Fair Work Agency: Its New Powers Explained

The Fair Work Agency (FWA) has published its first delivery plan, signalling a more proactive approach to employment rights enforcement across the UK. The announcement follows the first FWA-era National Minimum Wage naming round, in which 658 employers were identified for underpaying workers.

For employers, the message is clear: payroll, working time and employment procedures should be reviewed now, not after an inspection or enforcement notice.

For employees, the FWA provides another route for addressing unpaid National Minimum Wage, unpaid Employment Tribunal awards and unpaid Acas settlements.

This guide explains what the FWA is, its current powers and what businesses and workers need to know. If you need advice from employment law solicitors UK or are considering a claim with unfair dismissal solicitors UK, early legal advice can help protect your position.

What is the Fair Work Agency?

The Fair Work Agency is the UK’s single labour market enforcement body. It was established on 7 April 2026 under the Employment Rights Act 2025.

It brings together functions previously carried out by:

• The Employment Agency Standards Inspectorate;
• The Gangmasters and Labour Abuse Authority; and
• The Office of the Director of Labour Market Enforcement.

The intention is to replace fragmented enforcement with a more coordinated system. The FWA can work with other public bodies, share relevant information and use intelligence to identify employers, sectors and practices presenting a higher risk to workers.

Its remit includes National Minimum Wage enforcement, employment agency standards, gangmasters licensing, serious labour exploitation and financial penalties for employers who do not pay certain Tribunal awards or Acas settlements.

What powers does the FWA currently have?

The FWA’s current responsibilities include investigating and penalising National Minimum Wage breaches. However, there is an important transitional arrangement.

Although the FWA has statutory responsibility for National Minimum Wage enforcement, HM Revenue and Customs (HMRC) continues to carry out that enforcement under contract until April 2027. Around 500 HMRC specialists and associated systems are expected to transfer to the FWA from April 2027.

The FWA can also take action where an employer fails to pay:

• An Employment Tribunal financial award; or
• An Acas COT3 settlement agreement.

It can issue warning notices and financial penalty notices. It does not, however, act as a bailiff and does not itself recover the unpaid award. A claimant may need to use separate court enforcement procedures to recover the money.

The FWA also has wider investigation powers. Depending on the circumstances, officers may:

• Request information or documents;
• Interview workers or business representatives;
• Inspect workplace and payroll records;
• Visit business premises;
• Carry out inspections without advance notice; and
• Investigate serious labour exploitation or criminal offences.

Obstructing an officer or providing false documentation can itself create serious legal risks.

The 50% penalty for unpaid Tribunal awards and Acas settlements

The FWA’s financial penalty regime is particularly relevant to employers that ignore an Employment Tribunal judgment or fail to honour an Acas settlement.

The penalty is 50% of the outstanding award or settlement, subject to:

• A minimum penalty of £100; and
• A maximum penalty of £5,000.

The penalty is paid to the government. It does not replace the original debt, and it does not increase the employee’s compensation. The employer must still pay the full outstanding award or settlement amount to the worker.

What counts as an outstanding award?

An outstanding award is the unpaid financial amount due under an Employment Tribunal judgment. This may include compensation, wages, holiday pay or another financial sum ordered by the Tribunal.

For an Acas settlement, the outstanding amount is the sum the employer agreed to pay under the COT3 agreement but did not pay by the agreed date.

A worker can apply to the FWA if:

• At least 42 days have passed since an Employment Tribunal judgment was sent to the parties and the award remains unpaid; or
• The employer has failed to pay an Acas COT3 settlement by the agreed payment date.

The worker then completes the relevant FWA application. If the FWA decides to take action, it sends the employer a warning notice. The employer has 28 days to respond. If the employer does not respond or still fails to pay, the FWA may issue a financial penalty notice.

Employers should not assume that a penalty prevents separate court enforcement. An employee may use court procedures to recover the original award while the FWA process addresses the employer’s failure to pay.

What does “intelligence-led, proactive enforcement” mean?

The FWA’s first delivery plan is built around three broad themes: delivering its current responsibilities, building the new organisation and innovating its approach.

Its stated intention to become intelligence-led and proactive means enforcement will not depend solely on individual complaints. In practice, this may involve:

• Unannounced inspections: Officers can visit workplaces without prior notice where appropriate, particularly if advance warning could undermine the investigation.
• Sector targeting: The FWA will examine higher-risk sectors and supply chains, including areas such as social care, construction, agency work, hospitality and agriculture.
• Data-sharing: Information may be shared with relevant enforcement partners where there is a lawful basis and the information is needed for enforcement purposes.
• Risk-based investigations: Employers may be assessed by reference to previous breaches, the number of workers affected, the seriousness of the conduct and the likelihood of continued non-compliance.
• Greater focus on repeat offenders: A business that has previously received advice, a warning or an enforcement notice may face a lower tolerance for repeated failures.

