What is the current situation?
Enforcement of the rules relating to minimum wage, holiday pay, statutory sick pay, agency workers, licensing standards for gangmasters and parts of the Modern Slavery Act 2015, is undertaken currently 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 changing and when?
A new Fair Work Agency (FWA) will be introduced amalgamating the above various enforcement bodies into a new single enforcement body with extended reach. The FWA will also introduce the state enforcement of holiday pay for the first time.
The FWA will have wide-ranging powers aimed at strengthening enforcement of certain workplace rights. Briefly summarised, it will investigate and take action against businesses that do not comply with the law.
The FWA’s powers will 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 in relation to the national minimum wage and holiday pay.
Notably, the FWA will be able to bring tribunal claims on behalf of workers – even if the worker chooses not to. The FWA will also have the power to provide legal assistance for employment-related proceedings, and to recover enforcement costs from employers against whom enforcement action has been taken for non-compliance.
The FWA will also be able to enforce failure to comply with a new holiday record keeping obligation on employers to be introduced under the Employment Rights Act. The requirement is to keep for six years records to demonstrate 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). This new holiday record keeping obligation will come into force from 6 April 2026. The FWA is expected to be established on 7 April 2026, but it is unclear when its enforcement powers will come into force.
What you need to do
The timing of some of these actions will depend on when the detail of the new laws is finalised and when the changes come into force. However, you can start to plan now:
- Review your policies and practices on minimum wage, sick pay and holidays.
- Ensure good record-keeping in relation to national minimum wage, sick pay and holidays. Key personnel including managers need to be aware that, once the FWA is fully operational, risks of non-compliance with the rules relating to these aspects of employment law are likely to increase.
- 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 Fair Work Agency 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 Fair Work Agency.
- Inspection and investigation support: Advising on how to respond to requests for information, inspections or enforcement action from the Fair Work Agency.
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.