The Fair Work Agency: What this new enforcement body means for employers

HR teams and employers should start preparing now for what will become one of the most significant shifts in labour market enforcement in years. The new body is designed to streamline, strengthen, and modernise how workers’ rights are protected - and how employers are held accountable.

This article explains what the Fair Work Agency is, what it will do, and why employers should begin preparing now.

What is the Fair Work Agency?

The Fair Work Agency (FWA) will be an Executive Agency of the Department for Business and Trade, combining several existing enforcement functions into a single, more streamlined body, designed to improve compliance, reduce duplication, and strengthen protections for workers across the UK. Its creation follows the government’s commitment to ‘Make Work Pay’ and to simplify the enforcement landscape for both workers and employers. [1]

The main goal of the FWA is to replace what has been characterised as a ‘fragmented and inefficient’ enforcement system with a single point of contact, supported by a unified enforcement strategy [2].

What the Fair Work Agency will do

Unify enforcement of key employment rights

The FWA will consolidate enforcement of a growing range of statutory employment rights. At launch, this will cover several key areas.

• National Minimum Wage and National Living Wage.
• Holiday pay.
• Statutory sick pay compliance.
• Employment agency rules.
• Gangmasters licensing and labour exploitation offences.

Provide a single, recognisable point of contact

The FWA will act as a ‘one-stop shop’ for workers and employers alike. Instead of navigating multiple agencies, employers will have a single point of contact for guidance, inspections, investigations, and compliance queries. Workers will also benefit from a clear and reliable channel for raising concerns, with investigations coordinated and handled more transparently.

Business Secretary Peter Kyle has described the new body as “a game-changer in ensuring rights are properly enforced, whilst backing those businesses that already do the right thing.” [4]

Support employers to meet their legal obligations

Although enforcement is central, the government has emphasised that the FWA will also focus on ‘resolving issues upstream’ by supporting employers who want to comply with the law [2]. This is expected to include:

• clearer statutory guidance
• sector-specific compliance advice, particularly in high-risk sectors
• education and engagement before formal enforcement action.

Bring stronger powers to inspect and enforce

The FWA will have significantly enhanced enforcement powers, many of which go beyond current practice in areas such as holiday pay [2]. These are expected to include:

• powers to inspect workplaces and require the production of records and evidence
• notices of underpayment requiring arrears to be paid, with penalties of up to 200%
• the ability to bring employment tribunal claims on a worker’s behalf
• civil and criminal enforcement tools for serious labour market offences
• cost-recovery powers, allowing enforcement costs to be charged to non-compliant employers.

Key implications of the FWA for employers

The creation of the FWA is not simply administrative restructuring. It represents a step-change in how workplace rights will be enforced.

Stronger, more coordinated enforcement

Employers should expect increased inspections and scrutiny, particularly in relation to pay, holiday entitlement, and record-keeping.

Creates a more level playing field

Businesses that already invest in fair practices are likely to benefit from tougher enforcement against those who undercut them by failing to comply with the law.

Increased risk of financial exposure

The power to issue notices of underpayment with financial penalties, six-year look-back periods for holiday pay, and the ability to recover enforcement costs from non‑compliant employers is significant. Even inadvertent compliance errors could result in substantial financial exposure [5].

Greater likelihood of complaints and investigations

With a single, well-publicised enforcement body, workers will know exactly where to go for support, increasing reporting and regulatory engagement.

The Agency’s powers, including notices of underpayment with financial penalties of up to 200% and the ability to recover enforcement costs from non‑compliant employers, mean that even inadvertent compliance errors could carry significant financial exposure.[2]

Commenting on how the FWA will affect employers, Mentor’s employment law expert Susan Galashan is optimistic:

“On a more positive note for employers, the introduction of holiday rights enforcement will bring benefits over time. Holiday calculations and interpretation of the law is notoriously complex, and any additional guidance that this centralised function can provide will be very welcome.”
Susan Galashan, Senior Employment Law & HR Consultant

What HR teams should be doing now

Although the Fair Work Agency will not be fully operational in April 2026, employers should begin preparing now to reduce risk and strengthen compliance.

A sensible first step is to review pay practices, ensuring that National Minimum Wage, holiday pay, and statutory sick pay obligations are being met in practice - particularly in relation to deductions, working time calculations, and irregular-hours arrangements. HR teams should also audit contracts and workplace policies, focusing on worker status, holiday entitlement wording, record-keeping practices, and the use of agency labour.

Employers should assess whether internal reporting and grievance channels are clear, accessible, and trusted, as effective internal resolution can significantly reduce the likelihood of issues escalating to external enforcement.

Finally, investing in manager training - especially for those making front-line decisions - can help mitigate legal risk, embed good practice, and prevent costly enforcement action once the FWA becomes operational.

Final thoughts

The Fair Work Agency marks a new chapter in employment regulation and enforcement. Its mission is clear: to protect workers, support responsible employers, and raise standards across the labour market.

The period between now and April 2026 offers a valuable opportunity for employers to strengthen compliance foundations, reduce enforcement risk, and demonstrate a genuine commitment to fair, transparent, and lawful employment practices.

This article is intended for informational purposes only and does not constitute legal advice. The information is accurate at the time of writing but may be subject to change. For advice specific to your situation, please consult a qualified professional.

[1] UK Parliament, Make Work Pay: Employment Rights Bill. Third Report of Session 2024-25.

[2] Department for Business & Trade, Employment Rights Act 2025: the Fair Work Agency factsheet.

[3] Department for Business & Trade, Labour Market Enforcement Strategy 2025 to 2026: call for evidence, November 2024.

[4] Department for Business & Trade, Press release: New agency chair appointed to crack down on minimum wage underpayment and worker exploitation,14 October 2025.

[5] Lewis Silkin, Employment Rights Bill amendments published, 5 March 2025.