Annual leave

Annual leave: updated guidance on annual leave and holiday pay

On 1 April 2024, the Department of Business and Trade (DBT) updated its guidance on Simplifying holiday entitlement and holiday pay calculations to coincide with the earliest date that irregular hours and part-year workers move on to the new regime for those workers (our summary of those new rules here). 

The updated guidance addresses some of the confusion around which regime is applicable to term-time only workers who are paid an annual salary in 12 equal monthly instalments. Spreading pay across the year in this way for term-time only workers is very common in many sectors, including the education sector, where term-time only workers are commonplace. The original DBT guidance (issued in January 2024) had suggested that these workers fell outside the regime for part-year workers because they were paid across the year. If correct, that was a surprising outcome because a major part of the rationale for the changes was a desire to fix problems caused by the Brazel decision (see our summary of the Brazel decision here). 

The DBT guidance on this point has now been substantially revised to match our interpretation of the regulations, and confirms 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.”  

Other notable changes that have been made to the guidance include:

• The addition of new guidance which hints at a loophole in the legislation caused by the automatic rounding principle and suggests: “If an irregular hours/ part-year worker is paid weekly and works four hours a week or less, then it may be appropriate for the employer to round up to the next half hour or hour to ensure the worker accrues holiday entitlement.” However, this ‘best practice’ solution does not derive from the legislation itself
• Revised guidance on calculating statutory holiday entitlement accrued by irregular hours and part-year workers while they are on maternity or family related leave or off sick. However, employers should exercise some caution in following this part of the updated DBT guidance, as the regulations themselves do not correspond to the guidance

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