The UK employment law landscape is undergoing its biggest transformation in decades, and one of the most significant developments for employers is the launch of the Fair Work Agency.
Established in April 2026 under the Employment Rights Act 2025, the Fair Work Agency has been created to strengthen the enforcement of workplace rights across the UK. While many of the headlines surrounding the Employment Rights Act have focused on unfair dismissal, flexible working, zero hours contracts and sexual harassment protections, the creation of the Fair Work Agency could have one of the most immediate practical impacts on employers.
For years, employment rights enforcement has been spread across multiple government bodies. This often created confusion for workers, inconsistency in enforcement, and challenges for employers trying to understand who was responsible for what. The Fair Work Agency aims to change that by bringing key enforcement functions together under one organisation.
Importantly, while the Agency officially launched in April 2026, many employers are already reporting visits, enquiries and compliance activity. Although the Agency is expected to continue expanding its operations throughout 2026, businesses should not assume they have plenty of time before enforcement activity begins.
This is very much a live issue for UK employers today.
What is the Fair Work Agency?
The Fair Work Agency is a new government enforcement body established under the Employment Rights Act 2025. It was formally launched on 7 April 2026 and operates as an executive agency of the Department for Business and Trade. Its purpose is to simplify and strengthen the enforcement of employment rights across the UK.
The Agency combines the functions of several existing enforcement bodies, including HMRC’s National Minimum Wage enforcement team, the Employment Agency Standards Inspectorate, and the Gangmasters, Director of Labour Market Enforcement and Labour Abuse Authority.
In practical terms, this means there is now a single organisation responsible for enforcing a growing number of workplace rights.
The Government has stated that the Agency will continue to take on additional responsibilities over time, including enforcement of holiday pay and statutory sick pay, both of which are now confirmed to begin from 2027. The Employment Rights Act also gives the Government powers to expand the Agency’s remit further in future.
Why was the Fair Work Agency created?
Historically, enforcement of employment rights has often relied heavily on individual workers bringing claims through employment tribunals.
In reality, many workers do not pursue claims. Some are unaware of their rights. Others are concerned about the cost, time or stress involved. As a result, breaches can go unchallenged.
The Government’s position is that stronger enforcement is needed to ensure compliance and to create a level playing field for employers who already follow the law. The Fair Work Agency is intended to address this by providing a more proactive and coordinated enforcement approach.
Rather than relying solely on individual complaints, the Agency has powers to investigate, inspect, gather evidence and take action where it believes employment rights are not being upheld. Critically, the FWA can bring employment tribunal claims on behalf of workers, even if the worker themselves chooses not to. This is one of the most significant shifts from the old system. Workers who couldn’t afford to pursue a claim, or simply chose not to, are no longer the limit of an employer’s exposure.
For compliant employers, this should create greater consistency. For businesses that have gaps in their compliance processes, however, it could lead to increased scrutiny.
What powers does the Fair Work Agency have?
One of the reasons the Fair Work Agency has attracted so much attention is the breadth of its powers.
The Agency has inherited many enforcement powers from existing organisations and is expected to gain further powers over time. According to Government guidance, the Agency can investigate potential breaches, issue penalties, recover unpaid sums, and take enforcement action where employment rights have been violated. Where an underpayment is found, employers will receive a Notice of Underpayment requiring repayment within 28 days. The standard penalty is 200% of the underpayment, capped at £20,000 per worker though this reduces to 100% if paid within 14 days
It can also enforce compliance in areas such as National Minimum Wage legislation employment agency regulations and labour exploitation. Over time, holiday pay and statutory sick pay enforcement are also expected to fall within its remit. time, holiday pay and statutory sick pay enforcement are also expected to fall within its remit.
Legal commentators have highlighted that the Agency can investigate employers proactively, rather than waiting for an employee complaint to be made. It may also enter workplaces, request documentation and pursue enforcement action where breaches are identified.
For employers, this represents a significant shift. Historically, many organisations only reviewed certain HR processes when a grievance or tribunal claim arose. Increasingly, compliance may be assessed before disputes ever reach that stage.
What areas should employers be concerned about?
The reality is that most employers are not deliberately breaching employment law. However, many businesses have gaps in their documentation, inconsistent processes, or outdated records that could create problems if reviewed by an enforcement body.
