The Employment Rights Act 2025 made certain changes to the rules around holiday records, which came into effect on 6th April 2026.
Let’s break these down…
What holiday records do employers need to keep?
Employers must keep records which are ‘adequate’ to show whether the employer has complied with the following statutory obligations:
- Entitlement to leave (5.6 weeks in each leave year or, for irregular and part year workers, the amount of annual leave that they have accrued in that year, plus carry over, less leave already taken)
- Entitlement to holiday pay at the correct rate (e.g. a week’s pay in respect of each week of leave)
- Entitlement to a payment in lieu of holiday on termination (including a payment in lieu in respect of carried over leave)
It is not, therefore, just about showing a workers’ holiday entitlement (often found in their contract) and that they have received pay for this but will also involve showing pay has been calculated correctly, carry over entitlements and payments paid in lieu (and how these have been calculated).
Carrying over holiday
The law allows holiday entitlement to be carried over in the following circumstances:
- Where a worker is unable to take the leave due to a period of statutory leave (like family leave) they are entitled to carry this forward into the following leave year.
- Where a worker is unable to take the leave due to a period of sick leave they are entitled to carry this forward into the following leave year provided it is taken by the end of the period of 18 months from the end of the leave year in which the entitlement originally arose.
- Where an employer fails to recognise a worker’s right to annual leave or payment, fails to give them a reasonable opportunity to take their leave and fails to inform them that leave not taken will be lost, the worker will be entitled to carry forward any leave to which they were entitled. This essentially continues to be carried over until the employer remedies the situation.
The Employment Rights Act 2025 made certain changes to the rules around holiday records, which came into effect last month on 6th April 2026
What format do records need to be kept in?
There are no specific rules around the format these records have to take just that they must be ‘created, maintained and kept in such manner and format as the employer reasonably thinks fit’. This could be in one document or several.
Enforcement and the penalties for non-compliance
The new Fair Work Agency (FWA), established on 7 April this year, will enforce the requirements on record keeping. Strictly speaking, the FWA does not yet have enforcement powers (and there is no indication in the Government’s implementation plan as to when these might be given) however, as the rules are in force, the FWA will be able to review records retrospectively so it is important businesses start complying with record keeping requirements regardless.
In terms of penalties, a failure to keep adequate records will be a criminal offence punishable with a potentially unlimited fine. Further, if records show holiday pay has not been paid correctly, the FWA can demand payment for the sums owed and impose a penalty equivalent of 200% of the underpayment (capped at £20,000 per individual). The FWA will have other potential enforcement powers, including a right to inspect the workplace and require employers to produce documentation and evidence of compliance.
What should employers do now?
Employers will need to check their recording arrangements and assess whether these are sufficient in light of the new rules. In reality many employers already have a system for recording these details and it may just be tweaks are needed to ensure all of the above are captured and easy to produce on request. They should also review their data retention policies and procedures to ensure these records are kept for six years in line with the new requirements.
A common risk area for employers is around the calculation of holiday pay, with many organisations still confused over the types of payments that need to be included. Employers will need to make sure they are aware of the payments that need to be considered and adapt their systems accordingly.
Another area of risk for some organisations is where workers have mistakenly been categorised as self-employed. These individuals will not usually have been given holiday and will not have records available covering the above. Such workers already have the right to have holiday rolled over and paid on termination – which could amount to a hefty sum – and these penalties for non-compliance with holiday record requirements could add to this creating a substantial liability, particularly if there are large numbers of individuals involved.
Our specialist employment lawyers are ready to support you in reviewing your contracts, policies and working practices to ensure compliance with the new requirements. We can also assist you with other areas of risk for your business, including holiday pay calculations and employee status issues.
