Term-Time Only Contracts UK 2026: Holiday Pay Rules

Term-time only contracts sit in one of the most litigated corners of UK holiday pay. The risk is rarely about whether someone is “entitled” to paid leave (they are, if they are a worker). The risk is whether the employer has correctly identified (1) what type of worker they are dealing with and (2) which statutory calculation method applies for the relevant leave year. Post-2024 reforms give employers more tools, but they also create a bigger compliance trap: using the 12.07% method or rolled-up holiday pay for the wrong population, or applying it in the wrong leave year.

What this article is about: This guide is a compliance-grade employer framework for term time only contracts holiday pay. It explains how UK employers should structure, calculate and evidence holiday entitlement and holiday pay for term-time patterns, including how the post-1 April 2024 rules apply to part-year workers and irregular hours workers, when 12.07% accrual is lawful, when rolled-up holiday pay is permitted, and how to avoid the common errors that drive unlawful deduction of wages claims, school/MAT disputes and reputational exposure.

Section A: What is a “term-time only contract” in law and why does the label not decide the holiday pay method?

A “term-time only” contract is not a statutory category in UK employment law. It is a contractual working pattern most commonly used in education and adjacent services (for example catering, cleaning, transport, pastoral and peripatetic roles) where work is delivered during term-time and ceases or reduces during school closures. The legal framework that governs holiday entitlement and holiday pay remains the Working Time Regulations 1998 (as amended), alongside unlawful deduction rules under the Employment Rights Act 1996. The label “term-time only” helps describe the pattern, but it does not itself determine which statutory holiday calculation method applies.

1. The employer’s core compliance question (the one tribunals care about)

When a dispute arises, the key question is not “is this person term-time only?” It is:

“Is this individual a fixed-hours worker, an irregular hours worker, or a part-year worker for this leave year and have we applied the correct statutory mechanism accordingly?”

That classification determines whether you should be operating:

• the traditional 5.6 weeks framework (expressed in weeks or days for fixed patterns), or
• the post-April 2024 accrual framework (12.07% of hours worked) for the defined categories, and whether rolled-up holiday pay is even on the table.

2. The three term-time models employers use (and where they go wrong)

In practice, employers tend to run term-time contracts in one of three ways. Two are defensible when drafted and operated properly. One is the source of most disputes.

1) Permanent employment, fixed weekly hours during term, salary spread over 12 months
The employee works, say, 25 hours per week during term, receives a regular monthly salary all year, and the contract explains that pay is annualised and includes paid leave.
Risk if mismanaged: If documentation is vague, staff may argue non-working weeks are unpaid leave rather than holiday and challenge whether holiday pay has been handled correctly.

2) Permanent employment, fixed hours in term, paid only during working months (or in larger term-time instalments)
The worker is still permanent, but pay is not smoothed across 12 months.
Risk if mismanaged: Payroll teams often try to “pro-rate” statutory leave in a way that does not match the legal method for that worker category, or they apply 12.07% simply because the role is term-time, which is not the legal test.

3) Casual or variable engagement aligned to term-time demand (often treated as ‘term-time’)
For example, supply, peripatetic, exam support, casual invigilation, ad hoc support staff.
Risk if mismanaged: The employer assumes “casual” automatically means they can use 12.07% and rolled-up pay, without confirming the statutory definitions and leave year conditions, or without itemising rolled-up holiday pay properly. This is especially common where employers also use zero hours contract holiday pay logic as a proxy for term-time arrangements.

3. Why the post-April 2024 regime makes classification non-negotiable

From leave years beginning on or after 1 April 2024, the law introduced statutory definitions of irregular hours workers and part-year workers, a statutory accrual method for these workers of 12.07% of actual hours worked and the option to use rolled-up holiday pay, but only for these worker types and only when payroll and payslip conditions are met. This matters because term-time only workers can fall into different categories. Some term-time staff are genuinely fixed-hours employees. Others are part-year workers. Others are irregular hours workers. The rules diverge, and applying the wrong method tends to create repeat underpayments, not one-off errors.

