Just as employers begin to get to grips with the raft of employment law reforms taking effect in April 2026, the latest commencement regulations under the Employment Rights Act 2025 have introduced a significant late-stage development.
From 6 April 2026, employers will be subject to a new statutory obligation to maintain records of workers’ annual leave and holiday pay. Notably, failure to comply with this requirement will constitute a criminal offence.
This marks a substantial shift from the current position under the Working Time Regulations 1998, which require record-keeping in relation to working time only. While maintaining holiday records has long been considered best practice, it has not previously been a legal requirement. That will now change: employers must ensure they keep adequate records of annual leave entitlement and associated pay.
The introduction of this duty was not anticipated in the Government’s implementation roadmap, leaving employers with very limited time to prepare.
What constitutes “adequate records”?
Employers must retain records sufficient to demonstrate that:
- Workers have been informed of and permitted to take their full statutory annual leave entitlement (5.6 weeks)
- Workers have been correctly paid for that leave, including those with irregular hours or part-year arrangements
- Workers have received appropriate payment in lieu of accrued but untaken leave on termination, including any carried-over entitlement
Records may be kept in any format the employer reasonably considers appropriate, but must be retained for a period of six years.
Enforcement and penalties
Non-compliance will amount to a criminal offence, with potential exposure to unlimited fines.
Enforcement is expected to fall to the newly established Fair Work Agency, due to be established on 7 April 2026. The Agency is anticipated to have wide-ranging powers, including the ability to:
- Require employers to repay any identified underpayments
- Impose financial penalties of up to £20,000 per affected individual, in addition to repayment obligations
What should employers do now?
Given the short lead-in time, employers should take immediate steps to ensure compliance:
- Audit existing holiday and payroll systems to confirm they capture the necessary data and can securely retain records for six years
- Implement or formalise record-keeping processes where these are not already in place
- Review mechanisms for monitoring holiday usage, including evidence of reminders or notices requiring employees to take leave
- Check holiday pay calculations, particularly for atypical workers, to ensure accuracy
- Train HR, payroll teams and managers on the new legal requirements
- Update internal policies and procedures to reflect enhanced record-keeping obligations
Injury to feelings Update
Updated Presidential Guidance on Employment Tribunal awards for injury to feelings and psychiatric injury has now been published, updating the figures in line with the latest Retail Prices Index. It builds on (rather than replaces) the existing guidance, with the revised compensation bands applying to claims brought on or after 6 April 2026.
The Vento bands are guidelines that Employment Tribunals use to when assessing compensation for injury to feelings in discrimination and whistleblowing claims. They divide awards into three levels – lower, middle and upper- based on the seriousness of the employer’s conduct and its impact on the claimant, with only the most exceptional cases falling above the upper band.
For relevant claims, the updated “Vento bands” are:
- Lower band (£1,300 to £12,600)
For less serious cases, such as isolated or one-off incidents - Middle band (£12,600 to £37,700)
For cases that are more serious but do not merit the highest awards - Upper band (£37,700 to £62,900)
For the most serious cases, including prolonged or particularly severe conduct - Exceptional cases
Awards may exceed £62,900 in the most extreme circumstances
Key points for employers
- The updated bands will affect the potential value of discrimination and whistleblowing claims involving injury to feelings
- Tribunals retain discretion within these bands, depending on the severity and impact of the conduct
- Employers should take these increased award levels into account when assessing litigation risk and settlement strategy
Employment Law Updates – Increases applicable from April 2026
National Minimum Wage (from 1 April 2026)
- Age 21+: £12.71 per hour
- Age 18–20: £10.85 per hour
- Under 18 & apprentices: £8.00 per hour
Family Leave Pay (from 5 April 2026)
- £194.32 per week, or
- 90% of average weekly earnings (whichever is lower)
Statutory Sick Pay (from 6 April 2026)
Rate:
- £123.25 per week, or
- 80% of average weekly earnings (whichever is lower)
Structural changes:
- Paid from day one (removal of the waiting days)
- Extended eligibility (lower earnings limit removed)
- Increased employer cost exposure
Tribunal & Redundancy Limits (from 6 April 2026)
- Week’s pay cap: £751
- Unfair dismissal compensatory cap: £123,543
- Guarantee pay: £41 per day
