The Bellevue Brief Podcasts – Season 2 (ERA 2025) Episode 6 : Fair Work Agency

The Employment Rights Act 2025 (ERA) introduces a number of significant reforms for employers, HR leaders and businesses. Including the creation of a new enforcement body: the Fair Work Agency (FWA). In this episode of The Bellevue Brief, Bellevue Law’s Head of Legal Practice Susanne Hartigan and Associate Anjali Malik discuss what the agency is, how it will operate, and the practical steps employers should be taking now.

What Is the Fair Work Agency?

The Fair Work Agency is a new single state enforcement body designed to consolidate existing labour market enforcement functions. Although the Act itself does not name the agency, the government first referred to it in its October 2024 policy paper Next Steps to Make Work Pay.

The FWA will bring together several existing bodies, including:

• HMRC’s National Minimum Wage Unit
• The Employment Agency Standards Inspectorate
• The Gangmasters and Labour Abuse Authority

It will also replace the role of the Director of Labour Market Enforcement. The Secretary of State will be required to establish an advisory board based on a social partnership model, with representation from business, trade unions, and independent experts.

The FWA will sit as an executive agency of the Department for Business and Trade and will be chaired by Matthew Taylor, known for leading the 2017 Taylor Review on modern working practices.

What Will the FWA Enforce?

The agency will inherit and bring under one roof many existing powers from current enforcement bodies, as well as holding some new powers granted under the ERA. Its remit will include:

1. Workplace Inspections and Evidence Requests

 FWA officers appointed by the Secretary of State will have the authority to enter business premises (except private dwellings) without a warrant and require employers to produce documents or evidence demonstrating compliance.

2. Bringing Cases on Workers’ Behalf

The agency will be able to bring Employment Tribunal claims on behalf of workers, likely in cases involving large groups of affected employees.

3. Underpayment Notices and Penalties

If underpayments are identified, the FWA can require employers to:

• Pay workers what they are owed
• Pay financial penalties to the government
• Cover the cost of enforcement action

Penalties may reach 200% of the underpayment, capped at £20,000 per worker, a significant potential exposure for any employers with systemic miscalculations.

New Areas of State Enforcement: Holiday Pay and SSP

One of the most substantial shifts is that the FWA will be responsible for enforcing statutory sick pay (SSP) and holiday pay.

Statutory Sick Pay

The agency will be able to determine entitlement and require employers to provide statements and information. This differs from the current system, where HMRC is responsible only after an employee raises a dispute.

In addition, from 6 April 2026, SSP will:

• Become payable from day one, removing the three‑day waiting period
• No longer require employees to meet a lower earnings limit

Holiday Pay

This marks a potentially major change for employers. The FWA will enforce compliance with statutory holiday pay and rolled‑up holiday pay requirements.

A new obligation introduced during the Bill’s passage means employers must also keep records relating to annual leave and pay for six years. Failure to do so may become a criminal offence, with the requirement due to come into force in 2026.

When Will the FWA Become Operational?

The agency is expected to be formally established in April 2026. What remains unclear is when it will become fully operational and able to exercise its enforcement powers. Much depends on resourcing and funding, an issue commentators have repeatedly highlighted due to budget and staffing cuts affecting current enforcement bodies.

What Should Employers and HR Leaders Do Now?

While details are still emerging, there are several practical steps employers can take now to prepare:

1. Review Holiday Pay Calculations

Holiday pay remains one of the most complex areas of employment law especially for workers with:

• Irregular hours
• Variable pay
• Rolled‑up holiday pay arrangements

Employers should review calculations and processes now, before holiday pay comes under state scrutiny.

2. Strengthen Record‑Keeping

Accurate, accessible and detailed records will be crucial and documentation should be retained for six years.

3. Brief HR and Payroll Teams

Ensure teams understand:

• The upcoming enforcement environment
• The risks associated with non‑compliance
• Changes to SSP and holiday pay
• The potential scale of financial penalties

4. Monitor Future Announcements

As details around the FWA’s scope, powers and funding emerge, employers should stay informed and be ready to adapt.

Final Thoughts

Although the Fair Work Agency represents a significant shift in the landscape of labour market enforcement, it remains to be seen how effective the agency will be in practice. Its ultimate impact will depend heavily on resourcing and funding areas where the government has faced challenges in recent years.

We’ll continue monitoring developments closely and will provide updates as more is known about the FWA’s operational readiness, scope and approach.

Employers should be reviewing policies, training, risk assessments and investigation frameworks now to ensure they are ahead of the curve as these reforms come into force.