fiddly, and where most spreadsheet-driven payroll teams trip up. UK workers get 5.6 weeks of statutory paid holiday per year (GOV.UK: Holiday pay basics). But this entitlement is split into two pots:

Pot	Source	Length	Pay rate required
Regulation 13 leave	EU-derived	4 weeks	"Normal" pay — must include commission, regular overtime, etc.
Regulation 13A leave	Domestic top-up	1.6 weeks	"Basic" pay only — commission can be excluded

The statutory floor is therefore that four weeks per year must reflect commission, not all 5.6. The remaining 1.6 weeks can lawfully be paid at base salary alone. Most employers don't actually try to distinguish between the two pots — it's administrative pain for limited saving — and the GOV.UK guidance acknowledges that "many employers choose not to distinguish between the two pots of leave, and to pay the entire 5.6 weeks at the 'normal' rate of pay". If you do want to split them, you need to set this out clearly in the contract or staff handbook.

How do I actually calculate it? The 52-week mechanic

For a salaried rep with variable commission, the standard approach is:

1. Identify the worker's commission earnings over the previous 52 weeks ending on the last full week before the holiday begins.
2. Exclude any week in which the rep received no pay at all, and exclude weeks of sick or statutory leave. Substitute earlier weeks until you have 52 weeks of paid data, looking back no more than 104 weeks total.
3. Divide the total commission by 52 to get an average weekly commission figure.
4. Add that weekly figure on top of base pay for each week of Regulation 13 leave taken.

The 52-week reference period and its 104-week backstop are set out explicitly in the GOV.UK reforms guidance, which notes that weeks where the worker was not paid "must not be included" and the reference period is shortened or extended accordingly (GOV.UK reforms guidance).

A worked example

Take Priya, an AE on £45,000 base + £15,000 on-target commission (so £60k OTE on a 75/25 split). In the year to the start of her holiday, she earned £17,200 in commission across 52 paid weeks — slightly above target.

• Weekly commission average: £17,200 ÷ 52 = £330.77
• Weekly base pay: £45,000 ÷ 52 = £865.38
• Normal weekly holiday pay (Regulation 13): £865.38 + £330.77 = £1,196.15

If Priya takes a week off and you pay her only her base salary for that week, you have underpaid her by £330.77. Over the course of a year in which she uses all four Regulation 13 weeks, that's £1,323 of underpayment per rep. Across a 30-rep team, that's roughly £40,000 a year — every year — accruing on the wrong side of the balance sheet.

What about reps in their first year, or part-year reps?

If a rep has not been with you for 52 weeks, you use the weeks you have. Where you have, say, 26 complete paid weeks, divide commission earned by 26 (Acas guidance on irregular hours and part-year workers).

Reps on maternity, paternity, shared parental, adoption or long-term sick leave are a separate category — see our guide to maternity leave and commission for how the relevant period rules interact with statutory leave. The short version: weeks of statutory leave or sickness are stripped out and substituted with earlier paid weeks, going back up to 104 weeks if needed.

For genuinely irregular-hours and part-year workers — which most SaaS-style sales reps are not — there is now a separate 12.07% accrual mechanic with optional rolled-up holiday pay for leave years starting on or after 1 April 2024. If your reps are on fixed-hours contracts with variable commission, that regime doesn't apply to them; you stay on the 52-week reference period approach.

What's my backdated exposure?

This is the part most CFOs underestimate. Underpaid holiday pay can be claimed as an unlawful deduction from wages under Part II of the Employment Rights Act 1996. Two things have shifted the risk profile in the last few years:

First, the Supreme Court decided in Police Service of Northern Ireland v Agnew [2023] UKSC 33 that a series of holiday pay underpayments is not broken by gaps of three months between deductions (Law Society of Scotland analysis). The earlier EAT case of Bear Scotland had said the opposite, and a lot of payroll teams had quietly relied on that to assume their exposure was capped at the most recent three-month window. It isn't.

Second, in England, Scotland and Wales there is a two-year overall backstop on deduction-from-wages claims, introduced by the Deductions from Wages (Limitation) Regulations 2014. That backstop is still in force and is the binding cap on backdated holiday pay claims for most UK employers — but two years' worth of underpaid commission for an entire sales team is not a small number.

The contrarian point worth making: the "we'll deal with it if someone complains" stance assumes a rep will only ever flag this themselves. In practice, the trigger is usually a constructive dismissal claim, a botched redundancy, or an ex-rep's employment solicitor running through a pre-action checklist. By the time it surfaces, the employer is dealing with a multi-rep class-action-style claim, with two years of arrears across the team, plus reputational damage on Glassdoor and inside the rep community.

What should I do this quarter?

Four things, in order:

1. Audit your current holiday pay process. Pull a sample of payslips for reps who took holiday in the last six months. If holiday weeks look identical to non-holiday weeks in terms of pay, you have the problem.
2. Decide whether to apply the uplift to all 5.6 weeks or just the four Regulation 13 weeks. The administrative simplicity of "all 5.6" is usually worth the extra ~1.6 weeks of commission uplift per rep per year.
3. Implement a 52-week rolling average commission figure per rep, refreshed at the point holiday is taken. This is mechanical and well-suited to systems that already track commission accruals; in Commit this is a derived field on each rep's record that flows through to the Xero payroll export.
4. Quietly true up the last 24 months. This is the uncomfortable one. The legal exposure is real and dated; paying it now, with a clear note in the payslip, almost always costs less than litigating it later. Take advice on how to structure the communication.

FAQ

Does holiday pay on commission apply to fully commission-only reps?

Yes — in fact, the case for inclusion is even clearer for commission-only reps because commission is their normal remuneration. The 52-week reference period is the appropriate mechanic, and the same two-pot structure (4 weeks at normal, 1.6 weeks at basic) applies, though for a commission-only worker "basic" pay may be very low or zero, which is itself a separate problem worth reviewing.

What if my rep's commission is highly seasonal — say, mostly Q4?

The 52-week average is designed exactly for this. It smooths a Q4-heavy comp plan over the full year, so a rep taking holiday in February gets a weekly commission figure that reflects what they earned across the whole previous year, not just the immediately preceding (probably quiet) weeks.

Does this apply to one-off SPIFFs and contests?

Generally no, if the SPIFF is genuinely a one-off, exceptional incentive that isn't part of the rep's ordinary contractual duties. But the moment you run the "one-off" SPIFF every quarter, it stops being exceptional and starts looking like normal remuneration. Our piece on sales SPIFFs vs commission goes into the boundary in more detail.

How far back can a rep claim if I haven't been paying this correctly?

In England, Scotland and Wales, a maximum of two years' worth of underpayment under the Deductions from Wages (Limitation) Regulations 2014. The Supreme Court's Agnew decision removed the previously assumed three-month-gap rule, so the two-year backstop is the binding cap. In Northern Ireland, there is no equivalent backstop, so claims can in principle stretch much further.

Can I just pay rolled-up holiday pay — adding 12.07% to every commission payment?

Not for ordinary salaried reps. Rolled-up holiday pay is only permitted for irregular-hours workers and part-year workers, for leave years beginning on or after 1 April 2024. A full-time AE on a fixed-hours contract doesn't qualify, so you have to use the 52-week reference period.

Does our commission management software need to handle this?

It should. The hard part isn't the maths — it's getting an accurate, defensible 52-week commission total per rep at the moment holiday is requested, with weeks of statutory leave excluded and substituted with earlier paid weeks. That's exactly the kind of audit-trail-friendly calculation a dedicated tool is built for, and it's why spreadsheet-based comp tracking tends to drop the ball here.