From 6 April 2026, employers are expected to meet enhanced record-keeping expectations around holiday and leave pay; a development widely referred to as “R-day” or records day. At the same time, the Fair Work Agency (FWA) is expected to begin operating as a consolidated labour market enforcement body within the department for business and trade.

Viewed separately, each change is important. Viewed together, they represent a clear shift in compliance standards for payroll. Record-keeping requirements are becoming more explicit, and enforcement structures are becoming more coordinated. This combination increases both the evidential burden and the likelihood of scrutiny.

Payroll output to payroll evidence 

From April 2026, employers are expected to retain accurate, centralised records relating to holiday entitlement, holiday pay calculations and annual leave processed through payroll. Crucially, those records must be preserved for six years and be capable of being produced if requested.

Many payroll teams already retain payslips and payroll reports for extended periods. However, R-day moves the focus beyond what was paid to how it was calculated. In practice, this means organisations may need to demonstrate not only the final holiday pay figure but also the entitlement rules applied, the reference period used, the pay elements included or excluded and the treatment of any variable remuneration such as overtime or commission.

A subtle shift 

This represents a subtle but important compliance shift. Payroll accuracy has always mattered, but the new emphasis is on reconstruct-ability. If an inspector were to review a case several years after payment, the organisation would need to show clearly and coherently how the figure was derived. Reliance on informal practice, staff recollection or undocumented spreadsheet adjustments will create risk.

Business commentary surrounding R-day has highlighted the potential for significant penalties where record-keeping is inadequate. Regardless of how frequently enforcement action is taken, the direction of travel is clear: holiday pay must be demonstrably compliant, and the evidence must be durable. 

A new enforcement landscape 

The establishment of the Fair Work Agency signals a broader change in enforcement posture. Operating as an executive agency within the Department for Business and Trade, the FWA is intended to consolidate a number of existing labour market enforcement functions.

Its anticipated remit includes enforcement in relation to national minimum wage compliance, employment agency standards, unpaid tribunal awards, holiday pay and statutory sick pay, with further responsibilities expected in future years. Government materials indicate that enforcement officers may be empowered to inspect workplaces, require production of documents, issue civil penalties and pursue formal enforcement undertakings where non-compliance is identified. 

The practical implication is not simply that another regulator exists. It is that enforcement may become more coordinated, more proactive and less dependent on individual employee complaints. Where record-keeping standards are unclear or inconsistent, the risk of scrutiny increases. 

Why holiday pay is likely to attract attention 

Holiday pay has long been one of the most technically complex aspects of payroll compliance. The interaction between statutory entitlement, contractual enhancements and fluctuating remuneration patterns creates room for error, particularly in organisations with diverse working arrangements. 

Where overtime patterns vary, commission forms part of remuneration or employees work irregular hours, holiday pay calculations often rely on nuanced reference periods and system configuration decisions. Over time, different divisions or payroll cycles may adopt slightly different practices. Without clear documentation and consistent application, these differences have become potential vulnerabilities. 

R-day effectively formalises the expectation that holiday pay methodology must be recorded, retained and capable of being scrutinised. The creation of the FWA reinforces that expectation by strengthening the enforcement framework around it. 

The structural risk of fragmented systems 

One of the most common compliance weaknesses lies not in deliberate underpayment but in fragmented data ownership. In many organisations, HR teams manage leave booking and entitlement rules, payroll teams manage calculation engines and finance teams oversee reporting and reconciliations. IT, meanwhile, controls data retention and system architecture. 

Operationally, this division of responsibilities can function smoothly. From a compliance perspective, however, it creates potential blind spots. If entitlement records are held in one system, calculation logic in another and audit logs in a third, assembling a coherent evidential trail under inspection can become complex and time-consuming. 

An enforcement officer is unlikely to accept that key information “sits elsewhere”. They will likely expect a clear narrative that links entitlement, leave taken, calculation methodology, payment output and retention controls into a single, traceable chain. Where that chain is incomplete, inconsistent or dependent on manual intervention, compliance risk increases. 

Preparing for April 2026 

Preparation should begin with understanding the full lifecycle of holiday pay within your organisation. This means mapping how entitlement is determined, how leave is recorded, how calculation rules are configured within payroll systems, how payments are processed and how records are archived. 

It is equally important to test whether historic calculations can be reconstructed. Selecting a past case and attempting to rebuild the calculation from raw inputs can reveal gaps in retention, documentation or system accessibility. If reconstruction depends on individual memory or archived systems that are no longer readily accessible, remedial action may be required. 

Clarity, accuracy, transparency

Clear documentation of calculation methodology is also essential. Policies should accurately reflect system configuration, including the treatment of variable pay and the handling of leaver payments. Where manual overrides occur, there should be transparent justification and an audit trail. 

Retention controls deserve particular attention. The six-year expectation associated with R-day requires confidence that data will remain accessible, secure and unaltered throughout that period. Payroll professionals should confirm that audit logs are maintained, version control prevents silent amendment and archived payroll platforms remain retrievable if required. 

Finally, governance should be explicit. Assigning named accountability for holiday pay compliance evidence and clarifying the boundaries between HR, payroll, finance and IT reduces the risk of gaps emerging between functions. 

A compliance inflection point 

The key question is no longer simply whether calculations are broadly correct. It is whether the organisation can demonstrate, clearly and confidently, how those calculations were reached and how the records have been preserved. 

April 2026 should therefore be treated as a compliance go-live date. Strengthening documentation, retention architecture and cross-functional governance now will reduce risk later. 

Payroll has always been central to employment compliance. In the new environment taking shape, it may also be one of the first areas regulators examine.