The delivery plan also refers to new digital tools, including a payslip explainer, a holiday pay calculator and a unified case management system. These are intended to make compliance easier while improving the FWA’s ability to identify patterns of non-compliance.

The 658-employer naming round

On 3 September 2026, the government published a naming round involving 658 employers that had failed to pay the National Minimum Wage.

The announcement stated that approximately £4 million was repaid to more than 27,000 workers, with penalties totalling around £7 million.

Naming is separate from the FWA penalty for an unpaid Tribunal award. The National Minimum Wage naming process generally follows a formal Notice of Underpayment. Employers may be considered for naming where the relevant arrears meet the applicable threshold, subject to limited exceptional circumstances.

An employer under consideration normally receives a notification and can make written representations. The deadline is short, and representations need supporting evidence. The government guidance makes clear that arguments such as relying on an external adviser, an accidental breach or a change of ownership may not, by themselves, prevent publication.

Being named can create reputational risks beyond the financial penalty. Customers, employees, recruitment candidates, lenders, investors and commercial partners may all take an interest in public employment-law enforcement records.

What is changing from April 2027?

The FWA is preparing to take direct operational control of National Minimum Wage enforcement from April 2027.

The government also expects the FWA to begin enforcing statutory holiday pay and statutory sick pay as its remit expands. Holiday pay enforcement is not expected to begin before April 2027.

A government consultation on holiday pay compliance and enforcement closes on 22 September 2026. Its proposals include a stepped approach, beginning with guidance and opportunities to correct underpayments, followed by stronger enforcement where an employer does not remedy the problem.

Employers should not wait for the final framework before checking:

• Whether holiday pay is calculated using the correct components of pay;
• Whether workers are receiving their full statutory entitlement;
• Whether sick pay records reflect the current rules; and
• Whether payroll and HR systems are applying changes consistently.

Practical steps for employers

Employers should consider taking the following steps:

1. Audit National Minimum Wage compliance. Check each worker’s age, apprentice status, pay reference period and total working time.
2. Review deductions. Salary sacrifice arrangements, uniform costs, accommodation charges, wage advances and other deductions can affect whether the minimum wage has been paid.
3. Check working time. Training, opening and closing duties, travel between work locations, meetings and unpaid preparation time may need to be included.
4. Keep accurate records. Retain contracts, rotas, timesheets, payslips, payroll data, holiday records and records of deductions.
5. Review agency arrangements. Ensure recruitment agencies and labour providers are properly licensed where required and that responsibilities are clearly documented.
6. Act quickly on Tribunal awards and COT3 settlements. Pay by the specified date and retain evidence of payment.
7. Prepare an inspection protocol. Staff should know how to verify an officer’s identity, preserve records and direct legal requests to the appropriate manager or adviser.
8. Obtain advice before responding. A rushed or inaccurate response can create further problems, particularly where an investigation may involve multiple employment-law issues.

Employees who believe they have been underpaid or whose employer has failed to honour a Tribunal judgment should preserve payslips, contracts, correspondence, the judgment or COT3 and proof of non-payment.

Frequently asked questions

Can the FWA enforce an unfair dismissal decision?

The FWA can penalise an employer for failing to pay an Employment Tribunal award after the statutory conditions are met. It does not decide whether an unfair dismissal occurred. That is a matter for the Employment Tribunal.

Does the FWA collect unpaid compensation?

No. The FWA penalty scheme may result in a financial penalty against the employer, but the penalty is paid to the government. Separate court enforcement may be required to recover the original award.

Can a small business be named?

Yes. Size alone does not guarantee exemption from naming. Employers should respond promptly to any notification and obtain advice if they believe exceptional circumstances apply.

What should an employer do after receiving an FWA notice?

Do not ignore it. Check the deadline, preserve all relevant documents, establish what is alleged and consider taking advice from employment law solicitors before responding.

Final thoughts

The Fair Work Agency’s first delivery plan marks a shift towards coordinated, data-led and proactive enforcement. The 658-employer naming round shows that underpayment can result in both financial and reputational consequences.

Employers should audit pay, working time, deductions, holiday pay and record-keeping before an issue escalates. Workers should also act promptly if an employer fails to pay wages, a Tribunal award or an Acas settlement.

Read our guide on Employment Discrimination: What UK Employees Need to Know for related employment-rights information.

Need expert advice? Contact our Employment Law Solicitors or call 0208 154 3131 for advice on workplace disputes, unpaid awards, disciplinary matters and unfair dismissal claims.