4. Employer decisions you must make (and be able to defend)

For each term-time only contract population, employers should make and document decisions on:

• Employment status: worker vs employee vs genuinely self-employed (holiday entitlement attaches to “workers”, not the genuinely self-employed).
• Pattern classification for the leave year: fixed hours, irregular hours, or part-year.
• Pay architecture: annualised salary vs term-time instalments vs pay-as-worked.
• Holiday delivery method: leave taken and paid when taken vs rolled-up holiday pay (only where lawful and correctly itemised).
• Evidence: contracts, holiday policy, leave year definition, payroll configuration, payslip itemisation and records that workers are enabled and encouraged to take leave.

5. What happens if you get Section A wrong

Misclassification or label-led payroll tends to produce three employer problems:

• Unlawful deduction claims: individual or group claims for underpaid holiday, often with high employee confidence because holiday pay errors are arithmetic and repeat across pay periods.
• Budget shock and operational disruption: backpay exposure, grievance volume, union escalation, leadership time drain.
• Reputational exposure: especially for schools, MATs and public-facing organisations where disputes become public and governance-led.

Section A summary: Term-time only is a working pattern, not a legal classification. Your compliance outcome depends on whether the worker is fixed-hours, irregular hours or part-year for the relevant leave year and whether your contract and payroll system apply the matching statutory method. Post-April 2024 reforms make “getting the label right” irrelevant if the classification and method are wrong.

Section B: Which term-time only workers can lawfully accrue holiday at 12.07%?

The most common and most costly error employers make with term time only contracts holiday pay is assuming that term-time automatically means the 12.07% accrual method applies. That assumption was risky even before 2024. Post-2024, it is actively dangerous.

The law now permits 12.07% accrual, but only for specific categories of worker, and only for leave years beginning on or after 1 April 2024. Using it outside those boundaries will usually result in systematic underpayment.

1. The employer’s core question

“Is this term-time worker legally classed as an irregular hours worker or a part-year worker for this leave year?”

If the answer is no, the 12.07% method should not be used, regardless of how intuitive or administratively convenient it feels.

2. What the law changed in April 2024 (and what it did not change)

The Working Time Regulations were amended to introduce statutory definitions of irregular hours workers and part-year workers, alongside a statutory accrual mechanism of 12.07% of hours worked for those categories and a lawful route to rolled-up holiday pay, but only where the worker type and payroll conditions allow.

What did not change is the need for employers to correctly classify workers and apply the correct statutory method. The reforms did not create a shortcut for “term-time only” contracts. They created a classification test. For supporting context on how the reforms are being positioned for employers, see new guidance simplifies holiday pay calculations.

3. Who counts as an irregular hours worker?

An irregular hours worker is someone whose contractual working hours in a leave year are wholly or mostly variable. This is a definition-driven analysis, not a label exercise. In term-time environments, the role may be described as “term-time”, “casual”, or “ad hoc”, but the relevant question is whether the hours are contractually and practically variable across the leave year.

Key indicators employers should look for include:

• no fixed weekly or monthly hours
• hours that fluctuate materially between pay periods
• pay that is genuinely linked to hours worked, rather than an annualised salary
• a contract that does not guarantee a stable pattern across the leave year

Typical examples in term-time contexts include casual exam invigilators, peripatetic staff engaged as needed, ad hoc support workers brought in for specific demand and zero-hours or near-zero-hours arrangements where hours vary significantly.

Employer decision point: If you can predict the worker’s hours with reasonable certainty across the year, they are unlikely to be an irregular hours worker, even if they only work during term. Where you manage this population, align your approach with your broader irregular hours holiday pay methodology rather than relying on “term-time” as a proxy.

4. Who counts as a part-year worker?

A part-year worker is engaged under an ongoing contract but does not work for at least one full continuous week in the leave year and is not simply on unpaid leave during those weeks. This definition can capture some term-time arrangements, but it does not automatically capture all of them.

