Model deckchair with a cocktail umbrella above it, next to four piles of coins
Holiday pay – new record keeping requirements

As of 6 April 2026, UK employers face one of the most significant shifts in holiday pay compliance in decades. New requirements to keep holiday pay records now apply as part of a much broader transformation in employment law under the Employment Rights Act 2025.

Taken together, these developments signal a clear move towards stricter compliance expectations, greater transparency, and increased risks for employers if they do not fully comply.

Holiday pay record keeping

From 6 April 2026, employers are now legally required to keep detailed records of workers’ annual leave and holiday pay. 

This obligation represents a fundamental change. Historically, while employers needed to comply with holiday pay rules, there was no explicit requirement to maintain comprehensive records demonstrating that compliance. 

Under the new rules, employers must retain records showing:

  • holiday entitlement for every worker
  • holiday leave actually taken (including dates)
  • leave carried forward from previous years
  • holiday pay calculations (including supporting evidence and details of what elements were included or excluded)
  • zero hour contracts calculations, including the methodology used
  • payments in lieu of untaken leave on termination, including carried forward leave
  • evidence that workers were able to book and take their statutory leave

Critically, these records must be kept for at least six years from the date when the records were made. The records can be kept in any format the employer thinks reasonable. This could be dedicated software, a spreadsheet or a paper-based system.

The requirements apply not only to employees, but to all workers including those on part-time, zero or irregular hours contracts, agency and casual staff. This creates a significant administrative burden, especially for organisations with complex pay structures or large, flexible workforces.

Proving compliance

The key shift is not just in what employers must do, but in what they must prove.

Holiday pay calculations have long been complex, particularly for workers with variable pay. UK law requires that holiday pay reflects “normal remuneration,” including elements such as overtime and commission where applicable. For many workers, this is calculated using a 52-week reference period, capturing average earnings over time. 

In practice, errors are common. However, under the new regime, the risk is no longer limited to underpayment claims, it extends to failure to demonstrate compliance.

Perhaps the most striking development is that failure to keep adequate holiday records is no longer just a technical issue. It could now amount to a criminal offence, with potentially unlimited fines.

The Fair Work Agency (FWA), launched in April 2026 has enforcement rights for the new requirements.

Practical implications for employers

For employers, the message is clear: holiday pay is no longer a low-level compliance issue. It is a core legal and financial risk area. Organisations that rely on manual systems may face particular challenges.

Key actions include:

  • Reviewing holiday pay calculations to ensure all required elements of pay are included
  • Implementing robust record-keeping systems capable of evidencing compliance 
  • Aligning HR and payroll processes to ensure consistency
  • Conducting internal audits to ensure new procedures are adhered to

Ultimately, the new holiday pay rules are just one element of a wider transformation under the Employment Rights Act 2025.

With stronger enforcement, extended rights, and increased penalties, the UK is moving towards a model where:

  • Compliance must be demonstrable, not assumed
  • Enforcement is centralised and proactive
  • The consequences of non-compliance are significantly higher

For employers, adapting to this new environment will require not just technical accuracy, but a more strategic approach to workforce compliance.

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.