The Fair Work Agency has published its first delivery plan, covering 2026 to 2027. For payroll teams, this is more than another piece of employment law reading. It’s the clearest signal yet of how enforcement of pay, tips and holiday entitlement is about to change shape.
Here’s what’s in the plan, and what it means for payroll operations and tronc schemes specifically.
What the Fair Work Agency actually is
The FWA was established on 7 April 2026 under the Employment Rights Act 2025, bringing together several previously separate enforcement bodies, the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate, and the Office of the Director of
Labour Market Enforcement, into a single organisation. The aim is a more joined-up, visible enforcement regime, with a single point of contact for both workers and employers, rather than the fragmented landscape payroll teams have had to navigate until now.
Its first delivery plan, published in August 2026, sets out what the FWA calls a “deliver, build, innovate” agenda for its opening year.
What’s actually changing in 2026/27
For payroll, the headline point is that this year is a transition period, not a big-bang overhaul. A few dates matter, however.
- NMW enforcement stays with HMRC under a contracted arrangement throughout 2026/27. Full transfer into the FWA is planned for April 2027, when HMRC’s NMW officers move across.
- Holiday pay enforcement is a genuinely new power, since holiday pay has never before had a dedicated state enforcement body. It’s expected to begin sometime in 2027, following a consultation on how it will work in practice.
- Digital compliance tools are on the roadmap, with the FWA planning to build products intended to make it easier for employers to understand and evidence compliance with employment rights.
In other words, the enforcement architecture is being built now, and the teeth arrive next year. That gap is the opportunity for payroll functions to get ahead of it.
Why holiday pay enforcement should be on payroll’s radar now
Even though the FWA won’t formally start enforcing holiday pay until 2027, the direction of travel matters today. The plan confirms the FWA will oversee a new statutory duty for employers to keep records demonstrating compliance with the Working Time Regulations 1998, covering correct calculation of holiday pay, particularly for workers with variable hours or pay, and situations involving refused leave or carry-over.
For payroll teams, the real work isn’t waiting for 2027. It’s auditing holiday pay calculation methodology now, particularly for:
- Zero-hours and variable-hours workers, where average pay calculations are most error-prone
- Workers who receive regular overtime, commission or bonus, which should be factored into holiday pay
- Carry-over and accrual records, which the FWA will expect employers to be able to produce on request
Where the FWA later finds shortfalls, it will have powers to require repayment of arrears and issue penalties, separate from an employee’s own right to bring an employment tribunal claim.
The tronc angle, tipping compliance under closer watch
This is where the delivery plan connects most directly to hospitality and leisure payroll. The FWA already holds enforcement powers relating to tipping compliance under the Employment (Allocation of Tips) Act, and tronc arrangements sit squarely in scope.
Two changes are worth flagging for anyone running or overseeing a tronc.
Mandatory consultation
This was originally set to come into force in October 2026, requiring employers to consult workers on tipping policy. The date has been put back. We don’t know exactly when yet, though possibly early in the new year. Once in force, consultation will be a legal requirement before an employer introduces or changes a tipping policy. Payroll and HR will need a documented, repeatable process, not an informal chat with a few team leads.
Wider scope than many employers assume
A “qualifying tip” under the Act covers any tip or service charge the employer receives, or over which it has significant influence, regardless of whether it arrives by card, cash or app. That catches many arrangements employers might not think of as employer-controlled, including some independently administered tronc schemes where the employer still has a hand in the wider policy.
Real financial exposure
Where a tribunal upholds a complaint about unfair or mismanaged tip distribution, compensation can reach £5,000 per worker, a figure that adds up quickly across a multi-site hospitality operation, before any FWA enforcement action is layered on top.
The practical upshot is that Troncmasters and payroll teams administering tips need clean audit trails showing tips are allocated fairly, in line with a published policy, and that workers were consulted on that policy. “We’ve always done it this way” isn’t evidence.
What payroll teams should be doing now
The FWA describes its own approach for 2026/27 as “enhanced business as usual”, a deliberate signal that inspection activity will increase even before its full remit lands.
A few practical steps for payroll leaders:
- Audit holiday pay calculations for variable-hours and commission-earning staff ahead of 2027 enforcement.
- Review tronc governance, policy documentation, consultation records and allocation methodology, against the Code of Practice and the Employment (Allocation of Tips) Act.
- Tighten record-keeping generally. The FWA’s stated approach leans heavily on employers being able to evidence compliance, not just achieve the right outcome by chance.
- Watch the NMW transition. Even though HMRC keeps delivery through 2026/27, payroll systems and processes should be ready for a formal handover to the FWA in April 2027.
Keep an eye on the FWA’s digital tools. As these are developed, they may become the expected format for demonstrating compliance, so they’re worth tracking as they roll out.
The FWA’s first delivery plan doesn’t change payroll obligations overnight, but it does change the enforcement backdrop payroll operates against. Minimum wage, holiday pay and tipping compliance are converging under a single, better-resourced enforcer with an explicit mandate to raise the profile of state enforcement.
For payroll and tronc administrators, the sensible move is to treat 2026/27 as the preparation year the FWA itself says it is. By the time enforcement powers are fully live in 2027, the expectation will be that the paperwork already exists.
If you’d like to talk through what this means for your business, we’re here to help.
