Make work pay: Holiday pay compliance enforcement

Changes to holiday pay compliance could be on the horizon following a consultation launched by the government. Our employment law team looks into what the proposals so far include.

The government has launched a consultation on introducing formal enforcement of statutory holiday pay through the Fair Work Agency (FWA) from 2027. The proposals are designed to improve compliance while maintaining a supportive approach for employers.

Under the new regime, the FWA will enforce statutory holiday pay rights, investigate complaints, conduct proactive inspections and, where necessary, require employers to repay arrears and pay financial penalties.

The FWA will focus on helping businesses comply through guidance and voluntary correction of errors, reserving enforcement action for more serious or persistent non-compliance.

Key proposals include:

• A six-year enforcement period for holiday pay claims, aligning with employers’ record-keeping obligations and existing minimum wage enforcement. Claims arising before 18 December 2025 would not be enforceable by the FWA.
• Civil penalties mirroring the current minimum wage regime: 200% of arrears owed (reduced by half if paid within 14 days), subject to a £20,000 maximum per worker and a £100 minimum penalty per case.
• Potential public naming of employers found to have underpaid holiday pay, similar to the current approach for minimum wage breaches.
• The consultation also seeks views on targeting enforcement towards lower-paid and vulnerable workers and on the practical use of rolled-up holiday pay for irregular-hours and part-year workers.

With the FWA due to begin enforcement in 2027, employers should review holiday pay practices, ensure robust record-keeping systems are in place, and address any compliance risks in advance. The consultation closes on 22 September 2026.

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