The Fair Work Agency

07 Apr 2026

Employment law is evolving at pace. New rights, tighter expectations and greater scrutiny are all reshaping the way UK businesses manage their people. From 7 April 2026, that scrutiny will increase significantly with the introduction of a new enforcement body: the Fair Work Agency.

The Fair Work Agency forms part of the government’s wider Make Work Pay agenda, designed to reduce exploitation, improve employment standards and ensure workplace rights are meaningfully enforced.

While much attention has focused on headline changes within the Employment Rights Act, the Fair Work Agency itself has received far less explanation. If it’s not yet on your radar, you’re certainly not alone.

This blog explains what the Fair Work Agency is, how it operates, and the practical steps employers should be taking now to reduce risk and stay compliant.

What is the Fair Work Agency?

The Fair Work Agency (FWA) is a new government body responsible for enforcing key employment rights across the UK. It sits within the Department for Business and Trade and was created under the Employment Rights Act, which received Royal Assent on 18 December 2025.

Its purpose is simple but significant: to bring employment law enforcement into one coordinated system, giving regulators a clearer, more consistent view of how businesses are meeting their legal obligations.

Fair Work Agency Remit

The Agency’s remit covers core, day-to-day employment fundamentals, including whether:

  • Workers are paid at or above the correct National Minimum or Living Wage, taking account of unpaid time, deductions and uniform costs
  • Statutory payments such as holiday pay and Statutory Sick Pay are calculated and paid correctly
  • Workers are treated fairly and not exploited
  • Employment records are accurate, complete and up to date (including contracts, payslips and right-to-work documentation)
  • Appropriate agreements are in place where agency workers, umbrella companies or labour providers are used

This is expected to expand over time as additional enforcement responsibilities transfer to the Agency.

*Holiday Pay*

For the first time, statutory holiday pay will be actively enforced by a state body. Previously, employees were largely required to pursue underpayments themselves. From April 2026, that position changes. The Fair Work Agency will also publish clearer compliance guidance to help employers understand and meet their obligations.

What powers does the Fair Work Agency have?

The Fair Work Agency has wide-ranging and robust enforcement powers, including:

Workplace inspections

Enforcement officers can enter business premises and carry out inspections without needing a prior complaint from an employee. Obstructing an investigation or supplying false information may result in unlimited fines and up to 51 weeks’ imprisonment.

Requests for documents and evidence

The Agency can require employers to provide evidence such as:

  • Contracts and written terms
  • Payslips and payment records
  • Time and attendance data
  • Wage and pay progression records
  • Internal communications
  • Policies and handbooks
  • Dismissal and disciplinary documentation
  • Witness statements and medical certificates

Providing misleading or false documents carries criminal penalties.

Financial penalties for underpayment

Where workers have been underpaid, the Agency can issue Notices of Underpayment, requiring arrears to be repaid within 28 days. Claims can go back up to six years and cover wages, holiday pay and SSP.

Penalties include:

  • Repayment of arrears
  • A fine of 200% of the underpayment, capped at £20,000 per worker
  • A reduced penalty of 100% if paid within 14 days

Public naming

In some cases, non-compliant employers may be publicly named within 12 months of a case closing, creating reputational as well as financial risk.

Tribunal action on behalf of workers

The Fair Work Agency can bring claims to an employment tribunal on an employee’s behalf and provide legal assistance, reducing the burden on individuals.

Enforced changes to behaviour

The Agency can issue:

  • Labour Market Enforcement Undertakings – voluntary agreements to address non-compliance
  • Labour Market Enforcement Orders – legally binding court orders where undertakings are breached or refused

Breaching an Enforcement Order is a criminal offence.

Recovery of enforcement costs

The Agency can recover its enforcement costs from non-compliant businesses. While final rates have not yet been confirmed, indicative costs (based on similar regulators) could range from:

  • Around £1,000 for minor breaches
  • £2,000+ for standard investigations
  • £20,000+ for complex or long-running cases

When does the Fair Work Agency take effect?

The Fair Work Agency becomes operational on 7 April 2026. From this date, it can investigate, enforce and take action against breaches of employment law.

Employers should also note that from 6 April 2026, there is a legal duty to maintain adequate holiday and holiday pay records for up to six years.

Why this matters for small and medium-sized businesses

Most compliance issues don’t come from deliberate wrongdoing. They come from everyday inconsistencies:

  • Holiday pay calculated differently depending on who processes it
  • Contracts that no longer reflect working arrangements, or no contracts at all
  • HR records spread across inboxes, spreadsheets and systems

For small and medium-sized businesses, these risks are often greater. HR responsibility may sit with business owners or managers who already wear multiple hats, rather than a dedicated compliance function. That’s the reality of growing a business, but it does mean the areas the Fair Work Agency will focus on are often the ones most likely to need tightening up.

What employers should be doing now

The Fair Work Agency raises the expectation that existing rights are applied correctly and can be evidenced.

Practical steps include:

  • Review pay calculations
    Ensure National Minimum Wage, National Living Wage, holiday pay and SSP are calculated correctly, including unpaid time and deductions.
  • Strengthen record-keeping
    Wage, hour and holiday records should be accurate, accessible and securely stored. Holiday records must be retained for six years from April 2026.
  • Update employment contracts
    All employees, including part-time and casual staff, should have up-to-date written terms reflecting reality.
  • Check core policies
    Policies should cover holiday, sickness, working time and the use of agency or temporary workers.
  • Review how concerns are raised
    Employees should know how to raise concerns about pay or treatment, and managers should know how to respond and document appropriately.
  • Assess agency and umbrella arrangements
    Ensure written agreements are in place and that third-party providers meet minimum pay and holiday obligations.
  • Brief managers and payroll teams
    Those responsible for people management should understand the Fair Work Agency’s role and what good compliance looks like day to day.

For businesses operating in higher-risk sectors, it’s also essential to review obligations under modern slavery and labour abuse legislation.

How HR4 Business can help

Getting this right isn’t about complex new law, it’s about clear processes, consistent records and confidence in your basics. HR4 Business supports employers to review, fix and future-proof their people practices before enforcement becomes an issue.

If you’d like help reviewing your readiness for the Fair Work Agency, we’re here to support you.

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