The Fair Work Agency: The New Enforcement Reality for Employers

On 7 April 2026 the Department for Business and Trade (DBT) and the newly established Fair Work Agency (FWA) published a suite of three documents that together signal a meaningful shift in how labour market rules will be enforced across the UK: (1) a Strategic Steer for the FWA’s 2026/27 transitional year, (2) an Enforcement Policy Statement, and (3) a Code of Practice on Labour Market Enforcement Undertakings and Orders.
For employers, these publications are not simply “regulator housekeeping”; they provide a clear indication of the FWA’s priorities, how investigations will be opened and run, and what enforcement tools are likely to be deployed where non-compliance is identified. To better understand the implications for your organisation, it’s important to explore the FWA’s remit, the key changes introduced, and the government’s strategic priorities for the coming year, which are examined in detail in this article.

What is the Fair Work Agency?

The FWA is an executive agency of the DBT, created under the Employment Rights Act 2025 (ERA 2025), intended to deliver a labour market “where work pays, rights are respected and responsible businesses can thrive”. It consolidates enforcement functions that were previously spread across multiple bodies, with the stated aim of making the system easier for workers to access and simpler for employers to navigate.

From April 2026, the FWA assumed responsibility for several key areas of labour market enforcement that were previously overseen by different bodies. This means that the FWA now manages the enforcement of employment agency standards, ensuring agencies comply with regulations around fair treatment and transparent operations. It also takes charge of the gangmasters licensing regime, which is designed to regulate labour providers in sectors such as agriculture and food processing, and to prevent exploitation of workers in these industries.

In addition to these functions, the FWA is tasked with protecting workers from serious labour abuse and exploitation. This involves working closely with law enforcement agencies to identify and tackle issues such as forced labour, human trafficking, and other forms of severe exploitation.

However, during the transitional year of 2026/27, enforcement of the National Minimum Wage (NMW) will remain with HM Revenue & Customs (HMRC). HMRC continues to monitor and enforce NMW compliance under a contractual arrangement, while the FWA develops the infrastructure and processes necessary for a full transfer of these responsibilities, which is scheduled for April 2027.

The Enforcement Policy Statement clarifies the FWA’s broader remit, which covers several pay-related rights. This includes not only the enforcement of NMW and National Living Wage but also ensures gangmasters comply with licence conditions. The FWA is empowered to address serious labour exploitation by collaborating with law enforcement partners. Additionally, it is responsible for enforcing financial penalties awarded by employment tribunals, specifically in cases where employers fail to pay compensation or awards as ordered by the tribunal. This means the FWA can pursue employers who have not fulfilled their legal obligations to pay workers following an employment tribunal decision.

The 2026/27 Strategic Steer: the government’s five priorities for the transitional year

The Strategic Steer document frames 2026/27 as a “phased transition”: the FWA is expected to maintain (at least) predecessor bodies’ operational performance while laying the foundations for a broader remit and the full transfer of NMW enforcement. The paper records a 2026/27 budget of £60.1m (up from a combined £47.4m for the predecessor bodies in 2025/26), reflecting the expanded remit and planned introduction of holiday pay enforcement from 2027.

The five priorities are worth reading as a statement of regulatory intent. For employers, they also indicate where the FWA is likely to focus its early attention: repeated complaints, higher-risk sectors, and issues that create unfair competition (for example, underpaying staff or using non-compliant labour providers).

1. Reducing regulatory burdens: The FWA aims to help responsible employers by simplifying guidance, working with Acas, and introducing digital tools to make compliance less onerous.
2. Using intelligence and data: The agency is developing systems for sharing and analysing data, including real-time access to HMRC information, to better target enforcement and prepare for the transfer of NMW responsibilities in 2027.
3. Raising profile and awareness: The FWA plans to make its services more accessible through a streamlined digital “front door” for workers and employers, ensuring transparency in how complaints are handled and providing clear feedback on outcomes.
4. Thought leadership: The FWA will convene stakeholders including regulators, businesses, unions, civil society, and academics to identify risks and promote best practices across the labour market.
5. Preparing for 2027 and beyond: The agency is working with Acas to develop its full operating model, including powers for civil proceedings and the enforcement of new rights such as holiday pay, as well as mapping out future areas for expansion.

