If you have not yet looked at your holiday pay record-keeping processes, now is the time. From 6 April 2026, keeping adequate records of annual leave and holiday pay is no longer just good practice;. iIt is a legal requirement. And with very little notice from the Government, many employers are only just finding out.
At Thrive Law, we want to make sure you feel informed, prepared, and confident, not overwhelmed. So here is everything you need to know, broken down simply.
What Has Changed?
The new rules introduce a legal duty for all employers to keep what the legislation describes as “adequate” records that demonstrate compliance with annual leave and holiday pay entitlements. These records must be kept for six years, and the duty applies to all workers regardless of contract type, hours, or sector.
This is not a change that only affects larger businesses. Whether you employ five people or five hundred, the same rules apply.
What Records Do You Need to Keep?
Here is a straightforward breakdown of what your holiday pay records need to cover:
- Annual leave taken by each worker, including dates and the number of days or hours
- Leave carried forward from one leave year to the next, with clear justification
- How holiday pay was calculated, particularly for workers with variable pay or irregular hours
- Payments of accrued but untaken holidayin lieu of leave, such as those made on termination of employment
- Night working records, where applicable to your workforce
If you have workers on irregular hours, zero hours contracts, or with variable pay, it is especially important to make sure you can evidence how their holiday pay has been calculated. This has been a common source of tribunal claims in recent years, and clear records are your best protection.
Do Not Overlook Payslips
Even where a worker’’s pay does not change from week to week or month to month, payslips should now clearly reflect what leave was taken during that pay period and what type of leave it was, whether that is statutory annual leave, contractual leave, or something else.
It is a small detail that many payroll teams are not currently accounting for, but it is exactly the kind of thing that will be scrutinised in a tribunal or compliance review. Getting it right from the start is far easier than trying to unpick it later.
What Is the Risk of Getting This Wrong?
We want to be straightforward with you here. Non-compliance is a criminal offence, punishable by fine. This is not just an HR headache. It is a legal risk that sits at board and leadership level, and it applies from 6 April 2026 regardless of whether your business is aware of the change.
Beyond the financial penalty, poor records create real vulnerability in any employment tribunal claim, particularly those relating to underpaid holiday pay, which continue to rise year on year.
Three Things to Do Before 6 April 2026
The good news is that there is still time to get this right. Here is where to focus:
1. Review your current records
Be honest about what you have in place right now. Do your records cover all five categories above? Are they stored in a way that is accessible and retrievable for up to six years? If not, that is your starting point.
2. Brief your payroll and HR teams
This change touches both payroll and HR, so they need to be working from the same page. Share the checklist above, update any internal guidance, and make sure everyone responsible for leave management and payslip production knows what is expected from 6 April onwards.
3. Get a formal leave management system in place
If you are still managing holiday on a spreadsheet or via email (or a whiteboard, heaven forbid!), this is your sign to change that. A proper leave management system does not need to be expensive or complicated, but it does need to produce the kind of audit trail the law now requires.
Why Is This Happening Now?
Holiday pay has been a hotbed of employment litigation for years. Cases around how pay is calculated for workers with variable hours, commission, and regular overtime have been working through the courts and tribunals for a long time. These new requirements are part of a broader push to make compliance clearer, more consistent, and more enforceable.
Getting your records right is not just about compliance. It is about protecting your people and your business, and demonstrating that you take your responsibilities seriously.
Final Thoughts
We know change like this can feel daunting, especially when it lands with so little notice. But the businesses that act now are the ones that will avoid the stress, the fines, and the reputational risk further down the line.
If you are unsure about your current holiday pay practices more broadly, it might also be worth reviewing how you calculate pay for your variable hours workers. This is an area where we support a lot of employers, so you are not alone in finding it complex.
We Are Here to Help 💬
Not sure where to start? The Thrive Law team can help you review your current holiday pay approach, update your processes, and make sure you are fully compliant before 6 April 2026.
Get in touch with us at enquiries@thrivelaw.co.uk or call us on 0113 861 8101. We would love to help you get ahead of this.
