The Fair Work Agency - A new superpower in employment rights?
The Fair Work Agency (FWA) is a new public body referred to as a state enforcement agency, which will be established in April 2026 under the Employment Rights Bill reforms.
It will be an agency of the Department for Business and Trade (DBT) and will support the wider government strategy on employment rights. Duties will be carried out by enforcement officers and staff appointed by and working within the DBT.
What is the purpose of the Fair Work Agency?
The establishment of the FWA is a major change in the government’s approach to enforcement. Their two main aims are:
- To act as a powerful deterrent against non-compliance; and
- To act as a support agency for employers who want to get it right.
The DBT say that the FWA will combine existing enforcement functions and eventually be responsible for the enforcement of more employment rights. It will take over responsibilities from current bodies, including:
- HMRC and their National Minimum Wage Enforcement Team
- The Gangmasters and Labour Abuse Authority (GLAA)
- The Employment Agency Standards Inspectorate; and
- Employment tribunal
The scope of enforcement will be widened and the FWA will enforce key employment rights, including:
- Statutory Sick Pay
- National Minimum Wage (NMW) including entitlement to the NMW and record-keeping requirements
- Unlawful deductions from pay
- Statutory holiday entitlement and pay including arrangements for rolled-up holiday pay for irregular hours and part-year workers
- A new obligation to keep records demonstrating compliance with statutory holiday entitlement (including the amount of leave and pay) for six years, with failure to comply being a criminal offence punishable by a fine
- Agency worker protections
- Modern slavery, human trafficking, and forced labour
- Zero hour & low guaranteed hour contracts and the right to request more stable hours
- Gangmasters licencing
- Financial penalties for failure to pay sums ordered by an Employment Tribunal or in a COT3 (conciliation agreement).
Much of what is noted above is basic compliance with employment law which employers already have existing obligations to follow. Not all of this is new, it is just being brought together under one centralised agency rather than being dealt with by different bodies.
The Employment Rights Bill will also require the DBT to produce an annual report on the work of the FWA and an enforcement strategy every three years, and they will both be subject to parliamentary scrutiny in the usual way.
What will the Fair Work Agency be able to do?
The FWA will have extensive powers, many that have not been seen before, including:
- Inspection and investigation: Enforcement officers will be able to enter business premises and inspect workplaces, interview workers, require employers to produce relevant documents and other evidence to demonstrate compliance with employment law including contracts, payslips and right to work checks. They will also be able to check any computer or other equipment used to process or store information or documents, and even seize documents and equipment, if they deem it appropriate. In certain circumstances if they obtain a court warrant, enforcement officers can also enter people’s homes. The FWA would be able to investigate workplaces proactively without having to wait for a worker to raise an issue and may conduct spot checks, especially in businesses where non-compliance is typically high.
- Legal enforcement: The FWA will have new powers, some of which have not been previously covered by the existing enforcement bodies including the power to:
- Enforce employer failure to pay certain statutory payments to workers such as holiday and statutory sick pay (SSP). Neither SSP nor holiday pay are currently subject to enforcement. While SSP is usually relatively straightforward in terms of management, holiday pay is a complex area where employers can make mistakes, often not realising they are falling foul of the legislation.
- Issue notices of underpayment to employers if employees haven't received the statutory payments they are entitled to such as SSP or NMW. The notice specifies the amount payable to each affected individual within 28 days. This can cover underpayments going back up to six years, covering unpaid sums from when the Bill is passed or back six years in all cases for unpaid NMW. The notice of underpayment will also impose a penalty payable to the Secretary of State. Employers should be aware that any claims that underpayments were a mistake due to ignorance or human error are unlikely to provide any kind of defence.
- Issue a notice requiring a person to provide information - either by attending a specified time or place to answer questions, or by providing specified information or documents to request a labour market enforcement undertaking. If the Secretary of State believes that a person has committed a labour market offence, they can be asked to comply with any requirements set out in an such an undertaking. A court can make an order if an undertaking is refused, and failure to comply with an order is a criminal offence.
- Bring a case in an employment tribunal on one or more workers’ behalf, if they have the right to claim, even if they haven’t initiated it and don’t want to do so. The worker wouldn’t be too involved, making it much easier for cases to be brought forward.
- Bring proceedings in all types of employment tribunal claim, not just those falling within the FWA’s remit.
- Offer legal advice and assistance to workers who wish to bring employment claims, or who are or may be party to civil proceedings relating to employment or trade union law, or the law of labour relations. The FWA will also be able to reclaim their costs out of any costs awarded to the worker.
- Bring to justice anyone in breach of an employment right covered by the FWA including new offences for obstructing enforcement, failing to keep records, and producing false documents and/or information. The penalty is either a fine, imprisonment (for up to 51 weeks in England or Wales), or both. In addition, employers could be named publicly, which may have repercussions on their reputation, as well as give rise to additional claims from other workers if things haven’t been done properly.
- Cost recovery: The Secretary of State will be able to set out in the regulations how the Fair Work Agency can impose charges to recover enforcement costs from those employers who have enforcement action taken against them for non-compliance. This could have serious consequences for employers if they are charged a fee on top of receiving a penalty as well as having to make good on missing payments, not only in financial terms but also in terms of their brand, reputation, and standing within their business community.
- Advisory role: The FWA will be guided and supported by an advisory board made up of representatives from businesses, trade unions, and independent experts.
- Record keeping: Employers will be required to keep certain records relating to working hours, annual holiday entitlements, and sickness for a proposed six years to demonstrate compliance to the FWA.
What should employers do now?
As the Government moves from individual enforcement rights towards this centralised state enforcement function with additional penalties, we recommend:
- Conducting a full HR and/or payroll compliance audit
- Reviewing your contracts, policies, procedures, processes, and record keeping processes to ensure they are compliant and robust enough to withstand a challenge
- Preparing for six-year record retention requirements
This isn’t solely about avoiding penalties, it is about futureproofing your business and maintaining trust with your workforce.
We are here to help
If you would like an HR audit or need help preparing for the advent of the Fair Work Agency, please get in touch with a member of our specialist HR Consultancy team or speak to your usual Azets adviser.
