The Fair Work Agency (FWA) was established on 7 April 2026 as an executive agency of the Department for Business and Trade. The FWA is a new central enforcement body for key employment rights. It will coordinate and, in time, consolidate certain functions currently exercised by multiple agencies. Its stated aims are to improve compliance, make enforcement more consistent, and reduce the burden on compliant employers by targeting persistent offenders.
The FWA’s remit is expected to cover core statutory rights, including holiday pay and working time, national minimum wage compliance, unlawful deductions from wages, and aspects of agency work and labour market standards. It is expected to work closely with HMRC, the HSE, and other regulators, and to share intelligence.
Indicative powers include:
- Requiring information and documents from employers and payroll/HR providers.
- Inspecting premises and interviewing personnel.
- Issuing compliance and enforcement notices.
- Levying civil penalties for breaches.
- Requiring payment of arrears to affected workers.
- Referring serious or persistent breaches for prosecution where criminal offences are engaged.
- Publishing the names of non‑compliant employers in serious cases.
In practical terms the FWA will conduct targeted and risk‑based inspections, initiate thematic audits in sectors with higher non‑compliance, respond to worker complaints, and run campaigns on priority issues.
Holiday records
Holiday pay and record‑keeping are expected to be early priorities, given historic underpayments and calculation errors.
New obligations for employers were introduced through regulation 16B of the Working Time Regulations 1998 and by section 35 of the Employment Rights Act 2025. These obligations require employers to maintain adequate records for six years showing compliance with various statutory holiday provisions.
Employers must record:
- Worker status and working time arrangements: including whether the individual is full‑time, part‑time, variable hours, zero‑hours, casual, or irregular hours.
- Working time records: actual hours worked per day and week, including overtime and any time off in lieu arrangements.
- Holiday entitlement: the annual statutory and any contractual entitlement for each worker, including how entitlement is pro‑rated for part‑year or irregular hours workers.
- Holiday accrual and carry‑over: accrual calculations over the leave year, records of any carry‑over under sickness, family leave, or other permitted categories, and the legal basis for carry‑over.
- Holiday taken: dates of leave taken, the leave year to which it relates, and remaining balance.
- Holiday pay calculations: the method used (e.g. normal remuneration averaged over the relevant reference period) and the underlying data set (e.g. 52‑week average pay data, including commission, overtime and allowances where required).
- Payroll records: payslips and pay runs showing holiday pay items separately where possible, and any adjustments or arrears paid.
- Communications and policies: holiday policy, any collective agreements, and communications notifying workers of entitlement, use‑it‑or‑lose‑it warnings, and carry‑over rights.
Employers must keep records for at least 6 years from the date they were made.
How to keep records
Employers have flexibility in how they create and maintain these records. Records can be kept on an online management system or manually via a spreadsheet. Employers should check to ensure any existing system records all relevant information required for future inspections.
Data protection
Employers must keep records in line with UK GDPR.
Enforcement by the Fair Work Agency
The FWA is expected to use intelligence‑led inspections and to request information from employers where risk indicators are present or complaints are made. Employers may be required to produce records within prescribed timescales and to facilitate site visits and interviews.
Where breaches are found, the FWA may issue compliance notices requiring corrective action within a set period, impose civil penalties, and require employers to calculate and pay arrears to affected workers. In serious or persistent cases, employers may be named publicly. Certain conduct may give rise to criminal exposure where offences are engaged, for example obstruction of inspectors or deliberate falsification of records.
Non‑compliance also increases the risk of Employment Tribunal claims for unlawful deductions or breach of the Working Time Regulations, with associated legal costs, interest on arrears, and management time. Reputational risk is significant, particularly if non‑compliance is publicised.
What steps should an employer take now to comply
Practical steps to take include:
- Audit policies and holiday entitlement and holiday pay calculations, particularly where overtime, commission, irregular hours and part-year workers are affected
- Make sure holiday records are complete, accurate and retained for at least six years
- Take early legal advice if practices have evolved informally or if you suspect historic underpayments or record gaps
Taking steps now will allow employers to get ahead of any issues.
How we can help
Our employment law and HR teams can:
- Review and update your contracts, policies and procedures
- Train your managers to ensure that day-to-day practice around holidays is in line with your policy
- Audit your policies and procedures to ensure that you will comply with any future inspections
To find out how we can support your business, please get in touch.
