The Fair Work Agency went live on 7 April 2026. It is the most significant structural change to UK employment law enforcement in decades — bringing four separate enforcement bodies together under a single executive agency with a £60.1 million budget, broader powers, and a remit that will expand significantly into 2027 and beyond. For most employers who already comply with the law, the immediate change is one of tone rather than substance. For those with weak record-keeping, sloppy payroll, or technical breaches they have not yet found, the change is more material than it might appear.
What has changed
Until 7 April 2026, state enforcement of employment rights was split across four separate bodies — HMRC's National Minimum Wage Unit, the Employment Agency Standards Inspectorate, the Gangmasters and Labour Abuse Authority, and the Director of Labour Market Enforcement. The system was, by the government's own admission, fragmented and inefficient. Workers did not know who to complain to. Compliant employers were undercut by non-compliant ones. Whole categories of employment rights — most notably holiday pay — sat outside any state enforcement regime altogether.
The Employment Rights Act 2025 consolidates these four bodies into a single executive agency of the Department for Business and Trade. The Fair Work Agency does not have its own separate legal identity — its functions are formally exercised by the Secretary of State and discharged through enforcement officers — but in practical terms it is now the single front door for state enforcement of labour market legislation in Great Britain.
What the FWA is
The FWA is an executive agency, not a tribunal. It does not adjudicate disputes between individual employees and employers — that remains the function of the Employment Tribunal. What the FWA does is investigate, inspect, and take enforcement action against businesses that breach the legislation within its remit. It also brings the four predecessor bodies' functions, staff, and case loads into a single leadership structure with a unified strategy, governed by a statutory advisory board with equal representation from business, trade unions, and independent experts.
The agency launched alongside three published documents that together set out how it will operate: the Strategic Steer for the transitional year of operation, the Enforcement Policy Statement, and the Code of Practice on Labour Market Enforcement Undertakings and Orders. All three are published on GOV.UK and are worth reading if your business operates in any of the higher-risk sectors.
What powers it has
The FWA has a single, unified set of powers based on those of its predecessor bodies plus new powers introduced by the Employment Rights Act 2025. The headline powers in force from 7 April 2026 are:
- Investigation and inspection: Powers to enter business premises (including, in some circumstances, home offices), require employers to produce documents and records, and interview people on the premises. Certain enforcement officers also have PACE powers — Police and Criminal Evidence Act 1984 powers — for criminal investigations into labour market offences, including the power to force entry under warrant.
- Notices of Underpayment: Where the FWA finds that workers have been underpaid — whether in respect of National Minimum Wage, Statutory Sick Pay, or holiday pay — it can issue a notice requiring the employer to pay the arrears within 28 days plus a civil penalty.
- Labour Market Enforcement Undertakings and Orders: Voluntary undertakings agreed with employers to correct behaviour, or compulsory orders applied for through the courts. Breach of an LME Order is a criminal offence carrying a fine, imprisonment of up to 51 weeks, or both.
- Cost recovery: Power to recover the FWA's enforcement costs from employers against whom enforcement action has been taken.
The Act also gives the FWA the power to bring proceedings in the Employment Tribunal on a worker's behalf, and to provide or arrange legal advice and assistance. These powers are on the statute book but are not yet in force — the Strategic Steer indicates that the transitional year will be used to consider how to deploy them.
What it enforces — and what comes next
From 7 April 2026, the FWA is responsible for enforcement in respect of:
- National Minimum Wage and National Living Wage (delivered by HMRC under contract during 2026/27, transferring fully to the FWA in April 2027).
- Employment agencies and employment businesses, including umbrella companies (newly brought into scope as "employment businesses" by the ERA 2025).
- Gangmaster licensing across the UK.
- Serious labour exploitation and modern slavery offences in England and Wales.
- Labour market enforcement undertakings, orders, and related offences.
Holiday pay enforcement is the single biggest expansion on the horizon. The right to paid holiday applies to every worker, the calculation rules are notoriously complicated, and there has never been a state enforcement body for it. The Strategic Steer indicates that holiday pay enforcement will commence in 2027. Statutory Sick Pay enforcement will follow, though the timing is less clear.
Notices of Underpayment — the numbers that matter
A Notice of Underpayment requires the employer to pay arrears to each affected worker within 28 days. It also imposes a civil penalty payable to the Secretary of State.
- Penalty: 200% of the underpayment per affected individual.
- Cap: £20,000 per individual.
- Floor: £100 per individual.
- Early payment discount: If the arrears and penalty are both paid within 14 days, the penalty is reduced to 100% (a 50% reduction).
- Look-back period: Up to six years.
- Appeal: To the Employment Tribunal within 28 days, on limited grounds.
