The UK has launched the Fair Work Agency to strengthen enforcement of employment rights, targeting businesses that underpay staff or breach employment laws.
The new body, which opened its doors this week, comes after a nationwide crackdown recovered more than £7.3 million in back pay, highlighting the scale of wage violations across multiple sectors. The launch follows government enforcement action published in March 2026, which revealed that over £7.3 million in unpaid wages had been repaid to workers.
The figure relates to historic underpayments – many dating back several years – identified through HMRC investigations, underlining how breaches can persist undetected without effective enforcement. Around 60,000 workers were affected, with 389 employers collectively fined £12.6 million, in addition to being ordered to repay arrears. Violations were identified across sectors including social care, retail and sports, reinforcing concerns about widespread non-compliance.
“The vast majority of businesses in this country do the right thing by paying their staff properly and playing by the rules. It’s not fair on them when others are able to get ahead by not paying the wages their workers are owed,” stated the UK’s Business Secretary Peter Kyle. “A good employer doesn’t build their business on the back of unpaid wages, and I look forward to working with the new Fair Work Agency to ensure its powers are used to crack down on those who think the rules don’t apply to them.”
WHAT IS THE FAIR WORK AGENCY?
The Fair Work Agency (FWA), which officially launched on 7 April 2026, is the UK’s new single enforcement body for employment rights. Operating under the Department for Business and Trade, it brings together responsibilities previously handled by:
- HMRC’s National Minimum Wage unit
- The Gangmasters and Labour Abuse Authority
- The Employment Agency Standards Inspectorate
- The Office of the Director of Labour Market Enforcement
Established following the Employment Rights Act 2025, the agency is being rolled out in phases, starting with core labour market enforcement, with holiday pay and statutory sick pay enforcement expected to expand over time. Its aim is to simplify enforcement, improve compliance and provide a single point of contact for workers and employers.
NEW ENFORCEMENT POWERS FOR EMPLOYERS
The Fair Work Agency introduces stronger, more coordinated enforcement powers, including:
- Inspecting workplaces and requesting employment records.
- Ordering repayment of unpaid wages.
- Issuing civil penalties for breaches.
- Bringing employment tribunal claims on behalf of workers.
- Recovering enforcement costs from employers.
In serious cases, breaches can lead to criminal sanctions, including fines or imprisonment. The agency is chaired by Matthew Taylor, with Lisa Pinney serving as chief executive.
FAIR PAY FOR A FAIR DAY’S WORK
Employment Rights Minister Kate Dearden said the agency would play a key role in ensuring fairness. “Nobody should finish a week’s work and find they’ve been paid less than they’ve earned. I believe in a fair day’s pay for a fair day’s work,” stated Dearden. “That’s why we’re cracking down on employers who underpay. We’re making sure workers get the hard earned pay they deserve. I encourage every employer to check their payroll to ensure they don’t get caught out.”
The new watchdog is being introduced amid persistent concerns about labour market enforcement. Estimates suggest:
- Around 371,000 jobs were underpaid below minimum wage levels.
- Approximately 900,000 workers per year lose holiday pay, worth around £2.1 billion.
ENFORCING EMPLOYMENT RIGHTS
According to the Chartered Institute of Personnel and Development (CIPD), stronger enforcement is critical to ensuring employment rights are upheld in practice, particularly in lower-paid and insecure sectors.
Campaigners have welcomed the launch but warned the agency must be properly resourced to succeed. Emma Wilkinson, Director of the Employment Legal Advice Network (ELAN), said: “The employment rights most of us enjoy have been hard won: the right to feel safe at work, to a minimum level of pay, to holiday pay, to not be exploited. These are universal rights in the UK, enshrined in law. But employment rights without enforcement are worthless.”
She warned that many workers remain unprotected: “Too often that enforcement just isn’t there, in the face of an overstretched and under-resourced system… For too many people, particularly those in low-paid, insecure or precarious work, the system meant to protect them simply does not function.”
CALLS FOR STRONGER ENFORCEMENT AND TRANSPARENCY
Wilkinson described the launch as “a once-in-a-generation opportunity to change that… but it will only succeed if it is given the right foundations and focus.” She highlighted estimates showing that:
- Around 445,000 workers underpaid below minimum wage levels.
- Approximately 130,000 people in modern slavery.
- Around 900,000 workers losing holiday pay each year.
ELAN is part of a coalition of more than 30 organisations calling for reforms to ensure the agency is effective. Key recommendations include:
- Increased funding and staffing, including more labour inspectors.
- A trusted system for vulnerable and migrant workers.
- Greater transparency around enforcement data.
“The message from across the sector is clear and united – the Fair Work Agency must be well resourced, trusted by the most vulnerable workers and transparent,” added Wilkinson.
The CIPD has estimated that around £300 million per year may be needed for enforcement to operate effectively.
COMPLIANCE RISKS FOR BUSINESSES
Business groups and legal experts have warned that the agency’s powers could expose employers to significant risks, particularly where non-compliance is unintentional. Industries expected to face increased scrutiny include:
- Hospitality
- Social care
- Warehousing
- Retail
Common risk areas include:
- Holiday pay miscalculations.
- Overtime and commission structures.
- Payroll errors and deductions.
HOW EMPLOYERS CAN STAY COMPLIANT
Guidance from the CIPD and industry experts suggests businesses should:
- Conduct a full payroll and compliance audit.
- Ensure minimum wage compliance after deductions.
- Review holiday and sick pay calculations carefully.
- Maintain accurate records for at least six years.
- Update contracts and HR policies.
- Train managers on legal obligations.
Failure to comply could result in:
- Repayment of wages.
- Penalties of up to 200% of underpaid amounts.
- Public naming and reputational damage.
- Legal action and tribunal claims.
TURNING POINT FOR UK’S EMPLOYMENT RIGHTS
The launch of the Fair Work Agency marks a major shift in how employment rights are enforced in the UK. For workers, it promises stronger protections and faster access to justice. For employers, it signals a new era of increased scrutiny and accountability.
As the agency begins its work, the challenge will be ensuring it delivers on its central promise: that every worker receives the pay they are legally entitled to.
Click here for more information about the Fair Work Agency.
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