The Fair Work Agency: What’s changing and how to get ahead
Our Head of Tribunals, Craig Bennison, gives you the latest on the Fair Work Agency and what it means for you.
As part of the Employment Rights Bill, the government has announced plans to launch a new Fair Work Agency (FWA). It’ll be a single body responsible for enforcing key areas of UK employment law including holiday pay, Statutory Sick Pay (SSP), National Minimum Wage, and much more.
While the latest roadmap from the government shows the agency won’t be implemented until April 2026, the changes are significant, so I thought it’d help to highlight where it’ll impact employers most.
What is the Fair Work Agency?
The FWA is a proposed body in Labour’s Plan to Make Work Pay programme. The plan is for it to replace several existing enforcement bodies and bring their powers together under one central agency.
This means:
- More proactive inspections
- Ability to investigate, prosecute, and impose penalties on employment law violations
- Ability to pursue tribunal claims on behalf of workers even if they choose not to bring claims themselves
- Issuing of notices if it finds that payments such as NMW, holiday pay or SSP have been underpaid, requiring back pay
- Fines of up to 200% for underpayment (up to £20,000 per worker)
New areas of focus: Holiday pay and SSP
Two of the most significant areas of focus under the FWA because they apply to all workers are holiday pay and SSP.
Holiday pay
Currently, if an employee or worker thinks they’ve been underpaid holiday pay, they have to take the matter to an employment tribunal themselves. Under the FWA, this changes.
The agency will have the power to:
- Investigate holiday pay practices directly
- Issue a notice of underpayment to the employer
- Require the employer to repay the unpaid holiday pay
- Apply a financial penalty of up to 200% (capped at £20,000 per individual)
If paid within 14 days, the penalty can be reduced to 100%.
Even if the underpayment was accidental, the employer is still liable. And if someone was believed to be self-employed but is classed in law as a ‘worker’, they’re entitled to holiday pay and the FWA will be able to enforce that.
Statutory Sick Pay (SSP)
SSP will also see a change. Right now, HMRC can assess entitlement but there’s no state enforcement or penalty for getting it wrong. The FWA will alter that.
SSP will fall under the same enforcement model as holiday pay:
- Issue a notice of underpayment
- 200% penalties (reduced to 100% if paid within 14 days)
- Full back pay given
- Investigatory powers apply
Although SSP is typically easier to calculate, admin errors, incorrect eligibility assumptions, record keeping failures could trigger fines and investigations.
Investigatory powers
The FWA will also have significant powers to enforce holiday pay and SSP, including the ability to:
- Enter premises and inspect records
- Require individuals to provide documents or attend interviews
- Seize physical or digital files
- Examine computers or payroll systems
- (With a court warrant) enter private homes to gather evidence
These powers apply across all areas the FWA covers. But holiday pay and SSP are likely to be among the most commonly investigated due to their broad application and common misunderstandings.
Got any questions? We’re here to help
The Employment Rights Bill has almost completed its passage through Parliament and is expected to become law this Autumn. We’ll keep you updated every step of the way about what this means for your business.
If you’ve got any questions about any of these changes, get in touch on your free advice line via 0345 844 4848*.
Not part of our HR service yet? If you’d like to benefit from free advice all year round and guaranteed protection, get in touch on 0345 844 1111.
