If you have been keeping one eye on employment law over the last year or so, you will have seen the Fair Work Agency coming. It launched on 7 April 2026, and for the first time, the enforcement of workers’ rights in the UK sits under a single roof, with a real budget and a clear mandate to use it.
For employers who already run a tight payroll, this should not be cause for alarm. But it does raise the bar on what compliance actually looks like in practice – and the timeline for what comes next is worth understanding now, before it arrives.
What the Fair Work Agency actually is
Before April 2026, enforcement was split between three separate bodies.
- HMRC handled National Minimum Wage underpayments.
- The Gangmasters and Labour Abuse Authority looked after workers in higher-risk sectors.
- The Employment Agency Standards Inspectorate kept an eye on agency workers. Three teams, three sets of processes, and – inevitably – gaps.
The Fair Work Agency (FWA) brings all of that together. Established under the Employment Rights Act 2025, it is a single body with a single mission – consistent enforcement of workers’ rights, and far less room for non-compliant employers to slip through unnoticed.
The budget has already been increased by more than 25% to £60.1 million. This is not a symbolic gesture; the resourcing is real.
What it can do
The FWA has substantial powers. Officers can carry out workplace inspections, arrive unannounced, and require access to payroll records. Where underpayments are found, it can issue notices with a penalty of 200% of the underpayment – capped at £20,000 per worker – with a 100% discount available if settled within 14 days. The minimum penalty is £100, and the look-back period is six years.
It can name non-compliant employers publicly. It can bring tribunal claims on a worker’s behalf, without the worker needing to initiate proceedings themselves. And for the most serious cases, it has criminal prosecution powers under PACE – including the potential for personal liability for company directors, unlimited fines, and imprisonment.
To put some numbers on it, the March 2026 naming list included 389 employers, £7.3 million in wage arrears, and £12.6 million in fines. Most were caught on technical payroll errors rather than deliberate wrongdoing. That is worth bearing in mind.
What is live now, and what is coming
The FWA is rolling out its remit in stages.
April 2026 – already in effect
The FWA has taken over employment agency regulation, gangmaster licensing, and modern slavery enforcement. National Minimum Wage enforcement remains with HMRC for now, under a temporary arrangement.
April 2027
National Minimum Wage enforcement transfers fully to the FWA. Holiday pay enforcement begins, and new record-keeping requirements come into force – employers will need to retain annual leave and holiday pay records for up to six years.
To be confirmed
Statutory Sick Pay enforcement will come under the FWA at a date still to be set, with umbrella company regulation following later. The full scope is still being finalised, but the direction of travel is clear.
Why this matters even if your payroll is already clean
The honest answer is that the FWA is not primarily aimed at employers who have their house in order. It is designed to make life significantly harder for those who do not.
That is good news for businesses running a compliant payroll. If your competitors have been underpaying workers, taking shortcuts on holiday pay, or keeping records they could not defend under scrutiny, the environment just got considerably more difficult for them.
But it does raise one important point.
Being compliant is no longer enough on its own – you also need to be able to demonstrate it. From April 2027, that means six years of holiday and pay records, accessible and accurate, if the FWA ever asks to see them.
If you use umbrella companies, now is the right moment to review those arrangements. HMRC data suggests £500 million was lost to disguised remuneration schemes in 2022–23, almost entirely through umbrella company structures. The FWA has indicated this is firmly in its sights.
What to do now
The practical checklist is not complicated, but it does need to be worked through properly.
- Check your National Minimum Wage compliance, particularly for shift patterns, deductions, and sleep-in shifts – these are the areas where errors most commonly arise.
- Review how you calculate and record holiday pay, including whether overtime and regular commission are being factored in correctly.
- Make sure your payroll records are accurate, accessible, and retained for long enough.
- If you use employment agencies or umbrella companies, review those relationships before the FWA turns its attention in that direction.
- And keep an eye on the expanding remit. Statutory Sick Pay enforcement is coming. The scope will only grow.
The core of what the FWA will be checking – paying the right wages, calculating holiday correctly, keeping records that stand up to scrutiny – is nothing employers should not already be getting right. None of it is conceptually complicated. But it does require the right processes, and frankly, the right payroll support behind it.
If you would like to talk through how your current setup measures up, we are here to help.
