New Legal Duty on Holiday Records: What Employers Need to Know

From 6 April 2026, the Employment Rights Act 2025 introduced a new legal requirement for employers to keep detailed records of annual leave and holiday pay.

What many businesses have previously treated as good practice is now a statutory obligation.

What you now need to record

Employers must be able to clearly evidence:

• How much annual leave each worker is entitled to

• How much leave has been taken

• Any leave carried forward

• How holiday pay has been calculated

• Any payments made in lieu of untaken leave on termination

These records must be kept for six years.

The legislation doesn’t dictate exactly how you do this, but it does require records to be “adequate”. In practical terms, that means your records need to reflect what is actually happening in your business—not just what your policies say.

Failure to meet this requirement is now a criminal offence, with potential financial penalties.

Increased enforcement is coming

Enforcement will sit with the Fair Work Agency, a new regulator bringing together various labour market enforcement functions.

While its full powers are still being introduced, the direction is clear:
there will be greater scrutiny on how employers manage and evidence employment rights, including holiday pay.

A real example of what can go wrong

A recent Employment Tribunal case highlights the risks of getting this wrong.

In the case of Ageli v Sabtina Limited , a long-serving employee had been repeatedly unable to take annual leave due to ongoing understaffing. Over time, his untaken leave was informally carried forward, with an understanding it would eventually be paid.

This arrangement continued for decades without proper oversight.

When his employment ended in 2024, the employer refused to pay for 827 days of accrued leave. The tribunal found:

• The dismissal was unfair

• The employer had failed to provide a genuine opportunity to take leave

The outcome was a tribunal award of over £390,000 for unpaid holiday, alongside additional compensation.

While the scale of this case is unusual, the underlying issue is not.

Why this matters for your business

The right to paid annual leave under the Working Time Regulations 1998 has always required employers to ensure employees can actually take their leave.

Where that doesn’t happen, leave may carry forward rather than expire.

What’s changed is this:
you now need to prove it.

Without clear, accurate records, you are far more exposed to claims that:

• Leave was not properly managed

• Employees were prevented from taking time off

• Holiday pay has been calculated incorrectly

Informal arrangements (especially where leave is allowed to build up over time) are unlikely to stand up to scrutiny.

The risks are both financial and regulatory

Getting this wrong can be expensive:

• Claims for unpaid holiday can go back years

• Employees may also bring claims for unlawful deductions or unfair dismissal

• Poor record-keeping is now a breach of the law in itself

As enforcement ramps up, businesses that cannot clearly demonstrate compliance are likely to come under increased scrutiny.

What employers should be doing now

This isn’t just about having a policy in place. You need to ensure that:

• Employees are actively encouraged to take their leave

• Carry-over is controlled and limited

• Holiday pay is calculated correctly

• Your records accurately reflect what’s happening in practice

The focus has shifted from intention to evidence.