Employment Rights Act 2025 update: understanding the Fair Work Agency

Insight

15.09.2025

Updated as of 18 December 2025

The Employment Rights Act 2025 (ERA 2025) will create a new state employment rights enforcement agency called the Fair Work Agency (FWA).

According to the most recent government roadmap for the ERA 2025, it will come into existence in April 2026. We should, at this point, have a better picture of the FWA’s powers and responsibilities, its key areas of focus and – perhaps crucially – how well it will be resourced. All of these factors will ultimately determine how impactful and effective the FWA will be.

This blog sets out what we know now about the FWA and what this new agency might mean for employers.

What will the FWA be?

The FWA will not be independent of the Government (like Ofcom or the Equality and Human Rights Commission). It will be an administrative executive agency of the Department for Business and Trade (overseen by the relevant Secretary of State) and will support the wider government strategy on employment rights.

Its activities will be carried out by enforcement officers and staff appointed by and working within the Department for Business and Trade.

It will be supported by an expert advisory board made up of representatives from business and trade unions, as well as independent experts.

What will the FWA be for?

The FWA will be an advisory and enforcement agency, covering areas which are (in the main) already covered by existing agencies. However, a new enforcement area will be holiday pay and leave. The Act also bakes in the potential for the FWA to expand its remit further – see below.

It is intended to help employers comply with the law, to investigate employers suspected of breaking the law and to issue remedies and penalties for non-compliance. It represents a shift towards enhanced state enforcement (as opposed to individual enforcement), perhaps in recognition of the challenges faced by the employment tribunal system to bring speedy and effective justice for individual claimants.

According to the Department for Business and Trade, the FWA will: “bring together existing state enforcement functions and, over time, take on enforcement of a wider range of employment rights. This will be a single place where workers and employers can turn for help. It will improve efficiency by ensuring there is one leadership team to oversee work in line with a unified strategy. The FWA will aim to resolve issues upstream by supporting employers that want to comply with the law. But it will also have strong powers to investigate and take action against businesses that flout the law, to level the playing field for compliant businesses.” (emphasis added)

Who will it report to?

It will report to Parliament via annual reports and a three-yearly strategy – all of which will be published publicly.

What issues will fall within its scope?

The FWA will take on the work of the Gangmasters and Labour Abuse Authority (GLAA), which will be abolished. For readers who may not know, the main role of the GLAA is to investigate reports of worker exploitation and illegal activity such as human trafficking and modern slavery. It works with other enforcement agencies like the Police and the National Crime Agency.

In addition to modern slavery and human trafficking legislation, the FWA will absorb powers to investigate, enforce and penalise non-compliance with:

National minimum wage rules – currently regulated by the National Minimum Wage Enforcement Team
Statutory sick pay rules – currently managed by HMRC, although there is currently no penalty for non-compliance, so this will be a change under the FWA regime
Domestic agency rules – currently overseen by the Employment Agency Standards Inspectorate
Sums ordered by employment tribunal or agreed in a COT3 – already managed by the Department for Business and Trade

The FWA will also be able to investigate, enforce and penalise any failure to comply with and/or properly document statutory holiday leave and pay entitlements. This is probably the most significant change, as this entitlement is not currently the subject of state enforcement. It is plainly something for employers to take note of, given all workers and employees are entitled to statutory holiday leave and pay and the likelihood of making (unintended) errors in trickier cases is high, for example, for workers with irregular hours.

The Department says that the FWA could expand its remit to other employment rights, “as new challenges emerge”, but no information has been given as to what these are likely to be.

What powers will the FWA have?

Inspection: it will be able to initiate and carry out investigations against employers and demand to see documents/information. We assume such investigations will be triggered by reports of non-compliance, for example, from individual employees, trade unions or via other means (such as media/news reports), however, proactive enquiries or ‘spot checks’ could be within its remit. This is likely to be dictated by resource/capacity.

Issue civil penalties: where employers have failed to pay workers their statutory entitlements (including holiday pay), the FWA will be able to order them to do so within a set timeframe and pay a penalty to the government. The penalties are potentially significant (depending on the number and quantum of underpayments) – the current proposal is that they would broadly mirror the current penalties for non-compliance with National Minimum Wage, ie 200% of the value of any identified underpayment (or 100% if paid promptly), with a ‘look-back’ period of six years. This will be capped at £20,000 per individual.

Bring legal proceedings: it will be able to initiate or support any employment claims by employees in the Employment Tribunal against employers. We assume such cases will be ones where a very large number of people have been impacted and/or where there is a wider/strategic dimension to the litigation, for example, to clarify an uncertain area of law or strengthen a perceived widespread area of non-compliance. However, in theory, under the current Act the FWA could, for example, bring a standalone discrimination or unfair dismissal claim on behalf of an individual.

Provide advice (including legal advice): the FWA will be able to provide legal advice and support to employees wishing to bring employment claims. We assume there will be eligibility criteria for the provision of legal advice/support. The Department for Business and Trade also suggests it will issue advice/guidance and support employers to help them understand and comply with their legal obligations. It is unclear how this dimension of the FWA’s work will interact with the current role of ACAS and trade unions.

Issue enforcement orders: these will be in respect of breaches of criminal offences connected to the workplace and will require the employer to correct their behaviour. Breaches of such orders could result in fines or imprisonment.

Cost recovery: the FWA will be able to recover enforcement costs from non-compliant employers who the FWA has taken enforcement action against. What these costs will be and how recovery will work will be set out in further regulations. Also to note: intentionally obstructing investigative or enforcement action or failing to comply with enforcement measures (without reasonable excuse) will be offences under the current proposals.

What does it mean for employers?

In some ways the FWA does not represent a radical change as – by and large – it is ‘bringing under one roof’ the work currently done by a number of disparate agencies. The enforcement of holiday pay requirements is, however, new and significant, and employers will want to ensure they are compliant in this area.

The Department for Business and Trade is also clear that the FWA will exist to support both employers and employees alike. It says its enforcement activities will target “rogue” employers looking to gain unfair advantage and, therefore, will help “level the playing field” for compliant employers. This may be true and – given the FWA will have finite resources to manage and be accountable to Parliament – it seems likely that significant and proactive enforcement activity will be reserved for the most egregious breaches/unscrupulous employers.

However, the existence of the FWA will naturally increase the importance of checking and double-checking compliance with the relevant statutory entitlements and of employers documenting this, should the FWA come knocking (especially when it comes to holiday pay).

It will also provide another avenue (in addition to the Employment Tribunal) that individuals can direct grievances/complaints, regardless of their merits. This may raise the stakes for some internal complaints, including resulting in them taking longer to resolve, and potentially involving additional legal and reputational risks, which employers will need to weigh up and manage.

However, clear advice and support to employers on what compliance with certain statutory obligations means in practice should be welcome (assuming such advice is of a high quality), especially if this will cover the raft of new, untested and complex laws that the ERA 2025 will be ushering in over the next couple of years.

Naturally, whether the FWA represents a positive step for all stakeholders in the labour market or not will depend on the detail and ultimately on whether the agency is properly resourced and supported to carry out its intended work effectively and efficiently.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.