The Criminal Offence Hiding in Your Holiday Spreadsheet

Since 6 April 2026, failing to keep adequate holiday and holiday pay records has been a criminal offence punishable by an unlimited fine. It arrived with about a week’s notice, was left off the government’s implementation roadmap, and most SMEs still do not know it exists.

The Duty Nobody Saw Coming

Section 35 of the Employment Rights Act 2025 inserted a new Regulation 16B into the Working Time Regulations 1998. From 6 April 2026, every employer in Great Britain must keep records adequate to show that it has complied with its obligations on statutory annual leave and holiday pay.

This was not in the government’s Employment Rights Act implementation roadmap published last summer, and it was not in the Department for Business and Trade’s timeline for 2026 changes published on 11 February. It appeared in the commencement regulations published in late March and took effect roughly a working week later — on a date that happened to be a bank holiday.

Which is why a great many businesses are, at the time of writing, in breach without knowing it.

What You Have to Record — and for How Long

There is no prescribed format. Records may be created, maintained and kept in whatever manner the employer reasonably thinks fit: one system or several, digital or otherwise. The obligation is that they are adequate.

Adequate, in practice, means being able to evidence:

• Statutory leave entitlement for every worker, including irregular hours and part-year workers, and how it was calculated or accrued.
• Leave actually taken, and when.
• Leave carried forward from a previous leave year.
• How holiday pay was calculated, including which pay elements were included or excluded — overtime, commission, bonuses and other variable pay.
• Dates on which holiday pay was paid.
• Any payments made in lieu of annual leave, including for carried-over leave and payments on termination.

Records must be retained for six years from the date they were made.

Six years is a significant step up from what most SME systems are set up for. If your holiday tracking lives in a spreadsheet that gets overwritten each leave year, or in a payroll system you might change providers on, you have a problem that is structural rather than administrative.

The Penalty

Failure to keep adequate records is a criminal offence under the amended Regulation 29 of the Working Time Regulations, punishable by a fine that is potentially unlimited.

That is unusual, and worth pausing on. Most employment law breaches are civil matters resolved through a tribunal. This one is not.

Separately, if your records reveal that holiday pay has been calculated incorrectly, that is a second and different exposure. The Fair Work Agency will ultimately be able to issue a notice of underpayment requiring you to pay the arrears, plus a penalty of 200% of the underpayment — reduced to 100% where payment is prompt — capped at £20,000 per worker. It will also be able to bring tribunal claims on workers’ behalf.

Enforcement Is Coming, Not Here

The Fair Work Agency was established on 7 April 2026, the day after the records duty commenced. It consolidates the functions of the existing enforcement bodies covering national minimum wage, statutory sick pay and modern slavery, and it takes on responsibility for holiday pay.

Its enforcement powers in relation to holiday and holiday pay are not yet in force. The regulations transferring those powers from HMRC have not been made, and the FWA’s strategic steer for its first year indicates it will prepare to commence holiday pay enforcement in 2027.

Do not read that as a reprieve. The duty is already law. The FWA will be able to look at records retrospectively, and its powers to pursue holiday pay underpayments are expected to reach back several years.

In other words: the gap between the duty commencing and enforcement beginning is not a grace period. It is the window in which the records you will later be judged on are being created — or not.

Why Holiday Pay, Specifically

Because it is one of the most consistently mishandled areas of UK employment law.

Government estimates cited in commentary on the reform put the scale at around 900,000 workers a year having holiday pay withheld, worth roughly £2.1 billion. Holiday pay calculations are genuinely difficult where pay is variable, hours are irregular, or overtime and commission are involved. Getting it wrong is common and usually unintentional.

Which is precisely why the government moved from relying on individual workers to bring claims, to requiring employers to be able to prove compliance and creating a state body to check.

A Practical Audit

Work through these questions honestly:

• Can you produce, for any individual worker, a record of their entitlement, leave taken, carryover and holiday pay calculation for the current leave year?
• Could you do the same in five years’ time, including after a change of payroll or HR system?
• Do your records show which pay elements were included in holiday pay, or only the amount paid?
• How are irregular hours and part-year workers handled, and is the accrual method documented?
• Does your data retention policy align with a six-year requirement, or does it contradict it?
• Who owns this? In many SMEs holiday sits between payroll, line managers and a shared spreadsheet, which means nobody owns it.

If you cannot answer confidently, fix the system rather than the spreadsheet. The requirement is ongoing, and every month of inadequate records is a month you cannot go back and recreate.

The Bigger Signal

This reform tells you something about the direction of the whole Act. Increasingly, compliance is not about having done the right thing. It is about being able to evidence that you did.

Six years of holiday records. Six months to bring a tribunal claim. Documented probation reviews. Documented harassment risk assessments. Documented consultation on tipping policies. The pattern is consistent, and businesses that keep good records are about to find themselves at a significant advantage over those that do not.

This article is general information, not legal advice. If you are unsure whether your current records would meet the adequacy test, take advice on your specific arrangements.