What is the Fair Work Agency and what can it do? A 2026 guide for UK employers

The Fair Work Agency (FWA) is a new UK government enforcement body that launched on 7 April 2026 to enforce employment rights including:

• The National Minimum Wage (NMW)
• Statutory Sick Pay (SSP)
• Holiday pay
• Agency worker rules

The Employment Rights Act 2025 created the FWA as an executive agency of the Department for Business and Trade. The agency brings together enforcement that previously sat across HMRC, the Employment Agency Standards Inspectorate (EASI) and the Gangmasters and Labour Abuse Authority (GLAA). The FWA can inspect workplaces, demand records, issue Notices of Underpayment with penalties of up to 200% of the amount owed, and bring tribunal claims on a worker’s behalf. Craig Bennison, Head of Tribunals at Citation, sums up what this means in practice:

“Compliance gaps that previously went unchecked — particularly on holiday pay and SSP — are now far more likely to be investigated, and the penalties for getting it wrong are significant.”

Key takeaways

Question	Answer
When did the Fair Work Agency launch?	7 April 2026
What law established the FWA?	Employment Rights Act 2025 (Part 5)
Which department is the FWA part of?	The Fair Work Agency is a part of the Department for Business and Trade
Who is the first chair of the FWA?	Matthew Taylor CBE is the first chair of the Fair Work Agency
Which rights does the FWA enforce now?	The Fair Work Agency enforces agency worker rules, gangmaster licensing, modern slavery offences within remit, SSP, and holiday pay record-keeping
When does the National Minimum Wage (NMW) enforcement transfer?	The enforcement of National Minimum Wage rules will transfer to the Fair Work Agency in April 2027 (currently still HMRC)
What is the maximum penalty for underpayment of NMW, SSP, or holiday pay?	The maximum penalty for underpayment is 200% of the amount owed, capped at £20,000 per worker (reduced to 100% if paid within 14 days)
Can the FWA inspect businesses without warning?	Yes, the Fair Work Agency can enter business premises (with a warrant where required) and demand records

What is the Fair Work Agency?

The Fair Work Agency is a UK enforcement body for employment rights that began operating on 7 April 2026. The Employment Rights Act 2025 created it as an executive agency of the Department for Business and Trade. The Fair Work Agency consolidates three previously separate functions:

• The Employment Agency Standards Inspectorate (EASI)
• The Gangmasters and Labour Abuse Authority (GLAA)
• The Office of the Director of Labour Market Enforcement

The Fair Work Agency will also take over National Minimum Wage enforcement from HMRC, but that’s currently scheduled for April 2027. According to the Fair Work Agency’s Enforcement Policy Statement, published on GOV.UK , the Fair Work Agency is designed to secure compliance with labour market legislation, protect workers’ rights, and make sure compliant employers aren’t undercut by those who break the law. The agency is part of the government’s wider Make Work Pay programme.

When did the Fair Work Agency launch?

The UK government formally established the Fair Work Agency on 7 April 2026. From that date, it took over enforcement from EASI and the GLAA, and started taking reports and queries from workers and employers. Parliament passed the Employment Rights Act 2025 on 18 December 2025, and commencement regulations brought the agency into force on 7 April 2026. The government has described 2026/27 as a “transitional year”, as the FWA’s full set of powers will be phased in over the next 12 months, with National Minimum Wage enforcement the biggest piece still to transfer (April 2027).

What does the Fair Work Agency do?

The Fair Work Agency investigates, inspects and enforces compliance with relevant labour market legislation set out in Schedule 7 of the Employment Rights Act 2025 . Unlike the previous patchwork of enforcement bodies, the Fair Work Agency works proactively meaning it doesn’t have to wait for one of your workers to complain before opening an investigation. The Fair Work Agency’s powers include:

• Investigations: Opening proactive enquiries without needing a complaint from a worker.
• Workplace inspections: Entering premises (with a warrant where required) and inspecting working conditions.
• Information powers: Requiring employers to produce documents, payroll records, and evidence of compliance.
• Interviews: Requiring individuals to attend interviews and provide information.
• Notices of Underpayment: Ordering you to repay workers, typically within 28 days.
• Civil penalties: Imposing fines of up to 200% of the underpayment, capped at £20,000 per worker. Pay within 14 days and the penalty drops to 100%.
• Tribunal claims: Bringing proceedings in the Employment Tribunal on behalf of a worker who is not pursuing their own claim.
• Legal assistance: Supporting workers in employment-related disputes.
• Cost recovery: Recovering the costs of enforcement action from non-compliant employers.
• Public naming: Naming employers found to have breached the law, particularly on the National Minimum Wage.
• Criminal referrals: Pursuing the most serious breaches, including obstruction and knowingly providing false information, which carry unlimited fines.

