The Employment Rights Act 2025 introduces a significant new duty for employers to maintain detailed records of annual leave and holiday pay, marking a shift towards stronger enforcement of workers’ rights in the UK. These changes, expected to take effect from April 2026, form part of wider reforms aimed at improving transparency and accountability in the workplace.
This change was not part of the timeline of changes coming into force as a result of the Employment Rights Act and there has been no announcement from the government on this. This change was spotted in Reg 3(8) of the commencement regulations which brings into force Section 35 of the Employment Rights Act 2025.
Under the new regulations, employers are required to keep “adequate records” demonstrating compliance with statutory annual leave entitlements and holiday pay obligations. This includes records of leave taken, payments made, and how holiday pay has been calculated, particularly where variable elements such as overtime or commission are involved. Importantly, these records must be retained for a minimum of six years, aligning the requirement with existing obligations for National Minimum Wage compliance.
This represents a notable departure from the previous position, where employers only needed to keep records they “reasonably thought fit” to demonstrate compliance, without a strict obligation to record annual leave in detail. The new statutory duty therefore formalises record-keeping as a legal requirement rather than a matter of good practice.
The reforms are supported by enhanced enforcement mechanisms. A new body, the Fair Work Agency, will have powers to inspect records, investigate breaches, and impose penalties where employers fail to comply. Failure to maintain adequate records may constitute a criminal offence and expose employers to fines, as well as increasing the risk of adverse findings in employment tribunal claims.
In practical terms, employers must review their systems to ensure accurate tracking of leave and pay calculations.
If you have any questions on any of the issues raised in the above article, please contact Natalia Milne.