Holiday Pay Records Are Changing – What Every Employer Needs to Know

The Employment Rights Act 2025 brings major changes to UK employment law, including a new requirement from 6 April 2026 for employers to keep detailed holiday pay records for at least six years, with failure to comply potentially treated as a criminal offence carrying unlimited financial penalties.

Holiday pay has often been a difficult area for employers, especially for those with staff working part time, irregular hours or on zero‑hours contracts. Confusing calculations and poor records have frequently led to disputes and costly backdated claims. The new requirement for mandatory record keeping aims to prevent these issues by ensuring employers hold accurate information so employees receive the correct holiday pay. This obligation will be overseen by the Fair Work Agency, the newly established Government body responsible for enforcing employment rights and investigating non‑compliance.

Employers will now be legally required to keep complete records of all annual leave taken, covering both standard and additional entitlement. They must also retain clear evidence showing how holiday pay has been calculated, including which elements of pay, such as bonuses or commissions, were included. Any leave carried over from earlier years must be logged, and businesses must record any payments made for untaken holiday when an employee leaves.

These obligations form part of the wider set of reforms within the Act, which also introduces changes relating to predictable working hours, dismissal protections and measures to tackle workplace harassment, further tightening the overall employment framework.

For employers, the message is straightforward.

Effective systems for recording holiday entitlement and pay are now essential, and businesses will need to ensure that information is accurate and easy to retrieve, particularly for employees with variable working patterns. Many organisations may need to update their payroll or HR software so they can provide records promptly when required. This will become increasingly important as the Fair Work Agency exercises its authority to check compliance.

While some elements of the Employment Rights Act 2025 will not come into force until later in 2026 or 2027, the 6^th April saw a number of other introductions as well as the mandatory holiday pay records. These included the removal of the lower earnings limit and waiting days for eligibility for Statutory Sick Pay; Paternity Leave becomes a day one right; protection against whistleblowing sexual harassment; increased awards for failure to consult in a redundancy situation.

Reflecting on the significance of this development, Wende Hubbard, Managing Partner at Burgis & Bullock, said: “The new legislation sees additional burden placed on employers and their HR departments. It is now more important than ever that businesses ensure that their documentation and processes reflect the latest employment requirements.”

Wende Hubbard, Managing Partner at Burgis & Bullock