Employment Rights Act 2025
The Fair Work Agency
What you need to know
Understanding the new Fair Work Agency
The new Fair Work Agency is the Government’s single, consolidated body to monitor and enforce core employment rights.
It was established from April 2026.
What is the Fair Work Agency?
Most employment rights are enforced by individuals presenting a complaint to an Employment Tribunal or in limited cases enforced by the state on workers’ behalf – such as the National Minimum Wage. Acceptance that the current system of state enforcement is fragmented and inefficient, the Government’s new FWA will bring together existing state enforcement functions under one single body.
The Government believe this will improve efficiency by ensuring there is one leadership team to oversee work in line with a unified strategy. The FWA will aim to resolve issues upstream by supporting employers that want to comply with the law. But it will also have strong powers to investigate and take action against employers that flout the law.
How will the FWA operate?
The FWA will be an Executive Agency of the Department for Business and Trade (DBT) who will possess a range of enforcement powers, including powers to require employers to provide information, enter premises to get documents, and in some cases require employers to provide undertakings – backed up by criminal offences. The FWAs remit will cover:
- National Minimum Wage (NMW) – NMW entitlement, record-keeping and enforcement of arrears.
- Holiday pay – right to payment for holiday, including rolled-up holiday pay for irregular hours and part-year workers arrangements.
- Holiday leave and pay – an obligation to keep records demonstrating compliance with holiday entitlement (leave and pay) for six years, failure to comply being a criminal offence punishable by fines.
- A new obligation to demonstrate statutory sick pay compliance, failure to comply being a criminal offence punishable by fines
- Modern slavery offences
- Rules on employment agencies and employment businesses
- Gangmasters licencing
Many of these areas were already covered by existing enforcement agencies. However, new powers to issue notices of underpayment with a financial penalty, require information or documents and enter premises will be especially significant for employment rights that were not previously covered by enforcement bodies, e.g. holiday and sick pay.
Additionally, the FWA will review whether employers have failed to pay all or part of an award made by an employment tribunal.
The FWA have the powers to progress a case to an employment tribunal, even where the employee doesn’t wish to.
How will the FWA monitor compliance?
The FWA will monitor employer compliance by contacting employers to arrange an audit of their business. During this process, individuals may be required to attend interviews, answer questions and provide information or documents where reasonably believed to be relevant. Acknowledging that this is a huge task, it is expected that monitoring will initially be targeted at high-risk industries and sectors with poor compliance records.
The FWA also has a wide range of enforcement powers:
- FWA officers may enter a business’ premises at a reasonable time to inspect records and equipment, and seize documents.
- The FWA will be able to seek labour market enforcement undertakings where it believes a labour market offence has been committed.
- The Secretary of State, on recommendation by the FWA, will be able to issue a notice of underpayment to an employer that has failed to pay the correct amount of wages, SSP or holiday pay to a worker. The notice will require the employer to pay to the worker the outstanding amount within 28 days of issue.
- Additionally, the Secretary of State may require the liable business to pay a penalty calculated at 200% of the sum specified in the notice of underpayment, subject to a maximum of £20,000 and a minimum of £100.
- The Secretary of State will also have powers to bring employment tribunal proceedings on behalf of a worker and to provide legal assistance to a worker who becomes party to civil proceedings relating to employment-related matters. However, these powers are not yet in force.
How to prepare for the changes
Non-compliance is often unintentional, which makes the establishment of the FWA important for employers because this strengthened enforcement regime means that even unintentional issues will be identified quicker and acted upon with more significant implications.
What should employers do now?
Employers should review their employment contracts and HR Policies. However, it is also important to review the practical appliance. This includes:
- Reviewing payroll records.
- Reviewing holiday pay records and working time calculations (particularly for variable hours staff)
- Ensuring systems for requesting and monitoring annual leave are robust.
- Reviewing and revising existing policies and procedures
- Assessing whether day-to-day practices align with contractual terms and written policies, as discrepancies are likely to be a common trigger for enforcement action
- Completing internal mock-audits, refreshing record keeping systems and addressing historic issues, and
- Checking that workers are able to easily access information pertaining to their wages and annual leave and ensuring this aligns with their employment contract.
Ensuring these areas are compliant now will help put employers in a stronger position if scrutiny arises, and will help to mitigate and reduce the risk of potential penalties and workplace disruption.
Use this checklist to get ready:
1. Audit your current employment practices
Review your existing processes against current employment legislation, including:
- Contracts of employment and written statements of terms
- Pay practices, including National Minimum Wage compliance
- Working time records, holiday pay calculations and overtime arrangements
- Statutory payments and deductions from pay
- Policies and procedures relating to employee rights
Identify any gaps and create an action plan to address them.
2. Ensure employment documentation is up to date
Contracts, policies and employee handbooks should accurately reflect current legislation and how your business operates. Pay particular attention to:
- Changes to statutory employment rights
- Probation periods and dismissal processes
- Flexible working arrangements
- Family leave entitlements
- Disciplinary and grievance procedures
Outdated documentation can create unnecessary risk and weaken an employer’s position if challenged.
3. Strengthen record keeping
Good records will be essential in demonstrating compliance. Employers should ensure they maintain accurate records relating to:
- Hours worked
- Pay and deductions
- Holiday entitlement and holiday taken
- Employment status decisions
- Recruitment and onboarding processes
- Employee consultations and formal meetings
Records should be organised, accessible and retained in line with legal requirements.
4. Train managers and leaders
Many employment issues arise from inconsistent management practices. Managers should understand:
- Employee rights and employer responsibilities
- How to handle absence, performance and conduct issues fairly
- When to seek HR advice
- The importance of accurate documentation
A well-trained management team is one of the strongest safeguards against employment disputes.
5. Review your approach to compliance
Employers should move from a reactive approach to a proactive one. Regular HR health checks can help identify risks before they become complaints or investigations.
Consider introducing:
- Regular contract and policy reviews
- Annual compliance audits
- Manager training refreshers
- Clear HR processes and approval routes
6. Be ready to demonstrate good practice
If approached by the Fair Work Agency, employers should be able to show that they:
- Understand their legal obligations
- Have appropriate policies and procedures in place
- Act consistently and fairly
- Maintain reliable records
- Take corrective action when issues are identified
Preparation today can reduce risk tomorrow. Businesses that invest in robust HR foundations will be better positioned to respond confidently to increased employment rights enforcement.
How Hill HR can support you?
As your outsourced HR partner, we can help you manage your employment law compliance. We can provide advice on employment contracts, HR policies and ensuring your HR processes are compliant.
