As part of the wider implementation of changes to the Employment Rights Act 2025, the Government have established a single body the FWA which launched in April 2026 to combine multiple enforcement functions previously exercised by different bodies.
The agency has been introduced to tackle workforce exploitation and to strengthen employment rights and is separate from HMRC which still retains its tax and payroll compliance mandate.
What is the Fair Work Agency?
The FWA will enforce employment rights previously controlled by multiple bodies, bringing these controls under one entity: –
- HMRC national minimum wage compliance.
- The Gangmasters and Labour Abuse Authority (GLAA) focusing on labour exploitation.
- The Employment Agency Standards Inspectorate that oversees employment agencies.
- Employment Tribunals dealing with employee disputes.
What Will the FWA Enforce?
- National Minimum Wage compliance in relation to underpayment of wages and unlawful deductions from pay.
- Holiday Pay disputes – records for holiday pay now must be kept for 6 years by employers.
- Forced labour & modern slavery in the workplace.
- Exploitation of vulnerable workers.
- Non-compliance of umbrella companies and employment agencies.
What Powers do the FWA have?
- Investigate without a complaint and ability to perform spot checks and speak to employees.
- Request evidence to ensure businesses are compliant such as contracts, payslips, time & attendance records, holiday records and right-to-work checks – records can be requested going back 6 years.
- Issue fines, notices and penalties in relation to underpayments such as statutory payments and minimum wage.
- The FWA can bring an employment tribunal claim on behalf of an employee without them actively being involved.
When?
Although the FWA was introduced from April 2026, there is a staged approach to their enforcement timeline: –
- NMW – during 2026/27 during a transitional period continues to be delivered by HMRC and fully operational via FWA from April 2027
- Holiday Pay – April 2027 holiday pay enforcement begins with employers required to retain annual leave and pay records for up to 6 years from April 2026.
- Statutory Sick Pay (SSP) – no confirmed date of enforcement but will be focusing on the day one entitlement and ensuring correct calculation.
The Financial Risk
Fines for non-compliance can reach 200% per employee, capped at £20,000 so costs can quickly multiply. Mandatory back pay and arrears must be paid to employees. In addition, the FWA: –
- Can recover enforcement costs from employers.
- Name employers publicly for non-compliance.
- Can pursue criminal prosecution for serious breaches.
What Can Employers Do to Ensure Compliant?
Employers need consider if their current policies and procedures are watertight and not creating risk. According to the UK Department of Business and Trade the majority of NMW breaches are now in relation to salaried workers not hourly paid: –
- Ensure records are compliant and provide the required information as well as going back 6 years.
- Check national minimum wage – look at areas of risk such as unpaid excess hours for salaried workers, apprentices, salary sacrifice arrangements, unlawful deductions and unpaid training done outside of work time, travel between jobs and pre/post shift unpaid meetings or arriving staff to arrive early before their official start time and not paying them for this.
- Review how holiday pay is calculated and recorded. In particular, for irregular hours and part-year workers.
- If you use employment agencies or umbrella companies review those relationships and ensure documented and contractually accurate.
- Check statutory sick pay policies and calculations are compliant following the April 2026 day one rights.
How can DSG Help?
Our Payroll Team at DSG can support your business to ensure you are meeting your payroll obligations. If you want to speak to a member of the team about the changes, please contact [email protected].
