From 6 April 2026, every employer in the UK must retain holiday pay and annual leave records for a minimum of six years. This isn't guidance. It isn't best practice. It's a legal requirement, and failure to comply is a criminal offence carrying unlimited fines.

The new Fair Work Agency is launching at the same time, armed with powers to inspect your premises, seize documents, impose penalties, and bring criminal proceedings against employers who don't keep adequate records. The days of winging it with spreadsheets and memory are officially over.

This article explains exactly what's changing, what records you need to keep, what the Fair Work Agency means for your business, and what you should be doing right now to prepare.

What's changing from 6 April 2026

The Employment Rights Bill introduces a mandatory requirement for employers to retain detailed holiday pay and annual leave records for a minimum of six years. This aligns with the existing six-year retention requirement for National Minimum Wage records, creating a consistent standard across employment record-keeping.

Under the new rules, you must be able to demonstrate several things for every employee, both current and former.

Statutory leave taken. A complete record of all annual leave taken by each employee, including dates, duration, and the type of leave.
Holiday pay calculations. How you calculated holiday pay for each period of leave, including the methodology used and the figures that fed into the calculation.
Hours worked. Particularly important for part-time, irregular, and zero-hours workers where holiday entitlement is calculated using the 12.07% accrual method.
Variable pay components. If holiday pay includes overtime, commission, bonuses, or other variable elements, you must record what was included and how it was calculated.

These records must be retained for six years, even after an employee has left your business. That last point is critical. You can't delete someone's records when they hand in their notice. You must keep them for six full years from the relevant date.

The six-year requirement creates a lookback window that matches the limitation period for tribunal claims. In practice, this means an employee, or the Fair Work Agency acting on their behalf, could examine your records going back six years to check whether holiday pay was calculated and paid correctly.

What records you need to keep

The legislation refers to "adequate records," but what does that actually mean in practice? Based on the requirements set out in the Employment Rights Bill and guidance from employment law specialists, your records should include the following for each employee.

Leave records

Total annual leave entitlement for each leave year, including any contractual entitlement above the statutory minimum.
Leave taken. Dates and duration of every period of annual leave, with records of requests and approvals.
Leave remaining. Running balance of unused entitlement throughout the leave year.
Carry-over. Any leave carried over from a previous year, the reason for carry-over, and the deadline for using it.
Leave refused. Dates and reasons for any leave requests that were declined.
Bank holidays. How bank holidays were treated, whether they were included in the statutory entitlement or provided in addition.

Pay records

Holiday pay calculations. The method used to calculate holiday pay for each period of leave.
Reference period data. The pay data used in the reference period for calculating average earnings, typically the 52-week reference period.
Variable pay included. Overtime, commission, bonuses, allowances, and any other variable components that were factored into holiday pay calculations.
Rolled-up holiday pay. If you use rolled-up holiday pay for irregular or part-year workers, records showing the 12.07% calculation and how it was itemised on payslips.

Employment records

Hours worked. Particularly for variable-hours employees, including part-time, irregular, and zero-hours workers.
Working pattern. The employee's contracted hours and any changes to their working pattern during the record period.
Employment dates. Start date, end date, and any breaks in service.

This might sound like a lot, and it is. But the good news is that most of this information should already exist somewhere in your business. The challenge is making sure it's stored in a format that's accessible, accurate, and auditable for six years.

HR holiday compliance hero illustration

The Fair Work Agency and what it means for you

The Fair Work Agency is a new government enforcement body launching in April 2026. It consolidates three existing bodies into a single, more powerful agency chaired by Matthew Taylor CBE. The consolidation is designed to make enforcement more effective and to create a single point of contact for both compliance and guidance.

The Agency's powers are extensive. It can inspect your premises, interview your workers, require you to produce records, seize documents, issue penalty notices, and bring criminal proceedings. These aren't theoretical powers held in reserve. The Agency has been established with the explicit intention of using them.

What the Fair Work Agency can do

Workplace inspections. The Agency can enter your premises to inspect records and interview employees. You are required to cooperate.
Document seizure. If there's evidence of non-compliance, the Agency can seize documents and records for examination.
Civil penalties. Financial penalties can be issued for non-compliance, with the potential for 200% penalties in serious cases.
Criminal sanctions. Failure to keep adequate records is a criminal offence. The Agency can bring criminal proceedings, and fines are unlimited.
Legal proceedings on behalf of workers. The Agency can bring tribunal claims on behalf of employees who have been underpaid holiday pay, even if the employee hasn't raised a complaint themselves.
Cost recovery. The Agency can recover the costs of its investigations and enforcement actions from non-compliant employers.

It's important to understand that the Fair Work Agency isn't only about catching bad employers. It has a dual role: enforcement and guidance. For businesses that are genuinely trying to comply, the Agency will provide support and resources. But for those that aren't keeping adequate records, the consequences are severe.

What happens if you don't comply

The consequences of failing to keep adequate holiday records from April 2026 are more serious than many employers realise. This isn't an area where you'll get a polite letter and a second chance.

