What is the Fair Work Agency and what does it mean for your business?

Last month, the Fair Work Agency (FWA) was launched to enforce workers’ rights in the UK.

As part of the Employment Rights Act 2025, this new body brings together existing enforcement powers into a single agency – making it easier to investigate employers, recover unpaid wages, and take action against those who fail to comply with the law.

With FWA now active, small businesses will need to act fast to remain compliant and protect themselves from any penalties down the line.

What is the Fair Work Agency?

The Fair Work Agency (FWA) is the UK’s newly established single state enforcement body for employment rights. For employees, it’s a single point of contact to report bad behaviour or for support if they believe their rights haven’t been upheld.

The FWA brings together the responsibilities of four previous bodies into one executive agency under the Department for Business and Trade (DBT), including HMRC’s National Minimum Wage (NMW) team, Gangmasters and Labour Abuse Authority (GLAA), Employment Agency Standards Inspectorate (EASI), and the Office of the Director of Labour Market Enforcement (ODLME).

The purpose of FWA is to tackle widespread non-compliance with employment rights in the UK labour market.

In 2025, around 445,000 workers were paid less than the National Minimum Wage, while approximately 900,000 employees a year had their holiday pay withheld – collectively worth £2.1bn. The Government also named and shamed 389 UK employers for failing to pay the minimum wage to tens of thousands of workers.

Along with exercising these powers, this week, incoming FWA chair Matthew Taylor revealed that reducing the regulatory burden on business would also be a priority for the fledgling agency.

Whether that is indeed what it should be focusing on is another question. Representatives of trade unions, as well as industry experts, have already started to raise their concerns that this seems antithetical to the agency’s mandate. 

What powers do the Fair Work Agency have?

The FWA has significant authority to ensure businesses are compliant with new employment laws.

This includes workplace inspections, in which officers can enter a business’s premises to inspect records and gather evidence of compliance.

The FWA also has the power to investigate suspected breaches and request certain documents from employers (such as pay records and employment contracts).

Additionally, it can bring proceedings in an employment tribunal on an employee’s behalf, even if the worker doesn’t initiate the claim themselves. In this case, the FWA can offer legal advice and assistance to individuals involved in employment or trade union law cases. Businesses can also be publicly named and shamed if they fail to pay tribunal awards or ignore enforcement notices.

FWA inspection checklist: mandatory records to store

Businesses should keep accurate and up-to-date records to stay compliant with the FWA for at least six years. Here’s a breakdown of the type of records you’ll need to keep:

What fines and penalties can the Fair Work Agency levy?

The FWA has the power to penalise non-compliant businesses in several ways.

Most notably, if a business is found to be underpaying its staff (including the minimum wage, holiday pay, or statutory sick pay), the FWA can issue a notice for the correct amount to be paid within 28 days.

Employers can be fined 200% of the underpayment amount, with a minimum of £100 and a maximum of £20,000 per worker. However, if the penalty is paid within 14 days, it is often reduced by 50%.

In more serious cases, the FWA can issue Labour Market Enforcement Orders (LMOs) to address offences like not paying wages, holiday pay breaches, or violations of employment agency standards. LMOs can last up to two years, and failing to comply with them will result in fines or even imprisonment (up to 51 weeks in England and Wales).

Low awareness of the Fair Work Agency could cost SMEs

Despite the Employment Rights Act being introduced in late 2024, awareness of the FWA seems to be significantly low for small businesses.

According to a survey of 100 HR professionals working at SMEs recently conducted by BreatheHR, 36% said they’d never heard of the Fair Work Agency. Meanwhile, 50% reported that while they’ve heard about the new body, they don’t know a lot about it.

The lack of awareness around the FWA means that SMEs risk being fined, or even worse, committing a criminal offence, if their HR policies and documentation are found to be out of date or incorrect.

Wendy Read, HR Director at business support services company Omny Group, has called for better support for SMEs to properly understand and comply with new regulations by the FWA.

“The fact that over a third of SME employers haven’t even heard of the Fair Work Agency should be a wake-up call. We’re introducing a new regulatory body, yet the very businesses it will impact most are still in the dark.

“If the Fair Work Agency is going to succeed, it can’t just enforce, it has to enable. That means cutting through the noise, speaking the language of SMEs, and providing support that is genuinely accessible. Otherwise, we risk creating fear and confusion instead of progress.”

How businesses can prepare for the Fair Work Agency

With the FWA now up and running, SMEs will need more than just awareness. Instead, businesses should be proactive to ensure that all HR practices are fully aligned with the latest legislation.

This includes appointing a specific member of staff to monitor any important updates in employment law and flag any changes that the business needs to make to comply with them.

Additionally, businesses should ensure that all contracts and probation policies are updated to reflect new legislation, and that certain policies (such as holiday leave, sick leave and working hours) are in written format. Past policies should also be audited to ensure accuracy.

And finally, it’s essential to make sure that every employee is being paid at or above the National Minimum and/or Living Wage once deductions have been factored in. With FWA imposing a penalty of up to 200% of underpaid wages, this is something SMEs can’t afford to skip.

Bharat Siyani, VP of People and Culture at Breathe HR said: “Employers must be prepared. That means ensuring HR policies, contracts and records are up to date, reflect the latest employment legislation, and are easily accessible to the right people.

“Employers who hit all of these points will be in the best possible position to ensure they’re complying with new employment rights legislation and be prepared should the Fair Work Agency come knocking.”