What Employers must do from April 2026
From 6 April 2026, UK employers became subject to a new, explicit legal duty to keep adequate records of workers’ statutory annual leave and holiday pay, following the introduction of section 35 of the Employment Rights Act 2025, which inserted Regulation 16B into the Working Time Regulations 1998. This change represents a significant shift in employment law enforcement, moving holiday compliance from a largely reactive system driven by individual claims, to one requiring employers proactively to evidence compliance. The purpose of the reform is to ensure that employers can demonstrate not only that workers are entitled to statutory leave, but that leave is actually taken and paid correctly in line with the law, including for those with variable hours, fluctuating pay, or non‑standard working patterns.
Before April 2026, although employers were legally required to provide statutory annual leave and to calculate holiday pay correctly, there was no specific statutory obligation to keep records showing how those obligations were met. The Working Time Regulations only imposed a record‑keeping duty in relation to working time limits, such as the 48‑hour working week, not annual leave. As a result, many employers relied on fragmented or informal systems such as rotas, payroll summaries, emails or manual spreadsheets, which often proved inadequate when disputes arose. In tribunal proceedings, the absence of records frequently shifted the evidential burden onto employers, but there was no standalone offence for failing to keep holiday records. The new duty closes that gap by making record‑keeping itself a distinct legal requirement.
Under the new regime, employers must keep records that are “adequate” to show compliance with statutory leave rights. In practice, this means being able to demonstrate how much statutory holiday each worker is entitled to, when leave was taken, whether any leave was carried forward between leave years, and whether workers were genuinely permitted to take their holiday. Employers must also retain evidence showing how holiday pay was calculated, including which pay elements were included or excluded such as regular overtime, commission or bonuses and must document any payments in lieu of untaken statutory leave on termination of employment. These requirements apply equally to employees and workers, including zero‑hours staff, part‑year workers and those with irregular hours, for whom holiday accrual and pay calculations are often most complex.
There is no prescribed format for compliance, and the legislation allows employers to keep records in any manner and format they reasonably consider appropriate. However, records must be clear, accurate, accessible and capable of demonstrating compliance if inspected or challenged. Holiday and holiday pay records must be retained for six years from the date they are created, aligning with the limitation period for many employment claims. While there is no requirement to recreate historical records prior to 6 April 2026, all records created from that date onward must meet the new standard, meaning employers should ensure existing systems are capable of supporting long‑term retention and retrieval.
To incorporate these requirements effectively, employers should take a structured approach. This includes auditing current HR and payroll systems, ensuring that holiday entitlement, booking, approval, payment and carry‑over can be tracked end‑to‑end, and confirming that holiday pay calculations are transparent and consistently applied. Particular attention should be paid to staff with variable pay or irregular working patterns, as errors are more likely to arise in these cases. Training managers on proper holiday recording and approval processes, and ensuring alignment between HR policies and payroll practices, will also be essential in creating a defensible compliance framework.
The consequences of failing to comply are severe. Failure to keep adequate holiday records is now a criminal offence, enforceable by the newly established Fair Work Agency, which has powers to inspect employers, demand repayment of underpaid holiday pay, impose financial penalties, and pursue prosecution. Employers found in breach may face unlimited fines, significant back‑pay liabilities, and additional penalties. In employment tribunal proceedings, inadequate or missing records will substantially weaken an employer’s defence, as tribunals are entitled to draw adverse inferences where statutory records cannot be produced. Beyond legal sanctions, non‑compliance also carries reputational risk and undermines an employer’s ability to demonstrate good governance and fair treatment of staff.
In summary, holiday record‑keeping is no longer merely administrative best practice. From April 2026, it is a core legal obligation with criminal consequences for non‑compliance. Employers must be able to show, with documentary evidence, when leave was taken and how holiday pay was calculated in line with the Working Time Regulations. Those that act early to embed robust, transparent systems will significantly reduce legal risk, while those that fail to adapt face meaningful regulatory and financial exposure.
