The Employment Rights Act 2025 has introduced a number of changes for UK businesses, including a new statutory duty to keep holiday and holiday pay records for a minimum of six years, what this article calls the ‘six-year records rule’, which came into effect on 6 April 2026.

The newly launched Fair Work Agency (FWA) is expected to assume active enforcement of holiday pay from 2027. From 6 April onwards, failure to keep adequate records is a criminal offence and fines are unlimited.

To remain compliant, it’s essential for business owners and HR professionals to understand the changes. This blog covers:

• What changed.
• Which records are affected. 
• What it means for your HR and payroll workflows.
• What you should do next.

Disclaimer: The information in this article is current as of May 2026 and has been prepared by Employment Hero UK Ltd and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees and should not be relied on as professional advice. Some information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.

What is the six-year records rule?

The six-year records rule is a new legal duty that requires all UK employers to retain records relating to workers’ annual leave entitlement and holiday pay for a minimum of six years from the date those records are made.

The legislation doesn’t prescribe a specific format. Records can be digital, paper-based or held in an HR system, in whatever format the employer “reasonably thinks fit.” But they must be adequate enough to demonstrate that workers received their correct statutory holiday entitlement and the right holiday pay. In practice this means keeping records of the amount of leave taken, any payments made in lieu of untaken holiday and how holiday pay was calculated.

The rule mirrors the existing six-year requirement for National Minimum Wage records, which has been in place since 2021. Holiday pay records have now been brought in line with that same standard.

Why the six-year records rule matters to UK employers

The business risk behind this rule is significant, and it lands squarely on HR and payroll teams. 

The Fair Work Agency and what it means for enforcement

The Fair Work Agency (FWA) has operated from the 6th April as an executive agency of the Department for Business and Trade. It consolidated four existing functions under one roof: HMRC’s National Minimum Wage enforcement team, the Employment Agency Standards Inspectorate (EASI), the Gangmasters and Labour Abuse Authority (GLAA), and the Office of the Director of Labour Market Enforcement.

The FWA has broad powers. It can request records from employers, issue notices of underpayment and bring employment tribunal proceedings on a worker’s behalf. The FWA treats record-keeping and correct payment as two distinct legal enforcement tracks:

• The bookkeeping risk (criminal): As of 6 April 2026, failing to keep adequate records of statutory leave and pay has been a criminal offence. The requirement to build a six-year archive starts now and runs forward and the obligation to capture records correctly is immediate. The courts can issue unlimited criminal fines purely for inadequate record-keeping, even if your actual payments were correct.
• The underpayment risk (civil): If the FWA discovers actual shortfalls or systematic underpayments in your holiday calculations, they will have the power to issue a Notice of Underpayment, carrying civil penalties and a public naming and shaming mandate. These powers are expected to come into force in 2027. In the meantime, claims for holiday pay underpayment continue to be pursued through employment tribunals.

Full enforcement of the holiday pay record-keeping rules is expected to begin in 2027, but employers shouldn’t treat that timeline as a grace period. While the requirement itself isn’t retrospective, meaning you don’t need to panic-generate historical records prior to April 2026, your obligation to capture complete audit trails began on day one of the new rules, and these records must now build up over the next six years. You are not legally expected to produce 2020–2025 holiday pay records under this specific rule, but your 2026 data must be flawless from the outset.

Initial enforcement activity is expected to focus on higher-risk sectors, particularly hospitality and retail. But the rule applies to every UK employer.

Why HR and payroll teams are at the centre of this

Holiday pay sits at the intersection of HR and payroll. HR teams own leave entitlement data, employment contracts and records of leave taken. Payroll owns the pay calculations, deductions and the audit trail behind every payment. The gap between those two functions is exactly where compliance problems tend to appear.

Both teams need to understand the new obligation and agree on who owns what. If that conversation hasn’t happened yet, this is a good reason to have it.

Which records employers should review first

Not all employment records follow the same retention rules. Here’s a quick reference for the most common record types:

*The six-year limitation period for simple contract claims under the Limitation Act 1980 is the basis for this convention. The recommendation to retain personnel files for six years is therefore best practice rather than a statutory duty.

Compliance note on the six-year timeline: The six-year retention rule operates on a rolling, prospective basis starting from 6th April 2026. Employers are required to retain records generated from this date forward until a full six-year archive is established by 2032. It does not mandate the retrospective creation or retrieval of holiday pay records from before the legislation took effect.

Payroll records

Your payroll records need to show more than just the final pay figure. That means retaining the supporting calculations, such as earnings, deductions, tax information, pension contributions and the data that underpins those numbers. This is especially important for holiday pay, overtime and variable earnings, where the route from source data to final payment is more complex and more likely to be queried.

Holiday pay and annual leave records

This is the record type directly affected by the April 2026 change. At minimum, your records should capture:

• Employee name.
• Leave year dates.
• Statutory leave entitlement.
• Any additional contractual entitlement.
• Days or hours of leave taken.
• Days or hours of leave remaining.
• The pay rate used for holiday pay calculations.
• The actual pay calculation.

The obligation is more complex for workers on irregular hours, zero-hours contracts or part-year arrangements, where holiday accrual and pay calculations are less straightforward. These are also the workers most likely to be at the centre of any FWA investigation.

Working time and hours records

Timesheets, rota data and attendance records feed directly into holiday pay accuracy and minimum wage compliance. If your hours data is held in a separate system from your payroll or HR platform, that disconnect is a retention risk worth addressing.