Which employment rights does the Fair Work Agency enforce?

The Fair Work Agency enforces a defined list of “relevant labour market legislation” set out in Part 1 of Schedule 7 of the Employment Rights Act 2025. Some areas transferred on 7 April 2026, others phase in over the next year, and the National Minimum Wage transfers from HMRC in April 2027.

Right or area	Previously enforced by	Now enforced by
Agency worker regulations	Employment Agency Standards Inspectorate (EASI)	Fair Work Agency
Gangmaster licensing	Gangmasters and Labour Abuse Authority (GLAA)	Fair Work Agency
Modern Slavery Act 2015 (labour exploitation offences within remit)	GLAA / police	Fair Work Agency (alongside police and National Crime Agency)
National Minimum Wage (NMW)	HMRC	HMRC until April 2027, then Fair Work Agency
Statutory Sick Pay (SSP)	HMRC (limited enforcement)	Fair Work Agency (phased)
Holiday pay and annual leave records	No central enforcement	Fair Work Agency (phased; record-keeping duty live from 6 April 2026)

The Fair Work Agency does not enforce health and safety law. That stays with the Health and Safety Executive (HSE), which continues to inspect workplaces, investigate incidents and bring prosecutions in its own right.

How will the Fair Work Agency affect employers the most?

Of all the areas in the Fair Work Agency’s remit, holiday pay and Statutory Sick Pay (SSP) are the two most likely to affect you — because holiday pay and SSP apply to every worker, regardless of what sector you operate in or the size of your business.

What are the most common holiday pay mistakes UK employers make?

Holiday pay sits at the top of the Fair Work Agency’s enforcement priorities, partly because the rules around it are some of the most error-prone in UK payroll. The Chartered Institute of Personnel and Development (CIPD) has flagged that workers on irregular-hours and part-year contracts often can’t tell whether their holiday pay is being calculated correctly without checking their payslips closely — making this one of the most opaque areas of UK payroll for both employers and employees. The most common holiday pay mistakes are:

• Misclassifying workers as self-employed (anyone who is in law a “worker” is entitled to holiday pay)
• Miscalculating holiday pay for zero-hours or irregular-hours staff
• Leaving regular overtime or commission out of the calculation

Accidental underpayment is still underpayment — the Fair Work Agency can issue a Notice of Underpayment whether the error was deliberate or not.

What changed for Statutory Sick Pay in April 2026?

Statutory Sick Pay (SSP) changed on 6 April 2026 in three ways:

• SSP is now payable from day one of sickness absence (the three “waiting days” are gone).
• The Lower Earnings Limit no longer applies. P reviously, only employees earning more than £125 a week (the 2025-26 LEL) qualified for SSP; now, every employee qualifies regardless of earnings.
• A new 80% rate was introduced for lower earners. SSP is now £123.25 per week or 80% of the employee’s average weekly earnings, whichever is lower. This means anyone earning under £154.05 a week now gets less than the standard rate.

In practice, all three changes can catch you out if your payroll is still set up for the old rules, particularly the new 80% rule, which means SSP now varies by employee rather than applying a single weekly figure. Patchy sickness records also leave you exposed if the Fair Work Agency asks to see them. Before these changes, HMRC could rule on whether SSP was owed in a dispute, but it couldn’t run a proactive investigation, issue a Notice of Underpayment, or fine an employer for getting SSP wrong. The Fair Work Agency can.

Can the Fair Work Agency inspect my business without warning?

Yes. The Fair Work Agency has statutory powers to inspect workplaces and require documents, and it can act on its own initiative without a worker complaint. In some circumstances inspectors enter premises directly; in others, they need a warrant. Fair Work Agency officers can:

• Enter business premises and inspect records.
• Require individuals to provide documents or attend interviews.
• Seize physical or digital files.
• Examine computers and payroll systems.
• Enter private homes to gather evidence, with a court warrant.

