There is now a legal requirement on employers to keep detailed records of annual leave and holiday pay, as from 6th April 2026, under the Employment Rights Act 2025, which insets a new regulation into the Working Time Regulations 1998.
This came rather unexpectedly; it wasn’t included in the government’s published 2026 employment law timeline, so it has been a bit of a last-minute surprise. However, it is now in force, and all organisations must take action to ensure they are compliant.
Records that must be kept
Employers must maintain records that are adequate to demonstrate compliance with workers’ holiday rights. This includes;
- Annual leave taken (including carry-over from previous years);
- Workers’ entitlement to statutory ordinary and additional leave (5.6 weeks in total each year);
- Holiday pay calculations;
- What pay elements have been included or excluded (e.g. overtime, commission);
- Payments made in lieu of untaken holiday on termination of employment (including for any carried-over leave);
- Holiday arrangements for those on irregular hours and part-time workers.
What format should they be kept in?
The records do not need to be of a prescribed format; they can be kept in any system or structure the employer chooses to use, as long as they are clear and accessible.
How long do records need to be kept for?
All required records (as above) must be retained for six years from the date they were created.
This represents quite a change for employers and a greater admin burden for them, especially smaller ones, as in the past holiday record keeping has been a relatively informal process for most, whereas now they need to be able to actively evidence that they are meeting this new legal duty.
What are the penalties for non-compliance?
- Holiday pay claims;
- Backdated financial liability;
- Increased regulator scrutiny;
- Difficulty in defending any Employment Tribunal claims.
Failure to comply is a criminal offence, which can result in a fine.
How will it be enforced?
This new duty falls under ‘relevant labour market legislation’ and enforced by the new Fair Work Agency (FWA)- launched 7th April 2026.
The FWA’s powers will include the ability to inspect records and investigate compliance, thus showing a move towards there being stricter, evidence-based enforcement of employment rights.
What you need to do now!
To ensure compliance and reduce risk, the following steps are advised;
- Audit your current systems - review how annual leave and holiday pay are recorded across your HR and payroll systems;
- Check holiday pay calculations- ensure that they clearly evidence how calculations are done, particularly where variable pay i.e. overtime and commission, is involved;
- Identify and promptly address any gaps- looks for inconsistencies, missing date or any issues such as with informal processes;
- Ensure retention of all records- they need to be securely stored and accessible for at least six years from creation;
- Train relevant teams- make sure relevant staff such as HR, payroll, finance and managers know and understand the new requirements and what their role is in ensuring compliance.
Need further help?
Should you have any queries about this new legal duty or how to ensure compliance, do reach out to me at Strategic HR. I will be more than happy to provide you with support and guide you through embedding the requirements, whether that is in relation to your policies, procedures or providing training.
