A significant employment law change came into force in April 2026 with the introduction of the Fair Work Agency (FWA). While it has attracted less attention than some headline reforms under the Employment Rights Act 2025, the FWA represents a fundamental shift towards proactive, ‘state led’ enforcement of employment rights, with important implications for employers across all sectors.
What is the Fair Work Agency?
Operational from 07 April 2026, the Fair Work Agency is the UK’s new single enforcement body consolidating several existing regulators under one central authority.
It consolidates enforcement functions previously carries out by:
- HMRC (National Minimum and Living Wage enforcement)
- The Employment Agency Standards Insepctorate
- The Gangmasters and Labour Abuse Authority
The FWA enforces compliance across key areas including minimum wage, statutory sick pay, holiday pay, employment pay, employment agency standards, gangmaster licensing, labour exploitation, and the non-payment of Employment Tribunal awards and COT3 settlements.
What powers does the Fair Work Agency have?
The government has moved towards a more centralised, proactive enforcement model. The FWA has powers to investigate, intervene and penalise employers directly, including the ability to:
- Launch investigations on its own initiative
- Inspect payroll and HR records
- Enter business premises
- Speak directly to workers and managers
- Take enforcement action in the public interest
It may also provide legal assistance to workers and bring Employment Tribunal proceedings in its own name to recover unpaid wages or holiday pay where workers have not pursued claims themselves.
Why is this important to employers?
The most significant change is not the creation of new employment rights, but how existing rights are now enforced.
- Proactive enforcement: The FWA does not need to wait for an employee complaint or Tribunal claim before taking action.
- Evidence-based compliance: Employers must be able to clearly evidence payroll accuracy, holiday pay calculations (particularly for variable-hours workers) and pay decisions. Poor record-keeping significantly increases enforcement risk.
- No intent required: Enforcement is based solely on whether a breach occurred. Genuine mistakes or technical errors can still result in penalties if compliance cannot be demonstrated.
- Significant financial and operational exposure: Penalties can be up to 200% of the underpayment per employee, capped at £20,000. This means that even relatively minor or historic errors can quickly escalate into substantial liabilities, alongside disruption to the business and reputational damage.
Practical steps for employers
Employers should now treat compliance readiness as an operational priority:
- Audit payroll and holiday pay calculations, particularly for variable or irregular hours staff, overtime and deductions.
- Strengthen record-keeping, ensuring pay, hours worked, holiday entitlement and holiday pay records are accurate, accessible and retained for the required period.
- Align HR and payroll processes to avoid gaps or inconsistencies in data and decision-making.
- Train managers to formally document decisions relating to pay, hours and working arrangements, rather than relying on informal practices.
What are we still waiting to find out?
Although the Fair Work Agency is now operational, some aspects of its role will evolve over time. Employers should watch for:
- Phased enforcement and transitional arrangements during 2026 as responsibilities fully transfer.
- Further guidance on enforcement priorities is expected, including sector focus and investigation triggers.
- Potential expansion of remit, as the Employment Rights Act 2025 allows the FWA’s enforcement scope to be widened in the future.
Further detail is expected through government guidance and secondary legislation during 2026, and employers should monitor developments closely.
To discuss the Fair Work Agency, please contact our Employment team.
