Allowing workers to take paid annual leave is a well-known basic legal requirement, and the majority of employers have established policies in place to ensure compliance. However, new legislation introduced as part of the Employment Rights Act 2025 (the Act) has increased a number of obligations for employers when it comes to keeping certain records relating to annual leave. A change for many that has gone quietly under the radar.
Article / 9 Jun 2026
Changes to annual leave requirements: what employers need to know
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What should annual leave records include?
The changes in the Act place a duty on employers to keep records which are adequate to demonstrate compliance with the following:
- The obligation to give workers the right amount of annual leave – all workers are legally entitled to a minimum of 5.6 weeks’ annual leave per year. Part-year workers and irregular-hours workers’ leave is calculated on a pro-rata basis.
- The duty to pay workers the correct amount for annual leave.
- The duty to make a payment in lieu of accrued but outstanding holiday on termination of employment, including any holiday a worker was legally entitled to carry forward from a previous leave year.
Employers are required to keep ‘adequate’ annual leave records for six years and the records “may be created, maintained and kept in such manner and format as the employer reasonably thinks fit”.
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What if an employer doesn’t comply?
The Fair Work Agency, introduced in April 2026, will eventually have enforcement powers over non-compliance with the duty to keep records. Where employers fail to meet the requirements, they could be hit with potential fines and criminal liability. The Fair Work Agency will also have enforcement powers in relation to holiday rights generally and can issue notices of underpayment which will be 200% of the underpayment (capped at £20,000 per underpaid individual).
If, when investigating, the Fair Work Agency sees that employers are not keeping annual leave records, or are doing so inadequately, this could raise suspicions and lead to further investigations about compliance with holiday rights more generally.
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What employers need to do?
To ensure compliance, and reduce the risk of any investigation by the Fair Work Agency, employers need to:
- review how they calculate leave entitlement and whether any additional processes are required;
- check that systems and processes (including data privacy and retention policies) allow for records to be kept for 6 years;
- consider keeping records of emails/ communications encouraging employees to use up holiday before the end of the holiday leave year.
Contact an expert
If your business requires any support with understanding or implementing the above changes, please contact us and one of our experts will be happy to help.