The economics of this are worth understanding. If an employer has underpaid a worker by £3,000 over six years, the Notice of Underpayment requires payment of the £3,000 in arrears plus a £6,000 penalty (200%). If paid within 14 days, the penalty drops to £3,000. Apply the same numbers across a workforce of fifty workers with a similar underpayment and the total exposure is £300,000 — separate from any reputational consequences if the employer is publicly named.
Tribunal claims on workers' behalf
One of the most material new powers — though not yet in force — is the FWA's ability to bring Employment Tribunal claims on behalf of workers, including in respect of rights that sit outside the FWA's direct enforcement remit. In principle, this means the FWA could bring an unfair dismissal claim, a discrimination claim, or a redundancy consultation claim against an employer on behalf of a worker who has not themselves brought a claim. The Strategic Steer indicates the FWA will use the transitional year to consider how to deploy this power.
This is a significant shift. Most employment rights are currently enforced by individual workers presenting complaints to the Tribunal — and many workers, particularly low-paid or vulnerable ones, never do. State-led tribunal claims change the calculus. Employers who have historically relied on the friction of the Tribunal process as a de facto compliance shield should not assume that calculus continues.
The transitional year — what to expect in 2026/27
The government is explicit that 2026/27 is a transitional year. The FWA's first full enforcement strategy is due in April 2027, and several of its powers will not be deployed until then. Practically, this means:
- NMW enforcement continues to be delivered by HMRC under a contracting arrangement with the FWA. Full transfer is scheduled for April 2027.
- Holiday pay enforcement begins in 2027, not 2026.
- The civil tribunal-claim power and the legal-assistance power are on the statute book but not yet in force.
- The FWA is publicly focused this year on consolidation, intelligence and data infrastructure, public awareness, and stakeholder engagement.
The transitional framing should not be misread as a reprieve. The FWA already has full investigation, inspection, and Notice of Underpayment powers — including for Statutory Sick Pay and holiday pay — from 7 April 2026. The transitional language describes how the agency will deploy its resources, not what it can legally do.
Where the real exposure sits
Most FWA enforcement activity will not be triggered by deliberate wrongdoing. It will be triggered by technical breaches that employers either did not know about or had not got around to fixing. The categories most likely to surface in inspections are:
- Holiday pay calculation: Irregular-hours workers, the inclusion of overtime, commission, and bonuses in the holiday rate, the treatment of rolled-up holiday pay, and the carry-over of unused leave. This is the single biggest risk area, and the one with the largest retrospective exposure.
- NMW deductions and salary sacrifice: Uniform costs, equipment, training charges, and salary sacrifice arrangements that push pay below the National Minimum Wage. This is the most common category of NMW breach in HMRC's enforcement history and the one most likely to catch unintended employers.
- Working time records: Section 35 of the ERA 2025 introduces a new requirement to keep records "adequate to show" compliance with annual leave obligations, retained for at least six years. Most employers' current records will not meet this standard.
- SSP eligibility and payment: The day-one SSP changes from 6 April 2026 mean more employees qualify, sooner. SSP underpayments are now within FWA enforcement scope.
- Agency worker and umbrella company arrangements: Now within the FWA's remit, with key information document obligations and the requirement to include FWA enforcement officer contact details going forward.
What employers need to do now
- Run a National Minimum Wage audit. Check every deduction, salary sacrifice arrangement, and uniform or equipment charge against the current NMW rates. Travel time, training time, and time on tasks before a shift starts must be treated as working time where applicable.
- Audit holiday pay calculations. The rate must include regular overtime, commission, and contractual bonuses. Irregular-hours workers must have their holiday pay calculated on a 52-week reference period under the post-Harpur Trust rules.
- Review working time records. The new section 35 requirement means records must be auditable and retained for six years.
- Update payroll for the day-one SSP regime — no waiting days, no Lower Earnings Limit, with the 80%-or-flat-rate calculation for those previously below the LEL.
- Review umbrella company and agency worker arrangements. Key information documents will need to include FWA contact details going forward.
- Identify and document an internal escalation route for FWA correspondence. Inspectors can require documents on request — your business needs to know who responds and how.
- Where you find historic underpayments, consider whether voluntary self-correction is the right approach. The FWA has indicated that businesses approaching it to put their affairs in order will be treated differently from those it has to investigate.
- Brief line managers and payroll. Inspectors can interview staff on the premises. The answers given by managers and payroll staff will form part of the evidence base.
The Fair Work Agency is not, in its first year, a sudden enforcement crisis. It is a structural change whose effects will be felt over the next two to three years as its remit expands and its strategy beds in. The employers who will struggle are not those who deliberately flout the law — they were always at risk — but those who have allowed technical compliance gaps to accumulate on the assumption that no one was looking. Someone is now.