It sounds to me it is talking about holiday pay, which is pay that you get if you go on holiday. Let's say you have a working contract that includes one week or two weeks of holiday pay.
If this is the correct context for the sentence, then the sentence is saying that if the teacher does not go on vacation that year, he or she cannot ask for the money that would have been given for vacation time to be given to him/her in addition to his/her work pay. Vacation pay is only given if a vacation is taken.
Note, 'in lieu of' means 'instead of'
Yet maybe it is in a different context, in which the teacher is forced to take some
time off, unpaid. If that teacher instead chooses to work during that time, he or she cannot expect to get paid.
You need to know the context to know for sure what it is saying.