Holiday law changes from 2026 — what employers need to know & do

From 6 April 2026, employers have faced a new statutory duty to keep records relating to annual leave and holiday pay. Introduced by the Employment Rights Act 2025 (ERA), this marks a shift in how holiday compliance is enforced.

Here, Parmida Reis-Ghaleh and Hannah Morrison from our award-winning employment team explore what the new record-keeping requirements mean for employers, the risks of non-compliance and steps that organisations should take now to prepare.

What changed in 2026?

Mandatory holiday record‑keeping (from 6 April 2026)

All employers are now required to keep adequate and accurate records demonstrating compliance with statutory holiday entitlement and holiday pay obligations. This duty applies universally across the workforce, regardless of seniority, employment status or working pattern — and therefore captures full-time, part-time, irregular hours and casual workers alike.

The obligation isn’t limited to simply recording time off — rather, it extends to documenting how both holiday entitlement and pay are calculated. In practice, this will require employers to ensure that their systems and processes provide a transparent and auditable account of how holiday rights are administered in each case.

What records must be kept?

Employers must keep records to show that, for each worker, they have complied with their entitlement to:

1. annual leave
2. holiday pay (including payment in lieu of untaken holiday on termination of employment).
    

While the regulations don’t specify precisely what records need to be kept in order to demonstrate compliance, it would be prudent for employers to keep records of the following:

• Each worker's statutory annual leave entitlement, including any holiday carried forward from previous years.
• Holiday bookings, approvals and leave taken.
• Communications reminding workers to take their holiday allowance each year and warning that any untaken leave at the end of the leave year will be lost (except where it can be carried forward). 
• Holiday pay calculations, including any 52-week reference period calculations (where relevant) and the pay elements included (such as overtime, commission and bonuses). 
• Payroll data showing holiday payments made.
• Payments in lieu of accrued but untaken holiday on termination of employment.
• For irregular-hours and part-year workers, the accrual methodology used and associated holiday pay calculations.

These records must be retained for a minimum period of six years. While there’s flexibility as to the format — whether held within HR systems, payroll platforms or spreadsheets — the records must be complete, accurate and readily accessible in the event of inspection or challenge.

There’s also a data protection element to consider. As these records contain personal data, employers must ensure that they’re handled in accordance with UK GDPR requirements. In practice, this means being transparent with workers about how their holiday information is used, informing them that records will be retained for a minimum six-year period and having processes in place to retrieve records when responding to subject access requests.

Why this matters

The introduction of a statutory record-keeping duty raises the stakes for employers. Failure to maintain adequate records will constitute a criminal offence, exposing organisations to the risk of unlimited financial penalties.

Enforcement will sit with the newly established Fair Work Agency (FWA), which will have the power to investigate employers proactively. The FWA’s enforcement powers are being phased in and holiday pay enforcement is expected to begin in 2027, although a commencement date hasn’t been confirmed. This marks a notable departure from the current position, where enforcement is largely driven by individual worker complaints. The FWA’s ability to initiate investigations independently increases the likelihood of scrutiny, particularly in sectors with complex pay structures or non-standard working arrangements (for example, retail and hospitality).

There’s also a clear litigation risk. In the absence of adequate records, employers may find it difficult (if not impossible) to defend claims relating to underpayment of holiday pay or disputes concerning entitlement. The burden, in practical terms, will shift towards employers to demonstrate compliance through documentary evidence.

What employers should do now

Immediate actions

• Review the holiday and holiday‑pay data that you currently record.
• Identify any gaps (especially around pay components and carry‑over).
• Ensure that records are retained for six years.

Systems & processes

• Check that HR and payroll systems can produce a clear audit trail.
• Avoid fragmented records held only by individual managers.
• Ensure that holiday booking, approval and payment processes align.

Governance

• Assign responsibility for holiday compliance (HR/payroll).
• Train managers on correct holiday recording.
• Keep written holiday policies up to date.

Key takeaway

Records relating to holiday and holiday pay can no longer be treated as a routine administrative or payroll function. Employers must be able to evidence — in a clear and systematic way — how holiday entitlement and holiday pay have been calculated and applied in practice.

Those who can’t do so will face not only increased exposure to claims but also the prospect of criminal sanctions and regulatory enforcement. Preparation, particularly in reviewing systems, processes and governance structures, will therefore be critical in mitigating risk and ensuring compliance under the new regime.

Talk to us

As one of the largest and most specialised employment law teams in the country, we’re closely tracking every development and helping employers to prepare for the practical implications. 

Whether you need advice on holiday pay compliance, updating policies or navigating wider ERA reforms, our award-winning team is here to help.

Talk to our team by calling 0333 004 4488, emailing hello@brabners.com or completing our contact form.