TimeClock 365 works with UK employers who are discovering that "we paid the right amount" is no longer enough. Since 6 April 2026, a new statutory duty under the Employment Rights Act 2025 requires employers to keep adequate records proving holiday pay was calculated correctly — and for irregular-hours and commission-based staff, that calculation is the hardest one to defend on paper.

Why irregular-hours and commission pay are the highest-risk categories

For a salaried employee on fixed hours, holiday pay is simple: it's their normal weekly wage. For everyone else, it isn't. Two groups create the most exposure:

  • Irregular-hours and part-year workers — holiday pay must reflect a 52-week average of actual earnings (skipping weeks with no pay and looking back further to fill the average), not a flat estimate.
  • Workers with regular overtime or commission — case law has established that "normal remuneration" includes regularly-worked overtime and commission that forms part of a worker's normal pay, not just basic salary.

Both calculations depend on historical pay and hours data that has to be reconstructed accurately, week by week, whenever a holiday payment is challenged — whether by the worker, an employment tribunal, or now, a Fair Work Agency inspector.

What changed on 6 April 2026

Section 35 of the Employment Rights Act 2025 inserted a new regulation 16B into the Working Time Regulations 1998. It requires employers to keep records adequate to demonstrate compliance with the core holiday entitlement provisions — including the specific rules for irregular-hours and part-year workers — and to retain those records for six years from the date they were made.

Failing to keep adequate records is now a criminal offence under the amended regulation 29 of the Working Time Regulations, carrying an unlimited fine — and this applies even where the underlying holiday payment itself was correct. A business can pay every penny it owes and still be in breach simply because it cannot show its working.

Enforcement sits with the new Fair Work Agency, which has inspection powers modelled on National Minimum Wage enforcement: it can request records without a worker having raised a claim first.

What "adequate" actually means for variable pay

Guidance doesn't hand employers a fixed template, but for irregular-hours and commission-based staff, a defensible audit trail typically needs to show:

1. The raw inputs

Clock-in and clock-out data (or approved timesheets) for every shift in the relevant reference period, plus a record of which weeks counted toward the 52-week average and which were excluded because no pay was due.

2. The commission and overtime feed

A clear link between payroll's commission/overtime figures for each pay period and the worker's holiday pay calculation — not just the final number, but the components that fed into it.

3. The calculation itself

A reconstructable method: which 52 weeks were used, how gaps were filled, and what average was applied to the specific period of leave taken.

4. A leave and attendance log

Dates of leave requested, approved, and taken, so the entitlement side of the calculation (not just the pay rate) can be checked against actual usage.

Where spreadsheets fall down

A spreadsheet can hold the numbers, but it rarely survives scrutiny as an audit trail: it's usually overwritten each pay run, has no reliable record of who changed a figure or when, and depends on someone remembering to keep six years of versions. For a workforce with genuinely variable hours or commission, that manual process compounds the risk exactly where the calculation is already most error-prone.

A system that captures clock-in data at source — through leave and PTO management tied directly to attendance records — keeps the raw inputs and the calculation output linked automatically, which is what "adequate records" is actually asking for. Pairing that with a structured HR compliance record of leave requests and approvals closes the loop between entitlement, usage, and pay.

A practical starting checklist

  • Confirm which employees fall into irregular-hours, part-year, or variable-commission categories — they need a different record set than fixed-salary staff.
  • Check whether your current system retains raw hours and pay data for a full six years, not just the current or previous tax year.
  • Make sure commission and overtime figures used in holiday pay calculations are traceable back to payroll, not entered as a manual estimate.
  • Build a simple process for producing a calculation trail on request — don't wait for a Fair Work Agency letter to find out you can't.

FAQ

Do I need to keep six years of records for every employee, or just irregular-hours and commission-based staff?

The six-year record-keeping duty under the amended Working Time Regulations 1998 applies to all workers' holiday entitlement and pay records, but the calculation itself is far more complex — and far more likely to be challenged — for irregular-hours, part-year, and commission-based staff, because their holiday pay depends on a rolling 52-week average rather than a fixed weekly wage.

Is it a criminal offence even if I paid the correct amount of holiday pay?

Yes. Under the amended regulation 29 of the Working Time Regulations 1998, failing to keep adequate records is a standalone criminal offence carrying an unlimited fine, separate from whether the underlying holiday payment was actually correct.

What counts as "adequate" records for commission-based holiday pay?

There is no single fixed template, but employers should be able to show the raw hours/pay data for the relevant 52-week reference period, the commission or overtime figures that fed into the calculation, the method used to arrive at the average, and a record of the leave dates the payment relates to.

Can a spreadsheet satisfy the new record-keeping duty?

It can technically hold the data, but spreadsheets are commonly overwritten, lack version history, and depend on manual retention for six years — all weaknesses that make them a poor fit for a record that may need to withstand a Fair Work Agency inspection or tribunal claim.

Who enforces this duty, and how would an inspection happen?

The Fair Work Agency, which launched on 7 April 2026, has inspection powers modelled on National Minimum Wage enforcement and can request holiday records without a worker first raising a complaint.

When did this record-keeping duty come into force?

The duty took effect on 6 April 2026, under Section 35 of the Employment Rights Act 2025, which inserted a new regulation 16B into the Working Time Regulations 1998.

This article is general information, not legal advice. For guidance specific to your business, contact ACAS or a qualified UK employment solicitor.