Make Work Pay: holiday pay compliance and enforcement
The government has opened a consultation on:
- the proposed approach to holiday pay compliance and enforcement
- some of the important design features
- what support and guidance the Fair Work Agency can provide to help support compliance
Right to holiday leave and pay
Paid holiday or annual leave is a long‑established employment right which supports workers’ health and wellbeing and contributes to a productive and resilient workforce.
The Fair Work Agency will be enforcing workers’ rights to statutory holiday pay and ensuring that employers are complying with the law. State enforcement is intended to complement the Employment Tribunal system and provide an accessible, timely and effective route to resolution.
The government wants to build a compliance and enforcement framework that is fair, proportionate and effective for both workers and employers.
This consultation seeks views from all interested parties to ensure that holiday pay compliance and enforcement works well for everyone. The consultation will likely be of particular interest to workers, employers (of all sizes), Business Representative Organisations and trade unions.
The proposals are indicated to focus on supporting businesses to comply with the law wherever possible and taking firmer action only where necessary.
They are also consulting on a number of important design features, including how compliance and enforcement should be targeted, how far back the Fair Work Agency can enforce claims, and how penalties should be set.
Holiday pay law is complex and convoluted making it difficult to navigate, even for well-intentioned employers.
Clearer guidance and practical support will be essential to the success of the holiday pay compliance and enforcement regime.
This consultation provides an opportunity to consider what information, tools and support the Fair Work Agency could provide to help support holiday pay compliance across different sectors and business sizes.
Pay frequencies other than weekly that are not paid in arrears are difficult to align with regulated requirements. Major confusion also impacts variable weekly hours based on entitlements that are not considered irregular hours workers. Things can be a mess and there is limited understanding in employer obligations.
Why state is state enforcement being considered
State enforcement of holiday pay is intended to increase pay outcomes for workers who are more likely to be in low‑paid work where holiday pay underpayment is more likely.
State enforcement is expected to reduce systemic disparities in who can access holiday pay and is considered to support fairer outcomes for protected groups.
State enforcement can be more efficient than taking an individual claim to a tribunal and so will enable more workers to have their right enforced more quickly. Workers will not have to pay to have their rights enforced by the FWA (i.e. enforcement action is free for a worker).
The Fair Work Agency
The Fair Work Agency (the FWA) is an Executive Agency of the Department for Business and Trade.
The FWA is responsible for upholding compliance with workers’ rights and provides a single point of contact for workers who believe their rights have not been upheld.
The FWA has brought together state enforcement functions for employment rights with the objective of reducing fragmentation and inefficiencies across the system.
The FWA is responsible for enforcing a wide range of labour market legislation and protecting workers from exploitation, non-compliance and abuse. It has responsibility for upholding compliance with employment agency rules and the minimum wage, licensing of gangmasters, and acting against serious labour exploitation.
The FWA has a single set of powers to investigate and take action against employers that do not comply with the law. These powers include:
• Powers to enter and inspect workplaces and require employers to produce relevant evidence to demonstrate compliance with employment law.
• A civil penalty regime. Where FWA officers find that employers have underpaid workers, they are able to issue Notices of Underpayment that require the employer to pay workers the wages they are due and pay a penalty to government.
Over time, the FWA will take on new functions and enforcement of a wider range of employment rights, including the enforcement of holiday pay.
The government plans for the FWA to commence holiday pay compliance and enforcement in 2027.
Opinion
Statistics indicate that there is a sizeable group of employees and workers who are either denied their paid holiday rights, or receive holiday pay underpayments.
Many employer holiday pay schemes do not align well with the relevant holiday pay regulations as outlined in the Working Time Regulations. Holiday pay is also found in some cases to not align with the requirements of the relevant Employment Rights Act and associated holiday pay calculations. Some of that failure may be as result of overcomplicated rules that do not align well with more modern working patterns and practice and any pay frequency other than weekly.
The consultation is not an opportunity to change holiday pay law, but more about support and compliance options.
PAYadvice.UK 30/6/2026