Updated government guidance clarifies new holiday pay rules for salaried term-time only workers

Holiday entitlement reform

Employers welcomed the news, in late 2023, that the government would be making significant changes to the Working Time Regulations. The changes confirmed under the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the Regulations) included:

• The introduction of new legal definitions of 'part-year' and 'irregular hours' workers
• The introduction of a pro-rata mechanism to calculate accrued statutory holiday for these workers at the rate of 12.07% of worked hours
• The ability to roll-up holiday pay for these workers

The Regulations came into force on 1 January 2024, with the changes above taking effect from leave years starting on or after 1 April 2024.

Government guidance

The non-statutory guidance accompanying the Regulations has now been updated, having been first published in January 2024. The original version of the guidance suggested that workers in receipt of an annualised salary (such as term-time only workers in schools) would not be part-year workers under the Regulations. In other words, the Government guidance was effectively saying that these workers would continue to be entitled to unreduced statutory holiday notwithstanding the new rules.

When the guidance was first published, commentators observed that the advice on annualised salary workers seemed to be at odds with the prevailing interpretation of the Regulations themselves. This feedback has prompted the Government to update its guidance. The updated version was published on 1 April 2024 and now acknowledges that annualised salary workers can be part-year workers. Section 2.2 of the updated guidance states (at section 2.2):

"The regulations require that there must be a period of at least one week ‘for which they are not paid’ which means that it would still be possible for a worker to be paid ‘during’ that period so long as there is no expectation of them working in that period and nor are they receiving payment ‘for’ that period."

What does this mean for employers?

The updated guidance means that employers can treat annualised salary workers as part-year workers. This means that their statutory holiday entitlement will accrue at the rate of 12.07% of worked hours, in line with other part-year and irregular hours workers. In terms of the level of cost saving employers will be able to make as a result, this will depend on the number of weeks per year the worker spends working, and also on whether the employer operates a contractual holiday entitlement in excess of the statutory minimum.

Next steps

Employers may wish to update their staff contracts in order to reflect the fact that annualised salary workers' will accrue holiday entitlement at the rate of 12.07% of hours worked from leave years starting on or after 1 April 2024.

Please get in touch with your usual VWV contact if you require tailored advice to reflect your organisation's individual position.

For more information or advice, please contact Simon Bevan on 0117 314 5238, or Alice Reeve on 0117 314 5383 in our Employment team. Alternatively, please complete the form below.