What Changed in UK Holiday Pay Law in 2026?
The Employment Rights Act 2025 introduced a new statutory duty for UK employers: keeping "adequate records" of annual leave taken and holiday pay calculations for every worker. The duty took effect on 6 April 2026 and applies to all employers in England, Wales, and Scotland, regardless of size.
This is the most significant change to UK time-off compliance in over a decade. It does not change how much holiday employees are entitled to - the statutory minimum remains 5.6 weeks (28 days for a full-time, 5-day-a-week worker). What changed is the paperwork employers must now prove they're keeping.
The Three Things Employers Must Now Do
1. Keep Adequate Holiday Records for 6 Years
Employers must retain records showing how much statutory annual leave each worker has taken, and how holiday pay - including any termination payment in lieu of untaken leave - was calculated. This brings holiday record-keeping in line with the retention period already required for National Minimum Wage compliance.
2. Be Ready for Fair Work Agency Inspections
The Fair Work Agency (FWA) became operational on 7 April 2026, consolidating enforcement powers previously split between HMRC, the Employment Agency Standards Inspectorate, the Director of Labour Market Enforcement, and the Gangmaster and Labour Abuse Authority. The FWA can inspect business premises and interview workers without waiting for a worker complaint, and can issue penalty notices - including unlimited fines - for inadequate record-keeping.
3. Track Regular and Contractual Pay Components Accurately
Holiday pay calculations must reflect regular and contractual pay elements, not just base salary. Employers relying on manual spreadsheets or informal leave tracking face real exposure here, since "adequate records" means records that can reconstruct exactly how a figure was calculated, on demand, years later.
Who Is Affected?
Every UK employer with staff entitled to statutory annual leave - full-time, part-time, casual, and zero-hours workers included. Businesses using paper leave forms, email approvals, or disconnected spreadsheets are at the highest risk, since these systems rarely retain calculation history or produce an audit-ready report on short notice.
How TimeClock 365 Helps You Comply
TimeClock 365's leave management module automatically logs every holiday request, approval, and pay calculation with a timestamped audit trail - stored for as long as you need it, well beyond the 6-year minimum. Combined with our HR compliance reporting, you can generate an inspection-ready record for any employee, for any past leave year, in seconds rather than searching through spreadsheets or paper files.
Frequently Asked Questions
Do I need to change how much holiday I give employees?
No. The statutory minimum entitlement of 5.6 weeks (28 days for a full-time worker) has not changed. What changed is the record-keeping duty around how that leave and its pay are tracked and evidenced.
How long do I need to keep holiday pay records?
At least 6 years, matching the retention period already required for National Minimum Wage records.
What happens if I don't keep adequate records?
Failure to keep adequate holiday and holiday pay records is a criminal offence under the Employment Rights Act 2025 and can result in fines from the Fair Work Agency, which can inspect and investigate without a prior worker complaint.
When did this rule start?
The record-keeping duty took effect on 6 April 2026. The Fair Work Agency became operational the following day, 7 April 2026.
Does this apply to small businesses?
Yes. The duty applies to all UK employers with workers entitled to statutory annual leave, regardless of company size.
This article is for general information and does not constitute legal advice. For guidance specific to your business, consult ACAS or a qualified employment law solicitor.