Examples that may qualify include permanent staff who work only during school terms and do no work at all during closures, where the non-working weeks are genuinely non-working and not treated as paid weeks under the contract.

Examples that usually do not qualify include staff paid on an annualised salary spread across the year or staff whose contracts treat closures as paid non-working time. In these models, the employer is more likely to be retaining the employee on a fixed arrangement rather than operating a true part-year working pattern for statutory purposes.

Employer decision point: If non-working weeks are treated contractually as paid weeks (even if no work is done), the worker is unlikely to be a part-year worker for statutory purposes in that leave year.

5. Why permanent term-time employees are often excluded from 12.07%

Many term-time only staff are permanent employees working fixed weekly hours during term and paid either via annualised salaries or predictable term-time instalments. These workers commonly fall outside the irregular hours and part-year definitions. For them, statutory entitlement remains 5.6 weeks and holiday pay follows the normal “week’s pay” framework.

This is where employers most often get caught out: applying 12.07% because the worker “only works part of the year” without establishing that the worker is legally part-year. If you need a defensible classification approach, your rationale should map back to the statutory definitions and should align with the relevant entitlement logic, including the treatment explained in holiday entitlement for irregular hours where that category genuinely applies.

6. The continuing shadow of Brazel (and why it still matters)

The Supreme Court decision in Harpur Trust v Brazel established that permanent part-year workers could not have their statutory leave reduced by pro-rating. The 2024 reforms partially displaced the practical impact of that outcome for future leave years by introducing new definitions and an accrual mechanism for qualifying workers, but they did not retrospectively validate historic underpayments or remove the need for correct classification.

Employer risk: Using 12.07% for a worker who does not meet the statutory definition does not “override” Brazel-related exposure. It creates a new, easier-to-prove underpayment across each affected pay period.

7. What employers must decide and document

For every term-time only population, employers should be able to evidence:

• which statutory category applies: fixed-hours, irregular hours, or part-year
• why that classification applies by reference to contractual terms and actual working patterns
• which leave year rules are being applied: pre-1 April 2024 or post-1 April 2024
• why 12.07% is or is not being used and why it is lawful for that worker type

This documentation is not theoretical. It is what tribunals, auditors and advisers ask for when something goes wrong.

Section B summary: The 12.07% accrual method is lawful only for irregular hours workers and part-year workers in leave years starting on or after 1 April 2024. Many term-time only staff do not meet those definitions. Applying 12.07% simply because a role is “term-time” is a classification error that creates predictable and avoidable holiday pay liability.

Section C: How must holiday entitlement be calculated for permanent term-time employees with fixed hours?

Permanent term-time employees with fixed working hours sit at the centre of most term time only contracts holiday pay disputes. They are also the group employers are most likely to mis-handle, because their working pattern looks “part-year” but their legal classification is not.

The compliance mistake is predictable: employers attempt to pro-rate statutory holiday entitlement to reflect weeks not worked. For permanent, fixed-hours term-time staff, that approach is usually unlawful.

1. The employer’s core question

“If a term-time employee works fixed hours during term but does not work during school holidays, are they still entitled to 5.6 weeks’ statutory leave?”

In most cases, where a term-time employee is engaged on an ongoing contract with fixed hours during term and is retained by the employer throughout the leave year, the answer is yes. Statutory entitlement flows from the existence and continuity of the employment relationship, not from calendar attendance.

2. Why fixed-hours term-time staff are usually not part-year workers

A permanent term-time employee will generally fall outside the statutory definition of a part-year worker where:

• their weekly or monthly hours during term are fixed and predictable
• their contract establishes an ongoing employment relationship across the leave year
• they are retained by the employer during non-working periods, even if no work is performed
• pay is structured as an annualised salary or predictable term-time instalments

In these circumstances, non-working weeks are not treated as weeks with no employment. They form part of the overall employment relationship.

Employer risk point: Describing a role as “term-time only” does not convert fixed contractual hours into irregular hours for statutory purposes.

