Do you know what holiday your workforce takes, and what you pay for it?
Do you know what holiday your workforce takes, and what you pay for it?
From Monday 6th April 2026, you must be able to prove it. Not assume it, not approximate it, prove it with records that stand up to scrutiny.
What is going wrong in practice?
Most organisations treat annual leave as an administrative task rather than a governance issue. Systems track days booked, payroll runs payments, and leaders assume it all aligns.
It often does not.
I see three recurring gaps. First, employers record days taken but not how those days translate into statutory entitlement, especially where workers have irregular hours or variable pay. Second, payroll teams apply basic pay to holidays, ignoring overtime, commission, or allowances that should form part of ‘normal pay’. Third, data sits in silos. HR holds leave records, payroll holds pay data, and no one reconciles the two.
The new duty targets this exact problem. It forces employers to keep ‘adequate’ records that show compliance with both entitlement and pay. Adequate means detailed enough to demonstrate, not just assert, that you got it right.
Why does this create legal risk?
Holiday pay sits on a simple principle. Workers must receive their normal pay when they take statutory leave. Normal pay includes regular overtime and certain variable elements. If you underpay, even by small amounts, liability can build over time.
The new duty changes the evidential position. If you cannot produce records that show compliance, a tribunal can draw inferences against you. In plain terms, the absence of evidence can become evidence of breach.
This increases exposure in three ways. Financially, claims can stretch back, especially where underpayments form a series. Reputationally, holiday pay errors land badly: they look like you short-changed staff. Culturally, once employees question pay accuracy, trust drops quickly.
Where do leaders misjudge this?
Businesses often think, ‘We have a system, so we are fine.’ Systems help, but they only reflect what you configure. If you have not defined what counts as normal pay, your system will not guess.
There is also overconfidence around low claim volumes. A quiet tribunal history does not mean compliance. It often means no one has looked closely yet.
Finally, boards underestimate how messy their workforce really is. Casual staff, zero-hours arrangements, sales teams on commission, and shift premiums all complicate holiday pay. The more flexible your model, the higher the risk that your records do not tell a coherent story.
What should you do?
- Commission a joined-up audit of holiday entitlement and pay with both HR and payroll, not in isolation.
- Define ‘normal pay’ for each worker group, document it, and test it against actual pay data.
- Check your systems can link leave taken to the pay applied, at an individual level, and retain that data.
- Review historic exposure, quantify risk, and decide your strategy before someone else does.
- Put this on the board risk agenda, with a named executive accountable for compliance.
This is not about perfect record-keeping for its own sake. It is about answering a simple question with confidence and evidence: did we pay our people correctly for their leave?
If you cannot answer that today, what will you say when you must prove it?