The Enforcement Policy Statement: how the FWA will investigate and take action

The Enforcement Policy Statement is, in effect, the FWA’s public-facing guide to how it will regulate. It says enforcement is designed to secure compliance with labour market legislation, protect workers’ rights, and support fair competition so responsible employers are not undercut by those who break the law.

Investigations and inspections play a crucial role because they determine how enforcement actions progress from the outset. The FWA will review every complaint it receives, but not all complaints will result in a full investigation. An investigation typically begins when an enforcement officer makes initial contact with a business to ask questions or seek clarification about potential breaches of employment law.

During this process, enforcement officers have the power to require individuals to attend meetings and to request specific information or documents, which must be provided by a set deadline. Failing to cooperate, such as refusing to answer questions, delaying responses, or submitting false documents could lead to criminal prosecution under the ERA 2025. Therefore, businesses should ensure they respond swiftly, provide accurate information, and keep their records well organised when dealing with any enquiries from the FWA.

Where non-compliance is identified, the FWA will use what it refers to as a graduated toolkit, ranging from education and warning letters through to licensing action, court orders and prosecution. This toolkit includes supportive interventions such as advice and guidance to help employers meet their obligations, warning letters which require employers to respond with details of corrective actions, and civil penalties like Notices of Underpayment for outstanding arrears. More severe breaches may result in financial penalties, naming and shaming, or licensing action under the gangmasters regime, including refusal, suspension, or revocation of licences. In cases of persistent or deliberate breaches, the FWA can seek prohibition orders, Labour Market Enforcement Undertakings and Orders, or initiate criminal investigation and prosecution. In practice, the tool chosen will usually reflect the seriousness of the breach, whether it is repeated, and whether the employer has engaged and put matters right, ensuring the enforcement response is proportionate and targeted to the circumstances of each case.

Labour Market Enforcement Undertakings and Orders: a new compliance lever for criminal labour market offending

The Code of Practice on Labour Market Enforcement Undertakings and Orders sits alongside the Enforcement Policy Statement and explains how the FWA expects to use this regime under the ERA 2025. The Code expressly states it does not itself impose legal duties (and is not an authoritative statement of law). However, it is a useful indicator of how the FWA is likely to negotiate undertakings, when it will go to court, and what it will expect to see by way of evidence and implementation.

Labour Market Enforcement Undertakings (LMEUs)

The FWA might look to get an LMEU when it thinks a criminal “labour market offence” has happened (or is happening) and believes that at least one action needs to be included in an undertaking to stop further breaches. According to the Code, the FWA will take into account things like the number of suspected offences, any previous enforcement action, how many workers have been affected, the type of harm caused, how much money is owed, and whether the breach seems deliberate or reckless, rather than just a one-off mistake.

For example, imagine a recruitment agency is found to have underpaid a group of agency workers, failing to meet the National Minimum Wage over several months. The FWA investigates and discovers that this is not the first time such an incident has occurred; previous warnings have been issued, and dozens of workers are affected, with substantial arrears outstanding. The agency’s actions appear to be deliberate – perhaps they have manipulated records or ignored repeated advice. In this scenario, the FWA may issue a notice proposing a LMEU, requiring the agency to implement new payroll controls, provide staff training, and submit to independent audits for a set period, aiming to prevent further breaches and protect worker rights.

Process-wise, the FWA will issue a notice identifying the offence it believes has been committed and inviting the business to give an undertaking in specified terms. There is a 14-day negotiation period (or longer if agreed) to accept the proposed undertaking or propose alternatives. An undertaking takes effect once offered and accepted and lasts for a specified period (up to a maximum of two years). For directors and HR teams, the practical point is that an undertaking tends to formalise a compliance programme with deadlines; often requiring policy changes, training, record-keeping improvements, independent audits, or supply-chain controls, and the FWA may monitor progress.

