Guidance from an HR consultant in Bury St Edmunds on what the new Fair Work Agency means for your business and what you should be checking right now.
I’ve been having a lot of conversations with clients lately about a change that caught many of them off guard.
Since April 2026, a single government body called the Fair Work Agency has been actively enforcing employment rights across the UK.
It doesn’t wait for a complaint. It can turn up, inspect your records and issue penalties.
If you’ve been relying on the fact that nobody was checking, that’s no longer a safe assumption.
Here’s what you need to know and what to do about it.
What the Fair Work Agency actually does
Before April 2026, enforcement of employment rights was spread across several different bodies. The Fair Work Agency brought all of that under one roof, with expanded powers.
It covers areas including minimum wage, holiday pay, statutory sick pay and agency worker protections. It can inspect your premises, request your records and issue financial penalties. It can also bring employment tribunal claims on behalf of workers, and it has the ability to look back over six years of your records.
Workers can now report concerns directly through an online portal, without needing to go through a tribunal process themselves.
The government has called 2026/27 a transitional year. HMRC is still dealing with day-to-day minimum wage enforcement for now, but under the agency’s direction. From April 2027, everything transfers fully to the Fair Work Agency, including holiday pay enforcement.
So while it may feel like early days, the direction of travel is clear.
Why pay and leave are the priority
The agency’s initial attention is squarely on pay and leave. That’s because these are the areas where mistakes happen most often.
And they’re usually not intentional. A common example is holiday pay being calculated incorrectly for someone whose hours vary week to week, or who earns overtime. Another is statutory sick pay still being run under the old waiting-day rules, when it’s actually been payable from day one since April 2026.
Shortly after the agency launched, it published a report showing that 14% of UK workers had experienced at least one breach of their basic employment rights in the two years before summer 2025. That’s a big number. The agency was set up specifically because these problems are widespread, and it has the tools to go looking for them.
Record-keeping is now a legal requirement with real teeth
Since April 2026, every employer must keep detailed records of annual leave and holiday pay for six years. That means documenting how much leave each person took, how their holiday pay was worked out and what was actually paid.
For anyone on variable pay or commission, you need to be able to demonstrate exactly how those elements were factored into holiday pay calculations.
If you can’t produce adequate records, that’s a criminal offence. The fines are potentially unlimited.
A spreadsheet that gets updated sporadically isn’t going to cut it. If you haven’t already, investing in proper HR software to manage leave and entitlements is a sensible first step.
The financial penalties are serious
When the agency identifies underpayment, it can issue a Notice of Underpayment covering up to six years. On top of repaying what’s owed, you could face a penalty of up to 200% of the underpayment, capped at £20,000 per worker. If you settle within the required timeframe, that drops to 100%.
Put that into context. If you employ 15 or 20 people and your holiday pay calculation has been slightly off for a couple of years, the total bill can add up fast.
There’s also the reputational risk. The agency has the power to publicly name businesses on a government list of non-compliant employers. That kind of listing is easily found by anyone searching your company name.
What to review in your business now
If you want to get ahead of a potential inspection, start by looking at the areas the agency is most likely to focus on.
Holiday pay is top of the list. If any of your staff have variable hours, overtime or commission, check how their holiday pay is being calculated. Many businesses are still using a basic formula that doesn’t account for these elements properly.
Next, look at your leave records. Could you produce a clear, detailed breakdown of every employee’s leave and holiday pay for the past six years? If the answer is no, that’s a gap you need to close.
Your contracts are worth reviewing too. Do they reflect how your people actually work, or are they outdated templates that haven’t been updated in years?
Statutory sick pay is another area to check. Since April 2026, it’s payable from day one. If your processes still include waiting days, you’re not compliant.
Finally, consider your payroll records. Can you demonstrate how each figure was reached? An inspector won’t accept a vague explanation. They’ll want to see the workings.
If your documentation is scattered across email inboxes and old spreadsheets, that’s exactly the kind of situation that creates exposure.
Getting support before there’s a problem
As part of our HR consultancy services in Bury St Edmunds, we regularly help small businesses review their contracts, pay records and leave processes. It’s the kind of work that’s far less stressful and far less costly when it’s done proactively, rather than in response to an enforcement notice.
We can look at your current set-up, identify any gaps and help you put the right systems in place. Whether it’s updating your contracts, reviewing your payroll processes or recommending software to manage your records properly, we’ll work with you to get things sorted.
Let’s have a conversation
If any of this has made you pause and think about your own business, that’s a good sign. It means you’re taking it seriously.
As an outsourced HR consultant in Bury St Edmunds, I work with businesses like yours every day to make sure the basics are covered and nothing falls through the cracks.
A quick chat is all it takes to find out where you stand.
Get in touch and we can arrange a confidential conversation about your situation. Call us on 01473 653000 or email hello@pshumanresources.co.uk.
