A New Enforcement Agency is Born: The Fair Work Agency

In Brief

The Fair Work Agency (‘FWA’), a new enforcement body, was established on 7 April 2026. The FWA was conceived under the Employment Rights Act 2025 (‘ERA 2025’) and has been created to combine the enforcement of many employment rights enforced by other enforcement bodies, such as National Minimum Wage, and to take enforcement of broader rights such as holiday pay, under a single entity.

Although the FWA is now live, the Government acknowledges that it is being established through a phased transition, with 2026/27 largely about the FWA consolidating existing enforcement powers and functions before taking on its broader employment rights and powers. However, employers should pay attention to this potentially significant step change in employment law enforcement.

In this article, we explore some of the FWA’s key powers, its remit and priorities over the next year and what this could mean for employers.¹

What is the FWA?

The Government promised a new single enforcement body to improve and expand the system of enforcement of employment rights. The FWA is an Executive Agency of the Department for Business and Trade and will discharge certain enforcement functions relating to relevant labour market legislation given to the Secretary of State under the Employment Rights Act 2025. The idea was that the FWA would bring together certain existing state enforcement functions and, over time, take on enforcement of a wider range of employment rights – a single ‘one stop shop’ for workers and employers. Although how this is to be achieved in practice has been somewhat uncertain.

Helpfully, on the day of its establishment on 7 April 2026, the Government published several guidance and policy documents, including a Strategic Steer document, an Enforcement Policy Statement and Code of Practice for the FWA, which provide some additional colour around how the FWA will operate in practice, including when its powers will be implemented and what we can expect from its approach to enforcement.

The recent Strategic Steer document also confirms that the budget allocated towards enforcement has been increased by over 25% to £60.1 million in comparison with the previous combined budget of the various enforcement bodies. Various commentators had previously speculated about the resourcing of the FWA and how effective it could be in practice, particularly given the wide remit of its powers. However, the paper highlights the increase in budget and explains that this uplift is intended to ensure that the agency is properly resourced to carry out its statutory functions from day one. As such, the potential significance of this new body should not be overlooked.  

The FWA’s Powers and Remit: What and When

Powers

The FWA’s powers are wide ranging, and whilst some of these were previously available to its predecessor bodies, there are some notable new additions.

Its enforcement powers are expected to transition to or be granted to the FWA in phases, with the Strategic Steer document describing 2026/27 as a ‘transitional year’.

As of 7 April 2026, the FWA’s powers currently include the following, which are set out in further detail in our Reform Hub:

• General investigatory and inspection powers (such as powers to obtain documents or information, enter premises etc)
• Powers to issue labour market enforcement (‘LME’) undertakings and applying for LME orders from the court
• Powers to issue notices of underpayment (including in respect of National Minimum Wage, Statutory Sick Pay (‘SSP’) and holiday pay)

In addition, it is also set to have the following powers under the ERA 2025, which are not yet in force:

• The ability to bring proceedings in the employment tribunal on a worker’s behalf
• Providing or arranging for legal advice or assistance
• Recovering enforcement costs incurred in exercising its enforcement functions

The Strategic Steer document indicates that the transitional year will be used to consider how to effectively deploy the FWA’s powers, including the use of civil proceedings.

Remit

As of 7 April 2026, the FWA is responsible for enforcement in respect of certain listed laws, including:

• Employment agencies and employment businesses
• The unpaid employment tribunal award penalty scheme
• Gangmasters licensing and modern slavery
• Certain fraud offences
• Labour market enforcement undertakings, labour market enforcement orders and related offences under the ERA 2025

In addition, under the ERA 2025, the FWA will have the power to enforce the following additional laws, and is expected to take over more in time:

• Annual leave and holiday pay
• Annual leave records
• SSP
• Umbrella companies (once they are regulated similarly to employment businesses, expected in 2027)
• Social care workers’ pay

Whilst National Minimum Wage was also brought into the FWA’s remit on 7 April 2026, the Strategic Steer document indicates that National Minimum Wage enforcement will continue to be delivered by HMRC under a contracting arrangement with the FWA for the time being, with a view to the FWA taking over enforcement in April 2027. The paper also indicates that this transitional period will be used to prepare for the commencement of holiday pay enforcement in 2027.

The FWA’s Priorities

The Strategic Steer document sets out the FWA’s key focus areas and priorities during its first year:

• Reducing regulatory burdens – “creating a clearer, more coherent enforcement system that supports economic growth and compliant businesses while tackling non-compliance effectively”
• Intelligence and data – establishing “a unified data and intelligence infrastructure that supports seamless case management and risk-led enforcement”
• Public awareness and stakeholder engagement – “improving accessibility, responsiveness and raising the public profile of the FWA to increase awareness among workers and employers about how to report concerns”
• Thought leadership – “bringing together partner regulators, civil society, business representatives, trade unions and academics to build a shared understanding of labour market risks and to shape bold and practical proposals to strengthen enforcement, promote best practice, share learning and contribute to informed public debate about labour market standards”
• Preparing for 2027 and beyond – working with HMRC to prepare for the transition of National Minimum Wage enforcement powers, investing in workforce development, developing an operating model with Acas, considering how to deploy the full range of powers effectively, and preparing to commence holiday pay enforcement from 2027 as well as the enforcement of other rights

The FWA is expected to publish its Transitional Year Delivery Plan in due course responding to the points set out in the Strategic Steer document.

Impacts for Employers

The establishment of the FWA marks the start of what is set to be a significant shift in how employment rights are monitored and enforced in the UK, with the inclusion of new areas of law being enforced at a state level and new methods of enforcement available.

Whilst it seems there will be some breathing space before the FWA’s enforcement powers are extended to holiday pay next year, this is a particularly complex area for employers to get right and businesses shouldn’t wait until then to get their houses in order.

Miscalculation of holiday pay due, or failure to pay holiday pay to misclassified workers are common pitfalls for employers, the risks of which will only be magnified once the FWA is granted its enforcement powers.

Employers should be taking active steps now to review their holiday payments and processes, in addition to National Minimum Wage and SSP. It will also be important for businesses to ensure that records for key areas are maintained and up to date, given the increased enforcement risk.

For more information on the Fair Work Agency and all other areas of the Employment Rights Act 2025, visit our Reform Hub.

Please contact your usual Littler contact if you would like any support with preparing your business for these changes. For any client training queries, please contact Natasha Adom.