National Minimum Wage compliance remains one of the key enforcement priorities. Employers should ensure that all working time is being paid correctly, including training time, travel time where applicable, and any deductions that could reduce pay below the legal minimum.
Holiday pay is another area receiving increased attention. The Employment Rights Act introduced new record keeping obligations requiring employers to retain records relating to annual leave and holiday pay compliance for six years. Failure to do so may result in penalties.
Employers who use agency workers, labour providers or umbrella companies should also review those arrangements carefully. The Fair Work Agency has inherited enforcement powers relating to employment agencies and labour supply chains.
Statutory sick pay, family leave rights and wider Employment Rights Act compliance are also expected to become increasingly important as the Agency develops.
Why good record keeping matters more than ever
One of the biggest themes emerging from Fair Work Agency guidance is the importance of documentation.
Many employers know they are doing the right thing but struggle to prove it.
If the Agency requests evidence, employers will need to demonstrate compliance through records, not assumptions. This may include employment contracts, payroll information, holiday records, timesheets, absence records, right to work documentation, policies, procedures and communications with employees.
Good HR administration has always been important. The difference now is that poor record keeping may attract regulatory attention rather than simply creating problems during a tribunal claim.
Employers should review whether their HR systems allow them to retrieve information quickly and accurately if requested.
Why HR audits are becoming increasingly important
One of the most effective ways to prepare for the Fair Work Agency is through a proactive HR audit.
An audit allows employers to identify issues before an enforcement officer does.
This might involve reviewing contracts of employment, checking National Minimum Wage compliance, auditing holiday pay calculations, assessing family leave policies, reviewing right to work procedures, and ensuring employee records are complete and up to date.
Many employers only conduct audits after a problem has arisen. The launch of the Fair Work Agency creates a strong argument for carrying out preventative reviews instead.
Identifying and correcting issues early is almost always cheaper and less disruptive than dealing with enforcement action later.
Training managers and leaders
HR compliance does not sit solely within the HR department.
Line managers make decisions every day that can create compliance risks. Whether it is approving holiday requests, managing sickness absence, scheduling shifts or handling employee concerns, managers play a critical role in ensuring employment rights are respected.
Training managers on current employment law requirements is therefore becoming increasingly important.
The Employment Rights Act has introduced numerous changes and more reforms are expected throughout 2026 and 2027. Employers should ensure managers understand their responsibilities and know when to seek HR support.
A well trained management team is one of the strongest protections against both tribunal claims and regulatory scrutiny.
What should employers do now?
The launch of the Fair Work Agency should not create panic, but it should encourage action.
Businesses should start by reviewing their current compliance arrangements. This includes checking employment contracts, employee handbooks, payroll processes, holiday records and statutory entitlement calculations.
Organisations should ensure records are accurate, complete and accessible.
Managers should receive appropriate training on employment law developments and HR procedures.
Employers should also monitor ongoing Government consultations and updates, as the Agency’s powers and priorities are expected to continue evolving throughout 2026 and beyond.
Most importantly, employers should recognise that enforcement is becoming more proactive. Waiting for an issue to arise is no longer the safest strategy.
How HRM Derbyshire Peaks can help
At HRM Derbyshire Peaks, we help businesses stay ahead of employment law changes and build HR systems that stand up to scrutiny.
Whether you need support reviewing contracts, auditing HR processes, updating policies, training managers or preparing for Fair Work Agency compliance checks, we provide practical and tailored HR support that works for your business.
The Fair Work Agency represents a new era of employment rights enforcement in the UK. Preparing now will help protect your organisation, reduce risk and ensure you are ready for whatever comes next.
Final thoughts
The Fair Work Agency may be one of the most significant employment law developments of 2026.
Although many employers are still becoming familiar with the new organisation, enforcement activity is already beginning, and businesses should not assume that inspections or enquiries are years away.
The best approach is to focus on strong HR foundations. Accurate records, compliant processes, well trained managers and regular audits will put employers in the strongest possible position.
If you would like support reviewing your HR compliance and preparing for the Fair Work Agency, contact HRM Derbyshire Peaks today for expert guidance and practical support.