The UK Fair Work Agency: A New Era of Employment Rights Enforcement from April 2026

On 7 April 2026, the United Kingdom's new Fair Work Agency (FWA) will begin operating as the country's single enforcement body for employment rights. Created under the Employment Rights Act 2025, the FWA represents the most significant change to how employment law is enforced in decades. It consolidates three previously separate enforcement bodies into one organisation with broader powers, a wider remit, and the ability to investigate employers proactively without waiting for a worker to complain first. Every employer in the UK, from large corporations to small businesses, needs to understand what this means.

What the Fair Work Agency Replaces

Until now, enforcement of employment rights in the UK has been fragmented across three separate agencies. The Gangmasters and Labour Abuse Authority (GLAA) dealt with labour exploitation and the licensing of gangmasters in certain sectors. The Employment Agency Standards Inspectorate (EAS) regulated employment agencies and employment businesses. HMRC's National Minimum Wage enforcement team handled complaints about underpayment of the minimum and national living wage.

This fragmented approach created gaps. An employer might be investigated by one body while breaching obligations that fell under the jurisdiction of another. Information was not always shared efficiently. Some areas of employment law, notably holiday pay, had no dedicated state enforcement mechanism at all; workers had to bring their own claims before employment tribunals.

The FWA consolidates all three bodies into a single agency with a unified enforcement mandate. It will also take on new responsibilities that did not previously sit with any state body.

What the FWA Will Enforce

The FWA's remit covers a broad range of employment rights and obligations. It will enforce compliance with the National Minimum Wage and National Living Wage, including checking for underpayments caused by deductions, unpaid working time, or failure to account for uniform costs. It will enforce Statutory Sick Pay obligations, which from 6 April 2026 will apply to more employees following the removal of the lower earnings threshold and the three-day waiting period.

For the first time, statutory holiday pay will be subject to state enforcement. Previously, if an employer failed to pay holiday pay correctly, the worker's only option was to bring a claim before an employment tribunal. The FWA will now be able to investigate holiday pay compliance and take enforcement action directly. This is a major shift. Holiday pay underpayment is widespread in the UK, particularly among casual and zero-hours workers, and the introduction of state enforcement is expected to have a significant impact.

The FWA will also enforce the employment tribunal penalty scheme, labour exploitation and modern slavery legislation, and rules governing employment agencies and labour providers.

Proactive Investigation Powers

Perhaps the most important change is the FWA's power to conduct proactive investigations. Under the previous system, enforcement was almost entirely reactive. HMRC would typically investigate minimum wage complaints only when a specific worker filed a complaint. The GLAA needed intelligence or a referral before taking action.

The FWA is different. It can initiate investigations without a complaint from a worker. Its officers can enter business premises and request documents, including contracts of employment, payslips, timesheets, rotas, and communications relating to terms and conditions of work. Employers who obstruct an investigation or provide false information face serious consequences: unlimited fines and up to 51 weeks' imprisonment.

This proactive approach is modelled, in part, on enforcement regimes in other sectors such as health and safety. The rationale is clear: many workers, particularly those in vulnerable or precarious employment, do not feel able to raise complaints against their employers. Proactive enforcement ensures that compliance is monitored regardless of whether workers are willing or able to come forward.

Financial Penalties and Enforcement Costs

The financial consequences of non-compliance are substantial. Where the FWA identifies underpayment, it can issue a Notice of Underpayment requiring the employer to pay arrears within 28 days. The FWA can recover arrears going back up to six years, a significant extension of the previous position. On top of arrears, the FWA can impose a mandatory penalty of 200 per cent of the underpayment, capped at a maximum of 20,000 pounds per worker. This penalty is reduced to 100 per cent if paid within 14 days.

The FWA can also recover its own investigation and enforcement costs from non-compliant employers. While the exact hourly rates have not been finalised, estimates suggest a rate of between 150 and 200 pounds per hour. This is a new feature that did not exist under the previous enforcement regime and is designed to ensure that the costs of enforcement are borne by those who break the law rather than the taxpayer.

Additionally, the FWA has the power to publicly name non-compliant employers within one year of a finding. It can bring employment tribunal proceedings on behalf of workers who cannot or will not bring claims themselves. For more serious cases, it can issue Labour Market Enforcement Undertakings (voluntary compliance agreements) or apply to the court for Labour Market Enforcement Orders, which are legally binding. Breaking such an order is a criminal offence.

New Record-Keeping Requirements

From 6 April 2026, employers must maintain records of annual leave taken and holiday pay paid. These records must be retained for up to six years. This is a new statutory obligation, and it aligns with the FWA's power to recover arrears going back six years. Employers who do not keep adequate records will find it very difficult to defend themselves in the event of an FWA investigation.

Beyond holiday pay records, employers should ensure that all employment contracts are up to date and accurately reflect actual working arrangements, that payslips include all required information, and that working time records, including opt-out agreements under the Working Time Regulations, are properly documented and filed.

Practical Steps for UK Employers

With the FWA launching in just days, employers should take several immediate steps. First, audit your current pay practices. Check that all workers are being paid at least the National Minimum Wage or National Living Wage, accounting for all working time including training, travel between assignments, and time spent opening and closing premises. Ensure that deductions, such as uniform costs, do not bring pay below the statutory floor.

Second, review your holiday pay calculations. Make sure that holiday pay reflects normal remuneration, including overtime, commission, and regular allowances. The Supreme Court's decision in Harpur Trust v Brazel (2022) clarified that part-year workers must receive the full 5.6 weeks' statutory holiday entitlement. Incorrect holiday pay calculations are one of the most common compliance failures in the UK.

Third, set up systems for recording annual leave and holiday pay. If you do not already have a system for tracking this, put one in place before 6 April. Spreadsheets can work for small businesses, but larger employers should consider dedicated HR software.

Fourth, review your employment contracts and ensure they are accurate and up to date. From 6 April 2026, workers will also have the right to a written statement of terms from the first day of employment, and the content requirements for those statements have been expanded.

Finally, brief your managers and HR teams. The FWA's proactive investigation powers mean that a routine inspection could happen at any time. Staff responsible for payroll, employment records, and worker management should understand their obligations and be prepared to produce records quickly if requested.

Implications for Pakistani and International Businesses Operating in the UK

For Pakistani businesses with UK operations, or individuals who sponsor workers under the Skilled Worker visa route, the FWA adds a further layer of compliance risk. Employers who hold a Home Office Sponsor Licence are already subject to compliance checks from UK Visas and Immigration. A finding by the FWA that an employer has underpaid workers or breached employment rights could have knock-on consequences for the sponsor licence, potentially leading to suspension or revocation.

International businesses entering the UK market should factor FWA compliance into their planning from the outset. The cost of getting it wrong, both in terms of financial penalties and reputational damage, is substantial.

If you need assistance with UK employment law compliance, the Fair Work Agency, or any aspect of UK business regulation, contact LexForm for a confidential consultation.