Fair Work Agency: Will Your Holiday Pay Survive Scrutiny in 2027?

Holiday pay compliance is about to come under far closer scrutiny than most UK employers are used to. The Fair Work Agency, launched in April 2026, has been given real enforcement powers — and holiday pay is one of the areas it’s expected to focus on heavily as investigations ramp up toward 2027.

What’s actually changed

From April 2026, employers are required to keep detailed holiday and holiday pay records for at least six years. That’s a significant jump from the more casual record-keeping many SMEs have relied on until now — a spreadsheet updated inconsistently, or holiday requests approved by email with no clear audit trail.

The Fair Work Agency has been given the ability to investigate employers who fail to calculate or pay holiday pay correctly, alongside its wider remit covering other areas of worker rights. For many employers, the real risk isn’t a failure to keep any records at all — it’s that the records they do keep don’t stand up to scrutiny, or the underlying calculations were wrong in the first place.

Where holiday pay calculations commonly go wrong

Holiday pay looks simple until you have to calculate it for anyone whose pay varies — and that’s most workforces:

• Regular overtime should usually be factored into holiday pay calculations, not just basic salary.
• Commission and other regular payments often need to be included, depending on how consistently they’re earned.
• Irregular hours and part-year workers require careful application of the correct calculation method, particularly since recent changes to how holiday accrual is calculated for these groups.
• Rolled-up holiday pay is only permissible in specific circumstances and needs to be itemised transparently on payslips.

Get any of these wrong consistently across a workforce, and the potential liability from historic underpayment claims can be substantial — particularly now that six years of records need to exist to prove (or disprove) how pay was calculated.

Why accurate time and attendance data matters here

Holiday pay compliance ultimately depends on knowing, accurately, what someone actually worked and earned — hours, overtime, and any variable pay elements. Manual spreadsheets and estimated averages are exactly the kind of records that fall apart under scrutiny. A proper time and attendance system captures this data consistently, as it happens, and keeps it retrievable for the full six-year window the Fair Work Agency can now expect to see.

What to do now

1. Check how far back your current holiday pay records actually go, and whether they’d survive a genuine six-year audit.
2. Review your holiday pay calculation method for anyone with variable hours, overtime or commission.
3. Move away from manual tracking if your current process depends on spreadsheets, memory, or email approvals.
4. Get your system generating audit-ready records automatically, rather than trying to reconstruct history after the fact.

Holiday pay used to be one of those areas employers could get slightly wrong without much consequence. With a dedicated enforcement body and a six-year record requirement now in force, that’s no longer a safe assumption.

How can PeopleFirstHR Help?

Through our partnership with CaptureIT we can provide a system that can accurately record and calculate holiday pay.

Contact us to find out if your current holiday pay records would survive an audit?