Victoria Eustace and Ella Halsall, in our Employment Law team, provide practical guidance for employers on how to comply with the new duty from 6 April 2026.
What is changing and when?
From 6 April 2026, employers face a significant new obligation under the Employment Rights Act; the duty to keep detailed records of employees’ annual leave and holiday pay. This development marks a notable shift, with direct implications for HR professionals and employers. Below, we explain what the new duty involves, why it matters, and how employers can prepare effectively.
The new requirement stems from Section 35 of the Employment Rights Act 2025, which inserts a new regulation into the Working Time Regulations 1998. From 6 April 2026, under regulation 16B, employers must keep adequate records which demonstrate their compliance with employee’s entitlement to annual leave and related payments. Prior to the recent publication of the commencement regulations, it was not clear when these new requirements would come into force. The timeline is now especially tight, and is compounded by the Easter period, leaving HR teams with little room for manoeuvre.
What employers must record
From 6 April 2026, employers will be required to maintain records that demonstrate all workers, including those with irregular hours or part-time workers, have received their statutory paid holiday entitlement. The records must cover:
- Ordinary and additional annual leave taken
- Annual leave carried forward from previous years
- Details of holiday pay, including which pay elements have been included or excluded
- Any payments in lieu of annual leave, including for carried‑over leave.
Importantly, the records must be retained for six years from the date on which they were made. Employers have discretion over the format, provided the records are “adequate” to demonstrate compliance if challenged.
Administrative impact - a challenge for employers
Despite the significance of this new duty, there has been limited government communication on the subject.
For many organisations, especially those with complex leave and pay arrangements, the new duty could create a considerable administrative burden. Businesses relying on fragmented or outdated systems will need to act swiftly to ensure robust record-keeping. Even those already tracking annual leave may need to review their processes, as previously there was no explicit requirement to retain holiday pay records.
Enforcement and penalties
Enforcement of holiday record obligations will fall under the remit of the new Fair Work Agency (FWA), launching on 7 April 2026. The FWA will ultimately have extensive powers, including to enter premises (with a warrant), inspect and seize documents, and issue notices of underpayment. Penalties for non-compliance with the Working Time Regulations are severe. The FWA will have the power to issue notices of underpayments falling due in a six-year period. In addition to paying the individual(s) the specified sums due, a notice of underpayment will also require the liable party to pay a penalty to the Secretary of State and can amount to 200% of any underpayment, unless falling within limited exceptions. There is as well the possibility of criminal charges for serious breaches, such as failing to comply with enforcement orders or providing false information.
Practical steps for employers
- Audit current systems: Review existing processes for recording annual leave and holiday pay. Identify gaps and areas for improvement.
- Update documentation: Ensure records are comprehensive, covering all eligible staff and types of leave. Retain information for six years.
- Train HR teams: Provide guidance and training to HR and payroll staff on the new requirements and record-keeping standards.
- Strengthen data governance: Establish clear procedures for storing, accessing, and updating holiday records.
- Prepare for enforcement: Familiarise yourself with the FWA’s powers and enforcement processes. Be ready to respond to inspections or requests for evidence.
Employers who act in advance to strengthen their systems and processes will be best placed to demonstrate compliance and avoid penalties as the regulatory landscape evolves.
If you need assistance reviewing your holiday pay practices or implementing effective record-keeping procedures, our Employment Law team is here to help.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
