With the rollout of new measures in the Employment Rights Act on 6 April, there was a surprise addition in the form of a significant new obligation for employers to keep ‘adequate’ records of employees’ annual leave and holiday pay.
Whilst up to now, almost every employer will already have been keeping this information in one form or another, from now onwards records need to be more comprehensive and kept for at least 6 years from the date they were made. The records should cover all workers, including those with irregular hours or part-year contracts, and must show:
- Annual leave entitlement
- Leave taken
- Carried-over leave
- Holiday pay calculations (including overtime/bonuses)
- Any payments in lieu of annual leave, including for carried over leave.
- Pay in lieu upon termination
Fair Work Agency Powers
Whilst employers will have discretion over the format, their records must be sufficient to prove compliance. Failure to maintain these records could constitute a potential criminal offence. The new Fair Work Agency (FWA) will enforce this new strict holiday record-keeping. The FWA will have powers to inspect workplaces, audit records without a complaint, seize any pertinent documents and impose penalties up to 200% of underpayments.
Administrative impact
This new change will have a considerable administrative impact on employers. And given that there was little government communication on the subject prior to the announcement, organisations with complex leave and pay arrangements or fragmented or outdated systems might struggle more than more.
Employers must ensure quickly to ensure robust record-keeping. It’s essential that you:
- Review existing systems and processes – identify any gaps and potential areas for improvement.
- Update your policies – make sure that your systems track not just days taken but that the calculation of pay including irregular hours, overtime, bonuses for all eligible staff and different types of leave is correct.
- Centralise your records – if you have previously relied on spreadsheets or emails, move to a centralised, auditable system.
- Governance – put in place clear procedures for storing, accessing, and updating holiday records.
- Enforcement – appraise yourself with the FWA’s powers and enforcement processes. Be ready to respond to inspections or requests for evidence.
Employers who act promptly to strengthen their systems and processes will be best placed to demonstrate compliance and avoid penalties.
How can I help?
For help, advice and support so that you can maintain adequate records of annual leave and pay for a minimum of six years, please get in touch today – caroline.robertson@actifhr.co.uk.