3. The statutory entitlement position for fixed-hours term-time staff

For permanent employees with fixed hours, statutory entitlement remains 5.6 weeks’ paid annual leave. That entitlement is not converted into hours or percentages and should not be mechanically reduced to reflect weeks not worked.

This mirrors the standard Working Time Regulations approach for year-round staff, even though the working year is interrupted by school closures. Attempts to reflect “reality” through mathematical pro-rating often breach the statutory framework.

4. Why pro-rating instincts usually lead employers into breach

Employers frequently attempt to:

• reduce 5.6 weeks to reflect weeks worked
• apply a percentage reduction aligned to term-time attendance
• cap holiday entitlement to avoid perceived over-entitlement

These approaches usually fail because statutory leave is not earned only during working weeks. Retention of employment and fixed contractual certainty matter more than calendar presence.

This is why historic disputes involving fixed-hours term-time staff have been difficult for employers to defend and why applying irregular hours holiday pay logic to fixed-hours roles remains a high-risk strategy.

5. How holiday should be delivered in practice

Permanent term-time employees commonly take their statutory leave during school closure periods. This is lawful provided:

• the contract clearly identifies when statutory leave is taken
• the total leave delivered meets or exceeds 5.6 weeks
• holiday is not double-counted against unpaid non-working weeks
• workers are not prevented from taking their full entitlement

Generic statements such as “holiday is taken during school holidays” are a frequent source of dispute if the number of paid holiday weeks is not clearly defined.

6. Holiday pay calculation for fixed-hours term-time staff

Holiday pay for fixed-hours term-time employees is calculated using the normal “week’s pay” framework. It is based on normal contractual pay and does not usually require averaging over 12 or 52 weeks, because pay does not vary by reference to hours worked.

Employers should ensure that payroll logic aligns with contractual assumptions and with their wider annual leave policy, particularly where different staff populations are treated differently.

7. What happens if employers get this wrong

Mis-handling holiday entitlement for permanent term-time staff commonly results in:

• unlawful deduction claims covering multiple leave years
• claims emerging only on termination
• cohort-level disputes in schools and MATs
• budget and governance scrutiny

Because the error repeats annually, liability often compounds unnoticed until challenged.

Section C summary: Permanent term-time employees with fixed hours are usually entitled to the full 5.6 weeks’ statutory leave where they are retained on an ongoing contract throughout the leave year. Attempts to pro-rate or convert entitlement into percentages often breach the Working Time Regulations and create cumulative employer liability.

Section D: When is rolled-up holiday pay lawful for term-time only contracts and why it does not fix classification errors

Rolled-up holiday pay has returned to lawful use, but only in tightly defined circumstances. For employers managing term time only contracts holiday pay, this is one of the most misunderstood aspects of the post-2024 framework. Rolled-up pay can simplify administration, but it does not reduce statutory entitlement, does not legitimise the wrong accrual method, and does not protect against misclassification.

1. The employer’s core question

“Can we include holiday pay within regular pay for term-time staff without increasing legal risk?”

The answer is yes, but only for specific worker types and only if strict statutory conditions are met. Outside those boundaries, rolled-up holiday pay remains unlawful.

2. What changed in 2024 and what stayed the same

For leave years beginning on or after 1 April 2024, employers may lawfully use rolled-up holiday pay for irregular hours workers and part-year workers. This change reversed the long-standing prohibition, but it did not create a general permission to roll up holiday pay for all workers.

What did not change is that rolled-up holiday pay remains unlawful for fixed-hours employees, entitlement to 5.6 weeks’ statutory leave continues to apply, and workers must still be enabled and encouraged to take leave. The re-authorisation is procedural, not substantive. Further background is set out in our guidance on rolled-up holiday pay.

3. Why rolled-up holiday pay is often misused in term-time contexts

Employers frequently attempt to use rolled-up pay to resolve issues that are actually caused by incorrect classification. Common examples include rolling up pay for permanent term-time employees with fixed hours, using rolled-up pay to justify 12.07% accrual for workers who do not meet the statutory definitions, or assuming that paying “something extra” compensates for incorrect leave delivery.

