At a glance
- On 30 June 2026, the government launched a consultation on how the new Fair Work Agency (FWA) will enforce statutory holiday pay rights from 2027 under the Employment Rights Act (ERA).
- The FWA will be able to investigate underpayments, require repayment of arrears, issue penalties and promote compliance, while workers will retain the right to bring Employment Tribunal claims.
- The proposed enforcement regime would cover unpaid, underpaid or incorrectly calculated holiday pay, as well as situations where employers refuse leave or refuse to permit carry-over.
- The government proposes a six-year enforcement claim period and penalties of up to 200% of arrears per worker, subject to a maximum of GBP20,000 per worker.
- The consultation seeks views from workers and employers on compliance challenges, enforcement measures and the possible extension of the existing naming regime to holiday pay breaches.
On 30 June 2026 the government published a consultation paper on the proposed approach to upholding compliance with statutory holiday pay entitlement. The statutory right to holiday pay will be enforced from 2027 by the new FWA. The ERA provides for the FWA to have the power to uphold compliance with holiday pay law and to take enforcement action on behalf of workers. Enforcement by the FWA does not replace a worker's right to make a claim to the Employment Tribunal. The FWA will also provide a key educational role in supporting businesses through upskilling activities and advice on compliance with the legislation. State enforcement will bring the UK in line with many other countries in their approach to holiday pay compliance.
Evidence based on survey data suggests that there is a significant level of non-compliance with the law on holiday pay in the UK. Many affected employees do not pursue formal enforcement routes.
The FWA's remit will cover statutory holiday pay entitlement, including where statutory holiday pay has been underpaid, not paid, or calculated incorrectly, including where an employer has refused leave or refused to allow leave to carry over.
The government wants to build a compliance and enforcement framework that is fair, proportionate and effective for both workers and employers. The FWA will have a range of compliance and enforcement tools at its disposal, ranging from raising awareness and offering guidance and support to encouraging voluntary repayment of arrears, investigating claims of underpayment and issuing notices of underpayment requiring payment of arrears and penalties. In future, the naming regime which applies to National Minimum Wage may also be extended to holiday pay.
The government intends to set the claim period for FWA enforcement at six years, which aligns with the record-keeping requirements on employers (see our previous update here).
The government proposes that the penalty settings for holiday pay underpayment should be:
- A penalty amount of 200% of arrears per worker, reduced to 100% if full arrears and half the penalty are paid within 14 days.
- A maximum penalty of GBP20,000 per worker.
- A minimum penalty of GBP100 per case.
The government is considering a number of options to target enforcement on lower paid workers.
The consultation seeks views from workers as to whether they have been underpaid holiday pay.
From employers, the consultation seeks views on:
- How easy or difficult it is to comply with obligations in relation to holiday pay.
- The proposed approach for the FWA to support holiday pay compliance.
- Whether there are any other compliance activities the FWA should do to enforce holiday pay.
- Whether the naming policy should be extended to holiday pay.
- Whether the government's proposal to set the FWA claim period for enforcement should be six years as proposed.
The government is also seeking views on rolled up holiday pay.
The government’s approach is to support employers to comply with the law and their obligations, and to ensure that workers understand and can access their holiday pay rights.
The consultation does not cover consulting on changes to how holiday pay and holiday entitlement are enforced through the Employment Tribunal or on changes to how holiday pay is calculated, how much holiday entitlement a worker is entitled to or what is included when calculating holiday pay.
The consultation closes on 26 September 2026. Responses can be submitted here.
More to explore
