Situation before reforms under the Employment Rights Act 2025
Enforcement of the statutory rules relating to minimum wage, holiday pay, sick pay, agency workers, licensing standards for gangmasters and parts of the Modern Slavery Act 2015, was undertaken by a mixture of individuals bringing claims and different state enforcement bodies (such as HMRC, the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority).
So what’s changed/changing and when?
A new Fair Work Agency (FWA) was established on 7 April 2026 which amalgamates various of the above enforcement bodies into a new single enforcement body with extended reach, and introduces state enforcement of holiday entitlements and pay for the first time.
The FWA has wide-ranging powers aimed at strengthening enforcement of the relevant workplace rights. Briefly summarised, it will investigate and take action against businesses that do not comply with the law.
The FWA’s powers include being able to inspect workplaces and to require employers to produce evidence to demonstrate compliance with relevant employment laws, as well as the power to issue Notices of Underpayment and penalties.
Notably, the FWA has the power to bring tribunal claims on behalf of workers – even if the worker chooses not to. The FWA can also provide legal assistance for employment-related proceedings, and recover enforcement costs from employers against whom enforcement action has been taken for non-compliance.
According to the Government’s Strategic Steer to the Fair Work Agency for the Transitional Year of Operation, during 2026/27, minimum wage enforcement will continue to be delivered by HMRC under a contracting arrangement with the FWA. This will ensure continuity of service while the FWA prepares for the full transfer of minimum wage functions in April 2027.
The position as regards timing of the FWA enforcing rules relating to statutory sick pay is currently unclear.
The Government’s Strategic Steer to the Fair Work Agency for the Transitional Year of Operation indicates that the FWA will commence holiday pay enforcement in 2027.
From 6 April 2026, a new holiday record keeping obligation came into force under the Employment Rights Act, which will be enforceable by the FWA. The new requirement under the Act is for employers to keep for six years records to demonstrate their compliance with workers’ rights under the Working Time Regulations to holiday, holiday pay and pay in lieu of outstanding holiday on termination.
The Act provides that records may be created, maintained and kept in such manner and format as the employer reasonably thinks fit; currently, there is no further detail. Failure to comply will amount to an offence (punishable by a fine).
What you need to do
- Review your policies and practices on minimum wage, sick pay and holidays. Key personnel including managers need to be aware that risks of non-compliance with the rules relating to these aspects of employment law are likely to increase.
- Ensure good record-keeping in relation to national minimum wage, sick pay and holidays.
- Reduce the risk of complaints progressing to the FWA by taking active steps to resolve grievances internally and encouraging staff feedback. Ensure your grievance process is regularly reviewed and that managers follow it. You could consider setting up surveys for staff feedback.
How we can help
The introduction of the FWA increases the likelihood of inspection, enforcement and penalties where employers cannot evidence compliance. Employers will need stronger policies, clearer records and better internal controls.
Our HR and legal experts can support you with:
- Compliance and enforcement readiness reviews: Reviewing policies and practices relating to minimum wage, sick pay and holiday pay to identify gaps and potential areas of risk.
- Record-keeping and evidence frameworks: Helping you put clear systems in place to demonstrate compliance with record-keeping obligations, including in relation to holiday and pay.
- Manager awareness and accountability: Helping managers understand their role in compliance, record-keeping and responding to enforcement enquiries.
- Internal issue resolution and grievance handling: Reviewing grievance processes and supporting early resolution to reduce escalation to the FWA.
- Inspection and investigation support: Advising on how to respond to requests for information, inspections or enforcement action from the FWA.
Additional support and resources
Stay informed and prepared by signing up to our email updates, where we’ll share confirmed changes and key dates as they come into force. Members can access up-to-date guidance, template policies and letters in our HR & Legal Resources section, and our expert team is on hand to answer questions or provide practical support, whether or not you are a Make UK member. You can also contact our ERA enquiry line.
To see the planned changes at a glance, download our free Employment Rights Act planner for clear timelines and practical next steps. If you’d like a deeper insight, ask about our Audit and Impact Assessment - a structured review to help you understand your levels of risk, prioritise actions and plan with confidence.