Fair Work Agency: what employers need to know

What the FWA replaces

The Fair Work Agency consolidates enforcement functions that were previously spread across four separate organisations:

• HMRC National Minimum Wage enforcement team -- responsible for investigating NMW underpayment complaints and conducting proactive compliance checks
• Employment Agency Standards Inspectorate (EAS) -- enforced the rules on how employment agencies and employment businesses operate
• Gangmasters and Labour Abuse Authority (GLAA) -- licensed labour providers in agriculture, shellfish gathering, and food processing and investigated labour exploitation
• Director of Labour Market Enforcement -- set the strategic direction for labour market enforcement across the three bodies above

By combining these functions, the FWA aims to provide a single point of contact for workers and employers, reduce duplication, and strengthen enforcement. It also gains new powers that none of the predecessor bodies held individually.

What the FWA enforces

The FWA has a wider remit than any of its predecessors. Its enforcement responsibilities cover:

• National Minimum Wage and National Living Wage -- all employers must pay at least the statutory minimum. The FWA takes over HMRC's role in investigating underpayment, issuing notices of underpayment, and imposing financial penalties. This transfer is phased: HMRC continues NMW enforcement during the transitional year, with the function moving to the FWA in April 2027
• Holiday pay -- the FWA will be able to enforce compliance with holiday pay entitlements under the Working Time Regulations 1998, an area that previously relied almost entirely on individual tribunal claims. This is new state enforcement, anticipated in 2027 once the necessary regulations are made
• Statutory Sick Pay -- a new enforcement power created by the Employment Rights Act 2025. The FWA will be able to investigate employers who fail to pay SSP correctly, anticipated in 2027 once the necessary regulations are made
• Employment agency standards -- the rules governing how agencies operate, including fees, transparency, and worker rights
• Gangmaster licensing -- licensing of labour providers in regulated sectors continues under the FWA
• Umbrella company practices -- the FWA has new powers to investigate and take action against non-compliant umbrella companies
• Unpaid tribunal awards -- the FWA can pursue employers who fail to pay compensation awarded by employment tribunals

How the FWA enforces the rules

The FWA has a range of enforcement tools available to it. Enforcement can be proactive (the FWA decides to investigate a sector or employer) or reactive (responding to a worker complaint).

• Inspections: The FWA can inspect workplaces, examine payroll records, interview workers, and request documents. Obstructing an inspection is a criminal offence
• Enforcement notices: Formal notices requiring an employer to take specific steps to comply with the law within a set timeframe
• Financial penalties: Fines for non-compliance, including penalties for NMW underpayment of up to 200% of the arrears owed
• Naming: The FWA can publish the names of employers found to have breached employment rights, including NMW naming rounds
• Prosecution: In serious cases, the FWA can pursue criminal prosecution, particularly for labour exploitation and gangmaster licensing offences
• Tribunal award enforcement: The FWA can take action on behalf of workers to recover unpaid employment tribunal awards

What employers should do to prepare

If you already comply with employment law, the FWA should not change your day-to-day operations. However, the creation of a single enforcement body with expanded powers means that non-compliance is more likely to be detected and acted upon. Now is a good time to review your practices.

Audit your National Minimum Wage compliance

NMW enforcement is the FWA's highest-volume area. Common compliance failures include:

• Not accounting for uniform or equipment costs that reduce pay below NMW
• Incorrectly calculating pay for salaried staff who work additional hours
• Failing to increase rates when age thresholds change (for example, when a worker turns 21)
• Treating accommodation above the offset limit as part of pay
• Not paying for all working time, including time spent on mandatory training, security checks, or handovers

Review holiday pay compliance

This is a new area of state enforcement. Previously, workers could only challenge holiday pay through individual tribunal claims. The FWA will be able to investigate and enforce proactively (anticipated 2027). Check that:

• All workers receive at least 5.6 weeks of paid holiday per year
• Holiday pay is calculated correctly -- for workers with variable hours, this must reflect their actual earnings, including overtime and commission
• Workers are not discouraged from taking holiday
• Rolled-up holiday pay, if used, is calculated and paid correctly

Ensure Statutory Sick Pay compliance

Under the Employment Rights Act 2025, SSP is payable from day one with no lower earnings limit. The FWA will be able to enforce SSP compliance directly (anticipated 2027). Confirm that:

• Your payroll system pays SSP from the first qualifying day (no waiting days)
• All employees are eligible regardless of their earnings
• The rate is calculated correctly (80% of weekly earnings or the flat rate, whichever is lower)
• Your sickness absence policy reflects the current rules

Check agency and umbrella company arrangements

If you use employment agencies or umbrella companies, you should:

• Verify that your agencies hold any required licences (particularly in agriculture, food processing, and shellfish gathering)
• Check that umbrella companies you work with are transparent about pay deductions
• Ensure agency workers receive their day-one entitlements
• Review your arrangements to confirm no party in the supply chain is facilitating non-compliance

How this connects to wider changes

The FWA is part of the broader Employment Rights Act 2025, which also introduced:

• Reduced unfair dismissal qualifying period — from 24 months to 6 months (from 1 January 2027)
• Guaranteed hours for zero-hours contract workers
• Strengthened protections against fire and rehire
• Third-party harassment liability
• Extended trade union access rights

The FWA's creation signals a shift towards proactive, state-led enforcement of employment rights. Rather than relying solely on individual workers bringing tribunal claims, the government now has a single agency that can investigate sectors, target repeat offenders, and take enforcement action at scale.

Employers who maintain good compliance practices have nothing to fear. Those with gaps in NMW, holiday pay or SSP compliance should act now, ahead of the FWA taking on these enforcement functions (National Minimum Wage from April 2027).