The Fair Work Agency and what your business needs to know

The Fair Work Agency (FWA) means businesses may now be asked to show how they are meeting their employment obligations not simply assume everything is fine. For many employers, that is the real change. Most are trying to do the right thing but if you were asked today to produce the records, calculations and decisions behind your workforce practices, could you?

The Fair Work Agency (FWA) means businesses may now be asked to show how they are meeting their employment obligations not simply assume everything is fine. For many employers, that is the real change. Most are trying to do the right thing but if you were asked today to produce the records, calculations and decisions behind your workforce practices, could you?

What is the Fair Work Agency?

On 7th April 2026, the FWA came into operation as a new, single enforcement body for a defined set of employment rights, established under the Employment Rights Act 2025.

Before this, enforcement responsibilities were split across several separate bodies, each with its own remit and approach. The FWA brings key functions under one coordinated roof, with a unified strategy and stronger investigative powers.

Critically, the FWA does not create new employment rights. What has changed is who is checking, how proactively, and how quickly issues can escalate if an employer cannot evidence compliance.

Why this matters more for SMEs

Larger employers typically have in-house HR, payroll, legal and audit functions that catch errors before they accumulate. Many SMEs do not and that can increase exposure.

Where a smaller business has grown quickly, inherited older contracts or relies on outsourced payroll without regularly sense-checking outputs, compliance gaps can build quietly over months or years. Holiday pay is a common example: if overtime, commission or irregular earnings are handled incorrectly, the issue can sit in the background until someone challenges it or until the FWA asks for evidence.

Unlike older enforcement models that were often complaint-led, the FWA can use intelligence and risk indicators to target sectors, business models or practices for proactive investigation. That changes the risk calculation for every employer.

What the FWA covers and when

The FWA is being introduced in phases. It is important to distinguish between legal obligations that are already in force and enforcement functions that are transferring into the FWA over time.

Live now (April 2026)

• Holiday and holiday pay record-keeping: from 6th April 2026, employers must keep adequate records of leave taken, leave carried over, holiday pay and payments in lieu, and retain them for at least six years.
• The FWA was established on 7th April 2026 and has brought together enforcement in areas including agency standards, gangmasters licensing and serious labour abuse/exploitation.
• Statutory Sick Pay (SSP) reforms took effect from 6th April 2026 (including removal of the lower earnings limit and waiting days).

Transitional phase (2026-27)

• National Minimum/Living Wage enforcement continues to be delivered by HMRC during 2026-27 under a contracting arrangement while the FWA prepares for full transfer.

Coming next (2027 onwards)

• The government’s plan is for National Minimum Wage enforcement functions to transfer fully into the FWA from April 2027.
• Holiday pay enforcement is expected to commence in 2027, alongside wider remit expansion over time.

The FWA’s enforcement powers

The FWA has been given a range of powers that make it a materially different proposition from the fragmented system it replaced. Employers should understand what these are:

• Workplace entry and inspection of records: enforcement officers can enter premises and require employers to produce relevant documents and information. Visits are often arranged in advance, but the FWA can also act without prior notice where appropriate.
• Document and information notices: officers can require specific information or documents by a set deadline and can require individuals to answer questions.
• Civil enforcement tools: where underpayments or other breaches are identified, the FWA can require corrective action and may use civil penalties and recovery mechanisms based on existing enforcement regimes.
• Employment tribunal support and action: the FWA can support workers and, in some circumstances, bring proceedings in the employment tribunal on a worker’s behalf.
• Employment tribunal penalty enforcement: the FWA can issue warning and penalty notices where employers fail to pay tribunal awards.
• Criminal offences: obstructing an enforcement officer or providing false documentation can constitute a criminal offence.
  

If you identify a problem, the safest approach is to take advice early and correct it quickly. The enforcement policy places emphasis on securing compliance and preventing repeat breaches and prompt remedial action reduces risk.

What you should do now

These steps reflect the most immediate priorities for businesses across most sectors. They are not a complete compliance audit if you have specific concerns, we recommend a more structured review.

• Audit your pay calculations. Check National Minimum Wage and National Living Wage rates are current and applied correctly. Review any allowances, deductions and salary sacrifice arrangements for minimum wage impact.
• Put holiday record-keeping in place immediately. From 6th April 2026 you must keep records of leave taken, holiday pay, carry-over and pay in lieu for at least six years. Ensure the records show what was included in holiday pay calculations (for example, overtime, commission or bonuses where applicable).
• Review holiday pay calculations. For workers with variable pay, ensure your method aligns with current rules and that you can explain and evidence the approach.
• Review SSP administration. SSP changes apply from 6th April 2026. Confirm your payroll is processing this correctly and that absence records and SSP evidence are complete.
• Check agency worker arrangements. If you use temporary or agency staff, ensure you understand when equal treatment rights apply and that responsibilities between hirer and agency are clear and documented.
• Assign compliance ownership. Avoid the common SME risk where responsibility is assumed. Nominate one person to own employment compliance and to act as the point of contact if the FWA gets in touch.
  

Prepare a response plan. If you received a letter from the FWA today, what would you do? Know who you would contact, where records are held, and how quickly you could evidence compliance across pay, leave and statutory entitlements.

Key takeaway

The FWA is live. Many employers who are non-compliant are not deliberately so they have grown into complexity faster than their processes have kept up. The challenge now is that enforcement is more coordinated and more evidence-led.

Good intent is not a defence. Documentation is.

The single most useful question to ask yourself is this: if the Fair Work Agency asked us to prove compliance today; records, calculations, decisions; what could we show, and how quickly?

If the honest answer is ‘not much’ or ‘it would take a week to pull together’, now is the time to close those gaps, not when you receive a letter.

Need support?

Gravita can carry out a targeted compliance review across pay, holiday, SSP and record-keeping and help you put the right structures in place before any issues arise. Get in touch to discuss how we can help.