What the Fair Work Agency will mean for UK businesses

April 2026 will see the formal launch of the Fair Work Agency, a new government-backed service aimed at providing stricter enforcement of employment law as part of the Employment Rights Bill. 

The agency, which will be under the auspices of the Department of Business and Trade, will replace the existing Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement.  It will build on the powers of those bodies and existing enforcement regime, but with new, additional powers to be established by the secretary of state.

Helen Corden, an expert in sensitive employment issues with Pinsent Masons, said the launch of the Fair Work Agency would mark a fundamental shift in enforcing employment law in the UK.

“For large employers, this isn’t just a structural change - it’s a signal that compliance will be actively monitored and enforced,” she explained.

“With powers to pursue unpaid wages, holiday pay, and even bring tribunal claims on behalf of workers, the FWA removes historic reliance on individual claims and claimants.”

Among the powers the new agency will have are:

• rights to inspect workplaces and demand evidence of compliance with employment law
• civil payment enforcement against employers that have underpaid their workers - based on the National Minimum Wage Act 1998, this will allow them to issue notices which require employers to pay workers missing sums and a fine to the government
• the power to bring civil proceedings on a worker’s behalf – and provide legal advice and assistance where needed to civil legal cases related to employment law.
• an enforcement regime in respect of labour market criminal offences, including fines and imprisonment
• cost recovery to recover enforcement costs from employers against whom enforcement action has been taken for non-compliance. This is to be determined by the secretary of state at a future date.

Under the terms of the Employment Rights Bill, the FWA will also be required to produce an annual report on its work, and set out the terms of its enforcement strategy every three years. The agency will have an advisory board which will involve equal representation from the business community, trade unions and independent experts.

In the 2025 budget, chancellor of the exchequer Rachel Reeves spelled out that the government expects the FWA to have further powers going forward, gathering on-the-ground intelligence about employers exploiting staff and looking to disqualify directors found to be abusing workers’ rights if there are repeated breaches.

The government also said it aims to have eliminated the backlog of employment breach cases inherited form the previous administration, meaning that all employers breaking the law would be named publicly within a year of their case closing.

Jon Fisher, an employment expert with Pinsent Masons, said that public shaming of transgressors would be a key part of their ability to enforce.

“We’ve seen how similar measures under the National Minimum Wage naming scheme have become a real deterrent, with hundreds of employers publicly exposed for underpayment breaches,” he said.

“Reputational risk often outweighs financial penalties, particularly for consumer-facing brands. Employers should expect this approach to be replicated and amplified under the new regime.”

What this means for you:

Companies that do not take adequate action to prepare for the introduction of the FWA, and ensure they are complying with the ERB, will face major consequences – particularly in the public sphere.

We recommend auditing payment policies and systems to ensure that potential underpayment issues are resolved, and that governance and processes for HR and payroll to ensure accuracy and transparency are strengthened.

It is also important for companies to have clear strategies in place for how to deal with potential breaches to minimises risk of future exposure.

Corden added: “Businesses that fail to prepare risk significant financial and commercial penalties and reputational damage.

“The message is clear: proactive compliance is no longer optional - it’s a strategic imperative, and review of litigation strategies is recommended”