Employment Rights Act 2025: Holiday Record-Keeping
One last minute addition to the legislative changes on 6th April is a new duty on employers to keep and retain worker annual leave and holiday records.
The records will need to be kept for 6 years from the date on which they were made and should include:
- Ordinary and additional annual leave
- Annual leave carried forward from previous years
- Details of holiday pay, including which pay elements have been included or excluded
- Any payments in lieu of annual leave, including for carried-over leave.
Failure to comply will amount to a criminal offence, punishable by a fine, and it is expected that the enforcement of these new obligations will fall within the remit of the new Fair Work Agency.
Holiday Refresh: Do you include regular payments in your holiday pay calculations?
Whilst not new legislation, with the increasing scrutiny of holiday record-keeping, we felt it beneficial to have a refresh of a common miscalculation for holiday pay.
- The Fair Work Agency will be established on 7th April but will be introduced in phases with timescales and further information to follow in due course.
- Of the 28 statutory holidays that workers are entitled to during the holiday year, the first 20 of these must also consider any regular overtime that has been worked.
- For example, Alex is contracted to 20 hours per week but regularly works 5–15 hours of overtime per week.
- When they take their first week of annual leave, they are entitled to be paid an amount that reflects their average weekly earnings over the past 52 weeks, not their contracted amount.
- Alex’s employer calculates that they have been working an average of 27 hours per week in the 52 weeks prior to Alex’s annual leave, so Alex is paid 27 hours in holiday pay for the week.
- The tribunal case Palanki v The Big Table Group found that tips should also be included in holiday pay, where they are contractual, intrinsically linked to the performance of duties and are paid by the employer to the employee.
- In this particular case, the employee would lose approximately 50% of their wages when on annual leave if tips were not included.
- When deciding if a regular payment should be included, it can helpful to consider whether the exclusion of that pay would act as a deterrent to taking annual leave.
- Any holidays after the first 20 days can be paid at the workers’ contracted amount, though some employers choose to consider regular overtime for all holidays, for ease of calculation.
Reminder to have your say – 5 open consultations
The Government have opened several new consultations relating to the Employment Rights Act 2025 and their plan to “Make Work Pay”. They are inviting views from employers, workers, trade unions and members of the public who are likely to be affected by the new framework. If you would like to get involved in any of the topics below, you can follow the links and submit your views by the closing dates shown:
- Improving access to flexible working - closes: 30th April 2026, link here.
- Modernising the Agency Work Regulatory Framework - closes: 1st May 2026, link here.
- Draft code of practice on trade union right of access - closes: 20th May 2026, link here.
- Threshold for triggering collective redundancy - closes: 21st May 2026, link here.
- Misuse of non-disclosure agreements (NDAs) - closes: 8th July 2026, link here.
As always, we’ll continue to monitor developments closely and share further updates as the new employment framework takes shape.
