Employment Contracts: The 2027 Holiday Risk Many Employers Haven’t Considered

The Employment Rights Act 2025 has introduced many noteworthy changes to employment legislation that have made media headlines from employees being eligible for Statutory Sick Pay (SSP) from day one of sickness absence to the repeal of the majority of the Trade Union Act 2016.  One notable change that has received less media attention in comparison is the introduction of the Fair Work Agency (FWA) on the 7th of April 2026.

The main purpose of the FWA is to protect workers and ensure employers comply with employment legislation. At present, it is responsible for enforcing National Minimum Wage (NMW) and the National Living Wages (NLW), regulation of employment agencies and some modern slavery related offences.

The FWA have already named 100’s of employers who have failed to pay the NMW to employees and handed out millions of pounds worth of penalties. In the future, the FWA will enforce more areas including holiday pay and holiday records.

If you are an employer who operates with an April to March holiday year, the next few years could prove challenging. The number of bank holidays per year is set to vary because of the changeable date of Easter, which moves from March to April because it is celebrated on the first Sunday after the first full moon after the spring equinox.

Why Could a March – April Holiday Year be Problematic in 2027?

If employers operate with an April to March holiday year, this may cause problems depending on the wording of their employment contracts. For example, if the contract states that an employee is entitled to 28 days holiday inclusive of bank holidays, employees will always be getting the legal entitlement to holidays (28 days, or 5.6 weeks for a full-time employee in England and Wales) regardless of the amount of bank holidays in that specific year. For the year of 2026 – 2027, employees with this contract wording will need 10 days from their total entitlement for the bank holidays.

However, if the contract states an employee is entitled to 20 days holidays plus all of the bank holidays, for the same year, an employee would be entitled to 30 days paid holiday. If this comes as a surprise, this could prove costly for employers with many employees.

With the Fair Work Agency set to enforce holiday pay and holiday recording, now would be an ideal time to review contractual wording and make any necessary changes, particularly because the Employment Rights Act will make it more difficult for employers to change terms of employment with the fire and rehire changes.

As an employer, contractual wording is key to employment law compliance.  However, wording can quickly become non-compliant as the law changes. If you have contracts in place that need reviewing, then we can help with this. Feel free to reach out to our team of dedicated, employment law consultants today on 01509 861252.