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The Fair Work Agency: What Employers Need to Know
You may have started to hear more about the Fair Work Agency in recent months. While the detail is still developing, it’s an important change to our employment landscape and one that HR teams and Employers should be aware of. There is increasing discussion about the Employment Rights Bill and its impact.
At Limelite, we’re often asked what this new body is, what it will do, and whether it will change employers’ day-to-day responsibilities.
What is the Fair Work Agency?
The Fair Work Agency is a new enforcement body which is being introduced as part of the Employment Rights Act 2025. Its aim is to strengthen worker protections by making enforcement more consistent, visible and effective, while reducing the current approach across multiple agencies. The creation of the agency is closely linked to recent government proposals including the Employment Rights Bill.
The Fair Work Agency is expected to take on responsibility for areas currently covered by bodies such as:
- National Minimum Wage enforcement
- Employment Agency Standards
- Labour exploitation and modern slavery enforcement
- Certain holiday pay and statutory payment enforcement
- Unpaid employment tribunal awards
The Agency will begin operating from April 2026 and enforcement activity is expected to get underway quickly.
What will the Fair Work Agency do?
The Fair Work Agency will have wide-ranging powers to investigate and enforce employment rights. These include the ability to:
- Access payroll, HR and employment records, sometimes without notice
- Carry out inspections remotely or in person
- Speak directly to employees
- Require explanations of how pay and working practices operate in practice
- Investigate suspected breaches without an employee complaint
- Take legal action on behalf of workers or in the public interest
- Require corrective action, including payroll audits and repayment of underpayments
This means issues can be pursued even where an employee has left or does not wish to raise a claim. In the context of the new Employment Rights Bill, these powers are set to become even more significant for employers.
Why this matters for employers
While many employers already comply with employment law, the Fair Work Agency is likely to raise expectations around record-keeping, transparency and consistency. With the introduction of the Employment Rights Bill, compliance requirements will be more closely scrutinised.
As employers you will be expected to be able to provide accurate records of your decision making. Areas likely to attract attention include:
- Payroll accuracy
- Holiday pay calculations, particularly for variable or irregular hours
- Employment status decisions
- Pay and hours changes
- The quality and availability of records
Being compliant is essential, but being able to evidence compliance will be just as important, especially under the new Employment Rights Bill guidelines.
What should employers and HR teams do now?
Although the Fair Work Agency is still being implemented, employers and HR teams can take practical steps now. Anticipating the changes from the Employment Rights Bill is one key strategy for staying prepared.
- Review pay, holiday and working time practices
- Check employment status decisions
- Ensure contracts and policies are up to date
- Audit record-keeping processes
- Train managers on compliance basics
You should be able to demonstrate that each employee has received the correct entitlement and pay. Where hours vary, this may mean auditing contracts, working patterns and system set-ups, and ensuring reporting is accurate, in line with recent Employment Rights Bill requirements.
Managers make decisions that affect pay, hours and working patterns every day. If those decisions aren’t recorded properly, risk follows.
Taking a proactive approach now can significantly reduce risk later. The Employment Rights Bill brings new incentives for ensuring all records are in order.
What are the financial risks?
Where breaches are identified, the financial consequences can be significant under the current law and they may further increase once the Employment Rights Bill takes effect.
Penalties can be up to 200% per employee, capped at £20,000 per employee. This means relatively small errors can quickly become costly when the Employment Rights Bill provisions are enforced.
Holiday pay is a common risk area. Incorrect calculations for employees with variable or irregular hours can result in underpayments that escalate once penalties are applied, particularly where Employment Rights Bill criteria are relevant.
Importantly, there is no requirement to prove intent. Whether the issue arose from an administrative error, outdated systems or long-standing practices is largely irrelevant. The focus is simply on whether the breach occurred and how it was addressed. The Employment Rights Bill strengthens this approach.
Final thoughts
The Fair Work Agency represents a shift towards stronger and more consistent enforcement of employment rights. While it doesn’t create new legal obligations, it does raise expectations around compliance, transparency and record-keeping, especially with new requirements under the Employment Rights Bill.
For employers, now is the time to review everyday practices and make sure they stand up to scrutiny. A proactive approach today can prevent costly issues tomorrow as the Employment Rights Bill comes into force.
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