Holiday Pay Records: The Quiet Change With a Loud Penalty

Some of the biggest compliance risks aren’t the ones that make headlines — they’re the ones that slip in quietly and catch employers off guard. This is one of them. Since 6 April 2026, UK employers have been under a legal duty to keep detailed holiday pay and annual leave records — and failing to do so is now a criminal offence, punishable by an unlimited fine.

This guide explains what you actually need to record, for how long, and why this change matters more than it might first appear.

A quick explainer of the terms you’ll see

• Working Time Regulations 1998 — the main UK law governing working hours, rest breaks, and statutory annual leave entitlement.
• Adequate records — the legal standard this duty is set to: records don’t need a specific format, but must be sufficient to actually demonstrate compliance if challenged.
• Statutory annual leave — the legal minimum holiday entitlement, currently 5.6 weeks per year for most workers.
• Irregular hours and part-year workers — employees whose hours vary significantly, or who only work part of the year (common in seasonal, casual, or term-time roles) — groups where holiday calculations are often more complex and more error-prone.
• Fair Work Agency (FWA) — the new enforcement body we covered in a previous article, which is expected to take on enforcement of this duty.

What actually changed

Before April 2026, employers in Great Britain had no specific legal duty to keep records of holiday taken or holiday pay. The Working Time Regulations already required records relating to maximum weekly working time, but holiday records were, at most, good practice — not a legal requirement.

From 6 April 2026, that changed. Employers must now keep “adequate” records to demonstrate compliance with:

• the requirement to give workers their correct statutory annual leave entitlement,
• the obligation to pay them correctly for that leave, and
• the requirement to pay for any accrued but untaken leave when someone’s employment ends, including leave carried over from a previous year.

Notably, this duty wasn’t originally flagged in the government’s published implementation timetable for the Employment Rights Act 2025 — it was brought in by a commencement order published on 16 March 2026, giving employers very little advance warning before it took effect three weeks later.

What you actually need to record

“Adequate” records should be able to show:

• Annual leave taken by each worker
• Annual leave carried forward from previous years
• Details of holiday pay, including exactly which pay elements were included — for example, whether overtime, bonuses, or commission formed part of the calculation
• Any payments made in lieu of unused holiday, including for carried-over leave

This duty applies to all eligible workers, including those on irregular hours and part-year contracts — precisely the groups where holiday pay calculations are most likely to go wrong, and where the government has signalled particular concern.

There’s no prescribed format. You can keep these records in whatever manner you “reasonably think fit” — spreadsheet, HR system, payroll software — but they must be retained for six years from the date they were made, and they need to actually hold up as evidence, not just exist.

Why this is a bigger deal than it sounds

It’s now a criminal offence, not just a compliance gap. Failing to keep adequate records can result in prosecution and an unlimited fine — this sits in a different category to a typical HR policy shortfall.

It applies retrospectively in effect, going forward. The six-year retention clock starts from when each record is made, meaning the administrative burden builds cumulatively — by 2032, you’ll need six full years of holiday records on hand and readily retrievable.

It’s specifically tied to Fair Work Agency enforcement. As we covered in our previous article, the FWA can conduct inspections and demand documents. Holiday pay is explicitly one of the areas its remit is expanding to cover — meaning this isn’t a theoretical risk sitting quietly in the background.

Complex pay structures are the highest-risk area. If your business has variable-hours staff, seasonal workers, or roles with overtime, commission, or bonus elements feeding into holiday pay, this is exactly where calculations are hardest to get right — and exactly where records are most likely to be incomplete.

What employers should do now

1. Audit your current holiday records. Do you actually have records of leave taken, leave carried over, and how each element of holiday pay was calculated — or does this information live informally in manager inboxes and spreadsheets?
2. Check your systems can retain records for six years. If you’re relying on a payroll system with limited history, or on outgoing staff’s records being deleted when they leave, this is a genuine gap to close.
3. Pay particular attention to irregular hours and part-year workers. These are the groups most likely to have inconsistent or incomplete holiday pay calculations — and the ones regulators are expected to scrutinise first.
4. Standardise how holiday is recorded across your business. Inconsistent practices between managers or sites can look like non-compliance even where pay was actually correct — the record needs to demonstrate compliance, not just the underlying pay.
5. Don’t wait for an inspection to find the gaps. Review this now, while you have time to fix processes, rather than under the pressure of an active Fair Work Agency inquiry.

How Cheviot HR can help

Getting this right is about process as much as policy — making sure holiday and holiday pay are recorded consistently, accurately, and in a way that will hold up years later if it’s ever challenged. We can audit your current holiday record-keeping, identify gaps before they become a problem, and help you build a system that meets the six-year standard properly.

Get in touch at heidi@cheviothr.co.uk or visit https://cheviothr.co.uk to talk through what this means for your business.