Criminal offence. Failure to keep adequate records is a criminal offence, not merely a civil matter. This is a significant escalation from the previous regime and reflects the government's intention to take holiday pay compliance seriously.
Unlimited fines. There is no cap on the fines that can be imposed for non-compliance. The size of the fine will reflect the severity of the failure and the size of your business, but the theoretical maximum is unlimited.
Six-year lookback. The Fair Work Agency can examine your records going back six years. If you haven't been keeping adequate records during that period, every year of non-compliance is potentially a separate issue.
Tribunal claims on your behalf. The Agency can raise tribunal claims on behalf of your employees without those employees needing to bring the claim themselves. This removes the barrier that previously protected some employers, where individual employees were reluctant to make a complaint.
200% penalties. In cases of serious or deliberate non-compliance, penalties of up to 200% of the underpayment can be imposed. This is designed to make non-compliance more expensive than compliance.
Naming and shaming. The government has indicated that non-compliant employers may be publicly named. The reputational damage from being named as an employer that doesn't pay holiday correctly can be significant, particularly in competitive labour markets.

The combination of criminal liability, unlimited fines, and a six-year lookback makes this one of the most consequential compliance changes for UK employers in recent years. Ignoring it isn't an option.

How to prepare now

April 2026 is weeks away. If you haven't started preparing, the time to act is now. Here's a practical checklist for getting your business ready.

Professional UK HR holiday compliance infographic

Audit your existing records

Start by understanding what you currently have. Pull together your existing leave records, holiday pay calculations, and employment data. Identify gaps. Are your records complete for the current year? What about the past two or three years? You can't fix what you don't know is broken.

Pay particular attention to variable-hours employees, part-time workers, and anyone on irregular contracts. These are the cases where holiday pay calculations are most complex and where errors are most likely to exist.

Implement a digital system

If you're still managing leave through spreadsheets, paper forms, or email, it's time to move to a proper digital system. Manual records are difficult to maintain, easy to lose, and almost impossible to audit reliably over a six-year period.

Dedicated HR and leave management software automatically stores leave requests, approvals, calculations, and audit trails in a format that's designed for long-term retention. Platforms like Sage HR, which integrates directly with Sage Payroll, automatically maintain the kind of comprehensive records that the new legislation requires.

Train your HR and payroll teams

Make sure everyone involved in managing leave and calculating holiday pay understands the new requirements. This includes HR staff, payroll administrators, and line managers who approve leave requests. The rules around variable pay, the 52-week reference period, and the 12.07% accrual method for irregular workers are areas where mistakes commonly happen.

Document your processes. If the Fair Work Agency asks how you calculate holiday pay, you should be able to point to a clear, written policy rather than relying on individual knowledge.

Update your retention policies

Review your data retention policies to ensure they cover the six-year requirement for holiday and leave records. This applies to records for current employees and former employees alike. Make sure your HR systems are configured to retain records for the required period rather than automatically deleting them when an employee leaves.

Also consider GDPR implications. You need to retain records for six years for employment law compliance, but you must also ensure that the data is stored securely and accessed only for legitimate purposes. These two requirements can coexist, but you need to plan for both.

Review your holiday pay calculations

Use this as an opportunity to review how you calculate holiday pay, particularly for employees with variable hours or variable pay. Common errors include failing to include overtime in holiday pay calculations, not using the correct reference period, and miscalculating entitlement for part-year workers.

If you discover errors in your current calculations, fix them now. It's far better to identify and correct mistakes proactively than to have the Fair Work Agency discover them during an inspection with a six-year lookback.

Why software matters here

The six-year retention requirement fundamentally changes the practicality of manual record-keeping. A spreadsheet might work for tracking this year's leave, but maintaining accurate, auditable records across six years for every current and former employee is a different proposition entirely.

Paper forms get lost. Spreadsheets get overwritten. Email approvals get buried in inboxes. None of these formats are designed for the kind of long-term, structured record-keeping that the new rules demand.

Digital HR and leave management software solves these problems by design. Every leave request, every approval, every calculation is recorded automatically with timestamps and audit trails. Records are stored centrally, backed up securely, and accessible when needed.

Platforms like Sage HR and Sage Payroll, for example, automatically store leave records, holiday pay calculations, and approval histories in a format that's ready for inspection. The digital audit trail is maintained without anyone having to remember to update a spreadsheet or file a piece of paper. For businesses already using these tools, compliance with the new requirements happens largely in the background.

The cost of implementing a digital system is modest compared to the potential consequences of non-compliance. Even the most affordable leave management platforms cost a fraction of what a single unlimited fine or criminal prosecution would involve. More importantly, they save the hours of manual work that would otherwise be needed to maintain six years of records by hand.

The bottom line

The new holiday record-keeping rules from April 2026 represent a significant compliance obligation for every UK employer. The combination of six-year mandatory retention, criminal liability for non-compliance, unlimited fines, and a new enforcement agency with real teeth means this is not something you can afford to ignore or postpone.

The good news is that preparing doesn't have to be complicated. Audit what you have, implement a digital system, train your team, and update your retention policies. If you take these steps now, you'll be in a strong position when the rules take effect and when the Fair Work Agency comes knocking.

Don't wait until you're facing an inspection to discover that your records aren't adequate. The businesses that act now will be the ones that navigate this change without disruption. The ones that don't may find themselves dealing with consequences that are far more expensive and stressful than the effort of getting it right in the first place.

From April 2026, keeping adequate holiday records isn't optional. It's a criminal offence not to. The six-year retention requirement means the records you create today will need to survive until 2032. If your current system can't guarantee that, it's time to upgrade.

This article is for informational purposes only and does not constitute legal advice. The information is based on the Employment Rights Bill and associated guidance available at the time of writing. Employment law is subject to change, and you should consult a qualified employment lawyer or HR professional for advice specific to your business.

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