Other employment records

Contracts, pay change records, variation letters and absence records don’t fall under the six-year holiday pay rule specifically, but they often support payroll decisions and employment disputes. Under the Limitation Act 1980, the general practice is to retain personnel files for six years after employment ends.

GDPR and the six-year rule: Resolving the tension

GDPR requires that personal data isn’t kept longer than necessary. So how does a six-year statutory retention requirement fit with data minimisation?

The answer is straightforward. Where a law requires you to retain records, the lawful basis for doing so under UK GDPR is “compliance with a legal obligation” — Article 6(1)(c). Statutory retention obligations don’t conflict with GDPR; they provide a lawful basis for processing under Article 6(1)(c). However, the other GDPR principles still apply alongside — storage limitation, data minimisation and security remain relevant. This is why retaining records beyond the six-year statutory period requires its own separate justification.

What matters is that you document this clearly. Your data retention policy should specify which records are kept for six years, on what legal basis and what happens when that period expires. Secure deletion or anonymisation once the retention period expires is also a GDPR requirement.

If you’ve already mapped your data retention schedule for GDPR purposes, it needs updating to reflect the new six-year rule for holiday pay records.

What the rule means for your HR processes

The six-year rule has direct implications for how HR teams store records, manage leavers and assign ownership of retention responsibilities. 

Reviewing document retention policies

Most HR retention policies were written before this change. If yours lists different timeframes for holiday pay records or doesn’t mention them at all, it needs updating. The policy should be specific about:

• What records are kept.
• Who is responsible for them.
• Where they’re stored and when they’re deleted.

Ownership matters. In businesses where HR and payroll sit in different teams, or where finance has oversight of payroll, retention responsibilities can easily fall through the cracks.

Improving employee record accuracy

Keeping records for six years only helps if those records are accurate and complete in the first place. A six-year-old record with missing pay calculations or incorrect leave totals doesn’t demonstrate compliance; it creates a liability.

This is especially relevant if your leave and pay data lives in different systems. Discrepancies between what HR recorded and what payroll processed are hard to explain and harder to defend.

Handling leavers and archived records

Offboarding processes often focus on equipment, access removal and final pay. Record retention doesn’t always get the same attention. Leaver records, including holiday pay data for the full period of employment, need to remain accessible for six years after someone leaves, not just while they’re active on your system.

If your current HR or payroll software archives or restricts access to leaver records, check that this doesn’t create a practical gap in your compliance position.

What the rule means for your payroll processes

On the payroll side, the rule puts new pressure on audit trails, data alignment and how teams prepare for queries that may arrive years down the line.

Keeping a clear audit trail for pay decisions

Payroll teams often retain the final output of a pay run without preserving the inputs and calculations that produced it. For holiday pay specifically, that’s a problem. If a worker or the FWA queries whether their holiday pay was correct, you’ll need to show both the working and the final figure.

Retain source data alongside outputs. That includes hours worked, pay rates, variable pay elements and any adjustments. If you’re using rolled-up holiday pay for irregular-hours workers, keep records showing how the calculation was made, including how the 12.07% accrual figure was calculated.

Aligning payroll and leave data

Disconnected HR and payroll systems are one of the most common sources of compliance risk. When leave is recorded in one place and pay is calculated in another, reconciling the two six years later, or under an FWA audit, creates significant admin and opens the door to inconsistencies.

Connected systems that keep leave and pay data in the same place, updated in real time, make compliance significantly easier to demonstrate.

Preparing for future queries or disputes

Good records serve a practical purpose beyond regulatory compliance. When an employee raises a question about their pay, when a payroll error needs correction or when a formal claim is filed, your records are what you rely on. The FWA can request records at any point once its full enforcement powers are active. Being able to produce them quickly, accurately and completely is the difference between a straightforward response and an escalating investigation.

Common record-keeping gaps that create risk

Several common process weaknesses make six-year retention harder to deliver than it sounds on paper. 

Inconsistent data across HR and payroll systems

When leave is tracked in one system and pay is processed in another, small inconsistencies accumulate over time. A leaver’s record might show sixteen days taken in HR and fourteen in payroll. Over a six-year window, those gaps become very difficult to explain. The risk comes with both the inconsistency and the admin burden of trying to reconcile records under pressure.

Manual holiday tracking

Spreadsheets are the default for many SMEs. They work well enough for day-to-day tracking, but over six years they don’t hold up. Sheets can get lost. Formulas get overwritten. The staff who managed the sheets leave. The result is a record that exists in name but can’t demonstrate anything clearly.

The six-year rule makes a strong case for moving holiday tracking into a system that creates a continuous, timestamped record automatically.

No clear ownership of retention rules

In many businesses, responsibility for record retention is assumed to sit with someone else. HR thinks payroll handles pay records. Payroll thinks HR handles employment files. Finance isn’t sure. When nobody owns it clearly, things get missed and the gaps tend to show up at the worst possible moment.

How Employment Hero can help simplify record keeping

Make six-year record keeping simple with Employment Hero

April 2026 marked a genuine shift in compliance risk for UK employers that went beyond a change to a paperwork schedule. The six-year records rule is in force now, the Fair Work Agency is operational and enforcement is coming.

The employers who’ll handle this well are the ones who’ve used this as a prompt to review their systems, fix their gaps and make sure their HR and payroll processes create reliable records as a matter of course.

Want to see how Employment Hero keeps your HR and payroll records audit-ready?

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