The Fair Work Agency

Overview

The Fair Work Agency (FWA) is a new single, recognisable body that was established on 7 April 2026. One of the Government's aims in enacting the Employment Rights Act 2025 (ERA 2025) was to create a body that is responsible for:

• Setting and enforcing minimum workplace standards
• Promoting compliance of employment law, and
• Investigating suspected breaches of employment law.

The creation of the FWA will make certain regulatory bodies redundant, including the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate. The functions and enforcement responsibilities of these bodies have already been transferred to the FWA. It will gradually take on additional responsibilities, including enforcement of the national minimum wage, holiday pay and statutory sick pay (SSP).

This article focuses on what the FWA will investigate in respect of employers, how it will ensure that employers remain compliant with employment law and what employers need to do as a result of it being established.

What will the FWA do?

The FWA will investigate whether employers are paying their workers:

• The correct salary to which they are contractually entitled
• At a rate on or above the national minimum wage, and
• SSP.

The FWA will also require employers to demonstrate that their workers have received the correct amount of holiday pay and annual leave. A new duty, imposed under the ERA 2025, came into effect on 6 April 2026 that requires employers to keep written records of each worker's annual leave entitlement and details of when/how holiday pay has been calculated and paid for six years.

Additionally, the FWA will review whether employers have failed to pay all or part of an award made by an employment tribunal.

How will the FWA monitor compliance?

It is expected that the FWA will monitor employer compliance by contacting employers to arrange an audit of their business. During this process, individuals may be required to attend interviews, answer questions and provide information or documents where reasonably believed to be relevant. Acknowledging that this is a huge task, it is expected that monitoring will initially be targeted at high-risk industries and sectors with poor compliance records.

The FWA also has a wide range of enforcement powers:

• FWA officers may enter a business' premises at a reasonable time to inspect records and equipment, and seize documents.
• The FWA will be able to seek labour market enforcement undertakings where it believes a labour market offence has been committed.
• The Secretary of State, on recommendation by the FWA, will be able to issue a notice of underpayment to an employer that has failed to pay the correct amount of wages, SSP or holiday pay to a worker. The notice will require the employer to pay to the worker the outstanding amount within 28 days of issue.
• Additionally, the Secretary of State may require the liable business to pay a penalty calculated at 200% of the sum specified in the notice of underpayment, subject to a maximum of £20,000 and a minimum of £100.
• The Secretary of State will also have powers to bring employment tribunal proceedings on behalf of a worker and to provide legal assistance to a worker who becomes party to civil proceedings relating to employment-related matters. However, these powers are not yet in force.

We expect that the FWA will take a soft-handed approach to its initial investigations. They will likely begin investigating businesses that have been reported for past failings. Likewise, we suspect the FWA will narrow its use of enforcement powers to those businesses that are either found to be systematically unfair to their workers and/or are in a high-risk sector (e.g. public bodies).

What does the FWA mean for employers?

Non-compliance is often unintentional, which makes the establishment of the FWA important for employers because this strengthened enforcement regime means that even unintentional issues will be identified quicker and acted upon with more significant implications.

What should employers do now?

Employers should shift their focus from policy statements to practical, demonstrable compliance. This includes:

• Reviewing their payroll records and implementing a remediation plan for any shortfalls in worker wages that are identified. Employers should also ensure that any back pay is paid in a timely manner
• Reviewing holiday pay records and working time calculations (particularly for variable hours staff)
• Ensuring that their systems for requesting and monitoring annual leave are robust. In particular, employers should check that such systems can accurately recalculate leave entitlement for workers who do not work full-time hours and subsequently have their annual leave entitlement pro-rated;
• Reviewing and revising existing policies and procedures
• Assessing whether day-to-day practices align with contractual terms and written policies, as discrepancies are likely to be a common trigger for enforcement action
• Completing internal mock-audits, refreshing record keeping systems and addressing historic issues, and
• Checking that workers are able to easily access information pertaining to their wages and annual leave and ensuring this aligns with their employment contract.

Taking these steps now will help put employers in a stronger position if scrutiny arises, and will help to mitigate and reduce the risk of potential penalties and workplace disruption.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.