These approaches fail because rolled-up holiday pay is a payment mechanism, not an entitlement mechanism. If the underlying accrual method is wrong, rolled-up pay simply embeds the error into every payslip.

4. The statutory conditions employers must meet

For rolled-up holiday pay to be lawful, employers must ensure all of the following conditions are satisfied:

• Correct worker classification: the worker must qualify as an irregular hours worker or a part-year worker for the relevant leave year.
• Correct accrual base: holiday pay must reflect statutory entitlement, typically calculated as 12.07% of hours worked for qualifying workers.
• Transparent payslip itemisation: holiday pay must be clearly and separately identified on payslips and must not be hidden within a general rate of pay.
• No deterrence to taking leave: workers must not be discouraged, explicitly or implicitly, from taking statutory leave because holiday pay has already been paid.
• Statutory scope only: rolled-up pay may be used only for the statutory minimum. Any additional contractual leave must be paid when leave is taken unless the contract lawfully provides otherwise.

5. Employer decisions that must be taken deliberately

Employers choosing rolled-up holiday pay for term-time workers should be able to answer, and evidence, why the worker meets the statutory definition, which leave year rules apply, how holiday pay is calculated and displayed, how workers are enabled to take leave, and how any additional contractual leave is treated.

These are governance and compliance decisions, not payroll preferences.

6. Why rolled-up holiday pay increases scrutiny rather than reducing it

In disputes, rolled-up holiday pay tends to attract closer scrutiny of classification decisions and makes underpayment easier to quantify. Tribunals are alert to employers using rolled-up pay as a workaround rather than a compliant method, particularly in education and public-sector-linked environments.

Where rolled-up holiday pay is used incorrectly, it often amplifies rather than mitigates employer exposure.

7. What happens if employers misuse rolled-up holiday pay

Misuse commonly results in findings of unlawful deduction despite payment, orders to re-calculate holiday pay retrospectively, liability across multiple leave years, and reputational harm. Paying something labelled “holiday pay” does not defeat a claim where the statutory framework has been breached.

Section D summary: Rolled-up holiday pay is lawful only for irregular hours and part-year workers and only when strict transparency and leave-taking conditions are met. It does not correct misclassification, does not legitimise the wrong accrual method, and does not reduce statutory entitlement.

Section E: How should school closures and non-working weeks be treated for holiday pay purposes?

School closures sit at the fault line of most term time only contracts holiday pay disputes. The error is rarely deliberate. It usually arises because employers blur three legally distinct concepts: non-working weeks, paid annual leave, and retention without work. The Working Time Regulations treat these differently, and failing to separate them properly is a common trigger for underpayment claims.

1. The employer’s core question

“Are school holidays automatically treated as paid annual leave for term-time staff?”

The answer is no. School closures can only be treated as statutory holiday where the contract and payroll system clearly and lawfully designate them as such, and where doing so does not result in under-delivery of the statutory minimum.

2. The three categories employers must keep distinct

For compliance purposes, employers must distinguish between the following:

• Statutory annual leave: the 5.6 weeks’ paid leave required under the Working Time Regulations. It must be identifiable, countable, and capable of being taken.
• Contractual non-working weeks: periods where the employee is not required to work and is not on leave. These may be paid or unpaid depending on the contract, but they are not automatically statutory holiday.
• Retention without work: periods where the employment relationship continues during closures even though no work is performed. Retention is relevant to worker classification and entitlement.

Conflating these categories is the root cause of most term-time holiday pay disputes.

3. When school closures can lawfully be treated as statutory holiday

School closures may be treated as statutory holiday only where:

• the contract clearly states that some or all closure periods constitute annual leave
• the total paid leave delivered across the leave year meets or exceeds 5.6 weeks
• workers are not required to take unpaid leave in substitution for statutory holiday
• the arrangement does not result in hidden pro-rating

Designation alone is not enough. If, in practice, fewer than 5.6 weeks of paid leave are delivered across the leave year, statutory entitlement has not been met regardless of what the contract says.

