The Employment Rights Bill, which recently had its third reading in the House of Lords, is set to create the Fair Work Agency (FWA), creating a single body that will be responsible for overseeing and enforcing key employment entitlements.

What will the Fair Work Agency do?

The FWA will be an Executive Agency of the Department for Business and Trade and will be given a series of functions to enforce certain employment legislation. As a single point of contact between employers and employees, the FWA will have the power to oversee and enforce a range of key rights including National Minimum Wage, holiday pay, statutory sick pay, whistleblowing protection, collective consultation and redundancy rights, modern slavery and exploitation, and unpaid Employment Tribunal Awards.

The FWA will have investigative powers to initiate investigation and inspection of employers’ records. Employers can be ordered to produce documents and evidence to demonstrate compliance with employment law. If breaches of employment rights are found, the FWA will be able to issue Notices of Underpayment requiring the employer to pay the employee what they are owed and a penalty to the Government.

Holiday pay will be a key focus of the FWA, with a power to order repayment of unpaid holiday pay within 28 days, impose fines of up to 200% of the unpaid amount (capped at £20,000), and enforce claims stretching back six years. There may also be a new criminal offence introduced of failing to keep adequate holiday records.

The FWA may also be able to support employees legally in bringing cases against their employers, or even take cases to tribunal for them, as well as speed up repayment processes when employers fall short, and potentially “name and shame” non-compliant employers.

Existing penalties for minimum wage breaches will remain, but there is likely to be greater speed of enforcement and greater visibility of action.

The FWA is expected to launch in April 2026, following consultations and secondary legislation. Some enforcement powers may phase in gradually.

Criminal liability applies mainly to failure to maintain statutory records or comply with undertakings.

What should employers do now to prepare?

Organisations should be looking to get their affairs in order, and by the end of the year latest, ready for any possible FWA inspection in 2026. Advisable steps that employers should take are:

  • Audit risk areas: Review employment contracts to make sure that legal entitlements are correct. Pay systems should also be reviewed and updated. All records should be updated and available. Dispute handling processes should also be reviewed and updated to comply with employment rights and law.
  • Simplify policies: Ensure that workplace policies are clear and jargon-free. Policies should be made accessible to all staff, and staff should be informed where they can access policies.
  • Stay informed: Track Government updates and draft guidance issued by the Department for Business and Trade.
  • Train staff: Provide guidance and training to staff on how to handle queries and compliance issues. Guidance and training should include legal entitlements of employees, record-keeping obligations and best practice, and the powers of the FWA.

For employees, the FWA may create a fairer market by tackling rule-breakers and by making employees more engaged through being better informed of their legal rights. For employers, even small mistakes could trigger faster, public enforcement action.

Organisations that prepare now – by tightening systems, reviewing pay, and training staff – will be in a much stronger position than those who wait until the rules take effect.

If you have any questions or concerns about the Fair Work Agency and how your organisation can prepare, please contact employment lawyer Marie van der Zyl.