A significant but widely overlooked change took effect on 6 April 2026, placing new legal duties on all employers regarding how they record annual leave and pay.
Many employers will have missed this update, which forms part of the Employment Rights Act (ERA) 2025, so it is important that you act now.
What has changed?
Section 35 of the Act is now in force, creating a new statutory duty for all employers to maintain accurate and complete records of employees’ annual leave entitlement and pay, which must be retained for a minimum of six years.
Despite its significance, this requirement has attracted very little media attention and does not appear in the Government’s own published implementation timeline for the Plan to Make Work Pay.
What does this mean for your business?
Many businesses will already hold some annual leave and pay data, but the question is whether your existing records are detailed enough to satisfy the new legal standard.
For each employee, you will need to be able to demonstrate their:
- Annual leave entitlement, including statutory and any contractual enhancement
- Leave taken, including dates and duration
- Pay received for that leave
- Any carry-over or adjustments made during the leave year
Failure to comply will lead to action from the new Fair Work Agency (FWA), which was established on 7 April 2026.
This new agency is expected to oversee compliance with annual leave and is likely to take action in future if organisations aren’t compliant.
The full enforcement timeline is due to be outlined soon, but that does not mean that employers should wait to update and maintain their payroll processes.
Getting your payroll records in order
We strongly encourage all employers to review their current payroll and HR systems as a priority, given this change under the Act.
