The New Holiday Pay Rules: What Employers Need to Do Now

Are you recording the right data?

You need more than just booked days off. To comply with the new requirements, you need to be able to evidence holiday entitlement for each worker, all leave taken during the leave year, and how holiday pay was calculated. For workers with variable earnings, that means retaining 52 weeks of earnings data and being able to show how it fed into the holiday pay figure.

If your current record-keeping stops at “leave booked and approved”, it’s not enough. The question to ask is: if this were challenged at an employment tribunal, could we produce a clear and complete record of how we calculated this person’s holiday pay? If the answer is no, there’s a gap to close.

Are your HR and payroll systems aligned?

Holiday pay sits at the intersection of HR and payroll, which is exactly where things tend to fall down. HR knows when leave was taken. Payroll knows what was paid. If those two systems don’t communicate properly or if manual steps introduce errors, your calculations and records are more likely to be wrong.

This is one of the most common issues we see. The leave record says one thing, the payslip says another, and nobody has reconciled the two. Under the new record-keeping rules, that gap is much harder to explain away.

Are you consistent across all worker types?

Consistency matters, particularly for workers on irregular hours, overtime and variable pay, part-year workers and workers who leave mid-year. The rules around holiday pay for these groups are more complex and the record-keeping requirements are more demanding. If your processes work well for full-time salaried staff but are less clear for everyone else, that’s where your exposure sits.

The Gov.uk guidance on holiday entitlement covers the rules for different worker types in detail and is worth checking against your current approach.

What does this mean for your HR compliance approach?

For most employers, this isn’t about starting from scratch. It’s about strengthening what’s already in place. Most businesses have some form of leave tracking. The question is whether it captures the right data, whether it’s consistent across worker types and whether it could withstand scrutiny.

Getting this right will keep your business compliant with UK employment law, reduce the risk of disputes and underpayment claims, improve transparency for employees and make the process easier for your managers to apply consistently.

What you should do now

• Review what your current system records. Does it capture entitlement, leave taken and pay calculation for all worker types?
• Check your holiday pay calculations for anyone on variable pay or irregular hours. Are you using the 52-week average method correctly?
• Make sure HR and payroll are aligned. Run a spot check on a handful of records to confirm the figures match.
• If you’re relying on manual spreadsheets, consider whether they’re genuinely fit for purpose or whether it’s time to move to something more robust.
• If you’re not confident your holiday pay calculations are correct, get them reviewed now rather than waiting for a claim.

How Limelite can help

We help organisations across Worcestershire, Birmingham and the wider UK review and improve their holiday pay processes, update their leave policies and make sure their systems are set up correctly. Whether you need a focused compliance review or ongoing retained HR support, our team can help.

Find out more about our HR project support for one-off compliance work. Book a free 30-minute discovery call to talk it through.

Book a free 30-minute discovery call

The people we support, supporting us:

• Limelite HR & Learning recently supported me, our Trustees and our team at the Maternal Mental Health Alliance through a review of our terms and conditions. It was a great experience from start to finish.  Their guidance was balanced and they really understood the nuance of our specific situation as a small charity. Relationships are at the heart of all they do and this is reflected in such a positive outcome.  They are incredibly pro-active, write brilliant and succinct reports. I cannot recommend them highly enough.

  Laura Seebohm, CEO 
  Maternal Mental Health Alliance 

• At YMCA Worcestershire, we have been through a period of substantial change and development. As part of this we refreshed our vision, mission and values. We also did some solid work in creating a strategic framework with top line objectives. While we had done some preliminaries on further development of this into measurables, a challenge of capacity issues with a need for more operational focus was emerging. We were keen to get through this bottleneck because we knew the strategic planning and implementation would help to ease the operational challenges.

  We were very grateful to get Workforce Planning support for this through consultancy work with Limelite HR who reviewed what we’d done so far, liaised with key staff members and helped us to harness this into a more complete and workable format. This is now enabling us to have a clearer road map in our efforts and a means by which to monitor progress and will, in this respect, enhance our impact for those we serve in our charitable and transformative work. We very much appreciated the timely help with this – thank you to Workforce Planning and Limelite HR!

  Dr Annette Daly, CEO
  YMCA Worcestershire

• Firstly, thank you for turning the report around so quickly – much appreciated.

  Secondly, and even more importantly, I wanted to say what an impressive piece of work it is. The skills is in interpreting the data you’ve gathered and presenting it in a meaningful way, and you’ve absolutely nailed it. Well done!

  Louise Skittrall, CEO
  Robinson Grace

• The offsite has been extremely impactful and the team are working better together since, they often state this improvement is down to the time we spent with your support! It was fabulous to finally work with you and it was just as I thought it would be – you (and Helen) nailed it!

  MD 
  McLaren Applied