The Fair Work Agency: Key updates and employer guidance for a year of transition

One of the less publicised announcements in the 2025 Budget was the creation of a new Fair Work Agency. Launched in April 2026, it forms a key part of the Government’s wider ‘Make Work Pay’ agenda, aimed at simplifying enforcement, strengthening worker protections, and ensuring employers meet their legal obligations. Since its launch, further detail has emerged about how the Fair Work Agency will operate in practice, particularly during its first year.

Who is the Fair Work Agency?

The Fair Work Agency is a new single enforcement body for employment rights in the UK. Established under the Employment Rights Act 2025 and launched in April 2026, it brings together the functions of:

• HMRC’s national minimum wage enforcement team
• The Employment Agency Standards Inspectorate (EASI)
• The Gangmasters and Labour Abuse Authority (GLAA)

Its purpose is to provide one centralised authority for enforcing key workplace rights. This includes national minimum wage compliance, labour exploitation, employment agency regulation and, over time, an expanded remit expected to include areas such as statutory sick pay and holiday pay enforcement.

With broader powers and a more coordinated mandate, the Fair Work Agency is responsible for investigating breaches, issuing penalties, and ensuring underpayments are rectified. The introduction of the Fair Work Agency represents one of the most significant changes to labour market enforcement in recent years. It marks a clear shift away from fragmented oversight towards a more joined‑up approach, with greater visibility across the labour market. For employers, particularly those operating in lower‑paid or labour‑intensive sectors this signals increased scrutiny, more coordinated investigations, and potentially tougher consequences where issues arise.

What’s new?

More recent updates provide clarity on how the Fair Work Agency is expected to function during its first year. While detailed operational guidance is still evolving, 2026/27 is widely expected to act as a transitional period. During this time, the focus is likely to be on:

• Integrating the existing enforcement bodies
• Maintaining continuity in ongoing investigations
• Developing shared systems, data and operating approaches

This staged implementation reflects the broader rollout of reforms under the Employment Rights Act 2025, with further expansion of powers anticipated from April 2027 onwards.

What’s changing under the Fair Work Agency?

• From April 2026, the Fair Work Agency assumes overall responsibility for employment rights enforcement, including the strategic oversight of national minimum wage compliance
• The Fair Work Agency has powers to investigate workplaces, issue penalties for underpayments and take legal action to enforce compliance
• The creation of a single enforcement body is intended to reduce fragmentation and improve coordination across compliance activity
• The Government’s objective is to ensure that fewer breaches of employment rights go undetected, particularly for lower‑paid workers
• Over time, the Fair Work Agency’s remit is expected to expand further, with the potential to cover a broader range of employment rights and act as a central point of guidance for both employers and workers

Enforcement approach: what might change?

Alongside structural reform, there are expected to be changes in how compliance issues are handled in practice. Historically, HMRC has often supported employers in resolving national minimum wage issues through a combination of guidance, voluntary reviews and staged interventions before formal enforcement action is taken. Looking ahead, the creation of a central enforcement body, combined with increased coordination and data sharing, may lead to a more formal and structured approach to enforcement over time. While it is not yet clear how far existing support mechanisms will change in practice, employers should be prepared for:

• Greater emphasis on accurate record‑keeping and evidence
• Less reliance on informal resolution in some cases
• Increased likelihood of penalties where non‑compliance is identified

Taking proactive steps to review and correct issues before any engagement with the Fair Work Agency remains critical.

National minimum wage enforcement

It has been confirmed that HMRC will continue to carry out day‑to‑day national minimum wage enforcement during the 2026/27 tax year. However, it will do so under the strategic direction of the Fair Work Agency, with full operational responsibility expected to transfer over time.

For employers, this means:

• Inspection processes are likely to look familiar in the short term
• Existing HMRC engagement models may still apply during the transition
• However, intelligence, targeting and enforcement strategy are increasingly being coordinated centrally

This phased approach is designed to ensure continuity while the Fair Work Agency prepares to exercise its full powers.

Increased resources and broader remit of the Fair Work Agency

The Fair Work Agency is expected to operate with increased funding and resources compared to the combined predecessor bodies, reflecting its broader remit and the Government’s focus on enforcement. Importantly, employers should not assume that the transition period will result in reduced activity. Enforcement levels are expected to be maintained, and potentially strengthened, as systems and capabilities develop.

Looking ahead to 2027

The transitional year is not the end point. The Fair Work Agency is already preparing for further expansion, including:

• Full operational responsibility for national minimum wage enforcement
• Expansion into holiday pay enforcement, which will be brought into scope on a staged basis
• Wider use of civil enforcement powers, including the ability to take action on behalf of workers and recover underpayments

Over time, the Fair Work Agency is expected to develop into a system leader for labour market enforcement, influencing not only compliance activity but also future policy direction.

What employers should be doing now in response to the Fair Work Agency

We recommend that businesses:

• Review pay practices, working time and deductions carefully
• Assess exposure to key national minimum wage risk areas such as unpaid time, salary sacrifice arrangements and accommodation charges
• Ensure internal processes enable issues to be identified and corrected early
• Maintain clear and robust records to demonstrate compliance
• Seek specialist advice before any enforcement action arises

Our team can support businesses through proactive national minimum wage and workforce compliance health checks, either across the organisation or within specific high‑risk areas. Taking action now is likely to be significantly less costly and disruptive than responding once enforcement activity has begun.