April 2026 is shaping up to be one of the most significant moments for payroll compliance in recent years. Two changes are landing at the same time, and together they raise the stakes considerably for employers.
The first is R-day – short for records day – on 6 April 2026, when enhanced record-keeping expectations around holiday pay come into force. The second is the launch of the Fair Work Agency (FWA), a new consolidated enforcement body that will have real powers to investigate and act on non-compliance.
On their own, each change is important. Together, they represent a clear shift in what the government expects from employers, and how seriously it plans to check.
It’s not just about what you paid. It’s about how you worked it out.
Many payroll teams already keep payslips and payroll records for several years. That’s a solid foundation, but R-day goes further.
From April 2026, employers will need to retain accurate records covering holiday entitlement, how pay was calculated and how annual leave was processed through payroll. Those records must be kept for six years and must be available if requested.
Think of it as an audit trail, not just an audit. The end figure is only part of the picture. You’ll need to demonstrate:
- The entitlement rules you applied
- The reference period used
- Which pay elements were included or excluded
- How variable pay, such as overtime or commission, was handled.
Think about what that means in practice. If an inspector reviewed a case three years from now, could you walk them through the calculation from scratch — clearly, completely, with no reliance on staff memory or undocumented spreadsheet adjustments? If the answer is anything other than a confident yes, it’s worth taking action now.
The launch of the Fair Work Agency
Alongside R-day, the Fair Work Agency (FWA) will begin operating as an executive agency within the Department for Business and Trade. Its job is to consolidate a range of existing labour market enforcement functions into one coordinated body.
Its remit is expected to cover National Minimum Wage compliance, employment agency standards, unpaid tribunal awards, holiday pay, statutory sick pay, and more. Enforcement officers are expected to be able to inspect workplaces, request documentation, issue civil penalties and pursue formal enforcement where non-compliance is found.
The practical implication isn’t simply that a new regulator exists. It’s that enforcement is likely to become more proactive, more joined-up and less dependent on individual employees raising complaints. Where record-keeping is patchy or inconsistent, the risk of scrutiny increases.
Why holiday pay tends to attract attention
Holiday pay has long been one of the trickier areas of payroll compliance. The interplay between statutory entitlement, contractual enhancements and variable remuneration creates a lot of room for error, particularly in organisations with a mix of working patterns.
Where overtime varies, where commission forms part of pay, or where employees work irregular hours, calculations often rely on nuanced reference periods and system configuration choices. Over time, different teams or departments can end up doing things slightly differently without ever realising it.
R-day effectively formalises the expectation that methodology must be documented, retained and capable of standing up to scrutiny. The FWA gives that expectation real teeth.
The problem with fragmented systems
One of the most common compliance weaknesses isn’t deliberate underpayment — it’s fragmented data ownership.
In many organisations, HR manages leave entitlement, payroll handles the calculation engine, finance oversees reporting, and IT controls data retention. That division of responsibilities can work well day-to-day. Under inspection, it can create real problems.
If entitlement records live in one system, calculation logic in another and audit logs somewhere else entirely, piecing together a coherent evidence trail under pressure becomes difficult and time-consuming. Under inspection, “we’d need to check with HR” or “that’s a question for IT” won’t cut it. The expectation is
a clear, connected chain of evidence — not a cross-departmental treasure hunt.
Getting ready before April
Start by mapping the full lifecycle of holiday pay in your organisation.
- How is entitlement determined?
- How is leave recorded?
- How are the calculation rules configured in your payroll system?
- How are records archived once payments are processed?
Once you’ve mapped it, test it. Pick a past case and try to reconstruct the calculation from scratch using only what’s documented and accessible. That exercise alone will often reveal where the gaps are, whether in retention, documentation or system accessibility.
From there, it’s about tightening up:
- Calculation methodology needs to be clearly documented, and your policies need to accurately reflect how your system is actually configured, including the treatment of variable pay and leaver payments
- Manual overrides should always have a documented, auditable justification — not just a note in someone’s inbox
- Retention controls need to provide confidence that records will remain accessible, secure and unaltered for six years
- Governance should be explicit, with named accountability for holiday pay compliance evidence and clear boundaries between HR, payroll, finance and IT
April 2026 raises the bar – here’s what that actually means in practice
Payroll accuracy has always mattered. What’s changed is the expectation around evidence. Getting the calculation right is the baseline, but from April, you’ll also need to show how you got there and demonstrate that the records have been maintained in a way that would hold up under scrutiny.
The question has shifted. It’s no longer enough to get the number right. You need to be able to show your working and prove that the evidence has been kept safe.
