As employment law continues to evolve, one of the most significant developments for UK employers this year is the introduction of the Fair Work Agency.
For many businesses, particularly SMEs, the announcement has raised uncertainty about what the Agency will do, how it will affect employers, and what they should be doing to comply.
What is the Fair Work Agency?
In April 2026, The Fair Work Agency was established by the Government to bring together the enforcement of a number of employment rights under one body.
Rather than employees having to rely solely on making employment tribunal claims, the Agency will have powers to investigate employers and enforce certain employment rights directly. They aim to improve compliance with employment legislation whilst ensuring workers receive the pay and protections they are legally entitled to.
What powers will the Agency have?
The Fair Work Agency is expected to oversee and enforce a range of employment rights, including:
- National Minimum Wage compliance
- Statutory Sick Pay
- Holiday pay and annual leave records
- Modern slavery protections
- Agency worker regulations
- Labour exploitation and vulnerable worker protections
The Agency also has powers to:
- Carry out investigations
- Request employment records and payroll information
- Require employers to rectify underpayments
- Issue financial penalties where legislation has not been followed
- Take enforcement action without waiting for an employee to bring a tribunal claim
This isn't about creating unnecessary concerns, it’s about ensuring that your business has the correct processes, documentation and records in place before problems arise.
What does this mean for employers?
For businesses that already have good HR practices, this shouldn’t be a worry. However, employers who have outdated contracts, informal working arrangements or variable payroll practices may be at greater risk of investigation.
Below is a list of key areas for employers to review:
- Holiday pay calculations
- Annual leave records
- SSP procedures
- Working hours and pay
- Employment contracts
- Payroll compliance
- Record keeping
Employers must be able to show clear proof that they follow the rules and not just say they do it. You will be required to show real evidence to prove your compliance.
Ensure your record keeping is accurate
Maintaining consistent and accurate records remains a major challenge within the Employment Rights reforms. If an employer cannot show evidence on how holiday pay has been calculated, when leave has been taken, or how statutory payments have been processed, this may be a stumbling block during an investigation.
Having robust systems in place is likely to become just as important as complying with the legislation itself.
What should employers do now?
The best preparation is to review your current employment practices.
- Are your employment contracts up to date?
- Are holiday calculations accurate?
- Are payroll processes compliant?
- Is SSP being calculated correctly?
- Could you evidence compliance if asked to do so?
If the answer to any of the above questions is "I'm not sure", now is the ideal time to carry out an HR compliance audit.
How can we help?
At KeystoneHR, we help businesses review their contracts, policies and HR processes to ensure they remain compliant with the latest employment legislation. If you're unsure whether your business meets the Fair Work Agency rules, we'd be happy to help.