4. When school closures cannot be treated as holiday

Closures cannot be treated as statutory holiday where:

• the contract is silent or ambiguous
• closures are described as unpaid leave or neutral non-working time
• holiday entitlement is reduced to reflect weeks not worked
• workers are expected to absorb holiday into unpaid periods

In these cases, statutory leave remains outstanding and must be delivered separately.

5. Double-counting and hidden under-delivery

A common compliance failure is double-counting, where employers assume closures are holiday but also calculate entitlement as if closures are unpaid non-working weeks. This results in workers receiving less than 5.6 weeks of actual paid leave.

Another frequent issue is hidden under-delivery, where holiday is described globally (for example, “taken during school holidays”) but the actual number of paid holiday weeks is never quantified, tracked or evidenced.

6. How this plays out for different worker types

Permanent fixed-hours term-time employees: Closures are often used as the period during which holiday is taken. This is lawful only if the contract clearly identifies how much of that time is statutory leave.

Part-year workers: Closures are usually non-working weeks, not holiday. Holiday accrues separately at 12.07% and must be paid either when leave is taken or via rolled-up holiday pay where lawful.

Irregular hours workers: Closures have no automatic legal status. Holiday accrues based on hours worked and must be managed independently of the academic calendar.

7. Employer controls that reduce risk

To remain defensible, employers should:

• map the leave year against the academic calendar
• specify how many weeks of closure count as statutory holiday
• track statutory leave separately from non-working weeks
• ensure payroll mirrors the contractual position
• avoid generic references to “school holidays” in policies

Clear alignment with the organisation’s annual leave carry over rules is also important, particularly where leave cannot be taken as planned.

8. What happens if employers get this wrong

Misclassification of closures commonly leads to cumulative underpayment across leave years, disputes surfacing only on termination, cohort or union-led claims in schools and trusts, and governance or funding scrutiny.

These disputes are fact-driven and document-heavy, which disadvantages employers with unclear contracts and inconsistent payroll logic.

Section E summary: School closures are not automatically statutory holiday. Employers must clearly distinguish paid annual leave from unpaid or non-working weeks and ensure at least 5.6 weeks of identifiable, paid leave are delivered. Vague reliance on “school holidays” is a common and avoidable source of liability.

Section F: What happens to holiday pay when a term-time only worker leaves mid-year?

Leavers are where most term time only contracts holiday pay errors surface. Holiday pay disputes are often invisible while employment continues, but termination forces a final calculation. If the employer’s accrual method or worker classification has been wrong, the mistake becomes immediately measurable and legally actionable.

For HR and finance teams, leaver calculations are not a routine payroll task. They are a compliance stress test.

1. The employer’s core question

“How do we calculate outstanding holiday pay correctly when a term-time worker leaves partway through the leave year?”

The answer depends entirely on the worker’s statutory classification for that leave year and whether the employer has applied the correct accrual method from the outset. If either element is wrong, the final payment will expose it.

2. The statutory starting point on termination

Under the Working Time Regulations, workers are entitled to be paid for accrued but untaken statutory holiday on termination. Payment must reflect the correct statutory calculation method and contractual wording cannot override statutory entitlement.

This applies equally to term-time only contracts.

3. Leaver calculations for permanent term-time employees with fixed hours

For permanent fixed-hours term-time employees:

• statutory entitlement accrues on the normal basis
• the full 5.6 weeks’ entitlement applies across the leave year
• accrued leave is calculated proportionately up to the termination date

Key risk area: Employers often underpay leavers by retrospectively applying 12.07%, treating non-working weeks as reducing entitlement, or assuming holiday has been “used up” during closures without clear contractual allocation. Where statutory leave was not clearly designated and tracked, the evidential presumption often favours the worker.

