Holiday Pay Records Are Now a Criminal Offence to Get Wrong

The ERA 2025 made inadequate holiday record-keeping a criminal offence — for all workers, not just those on zero-hours contracts.

Holiday pay has long been an area where employer non-compliance is widespread, often unintentional, and expensive when it surfaces. Employment tribunal claims for holiday pay underpayment have been running at record levels for years. The Employment Rights Act 2025 did not make holiday pay disputes any easier to resolve — but it did raise the stakes for poor record-keeping in a way that most employers haven't registered yet.

Keeping inadequate holiday records is now a criminal offence. Not a civil penalty, not a tribunal liability — a criminal offence. The obligation applies to all workers. And the Fair Work Agency has a six-year lookback window to examine records going back to 2020.

What changed under the ERA 2025

The Working Time Regulations 1998 already required employers to keep "adequate records" to show Working Time Regulations compliance. But enforcement was primarily civil, and the records requirement was vague enough that most employers treated it loosely — a few spreadsheets, some calendar entries, annual leave requests in an email thread.

The ERA 2025 amended the Working Time Regulations to make the holiday records requirement explicit and enforceable as a criminal matter. The amendment requires employers to maintain records sufficient to demonstrate:

• Each worker's statutory holiday entitlement for the leave year
• How much holiday the worker has accrued to date
• How much holiday the worker has taken, and when
• The pay calculation for each holiday period taken
• Any carry-over entitlement from the previous leave year, and why

Failure to maintain records meeting this standard is a criminal offence. The employer — or in practice, a director or officer of the company — can be prosecuted.

This is not a future risk. The requirement is in force now. If an FWA officer inspects your records and finds they cannot demonstrate holiday entitlement, accrual, and pay calculation for each worker, you are exposed.

This applies to all workers

The most important thing to understand about this change is the scope. A significant portion of the ERA 2025 guidance published by solicitors and HR consultancies focuses on irregular-hours workers and zero-hours contracts — because the Act made significant changes to how holiday accrues for those groups. That focus is understandable, but it has created a misleading impression that the records requirement is primarily about managing casual workers.

It is not. The criminal records obligation applies to all workers — full-time employees on fixed salaries, part-time workers with regular hours, term-time workers, zero-hours workers, agency workers placed with you as the hirer, and casual workers. If someone works for you and is a worker under the Employment Rights Act 1996 definition, you must keep adequate holiday records for them.

The irony is that full-time salaried employees are often the worst-documented group. Many employers simply track annual leave requests (so they know who is off when) without maintaining a formal record of entitlement, accrual, and pay calculation. That informal approach is no longer adequate.

The 12.07% method for irregular-hours workers

For workers with irregular hours — including zero-hours workers, casual workers, and term-time workers — the ERA 2025 introduced a standardised accrual method: 12.07% of hours worked, accruing at the end of each pay period.

The 12.07% figure is derived from the statutory holiday entitlement (5.6 weeks) as a proportion of the working year (46.4 weeks): 5.6 ÷ 46.4 = 12.07%. For every hour worked, the worker accrues 0.1207 hours of holiday entitlement.

Your records for irregular-hours workers must capture:

• Hours worked in each pay period
• Holiday accrued at 12.07% of those hours
• Running cumulative accrual balance
• Holiday taken (in hours) and the pay calculation for it
• Balance carried forward at year end (if any, and the reason)

Records showing only days worked or shifts completed are not sufficient — you need the hours, because the accrual calculation depends on them.

Rolled-up holiday pay: now explicitly legal

One of the more practically significant ERA 2025 changes is the explicit legalisation of rolled-up holiday pay for irregular-hours workers and part-year workers. Previously, a 2006 European Court of Justice ruling in Robinson-Steele v RD Retail Services made rolled-up holiday pay unlawful — the argument being that it discouraged workers from taking leave. The UK government reversed this post-Brexit.

Under the ERA 2025, employers can pay rolled-up holiday pay to irregular-hours workers and part-year workers only. The rolled-up pay must be at least 12.07% of the worker's pay for the pay reference period, clearly identified on payslips as a separate component, and calculated correctly. You cannot roll up holiday pay for workers with regular hours on regular contracts — it remains unlawful for those workers.

Critically: even if you pay rolled-up holiday pay, you still need to keep the records. Rolled-up pay satisfies the pay obligation; it does not remove the record-keeping obligation. You must still record accrual, notional holiday taken, and the calculation basis.

The six-year lookback

The Fair Work Agency can investigate holiday pay records going back six years. The limitation period for most tribunal claims is three months (two years for unlawful deduction claims), but the FWA's enforcement powers operate on a longer horizon.

What this means in practice: records you should have been keeping from 2020 onwards are within scope. Many employers do not have structured holiday pay records going back six years — annual leave requests and approval emails exist, but the underlying entitlement and pay calculations may not.

This is not a reason to panic, but it is a reason to start building proper records now rather than waiting. An employer who cannot produce six years of records will have difficulty demonstrating historic compliance, but an employer who can demonstrate good records from 2026 onwards and reasonable approximations for earlier years is in a different position to one who has no records at all.

What adequate records look like

There is no prescribed format. The law requires "adequate" records, and adequacy is assessed against whether the records can demonstrate entitlement, accrual, usage, and pay calculation. A spreadsheet that captures all of those elements is adequate. A sophisticated HR system that captures none of them is not.

For a full-time employee on a fixed salary, a compliant record for one leave year would need to show, at minimum:

For a worker with variable pay — commission, overtime, tips — the pay calculation basis becomes more complex. The Working Time Regulations (as amended) require holiday pay to reflect "normal remuneration," which includes regular overtime and regular commission. A record that shows only base salary for a worker who regularly earns commission is an inadequate record and a potential tribunal liability.

Bank holidays and carry-over

The statutory minimum of 5.6 weeks includes bank holidays if you designate them as part of the statutory entitlement. Most UK employers grant 28 days including eight bank holidays, meaning the additional contractual entitlement is 20 days. Some grant 28 days on top of bank holidays — 36 days total. Either approach is lawful; the records must reflect which approach you have taken and apply it consistently.

Carry-over rules changed under earlier Working Time Regulations amendments to allow carry-over of up to four weeks where illness or maternity/paternity leave prevented holiday being taken. The ERA 2025 did not significantly change this position, but it did reinforce the requirement to document the reason for any carry-over. "Couldn't fit it in" is not a lawful reason for carry-over beyond what the regulations permit.

Records compliance checklist

Most SMEs are not doing this properly. A spreadsheet tracking who is on holiday when is not a holiday pay record — it is a scheduling tool. The distinction matters, and the consequences of ignoring it have materially increased under the ERA 2025.

Sources

• Employment Rights Act 2025 (legislation.gov.uk)
• Working Time Regulations 1998 (legislation.gov.uk)
• GOV.UK — Holiday entitlement
• GOV.UK — Rolled-up holiday pay guidance
• GOV.UK — ERA 2025 implementation timeline