Holiday pay is one of those employment issues most electrical contractors want to get right — but, in practice, it has become complex, technical and easy to miscalculate, particularly for businesses operating shifts, overtime and variable working patterns.
Many employers who believe they are compliant may, in fact, be underpaying holiday pay without realising it.
This article explains why the risk exists, why it matters, and what contractors should do now — including what to expect from the new Fair Work Agency (FWA).
Why holiday pay is particularly tricky in the electrical sector
Electrical contracting often involves regular and irregular overtime, shift premiums, standby/call‑out and other allowances, and variable hours depending on projects and workloads.
Under UK law, statutory holiday pay is not just basic pay. For the first four weeks of statutory leave, holiday pay must reflect a worker’s ‘normal remuneration’. That can include payments that are routinely earned — such as regular overtime and shift allowances.
Because pay structures in the sector are rarely flat or simple, errors often arise not from intent, but from complexity.
“We’ve always done it this way” is no longer a safe assumption
Historically, holiday pay disputes were usually raised by individuals through employment tribunals. That meant many issues went unnoticed or unchallenged.
The direction of travel is changing: holiday pay compliance is moving towards a more proactive, inspection‑based model. That means employers should expect greater focus on systems, records and calculations — not just reacting if someone raises a complaint.
The Fair Work Agency (FWA): inspections, underpayment notices and penalties
From 7 April 2026, the new Fair Work Agency (FWA) will bring enforcement of key employment rights into one place. Over time, it will take on enforcement of statutory holiday pay as part of a wider remit.
What this means in practice:
- Workplace inspections and evidence requests: FWA enforcement officers can inspect workplaces and require employers to produce documents and other evidence to demonstrate compliance.
- Notices of underpayment: where underpayment is found, the FWA can issue a notice requiring the employer to pay workers what they are owed and to pay a penalty to the government.
- Civil proceedings: the FWA can bring proceedings in the Employment Tribunal on a worker’s behalf and provide legal assistance in employment‑related cases.
- Enforcement undertakings/orders: for serious or repeated non‑compliance, the regime includes undertakings and orders; breach of an order can be a criminal offence.
- Cost recovery: the framework allows for recovery of enforcement costs from non‑compliant employers (subject to regulations).
Penalties for holiday pay underpayment may include:
- Repayment of the underpaid holiday pay to affected workers.
- A financial penalty of up to 200% of the underpayment (capped at £20,000 per worker).
- Reducing the penalty to 100% if paid within a short timeframe.
- Potential look‑back periods of up to six years— increasing the value of getting it right now.
Records matter as much as pay
To demonstrate compliance, employers should be able to show: how holiday entitlement is calculated; what pay elements are included in “normal pay”; and clear records of hours worked, leave taken and pay paid.
If records are incomplete or unclear, it becomes difficult — sometimes impossible — to evidence compliance, even where the intention was to pay correctly.
What should electrical contractors do now?
The most important step is to review holiday pay arrangements and consider:
- Review holiday pay calculations — are regular overtime and shift payments being included correctly?
- Check contractual terms and pay elements — which allowances are “routinely earned” in your business?
- Validate records — do you have reliable hours, overtime and leave records and can you evidence the calculation?
- Fix forward — if you identify gaps, correct processes and payroll configuration for future leave.
- Use sector‑specific guidance — generic approaches often miss the realities of shift and overtime working.
Holiday pay compliance is no longer a background HR issue. For electrical contractors operating shifts, overtime and variable pay, it is a business risk that deserves attention. A short review now can reduce exposure, protect your workforce, and provide confidence that your business is doing the right thing.
ECA guidance: a practical starting point
ECA provides clear, sector‑specific guidance on holiday pay to help members understand what needs to be included, how the rules apply in practice, and how to reduce risk through correct processes and records. Use the ECA guidance as your first step and take professional advice where necessary.
If you would like to discuss these changes, visit ECA's website for contact details for the Employee Relations team.
There is also support for Employment Law through several upcoming Growth Hub courses.
Last updated 19 February 26