4. Leaver calculations for part-year workers (post-1 April 2024 leave years)

For part-year workers in leave years beginning on or after 1 April 2024:

• holiday accrues at 12.07% of hours worked
• accrued entitlement must be calculated up to the final day of employment
• any untaken accrued holiday must be paid on termination

Where rolled-up holiday pay has been used lawfully, employers must be able to evidence that holiday pay was actually paid and properly itemised. Failure to do so undermines reliance on rolled-up pay as a defence.

5. Leaver calculations for irregular hours workers

For irregular hours workers:

• holiday accrual is based on hours actually worked
• accurate time and pay records are essential
• termination payments must reflect accrued but untaken statutory leave

Key risk area: Incomplete or inconsistent time records often prevent employers from evidencing correct accrual, shifting risk sharply in favour of the worker.

6. Pre- and post-April 2024 leave years must be treated separately

Where termination spans leave years before and after 1 April 2024, employers must apply the correct accrual method to each leave year separately. The post-2024 rules do not retrospectively validate historic calculations or cure underpayment arising in earlier leave years.

This temporal distinction is frequently overlooked and is a common source of miscalculation.

7. Why leavers expose historic compliance failures

Termination forces employers to answer questions that may have been avoided for years:

• how much statutory leave was actually delivered
• on what legal basis accrual was calculated
• whether holiday pay can be evidenced
• whether closures were treated consistently with the contract

If these questions cannot be answered cleanly, the final payslip often becomes the trigger for a claim.

8. Employer actions that reduce leaver risk

Before finalising termination payments, employers should:

• confirm the worker’s statutory category for the relevant leave year
• audit accrual logic against the correct legal framework
• verify that holiday has been correctly allocated and paid
• document assumptions used in the final calculation

For high-risk environments such as schools, MATs and public-sector-linked organisations, leaver calculations should be treated as a compliance review exercise, not just a payroll step.

Section F summary: Leaver calculations expose whether term-time holiday pay has been handled lawfully throughout the employment relationship. Correct outcomes depend on accurate worker classification and the lawful accrual method for each leave year. Errors at termination often uncover historic underpayment and trigger wider employer liability.

Section G: What are the enforcement, cost and reputational risks for employers who get term-time holiday pay wrong?

Errors in term time only contracts holiday pay rarely remain isolated. Because holiday pay is a statutory right and the same calculation logic is applied repeatedly across pay periods, a single mistake usually results in systemic underpayment. When enforcement follows, the consequences are financial, operational and reputational.

1. The employer’s core question

“What is the real downside if our term-time holiday pay approach is wrong?”

For many employers, particularly in education and public-sector-linked environments, the answer is material cost exposure, management distraction and reputational damage that far outweighs any perceived payroll saving.

2. How holiday pay enforcement typically arises

Holiday pay disputes do not usually begin with a formal audit. They tend to arise through:

• grievances raised by informed employees
• leavers querying final pay
• union or staff body challenges
• internal HR or payroll reviews
• external scrutiny following policy changes

Once raised, these issues are difficult to contain because the calculations are objective, comparators are easy to identify, and the same error often affects whole cohorts rather than individuals.

3. Financial exposure employers underestimate

The cost risk rarely sits in a single pay period. It typically includes:

• backdated holiday pay across multiple leave years
• unlawful deduction claims framed as a “series”
• associated employer NIC and pension adjustments
• professional fees for advice, negotiation and defence

For schools, academies and trusts, this can also trigger budget re-forecasting, funding body scrutiny and board-level governance issues.

4. Tribunal risk profile for term-time disputes

Holiday pay claims are attractive to claimants because they are arithmetic, evidence-driven and often cohort-based. Tribunals tend to focus on how the employer classified the worker, whether that classification was justified by contract and practice, and whether the correct statutory method was applied.

Employers relying on convenience, historic custom or sector norms are particularly exposed. Once proceedings are issued, associated costs often escalate quickly, as outlined in guidance on the average cost of employment tribunal to employer.