The Code stresses that measures must be “just and reasonable” and should explain how they will achieve compliance in practice.

Labour Market Enforcement Orders (LMEOs)

Where an undertaking is refused, not agreed within the negotiation period, or breached, the FWA may apply to the courts for an LMEO. The court considers whether the underlying offence is made out on the balance of probabilities and whether it is just and reasonable to make an order. Like undertakings, orders can last for up to two years and can be varied or discharged.

For example, suppose a logistics company has been found to repeatedly underpay staff, despite previous enforcement actions and formal warnings, and the FWA proposes a LMEU requiring improved payroll systems and mandatory staff training. The company refuses to agree to the undertaking within the negotiation period. In response, the FWA applies to the court for a LMEO. The court reviews the evidence, determines that the offence has been proven on the balance of probabilities, and finds it just and reasonable to issue an order. The LMEO obliges the company to implement precise payroll controls, submit to independent audits, and ensure compliance for up to two years. If the company fails to comply with the LMEO, further criminal penalties may follow, reinforcing both the integrity and deterrent effect of the regime.

For directors, the critical point is that breach of an LMEO, without reasonable excuse, is itself a criminal offence. The Code references custodial penalties (including up to two years’ imprisonment and/or a fine on conviction on indictment) and indicates that organisations and, in some circumstances, individual officers/partners can be prosecuted where offending is attributable to neglect or is committed with consent or connivance. An LMEO therefore needs proper governance: owners, milestones, evidence of completion, and ongoing monitoring.

Practical implications for employers: preparing for an increasingly data-led, joined-up regulator

Although the FWA’s stated aim includes supporting compliant employers and reducing unnecessary burdens, the direction of travel is toward a more integrated, intelligence-led enforcement body with more visible outcomes. That tends to reward employers who can show clear processes and reliable records, and exposes businesses relying on informal practices, legacy arrangements or inconsistent documentation.

• Map FWA touchpoints across your business. Identify where you use agency workers, outsourced labour, umbrella arrangements, or labour providers in licensable sectors, and allocate internal ownership for compliance.
• Stress-test NMW compliance and record-keeping. Ensure time records, deductions, salary sacrifice arrangements and “expenses” practices are robust. The Enforcement Policy Statement underscores that a Notice of Underpayment is generally triggered by arrears outstanding at the start of an investigation.
• Audit your use of labour providers. In supply chains where a gangmaster licence is required, ensure you have active verification processes and contractual protections; the Code of Practice gives examples where undertakings could require notifications or active checks.
• Have an inspection playbook. Decide in advance who engages with enforcement officers, how documents will be located and produced quickly, and how worker interviews will be managed. Train operational teams on the risks of obstruction or providing inaccurate documentation.
• Take “nudge” activity seriously. The policy recognises self-correction and voluntary disclosure in some circumstances. Early action before an investigation starts may materially reduce financial, reputational and legal risk.
• Plan for holiday pay enforcement from 2027. The Strategic Steer expressly expects preparation for the commencement of holiday pay enforcement; employers should not assume this will be a “light touch” addition.
• Governance and evidence. If an undertaking or order is proposed, treat it as a project with board-level visibility: define measures, assign owners, keep an audit trail, and monitor completion. The compliance burden often lies in proving, not merely asserting, that measures have been implemented.

Conclusion

The creation of the FWA is best understood as a structural shift: fewer silos, a clearer “front door” for complaints, and a regulator that intends to combine advice-led compliance work with targeted, higher-impact enforcement. For most SMEs, the sensible response is not to wait for first contact from the regulator, but to use the 2026/27 transitional year to tighten wage and working time compliance, strengthen documentation, and ensure labour supply chains stand up to scrutiny.

This article is for general information only and is not legal advice. Specific advice should be taken on particular facts, especially where an investigation is underway or contemplated.