The Surprise 6-Year Holiday Record Rule: What UK Employers Need to Know Right Now

The Surprise 6-Year Holiday Record Rule: What UK Employers Need to Know Right Now

UK business owners and HR teams are facing a sudden, major compliance challenge. With very little fanfare, the government has introduced a last-minute mandatory requirement regarding how employee annual leave and holiday pay records must be retained.

Starting 6 April 2026, under the Employment Rights Act 2025, employers are legally required to keep detailed records of employee annual leave and holiday pay for a period of six years.

Because this reform was tucked into an amendment regulations package on 16 March 2026, it completely missed the Department for Business & Trade’s heavily publicized "Plan to Make Work Pay" timeline. As a result, many employers have been left completely in the dark.

Here is what you need to know to stay compliant and avoid severe penalties.

⚠️ The Stakes: Unlimited Fines and Criminal Offenses

For many businesses, especially smaller ones, tracking time off has historically been informal, handled via basic payroll spreadsheets or loose HR portal entries. Moving forward, informal is no longer an option.

Failing to maintain these records is now a criminal offense that carries the risk of unlimited financial fines.

Furthermore, enforcement is getting a massive upgrade. Starting 7 April 2026, a new enforcement body called the Fair Work Agency (FWA) will take over from the HMRC minimum wage team. If the FWA finds that you have underpaid an employee's holiday pay, they can enforce:

·         Full repayment to the affected worker.

·         Total financial penalties of up to 200% of the underpayment (capped at £20,000 per underpaid individual).

📋 What Must You Legally Record?

Under Regulation 3(8) of the new rules, your record-keeping must be meticulous. Employers are now mandated to track and store the following four data points for six years:

·         Both ordinary and additional annual leave taken by every employee.

·         Detailed tracking of holiday carry-over, mapping exactly how much leave is rolled over from previous years.

·         Granular holiday pay breakdowns, explicitly specifying which pay elements (such as overtime or bonuses) were included or excluded from the calculation.

·         Any payments made in lieu of annual leave, including any remaining carried-over leave paid out upon the termination of employment.

> The Silver Lining: The regulations state that records can be kept "in such a manner and format as the employer reasonably thinks fit". You have the flexibility to store this information digitally or on paper, provided it is complete, accurate, and completely retrievable for six years.

🍫 Heads Up: The 2026/2027 "Fat Year" Calendar Quirk

As if a major legislative overhaul wasn't enough, the calendar is throwing an extra wrench into HR plans for the April 2026 to March 2027 holiday year.

Because Easter is based on the lunar calendar, its dates shift wildly. In 2026, Easter falls on Sunday 5 April, but in 2027, it arrives early on Sunday 28 March.

For employers whose annual leave year runs from 1 April to 31 March, this creates a "Fat Year" containing two Easters and therefore two sets of bank holidays within a single 12-month period.

How to Handle the Double Easter:

·         Check Employee Contracts Immediately: Employees are not automatically entitled to take every single bank holiday just because they appear on the calendar. Entitlements depend entirely on contract wording.

·         Watch out for Wording: If a contract specifies that an employee gets "one Good Friday off per year," they do not have an automatic right to take the second Good Friday that falls in March 2027.

·         Prepare for the Crash: The following holiday year (April 2027 to March 2028) will experience the exact opposite problem: a "Lean Year" with zero Easter bank holidays.

🛠️ Action Items for Employers

The Chartered Institute of Payroll Professionals (CIPP) advises that employers act immediately rather than waiting to see how quickly the Fair Work Agency begins audits.