Does the annual leave record-keeping duty apply to small employers?

Yes. The duty that began on 6 April 2026 applies to all employers regardless of size, and covers all workers rather than only employees. There is no small-business exemption, so a five-person business carries the same obligation as a five-hundred-person one.

How long do employment records need to be kept?

Employment records are generally kept for at least six years, which matches the limitation period for most contract claims. The practical test is whether you could evidence a holiday pay calculation from several years ago, including the reference period used, if it were challenged today.

What changes for zero-hours workers in October 2026?

Zero-hours workers gain a right to reasonable notice of shifts and to compensation where a shift is cancelled or cut short at short notice. In practice this means rota changes need to be recorded with timestamps rather than handled informally.

Can payroll software handle this on its own?

Payroll usually handles salaried staff well. The gap is irregular hours, where accrual depends on hours actually worked and those hours often sit in a separate rota. Connecting the rota to payroll is normally the step that closes the gap, rather than replacing either system.

The Employment Rights Act Record-Keeping Duty UK SMEs Are Already Breaching

Since 6 April 2026, every UK employer must keep records of annual leave and holiday pay for all workers, including casual and zero-hours staff. There is no exemption for small employers. From around October 2026, zero-hours workers also gain the right to reasonable notice of shifts and compensation when a shift is cancelled late.

The Employment Rights Act is the largest overhaul of employment law in England, Scotland and Wales in a generation, and Pinsent Masons notes that its provisions land in phases rather than all at once. That phasing is the problem. Duties that started quietly in April are already live, and most small employers have not changed anything.

What exactly has to be recorded since April 2026?

The duty covers annual leave and holiday pay for every worker. In practice that means, for each individual:

Leave accrued in the current leave year
Leave taken, with the dates
Holiday pay calculated and paid, and the reference period used
Any leave carried over, and the reason it was carried over

For salaried staff on fixed hours, a payroll system usually holds most of this already. The exposure sits with irregular workers: casual shifts, term-time staff, and anyone on a zero-hours arrangement, where accrual is a percentage of hours actually worked and the numbers live in a rota spreadsheet rather than in payroll.

Why a spreadsheet is a compliance risk rather than a record

A spreadsheet is not the problem in itself. The problem is that a spreadsheet has no memory of who changed what, and no way to reconstruct a figure from two years ago.

If a worker brings a claim, the question is not whether you paid them correctly today. It is whether you can evidence what they accrued, what they took, and how the pay was calculated at the time. A file that has been edited a hundred times by four people cannot answer that.

The three failure modes we see most often in SMEs:

Rota lives apart from payroll. Hours worked are in one system, holiday accrual is calculated by hand somewhere else, and the two drift.
Nobody owns carry-over. Leave rolls into a new year informally, with no record of why it was allowed.
Reference periods are guessed. Holiday pay for irregular hours needs an averaging calculation, and it is often estimated rather than computed.

What is coming in October 2026?

The next phase gives zero-hours workers a right to reasonable notice of shifts, and compensation where a shift is cancelled or curtailed at short notice. For a business that staffs to demand, that turns rota changes into a financial event that has to be tracked, not just a message in a group chat.

The record-keeping duty and the notice duty compound. From October, you need to evidence not only what someone was paid, but when they were told they were working and what happened when that changed.

What to automate first

The aim is not to buy a compliance product. It is to remove the manual steps where the record breaks.

Task	Done manually	Automated
Accruing leave for irregular hours	Recalculated by hand each month	Derived from rota hours as they are logged
Holiday pay reference period	Estimated, or copied from last time	Computed from the actual pay records
Shift notice and changes	Message in a chat thread	Timestamped against the worker record
Producing a record for a claim	Reconstructed from old files	Exported from a single source

Start with the rota-to-payroll link. Once hours flow into the same place the pay is calculated from, accrual and the reference period stop being manual work, and the record becomes a by-product of running the business rather than a separate job somebody has to remember.

What this does not do

Automation does not decide policy. It will not tell you whether to allow carry-over, what notice period is reasonable for your sector, or how to handle a disputed shift cancellation. Those remain decisions for you and your employment adviser. What it does is make sure that once you have decided, the decision is applied consistently and the evidence exists a year later.