28th May 2026
The Fair Work Agency Is Here: What Employers Need to Know
As highlighted in our Employment Law Update earlier this year, a significant development under the Employment Rights Act 2025 has now taken effect.
From 7th April 2026, the new Fair Work Agency (FWA) has officially been established. It brings together three previously separate enforcement bodies into one central organisation:
- The Employment Agency Standards Inspectorate
- The Gangmasters and Labour Abuse Authority
- HMRC’s National Living Wage enforcement team
This represents a fundamental shift in how employment rights are enforced in England and Wales.
While much of the focus around the Employment Rights Act 2025 has been on new employee rights, this change to enforcement is just as important (and often overlooked). However, its potential impact on employers of all sizes should not be underestimated.
This article explains in further detail what the Fair Work Agency does, why it matters and what practical steps employers should be taking now.
Why Was The Fair Work Agency Created?
For context, the creation of the Fair Work Agency is a central pillar of the Employment Rights Act 2025. The Government’s intention with this reform is to strengthen the enforcement of workplace rights and make it easier to identify and act on breaches.
In simple terms, the Fair Work Agency has been created to:
- Set and enforce minimum workplace standards;
- Promote compliance with employment law; and
- Investigate suspected breaches more effectively.
As explained above, enforcement was previously spread across multiple organisations, which could lead to gaps, delays or inconsistencies. By consolidating these functions into a single body, the Government has aimed to create a more proactive and visible enforcement regime.
What Does The Fair Work Agency Do?
The Fair Work Agency has wide-ranging powers to investigate whether employers are complying with key employment law obligations.
In particular, it will look at whether workers are receiving their full contractual pay, at least the National Minimum Wage/National Living Wage and Statutory Sick Pay (SSP), where eligible.
In addition, the FWA will review compliance with holiday entitlement and pay, which is becoming an increasing area of scrutiny. In particular, this important development is that a new statutory requirement for employers to keep detailed holiday records for 6 years came into force on 6th April 2026, including:
- Each worker’s annual leave entitlement;
- How holiday pay has been calculated; and
- When holiday pay has been paid.
This obligation significantly increases the level of documentation employers must maintain and makes it much easier for the Fair Work Agency to identify non-compliance during an audit.
What Powers Does The Fair Work Agency Have?
The Fair Work Agency has a wide range of enforcement tools at its disposal, including:
Workplace Inspections
The Agency can enter workplaces and require the production of documents to check compliance. While similar powers existed previously, the key difference is that enforcement is now centralised, likely to be more consistently applied and may result in higher-stakes penalties.
Labour Market Enforcement Action
Where serious issues are identified, employers may be subject to:
- Labour Market Enforcement Undertakings (voluntary commitments to improve practices) or
- Labour Market Enforcement Orders (legally binding requirements)
Failure to comply with an Enforcement Order is a criminal offence, which can result in fines or imprisonment.
Underpayment Notices and Financial Penalties
If an employer is found to have underpaid wages, Statutory Sick Pay (SSP) or holiday pay, they can be required to repay the worker within 28 days and may face a penalty of up to 200% of the underpayment, with a minimum penalty of £100 and a maximum penalty of £20,000.
Legal Proceedings
Crucially, the Fair Work Agency also has the authority to bring civil proceedings in the Employment Tribunal on a worker’s behalf. This allows the agency to step in, provide legal assistance, and represent individuals who are unable or unwilling to bring claims themselves.
Furthermore, unlike some of its narrower functions as described above, the Fair Work Agency can bring Tribunal proceedings for almost any rights falling under employment law, such as unfair dismissal or dismissal.
What Should Employers Do Now?
Given the increased scrutiny and potential consequences, employers should act now to ensure they are prepared. For instance, employers may wish to:
Audit Payroll and Pay Practices
This can be done by checking that all workers are receiving their correct pay and entitlements, promptly identifying and correcting any underpayments and ensuring that any back pay is processed in a timely manner.
Review Holiday Pay and Working Time
If not already doing so, employers should assess how holiday pay is calculated (particularly for workers with no fixed hours) and ensure these calculations align with current legal requirements. In addition, employers may find it useful to implement a system to accurately track holiday entitlement and pay, keeping in mind the new requirement from 6th April 2026 to ensure these records are retained for the required 6-year period.
Review Statutory Sick Pay (SSP) Processes
This recommendation is particularly important given the reforms that the Employment Rights Act 2025 brought to SSP in April 2026. Particularly, SSP is now available to all employees regardless of their weekly earnings (scrapping the previous £123 per week Lower Earnings Limit) and is available from the first day of sickness absence. In addition to these new requirements for monitoring when SSP is payable, there is also the additional monitoring needed in terms of the amount of SSP that needs to be paid. Specifically, SSP is now payable at 80% of an employee’s earnings or the current flat rate of £123.25.
Should you need to discuss any of this further, contact us. We’d be happy to help.
