What is the Fair Work Agency?
The FWA replaces the fragmented enforcement landscape of the past. It merges the functions of HMRC’s NMW Enforcement, the Employment Agency Standards (EAS) Inspectorate, and the Gangmasters and Labour Abuse Authority (GLAA).
- The Mission: To provide a “one-stop shop” for workers to enforce their rights and for the state to proactively audit business compliance.
- The Scope: Its remit covers National Minimum Wage (NMW), Statutory Sick Pay (SSP), Holiday Pay, Paternity/Parental Leave, and the regulation of umbrella companies.
New Powers: From “Reactive” to “Proactive”
Unlike the previous system, which often relied on disgruntled employees filing a claim at a tribunal, the FWA is designed to be proactive.
Investigative Powers
FWA inspectors have the legal right to enter business premises, interview staff, and demand access to payroll records without a court order if they suspect a breach of “Fair Work” standards.
Civil Penalties & Fines
The FWA can issue “Notices of Underpayment.” If a business is found to have underpaid NMW or SSP:
- They must pay 100% of the arrears to the worker.
- They face a financial penalty of up to 200% of the arrears (capped at £20,000 per worker).
The “Naming and Shaming” List
The FWA will maintain a public register of employers who have failed to comply with enforcement notices. For a business, the reputational damage often outweighs the financial fine.
Comparison: The Enforcement Shift
| Feature | Pre-2026 (Fragmented) | Post-April 2026 (FWA) |
| Enforcement Style | Mostly complaint-led (Tribunals) | Proactive Audits (State-led) |
| Holiday Pay | Self-policed (Worker must sue) | Publicly enforced by FWA |
| SSP Enforcement | Limited HMRC oversight | Active inspection of Day-1 records |
| Umbrella Companies | Largely unregulated | Directly licensed and audited |
| Max Penalty | Varies by breach | Up to 200% of arrears |
Impact on Payroll Audits
For Hewitt’s Payroll, “compliance” now means being “audit-ready” at all times. The FWA will focus on three specific areas during a payroll audit:
- The 80% SSP Rule: With the removal of the Lower Earnings Limit, the FWA will check that low-earners are receiving exactly the lower of 80% AWE or the flat rate.
- The 6-Year Holiday Trail: Inspectors will ask to see the calculation logic for holiday pay (including overtime and commission) going back six years.
- Day-One Rights: They will look for patterns of “probationary dismissals” that coincide with requests for Paternity or Parental leave.
Compliance Warning: The FWA has the power to hold directors personally liable in cases of repeated, deliberate non-compliance, particularly concerning the misclassification of workers as “self-employed” to avoid SSP and NMW.
Survival Guide for Businesses
To prepare for the first wave of FWA inspections in late 2026, we recommend the following:
- Conduct a “Shadow Audit”: Review your last 12 months of payroll data against the 2026 SSP and Holiday Pay rules.
- Centralize Records: Ensure that HR “leave” data and Payroll “pay” data are stored together. An FWA inspector will not accept “it’s in a different system” as an excuse for missing records.
- Review Umbrella Partners: If you use third-party labor providers, ensure they are FWA-compliant. Under the new “Joint and Several Liability” rules, the end-user of the labor can sometimes be held liable for the supplier’s payroll errors.