Holiday Pay Record Keeping
A last-minute addition to the Employment Rights Act changes coming into force on 6 April 2026 has caught many employers off guard.
Holiday Pay Record Keeping
A last-minute addition to the Employment Rights Act changes coming into force on 6 April 2026 has caught many employers off guard. While much of the focus has been on the more widely publicised reforms, a new and immediate legal duty has quietly emerged: employers must now keep detailed records of annual leave and holiday pay. It is not headline-grabbing, but it is significant - and crucially, it is already here.
On the surface, this looks like an administrative change. In reality, it represents a shift in how employers need to evidence compliance. From April, organisations must be able to clearly demonstrate not just what holiday has been taken, but how holiday pay has been calculated, what elements of pay have been included or excluded, and any payments made in lieu. These records must be retained for six years and be accessible if challenged.
What does this mean for employers?
This moves holiday pay from an area where many businesses have historically relied on systems and assumptions, into one where clear audit trails are essential. If you cannot evidence your approach, you are exposed. That exposure comes in the form of holiday pay claims, backdated liabilities and increased scrutiny, particularly if another issue brings your organisation under the spotlight.
Where is the risk increasing?
The key risk lies in inconsistency. Many employers have payroll systems that process holiday pay, but fewer can clearly explain the calculation methodology or demonstrate that all relevant pay elements - particularly variable pay - have been correctly included. The danger is not always that the calculation is wrong, but that it cannot be proven to be right.
What should you be doing now?
This is not about overhauling everything overnight. It is about tightening what you already have. Employers should be reviewing whether their systems accurately capture leave data, checking how holiday pay is calculated (especially where overtime, commission or variable pay is involved), and ensuring records can be retained and retrieved over a six-year period. Training HR and payroll teams is also critical, because compliance will ultimately sit in how processes are applied day-to-day, not just how they are designed.
How to get this right
The organisations that will manage this well are those that treat it as part of a broader compliance framework, not a standalone task. That means aligning payroll, HR systems and internal processes so they tell a consistent story. It also means ensuring managers understand the basics, because gaps often emerge at the operational level rather than in policy documents.
How we can help
This is exactly the type of change where a short, focused review can make a significant difference. Whether it is sanity-checking your current approach, reviewing your holiday pay calculations, or ensuring your systems will stand up to scrutiny, we can help you identify gaps and put practical solutions in place. As set out in our Employment Rights Act guide, this is about structured preparation, not reactive fixes.
The key message? This may look like a minor change, but it creates real risk if overlooked. With the deadline already here, now is the time to make sure your approach is robust, evidenced and ready.
If you haven't already downloaded our Employment Rights Act guide, you can do so here.