New Duty to Retain Annual Leave Records For 6 Years From April 2026
Employers Will Be Required to Retain Adequate Records To Demonstrate Compliance
In an unexpected development, recent commencement regulations confirm that from 6 April 2026, a New Duty To Retain Annual Leave Records for 6 years will come into effect. The duty applies to all eligible workers, including those with irregular hours and part-year workers,not just full-time workers. The timing of this new requirement, introduced under the UK Employment Rights Act 2025 (“ERA 2025”), was previously unknown and had not featured in the Government’s implementation timelines.
Key Elements of the New Duty to Retain Annual Leave Records for 6 Years
- Employers will be required to keep “adequate” records to demonstrate compliance with entitlement to annual leave (including additional annual leave and annual leave of irregular hours and part-year workers), entitlement to holiday pay, and the requirement to make payment in lieu of holiday outstanding on termination of employment (including any carried over).
- Employers will have discretion to create, maintain and keep the records in such manner and format as they reasonably see fit.
- Records must be retained for six years from the date of creation.
What Should Adequate Records Include
- Statutory and Company annual leave taken
- Annual leave carried forward from previous years
- Details of holiday pay calculations (including what pay elements were included or excluded)
- Payments in lieu of untaken holiday on leaving
Unsure whether your organisation is meeting the new 6-year retention requirement?
Many employers are still reviewing how their current systems align with the updated record-keeping obligations.
A structured audit can help confirm compliance and identify any gaps in your processes.
Enforcement
Failure to comply with this new duty will be an offence, punishable by a fine.
The Fair Work Agency, set to be established on 7 April 2026, as part of the ERA 2025 reforms, is anticipated to play a central role in enforcing compliance. In due course, it will have a range of enforcement powers, including to request records, issue notices of underpayment, and bring employment tribunal proceedings on a worker’s behalf. However, while some of the Fair Work Agency’s powers will take effect on 7 April 2026, this does not currently include its enforcement powers in respect of annual leave and pay or annual leave records. These powers are expected to follow in phases and we await further developments.
Next Steps
This new record-keeping requirement is likely to increase the administrative burden on businesses. While many employers will already have some systems in place to record annual leave information, these processes should be reviewed to ensure that all annual leave and pay entitlements are accurately tracked and documented and can be retained for six years. Employers may want to assess their existing annual leave and pay records and consider taking remedial steps where necessary, given the increased enforcement risk.
My recommended actions you should take now, are:
- Auditing existing record-keeping systems
- Updating HR/payroll processes
- Ensuring records are retrievable for six years
- Reviewing how variable pay elements are included in holiday pay calculations
Practical point: Even where processes are in place, they are not always regularly reviewed against updated legal requirements.
A compliance audit can provide reassurance that your systems remain aligned with current obligations.
How Kea HR Supports Owners of SMEs
KEA HR works with SME owners who want practical, proportionate HR support, without corporate complexity.
We help small businesses:
- Manage probation periods properly
- Deal with underperformance confidently
- Dismiss employees fairly and safely
- Reduce tribunal risk
- Put simple, compliant processes in place
Our advice is clear, commercial, and tailored to how small businesses actually operate.
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Need clarity on your annual leave record compliance?
Our audit provides a structured review of your current processes and highlights any areas requiring attention under the new retention requirements.
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