Stop press: government holiday pay guidance updated

Schools will have been following with interest recent developments in relation to holiday pay arrangements for those working irregular hours or for only part of the year (“part-year workers”).

The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the “new Regulations”), came into force on 1 January 2024 – although the changes to holiday apply to holiday years beginning on or after 1 April 2024 – and make several changes to holiday arrangements for part-year workers. In particular:

• They allow an employer to calculate holiday accrual for such workers at a rate of 12.07% of hours worked in a pay period. This reverses the decision in the Supreme Court in the Harpur Trust v Brazel case and returns the position to that adopted by most schools prior to the Supreme Court judgment
• They allow an employer to pay rolled-up holiday pay, a practice where a worker’s hourly rate is enhanced to incorporate an element for holiday.

The government published guidance to assist employers in interpreting the new Regulations. It should be noted that government guidance is not authoritative as to the meaning of regulations, only decisions of the courts are. However, it can influence how regulations are interpreted.

The guidance was updated on 1 April 2024 and reflects a change in position from the government. Importantly, the updated guidance includes the following significant change to the interpretation of the definition of part-year worker.

The definition of “part-year worker”

A key question for schools arising from the new Regulations was whether the definition of a “part-year worker” covered term-time only staff who are paid an annual salary in twelve monthly instalments. This is significant given that most teaching staff, and many support staff within schools, will fall into this category. We published a note addressing this question which can be found here. In summary:

• Our view was that, on a strict reading of the new Regulations which a court would take, whilst there is some ambiguity, those staff engaged on a term-time-only contract, who have weeks where they are not expected to work but continue to be paid over 12 months, do not appear to fall within the definition of a “part-year worker”
• The government guidance published in January 2024 supported this interpretation, providing an example of an individual (“Ian”) who is paid an annualised salary over 12 months but has periods of time that last more than one week where he is not working. The guidance suggested that Ian would not be a part-year worker for the purposes of the new Regulations.

The government guidance in this respect has led to concern within the sector and uncertainty as to the calculation of holiday entitlement and pay for salaried term-time only staff. The implication was that the decision in Brazel would continue to apply and those members of staff should receive, and be paid for, a minimum of 5.6 weeks’ holiday each year.

Given the lack of clarity in relation to this, the Independent Schools’ Bursars Association obtained Counsel’s opinion from Caspar Glyn KC, who was instructed in the Harpur Trust v Brazel case. Counsel agreed with our analysis of the definition of “part-year worker” under the new Regulations.

Updated guidance

However, the latest iteration of the government guidance, updated on 1 April 2024, removes all reference to the “Ian” example. Instead, it notes as follows:

“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.”

The government has therefore changed its view and changed its guidance. The key change is that they are now of the view that no longer does a part-year worker have to be, for a period of at least a week, both:

• (i) Not working
• (ii) Not receiving pay in the period for which they are not working.

The government’s view is now that in that period of at least a week the worker is a part-year worker if they are both:

• (i) Not working
• (ii) Not paid being paid for that period in which they are not working.

Accordingly, the government has reversed its position on the meaning of the new Regulations and this highlights the ambiguity that exists within the drafting.

The guidance now supports a different interpretation i.e., that term-time employees who only work and receive pay in relation to those term-time hours, but receive their pay averaged out over 52 weeks for administrative purposes, are arguably part-year workers.

This is a welcome revision for schools who may otherwise have been concerned that a significant majority of term-time only staff would not fall within the scope of the new Regulations.

Given the ambiguity within the drafting of the new Regulations, it is possible that this interpretation could be challenged. Unfortunately, clarity will only be achieved by way of binding case law which is likely to take a number of years. However, taking into account this element of risk, schools may now legitimately rely on the updated government guidance and consider that term-time staff, as described above, fall within the meaning of “part-year worker”.

This note has been reviewed by Counsel who agrees with its content.