From 6 April 2026, you must keep adequate annual leave and holiday pay records for six years under Section 35 of the Employment Rights Act 2025, which inserted a new Regulation 16B into the Working Time Regulations 1998. Failure to keep adequate records is a criminal offence carrying potentially unlimited fines.

What penalties can the Fair Work Agency impose?

The Fair Work Agency can issue Notices of Underpayment requiring you to repay workers within 28 days, plus a financial penalty of up to 200% of the underpayment, capped at £20,000 per individual worker. If you pay the penalty within 14 days, it drops to 100% of the underpayment. Notices can cover underpayments going back as far as six years. The most serious breaches are pursued as criminal offences. These include:

• Failing to comply with a labour market enforcement order.
• Knowingly or recklessly providing false information or documents.
• Obstructing a Fair Work Agency officer.
• Failing to keep adequate holiday and annual leave records from 6 April 2026.

These offences carry unlimited fines on conviction. The Fair Work Agency can also publicly name employers found in breach — the same naming approach already used for National Minimum Wage cases, where GOV.UK publishes the list of underpaying employers on its website .

Example: Hospitality employer, holiday pay underpayment

A mid-sized restaurant has 25 zero-hours kitchen and waiting staff, all on casual contracts and paid a flat hourly rate, with no separate holiday pay. In autumn 2026, the Fair Work Agency (FWA) turns up unannounced because hospitality as a sector has been flagged as a concern for non-compliance. The FWA inspector asks the employer for two years of annual leave records, but the restaurant doesn’t have them. Failing to produce the records is a criminal offence in its own right (the duty to keep them has been in force since 6 April 2026), before the inspector has even checked a single payslip. The staff were entitled to 5.6 weeks’ statutory holiday a year, with holiday pay based on their average weekly earnings. The restaurant’s flat hourly rate didn’t include a holiday pay element, and no separate holiday pay was being paid out when staff took leave. The Fair Work Agency works out an average underpayment of £600 per worker. Across 25 workers, that’s £15,000 in arrears. The Notice of Underpayment lands a few weeks later: £15,000 back to the workers within 28 days, plus a £30,000 penalty (200% of the underpayment) to the Secretary of State. If the restaurant pays the penalty within 14 days, it halves to £15,000. The missing records are a separate criminal matter, handled outside the Notice of Underpayment process. The Fair Work Agency can refer the case for prosecution, and the court can impose an unlimited fine if the employer is convicted. Total exposure: £30,000–£45,000 in pay-out and penalties, and a potential criminal conviction. On top of these costs, the Fair Work Agency can also take action to recover the costs of its own enforcement action. This probably didn’t feel like a mistake when the restaurant set its payroll up that way. A flat hourly rate is simple to run, easy for staff to understand, and keeps payroll admin down. The problem is that “simple” and “compliant” aren’t the same thing.

What should employers do to prepare for Fair Work Agency inspections?

Craig Bennison, Head of Tribunals at Citation, recommends working through this short compliance checklist now:

• Audit your holiday pay calculations. Look especially at zero-hours, part-year and irregular-hours workers, where misclassification is most common.
• Start keeping annual leave records. From 6 April 2026, you must keep records of leave entitlement, leave taken, carry-over, holiday pay, and any payments in lieu, retained for six years.
• Check worker status. Anyone wrongly labelled “self-employed” who is in fact a worker is owed holiday pay, and triggers backdated liability.
• Review your SSP processes. SSP changed on 6 April 2026 (day-one entitlement, removal of the Lower Earnings Limit), and SSP enforcement now sits with the Fair Work Agency.
• Check your National Minimum Wage (NMW) compliance. Enforcement stays with HMRC until April 2027, but the standards don’t change.
• Update your contracts and policies. Make sure employment contracts, casual-worker agreements and payroll instructions reflect 2026 rules.
• Brief your managers. Line managers need to know what an inspection looks like, and what they can and cannot say to a Fair Work Agency officer.
• Take advice early. Acas publishes free guidance on the new record-keeping duty , and a compliance review from an HR specialist will catch issues before they become Notices of Underpayment.

Walk into a Fair Work Agency inspection ready

A Fair Work Agency inspection can mean a Notice of Underpayment, a 200% penalty and a criminal records offence on top. Citation’s HR and employment law experts audit your holiday pay, SSP and record-keeping, fix the gaps and put compliant processes in place before an inspector calls.

If you follow our advice a tribunal claim still comes through, we defend it and pay any award up to £150,000.