For lots of small businesses, annual leave has always been managed in a fairly simple way: a wall planner in the office, a spreadsheet, a note in the diary and maybe a quick check at the end of the year to see who has days left to take.
Since 6 April 2026, employers now need to keep more detailed records around annual leave and holiday pay - those records also need to be kept for at least six years.
It doesn't mean you need to overcomplicate things, but it does mean you need to be able to show what holiday has been taken, how it's been worked out and where those records are kept.
What has changed?
Employers now need to keep records of:
- Holiday taken
- Holiday carried over from previous years
- Holiday pay
- Any payments made instead of holiday, such as unused holiday paid when someone leaves
- How holiday pay has been calculated, including what has been included in that calculation, such as commission, bonuses or other relevant payments
These records need to be kept for at least six years from the date they were made.
In simple terms, it is no longer just about knowing that someone had time of, you need to be able to show the evidence it properly.
Why this might be a bigger change for small businesses
For larger organisations, this may already be built into an HR or payroll system.
But for smaller businesses, it could be more of a shift.
Many small employers still use paper records, wall planners or basic spreadsheets to manage annual leave. In the past, it has been quite common to keep the current holiday year and maybe the previous year, then clear out older records.
That approach often made sense from a data protection point of view, because businesses were trying not to keep personal data for longer than they needed to. Now, employers need to balance that with the requirement to keep holiday and holiday pay records for six years.
So, if you are using a wall planner, think about what happens at the end of the year - is it scanned and saved or stored securely? Could you find it again if you needed it in a few years' time?
If you are using spreadsheets, are they consistent? Are they backed up? Are they secure? Can the right people access them when needed?
It's not just about recording days off
The records are not only about when someone is away from work, you also need to be able to show how holiday pay has been calculated.
That can be very straightforward for employees who receive the same pay every month.
But it can become more complicated where someone:
- Works irregular hours
- Has variable pay
- Earns commission
- Receives bonuses
- Works overtime
- Leaves the business with unused holiday
In those situations, holiday pay may need to be calculated using an average over a reference period. If that applies in your business, it's important that the calculation is correct and that you have a clear record of how you got there!
Why this matters now
This change also sits alongside the launch of the Fair Work Agency.
The Fair Work Agency has been created to bring together enforcement around several employment rights, including holiday pay, statutory sick pay, national minimum wage and other workplace rights.
We don't yet know exactly how inspections and enforcement will look in practice for every business - but what we do know is that employers are increasingly being asked to prove compliance.
In other words, it is not enough to say, "yes, we do that" - you need to be able to show it.
What should employers do now?
A good place to start is by looking at how you currently manage annual leave.
Ask yourself:
- Do we have a clear record of all holiday taken?
- Do we record holiday carried over from previous years?
- Do we record holiday paid out when someone leaves?
- Can we show how holiday pay has been calculated?
- Are records stored securely?
- Are records easy to find if we need them?
- Are we keeping records for six years?
- Do managers and payroll know what needs to be recorded?
You don't need a complicated system, you just need a consistent one.
That might mean scanning and saving paper records, tightening up your payroll process, or moving to a digital HR system (if that makes sense for your business.)
Don't forget to remind people to take their holiday!
Holiday compliance is not only about keeping records - employers should also be encouraging employees to take their annual leave. It's always good practice to check holiday balances regularly rather than leaving it all until the end of the year.
A quarterly review can be really helpful: it gives you the chance to spot whether someone has taken very little holiday, has too much left to use, or needs a reminder to book time off.
Towards the end of the holiday year, it's also wise to remind employees of any "use it or lose it" rules, especially if your contracts say that unused holiday cannot normally be carried over.
Would a holiday checklist help?
A full holiday policy may not be necessary if the key details are already covered in the employment contract - but a simple holiday procedure or checklist can be really useful, and it gives everyone a clear process to follow whilst reducing confusion later.
It could cover things like:
- How employees should request holiday
- How much notice they need to give
- How requests are approved
- Whether leave is handled on a first come, first served basis
- What happens if too many people request the same dates
- Whether holiday can be carried over
- When employees will be reminded to use their leave
- How holiday pay is calculated
- Who is responsible for keeping records
A simple checklist for employers
If you haven't reviewed your annual leave process recently, now is a good time to do it.
Here are a few practical steps to take:
- Check your contracts
Make sure holiday entitlement, carry-over rules and payment when someone leaves are clear. - Review how holiday is recorded
Look at whether your current method gives you enough detail and whether records are being kept securely. - Check how holiday pay is calculated
This is especially important for employees with variable pay, overtime, commission or bonuses. - Keep records for six years
Make sure holiday and holiday pay records are not deleted or thrown away too early. - Remind employees to take leave
Build in regular checks so people are encouraged to take their holidays during the year. - Create a simple holiday procedure
This does not need to be long or complicated. It just needs to explain how things work in your business. - Get support if you are unsure
Holiday pay can be tricky, particularly where employees work irregular hours or have variable pay.
Final thoughts...
For small businesses this might feel like another layer of admin - but good holiday records are there to protect both the business and the employee. They help show that people are getting the leave and pay they are entitled to, plus they can reduce the risk of disputes later.
The key thing is to make sure your process is clear and properly recorded.
If you're a bit unsure whether your current annual leave records are enough, Dawson HR can help you review your contracts, holiday processes and record keeping so you can be reassured that your business is meeting its obligations.
Need some assistance? Feel free get in touch with the Dawson HR team today!