The Fair Work Agency (FWA) - the UK's new single labour market enforcement body - has now published its delivery plan for 2026 to 2027. The plan sets out how the FWA intends to operate in its foundational year and gives employers a sense of where enforcement activity is heading.
What is the Fair Work Agency?
The FWA was established on 7 April 2026, bringing together the Employment Agency Standards Inspectorate, the Gangmasters and Labour Abuse Authority, and the Office of the Director of Labour Market Enforcement into a single, intelligence-led enforcement agency. It will also take over enforcement of national minimum wage (NMW) and gain new powers to enforce holiday pay and statutory sick pay. As such, the FWA has been busy recruiting new management teams, to support its ability to take on all these powers.
The FWA’s stated purpose is threefold:
- to help workers understand and access their rights,
- to support compliant employers, and
- to take "tough action against rogue employers who exploit workers or undercut legitimate business".
National minimum wage: enforcement is transferring
The FWA already has statutory responsibility for national minimum wage (NMW) enforcement, although HMRC is continuing to deliver this function under contract until full transfer in April 2027. At that point, approximately 500 HMRC employees will transfer to the FWA, and the agency will take direct operational control. The delivery plan commits the FWA to ensuring an effective transfer and integration of the NMW staff, including securing real-time access to relevant HMRC systems and transitioning business processes, guidance and supporting products.
For employers, this consolidation is significant. A single enforcement body with integrated intelligence, data-scraping capabilities and a unified case management system could well be more effective at identifying non-compliance than the previous regime. The FWA has also signalled its intention to deepen sector-level understanding in high-risk sectors such as social care and construction, suggesting that employers in those industries should expect closer scrutiny. In practice, retail and hospitality can also be expect to be under the spotlight.
In our experience, minimum wage breaches by large employers tend to happen because employers have been caught out by technical rules (or HMRC’s interpretation of those rules), rather than because they are deliberately trying to underpay anybody. In some cases, the “compliant” outcome is unexpected or even arguably unfair (for example, when it restricts a lower earner’s ability to take part in salary sacrifice benefit schemes). It remains to be seen how the FWA will support those employers who are trying to be compliant and whether it will also advocate for, or support, underlying changes in legislation or interpretation.
Holiday pay: enforcement on the horizon
The FWA has confirmed it intends to begin holiday pay enforcement in April 2027. The delivery plan confirms that the FWA is preparing to communicate a new enforcement approach, along with guidance and tools to support holiday pay compliance. To shape that approach, the government has also launched a consultation on holiday pay compliance and enforcement which closes on 22 September 2026.
The consultation envisages the FWA adopting a supportive approach, with guidance and opportunities to correct underpayments before moving to punitive enforcement action.
In terms of enforcement action, the FWA has considerable powers, including to demand underpayments of holiday pay and impose a penalty of 200% of the underpayment, capped at £20,000 per underpaid individual (halved to 100% if paid within 14 days). The consultation also proposes that employers will also be “named and shamed” for underpayment of holiday pay, in line with the current regime for employers who breach minimum wage legislation.
Employers who have not audited their holiday pay calculations (particularly for workers with variable hours, commission earners or those receiving regular overtime) should treat this as an early warning. Employers who may have misclassified workers or employees as ‘self-employed’ should also consider reviewing their practices sooner rather than later.
Among the practical tools the FWA has suggested it will develop in year one is an online holiday pay calculator and an online payslip explainer, both designed to make compliance simpler for employers and more transparent for workers. However, we do not anticipate that any such calculator will be able to address the full complexity of holiday rules and so will not be a panacea for the remaining uncertainty regarding holiday pay.
New powers and an intelligence-led approach
The FWA has been granted new powers from day one, including powers under the Fraud Act. The delivery plan notes that the agency is working with legal and enforcement partners to understand the evidential standards for these powers and to build a shared view of how they can be deployed most effectively.
More broadly, the FWA's approach is intelligence-led. It plans to develop open-source data-scraping capability, procure a unified case management system with integrated AI, and maximise access to data and management information across the organisation. The agency also intends to publish a three-year Enforcement Strategy in April 2027, which will set out refined, outcome-focused metrics for the period 2027 to 2030.
The five "step changes" the FWA has identified - identity, impact, intelligence, innovation and influence - signal an agency that wants to be visible, data-driven, and proactive rather than purely reactive.
What should employers do now?
The FWA's delivery plan makes clear that enforcement is intended to become more joined-up, better resourced and more technologically capable. Even in this transitional year, operational performance targets remain in place and new powers are being tested. Employers should consider the following steps:
- Audit NMW compliance. With enforcement transferring fully to the FWA in April 2027 and sector-specific targeting on the agenda, now is the time to check that pay practices - including salary sacrifice arrangements, deductions, and the treatment of time off in lieu - are compliant.
- Review holiday pay calculations and employment status. State enforcement of holiday pay obligations is imminent. Employers should review how they calculate holiday pay, particularly for workers with irregular hours, overtime, commission or other variable payments. Audit the employment status of freelance workers.
- Check record-keeping. Recent changes to the law mean that employers are now required to keep adequate records of holiday entitlement, holiday pay and payments in lieu for six years and that failure to do so is a criminal offence. With a new enforcement body specifically tasked with this area, the risk of non-compliance being identified (and penalised) is increasing.
- Watch for further guidance. The FWA is developing new guidance, digital tools and compliance resources throughout 2026–2027. Employers should monitor gov.uk for updates, particularly the promised holiday pay calculator and the three-year Enforcement Strategy due in April 2027.
- Make your views known. We’ll be responding to the holiday pay enforcement consultation and encourage you to do the same (or let us have your thoughts).
In summary, we can expect a single enforcement agency with broader powers, better data and a mandate to make its presence felt. We’re happy to help you get ready for the new regime, so please get in touch if you would like our support.