5. Reputational and governance impact

In education and other publicly accountable sectors, disputes over statutory holiday pay rarely remain private. They can undermine leadership credibility, prompt collective escalation and attract external attention, even where individual sums are modest.

Allegations of underpaying statutory holiday are difficult to manage reputationally and often trigger wider reviews of HR and payroll governance.

6. Operational disruption and management time

Once a holiday pay issue surfaces, employers commonly face:

• multiple grievances and appeals
• parallel payroll corrections
• contract and policy re-drafting exercises
• staff communications and consultation obligations

This diverts HR, finance and leadership capacity away from core operations.

7. Risk mitigation priorities for employers

Employers seeking to control exposure should prioritise:

• accurate worker classification for each leave year
• alignment between contracts, policy and payroll logic
• documented decision-making on accrual and payment methods
• proactive audits before disputes arise

Waiting for a challenge usually increases both cost and complexity.

8. What happens if employers take no action

Where employers continue with known or suspected non-compliance, liability continues to accrue, claims become harder to defend and exposure often expands beyond the initial workforce group.

Section G summary: Term-time holiday pay errors create cumulative financial liability, tribunal exposure and reputational risk. Because mistakes are repeatable and easy to evidence, they frequently escalate beyond individual disputes. Proactive classification and compliance decisions are significantly cheaper than reactive defence.

FAQs: Term time only contracts holiday pay

1. Is “term-time only” a legal employment status under UK law?

No. “Term-time only” is a contractual working pattern, not a statutory category. Holiday entitlement and holiday pay are determined by whether the individual is a worker or employee and whether they are classed as fixed-hours, irregular hours or a part-year worker for the relevant leave year.

2. Can all term-time only workers use the 12.07% holiday accrual method?

No. The 12.07% accrual method applies only to irregular hours workers and part-year workers, and only for leave years beginning on or after 1 April 2024. Many term-time only workers, particularly permanent staff with fixed hours, fall outside these definitions.

3. Do permanent term-time employees still receive 5.6 weeks’ statutory holiday?

In most cases, yes. Where a permanent term-time employee is engaged on an ongoing contract with fixed hours and is retained by the employer throughout the leave year, they are usually entitled to the full statutory minimum of 5.6 weeks’ paid annual leave.

4. Can school holidays automatically count as statutory holiday?

No. School closures are not automatically statutory holiday. They can only count as paid annual leave where the contract clearly designates them as such and where at least 5.6 weeks of identifiable, paid leave are actually delivered across the leave year.

5. Is rolled-up holiday pay lawful for term-time only contracts?

Rolled-up holiday pay is lawful only for irregular hours workers and part-year workers, and only where statutory conditions are met. It remains unlawful for fixed-hours employees and does not correct misclassification or incorrect accrual methods.

6. Does the Harpur Trust v Brazel decision still matter after the 2024 reforms?

Yes. The 2024 reforms changed how holiday accrues for certain workers going forward, but they did not retrospectively validate historic underpayments or remove the need for correct classification. Brazel-related risk can still arise where workers do not meet the new statutory definitions.

7. What happens if a term-time worker leaves partway through the year?

On termination, workers are entitled to payment for accrued but untaken statutory holiday. Leaver calculations often expose historic errors, particularly where the wrong accrual method has been applied throughout the employment relationship.

8. How far back can holiday pay claims go?

Claims are usually brought as unlawful deduction claims and may extend back multiple years where underpayment forms part of a series. This can create cohort-level exposure rather than isolated liability.

Conclusion

Term time only contracts holiday pay is not an administrative detail. It is a classification-led compliance issue with direct cost, governance and reputational consequences for employers. The post-April 2024 reforms offer lawful flexibility for irregular hours and part-year workers, but they also raise the stakes for getting classification wrong.

For HR professionals and business owners, the defensible approach is to identify the correct worker category for each leave year, apply the matching statutory calculation method and ensure contracts, policies and payroll systems are aligned. Reliance on labels, historic practice or administrative convenience is no longer sustainable. Proactive compliance is materially cheaper than reactive defence.

Glossary

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