Holiday Pay Record-Keeping: What Employers Need to Know Before April 2026

Payroll legislation rarely stands still, and the rules around holiday pay and leave records are evolving again. From April 2026, employers will face clearer expectations about how long key payroll records must be retained and what evidence should exist to support holiday pay calculations.

For payroll teams, bureaus and accountancy practices, this is less about a sudden new burden and more about strengthening something that should already be good practice: keeping clear, defensible records that show how employees’ holiday entitlement and pay were calculated.

At TCW Accountancy and Training Solutions, we see this as a practical opportunity for employers to tighten payroll processes and avoid disputes before they arise.

Why holiday pay records matter

Holiday pay has been one of the most litigated areas of employment law in the UK over the past decade. Tribunal cases have repeatedly centred on one simple question: how was the holiday pay calculated, and can the employer prove it?

When records are incomplete or inconsistent, even small payroll errors can become expensive legal disputes.

Good record-keeping provides three important safeguards:

First, it allows employers to demonstrate compliance with employment legislation.

Second, it helps payroll teams apply consistent calculations across different worker types.

Third, it protects the business if a worker challenges their pay or entitlement years later.

In other words, payroll records are not just administrative paperwork. They are evidence.

What records employers should keep

To manage holiday pay correctly, employers should maintain clear documentation covering three core areas.

Holiday entitlement and accrual - Records should show how each worker’s leave entitlement is calculated and how it accrues over time. This is particularly important for irregular hours workers and part-year workers, where entitlement may be calculated differently from standard full-time employees.

Holiday pay calculations - Employers should retain the workings behind holiday pay calculations, including any elements considered part of “normal pay”. This may include overtime, commission or regular allowances where these form part of a worker’s typical earnings.

Leave taken and payments made - Payroll systems should clearly record when leave was taken and the amount paid for that leave period. If rolled-up holiday pay is used for eligible workers, this must also be clearly identifiable on payslips and payroll records.

The goal is simple. Anyone reviewing the records should be able to understand how the figure on the payslip was produced.

How long records must be kept

From April 2026, employers will be expected to retain holiday pay and leave records for six years.

This aligns more closely with other statutory record-keeping periods and reflects the reality that employment claims can arise several years after the original payment was made.

Many organisations currently retain general PAYE records for three years. In practice, many payroll professionals will choose to standardise retention policies to six years across all payroll records to simplify compliance and reduce risk.

Practical steps for employers

Preparing for the updated expectations does not require complex new systems. In most cases, it simply means strengthening processes that payroll teams already operate.

Three practical checks can make a significant difference.

Reconcile leave records against payroll - Regularly compare leave accrual, leave taken and the holiday pay processed through payroll. Any unexplained differences should be investigated promptly.

Review how “normal pay” is calculated - Where employees receive overtime, commission or allowances, payroll teams should periodically review whether these elements are correctly reflected in holiday pay calculations.

Maintain an accessible audit trail - Payroll records should be stored in a way that allows calculations and decisions to be retrieved easily if requested by regulators or in the event of a dispute.

Holiday pay remains one of the most technically demanding areas of payroll. Strong record-keeping ensures that when questions arise, the answers are already in the system.

About TCW Accountancy and Training Solutions

TCW supports businesses with payroll, tax and accountancy services. Our focus is practical, compliant payroll processes that protect employers and support their people.