The New “Six-Year Rule”
Previously, while it was good practice to keep records, there was no specific statutory period for holiday data under the Working Time Regulations. That changes now.
- The Requirement: Employers must retain “adequate records” to prove they have provided the correct statutory annual leave and holiday pay.
- Retention Period: Records must be kept for six years from the date they were created.
- Post-Employment: This duty persists even after an employee leaves the company. If a worker left in 2027, you must be able to produce their 2026 records until at least 2032.
What Constitutes an “Adequate” Record?
The Fair Work Agency (FWA)—the new enforcement body launching in April 2026—won’t just check if you paid the money; they will check how you reached that figure. Your records must include:
- Entitlement & Usage: A clear log of the employee’s statutory entitlement vs. how much leave was actually taken (including dates).
- Calculation Logic: For workers with variable pay (overtime, commission, bonuses), you must store the data used for the 52-week average calculation.
- Payments in Lieu: Comprehensive records of any holiday pay paid out upon termination of employment.
- Carry-Over Agreements: Documentation of any leave carried over due to sickness or parental leave, including the “use it or lose it” notifications sent to employees.
Why the Shift? (The Enforcement Factor)
This isn’t just about storage; it’s about the shift from Tribunal-led to State-led enforcement.
The Fair Work Agency (FWA) Powers
The FWA has the authority to audit your payroll without an employee complaint. If they find your records are inadequate:
- Presumption of Underpayment: If you can’t prove you paid it correctly because the records are missing, the FWA may assume an underpayment occurred.
- Notices of Underpayment: They can issue notices for arrears going back the full six years.
- Financial Penalties: Fines can be up to 200% of the underpayment (minimum £100, maximum £20,000 per worker).
Operational Roadmap for Hewitt’s Payroll
Bridge the HR-Payroll Gap
Holiday entitlement and absence are often tracked in HR software, while payment is tracked in payroll software. You must ensure these two systems “talk” to each other or that both are archived synchronously.
Update Data Retention Policies
General PAYE records only require 3 years of retention by HMRC. You must update your GDPR/Data Privacy policies to reflect that holiday-related data will now be kept for 6 years to meet this specific legal obligation.
Digitize Variable Pay Evidence
If an employee receives a “regular” bonus or overtime, that data must be included in their holiday pay calculation. Ensure your system saves the “snapshots” of earnings used for these calculations so you don’t have to reconstruct them years later during an audit.
Audit Your “Adequacy”
Pro Tip: Imagine an FWA inspector walks in today and asks for the holiday pay breakdown for a zero-hours worker from 18 months ago. If you can’t produce it within minutes, your current record-keeping is likely “inadequate.”
Summary Table: Retention Requirements 2026
| Record Type | Retention Period | Enforcement Body |
| Holiday Pay & Leave | 6 Years | Fair Work Agency |
| National Minimum Wage | 6 Years | Fair Work Agency (HMRC) |
| PAYE & Tax | 3 Years | HMRC |
| Statutory Sick Pay | 3 Years (Recommended) | Fair Work Agency |