Amongst the sweeping changes to UK employment law under the Employment Rights Act (ERA), employers could be forgiven for having overlooked the new duty to keep records relating to annual leave. The duty was not even referred to in the government’s timetable for implementation of the ERA but was brought into force with effect from 6 April by a commencement order published on 16 March – leaving employers very little time to prepare for a significant administrative burden with potentially serious legal risks in the event of non-compliance.

The duty is to keep records which are ‘adequate’ to show whether the employer has complied with workers’ entitlements to holiday and holiday pay.

The records may be created, maintained and kept in such manner and format as the employer reasonably thinks fit and must be retained for six years from the date on which they were made.

Adequacy

To demonstrate adequacy of records, employers should have regard to the following points:

• Completeness: It should be possible to trace holiday and holiday pay entitlement end to end: from calculation of entitlement to booking/approval, to time off actually taken to holiday pay calculation and to payment made on time.
• Accuracy: There should be a transparent methodology for calculating ‘normal remuneration’ and reference periods with consistency across similar workers.
• Accessibility: Employers need to access records without unnecessary delay.
• Governance: There should be documented leave policies, allocation of responsibility (HR/payroll/line managers), monitoring management information, and board level oversight if appropriate.
• Retention: The business should have evidence of six-year retention controls and a further process for retaining relevant records if an investigation or litigation is contemplated or ongoing.

Enforcement

Failure to keep adequate records is a criminal offence punishable by a fine which can be of any amount (ie unlimited).  Enforcement will fall within the remit of the Fair Work Agency (FWA) which was established on 7 April 2026.  However, the FWA’s new powers of enforcement in respect of holiday and holiday pay are not yet in force and a date for these powers coming into effect has yet to be set. On 7 April the FWA published its strategic steer for its first year of operation which says that the FWA is to ‘prepare to commence holiday pay enforcement in 2027’.   This implies that enforcement in relation to holiday record-keeping may also only come into effect in 2027 although this cannot be guaranteed.

Once the FWA’s enforcement powers come into effect, they will have information gathering powers and warrant based entry and seizure available to investigate compliance.  The FWA will also have powers to issue notices of underpayment of holiday pay to individuals and associated penalties of 200% of the underpayment, and to bring claims in the employment tribunals on behalf of workers.

The FWA intends to publish its first Statutory Enforcement Strategy in April 2027 which should provide further information about its priorities.  However, the FWA Chair Matthew Taylor has said that the FWA will focus on persuading employers to comply with reforms rather than using its enforcement powers.

Action for employers

Employers have a window of opportunity now to put in place compliant record-keeping mechanisms before the risk of enforcement action by the FWA kicks in.  It will be necessary to review processes, policies and payroll systems to ensure that all relevant information is captured and that the organisation is legally compliant.

Useful links

• Employment Rights Act 2025.

Other articles in our Employment Rights Act 2025 series

• Employment Rights Act: Preparing for change: April changes coming into force – Be Aware UK
• Employment Rights Act: Preparing for change: New harassment measures extend protections for employees 
• Employment Rights Act: Preparing for change: Contract change update and action points – Be Aware UK
• Employment Rights Act: Preparing for change: The impact of changes to unfair dismissal – Be Aware UK
• Employment Rights Act: Preparing for change: Consultations on the trigger for collective redundancy consultation and detriments for taking industrial action – Be Aware UK
• Employment Rights Act: Preparing for change: First major Employment Rights Act measures come into force – Be Aware UK
• Employment Rights Act: Preparing for change: Consultations on implementation of measures on flexible working, fire and rehire and tipping – Be Aware UK
• Employment Rights Act: Preparing for change: Revised timetable for implementation – Be Aware UK
• Employment Rights Act: Preparing for change: Employment Rights Bill receives Royal Assent, becoming the Employment Rights Act 2025 – Be Aware UK

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