Fair Work Agency: The government can now inspect your business without a complaint

If you employ anyone, even one person, you need to know about a new enforcement body called the Fair Work Agency, which went live on 7 April 2026.

It has the power to inspect your premises and check your records without waiting for an employee to raise a concern. If it finds problems, it can fine you up to 200% of any underpayment. 

Until this week, employment law enforcement was split across three separate bodies that rarely talked to each other. If you were paying staff roughly right and nobody complained, the chance of being investigated was close to zero. That has changed. 

Rona Loweth, who manages the McKinney HR support service, said:

"Employers who already comply with employment law will not be adversely affected by the establishment of the FWA. It is good practice to ensure you keep up to date with changes in employment law and regularly review your compliance.

"Small businesses that employ lower-paid, part-time or irregular hour workers should take extra care to ensure compliance with holiday pay, statutory sick pay and minimum wage in particular."

What is the Fair Work Agency (FWA)? 

The FWA is a single government agency that replaces HMRC's National Minimum Wage unit, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority. It sits within the Department for Business and Trade, created under the Employment Rights Act 2025. It is chaired by Matthew Taylor, with Lisa Pinney as CEO. 

A nine-member advisory board was appointed on 24 March, with equal representation from independent, employer and trade union backgrounds. Employment Rights Minister Kate Dearden MP oversees the agency. 

The big shift

The FWA can open investigations based on its own analysis and sector trends. It does not need a complaint from a worker to start looking at your business. This is the single biggest change from the old system. 

Its inspectors can enter your premises, examine your records, interview your workers and request evidence of compliance. If they find underpayment, they can issue a notice requiring you to pay what's owed within 28 days, alongside a penalty. 

The agency can also bring Employment Tribunal claims on behalf of workers, even if the worker decides not to pursue it themselves. And it can publicly name employers who breach the rules.

For a micro business, the reputational risk alone is serious. 

HR consultant, Farzana Parkar, advised:

"As small businesses typically lack a dedicated HR resource, they may find themselves under greater scrutiny. The key areas to get right are minimum wage compliance, holiday pay calculations, and written contracts.

"Getting your house in order now — before issues arise — is far more cost-effective than dealing with an investigation later."

Three things most micro employers get wrong 

• Holiday pay for irregular-hours workers 

If any of your staff work variable hours, you need to calculate their holiday pay using a 52-week reference period that reflects what they actually earned.

If someone regularly works overtime in busy months, that overtime should be reflected in their holiday pay. Many small employers still use basic pay only. That's wrong, and it's one of the areas the FWA will scrutinise. 

• SSP records 

From 6 April, statutory sick pay is payable from day one of sickness for all employees, regardless of earnings. The three-day waiting period and the lower earnings limit are both gone. SSP is now calculated at 80% of the employee's average weekly earnings, or the flat rate of £123.25 per week, whichever is lower.

In practice, that means lower-paid workers who previously had no SSP entitlement at all now qualify, but may receive less than the full flat rate. 

•  National Minimum Wage compliance 

The most common NMW breaches are not deliberate. They're technical errors: failing to pay for training time, not counting travel between work sites, or making deductions for uniforms or equipment that take effective pay below the minimum. 

HMRC's most recent naming round listed hundreds of employers for minimum wage breaches, and most were mistakes, not malice.  

The new record-keeping duty 

From 6 April 2026, you must keep holiday and holiday pay records for six years. Failure to do so is a criminal offence, punishable by a fine. This applies even after an employee has left. 

Your records must show: each worker's statutory and contractual leave entitlement, the leave they've taken, how you calculated their holiday pay (including treatment of overtime and variable pay), any carry-over, and payments in lieu on termination. 

The Employment Rights Act says records can be kept in whatever manner and format you reasonably think fit.  

A common piece of advice among Enterprise Nation HR advisers is proactive compliance.

Belinda Mangena, HR consultant and SME business adviser, echoes this sentiment:

"Non-compliance risks significant penalties, cost recovery, and reputational damage. I advise businesses to audit contracts and handbooks to reflect day-one rights for sick pay and parental leave in line with the Employment Rights Act 2025.

"It is also essential to verify payroll systems for new SSP and National Living Wage rates, and ensure meticulous record-keeping to remain 'audit-ready'.

"Proactive compliance is now a strategic imperative."

What the penalties look like 

The FWA can issue penalties of 200% of any underpayment, capped at £20,000 per worker. That drops to 100% if paid within 14 days. It can also publicly name your business. 

Obstructing an investigation or providing false information carries unlimited fines and up to 51 weeks in prison. 

Not everything is enforceable on day one 

The FWA took over National Minimum Wage enforcement from HMRC on 7 April. Agency worker protections and gangmaster licensing also transferred immediately. 

Holiday pay and SSP enforcement powers are being phased in. The exact date those powers become active has not yet been confirmed.  

But the six-year record-keeping duty is live from 6 April regardless, and those records will be retrospectively examinable once the enforcement powers switch on. 

What to do now 

• Run a minimum wage check for every worker, factoring in all working time and deductions (including unpaid training, travel between sites, and uniforms or equipment) 

• Review how you calculate holiday pay for anyone on variable hours, overtime or commission 

• Start recording SSP payments and absences from this month, including for workers who previously fell below the earnings threshold

• Set up a simple, retrievable system for holiday and holiday pay records and commit to keeping them for six years 

• Update employment contracts and sickness policies to reflect the removal of SSP waiting days and the lower earnings limit 

Where to get free help 

Acas has published free guidance and webinars on the Employment Rights Act changes.

The government's dedicated employment changes website has timelines and action points for each measure. The FWA itself will offer guidance and support from 7 April, not just enforcement. 

Most of this is not complicated. It's about getting the basics written down, stored properly and kept up to date. The FWA won't start with holiday pay enforcement, but when it does, it will be looking backwards. The records you keep from this month are the ones that matter.

People also read

• March 2026 HR and employment law update

• April 2026 employment law changes: A quick guide

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