What is the FWA?

The FWA brings together enforcement functions previously exercised by multiple bodies. Its remit includes:

• Employment agency standards enforcement;
• Pay-related rights, including the National Minimum Wage (“NMW”) and National Living Wage (“NLW”);
• Gangmaster licensing requirements and license conditions;
• Protections against serious labour exploitation; and
• Enforcement of Employment Tribunal penalties.

In practical terms, the FWA has taken over the existing functions of the Employment Agency Standards Inspectorate (EASI) and the Gangmasters and Labour Abuse Authority (GLAA). Full enforcement responsibility for NMW is expected to transfer in April 2027 and, until then, HMRC will continue to enforce NMW under a contracting arrangement with the FWA.

In terms of what lies ahead, the FWA is due to publish its first ‘Statutory Enforcement Strategy’ in April 2027 and its First ‘Statutory Enforcement Annual Report’ at the end of the 2027/2028 financial year.

New enforcement powers: underpayment orders, penalties and record inspection

The direction of the FWA is becoming clear: faster repayment to workers, greater financial consequences for non-compliance, and increased visibility of records. Key powers of the FWA include:

• Underpayment orders: the FWA can require an employer to pay any amount owed to an individual within 28 days.
• Financial penalties: penalties of up to 200% of the sum owed may be imposed (capped at £20,000 per worker). These may be reduced if payment is made promptly (for example, reduced to 100% where payment is made within 14 days).
• Record inspection: the FWA can inspect holiday and pay records at any time.

Investigations: information requests and entry to premises

The FWA has broad investigatory powers to determine whether to exercise its enforcement functions and to gather evidence of non-compliance. It may require individuals to attend a meeting and answer questions and can compel the provision of information or documents by a specified date.

However, these powers may only be exercised where the FWA holds a reasonable belief that doing so will produce relevant results and is necessary for any “enforcement purpose”, as defined in section 96 of the Employment Rights Act 2025 (“ERA 2025”).

Enforcement officers may also enter premises to inspect records and, where appropriate, seize documents and access systems used to store or process information. Entry must take place at a reasonable time unless delay would frustrate the inspection. A warrant is required to enter a dwelling, reflecting the Government’s intention to retain broadly similar business‑premises powers to the pre‑FWA regime, while affording additional protection to private homes. Powers under section 95 of the ERA 2025 extend to electronic records, and any materials seized may be retained for as long as is necessary.

Notices of underpayment

Under section 103 of the ERA 2025, the Secretary of State may issue a notice to a “liable party” that has failed to pay sums due to an underpaid individual under specified labour market legislation. This currently includes the NMW and will, in due course, extend to statutory sick pay (“SSP”) and holiday pay,

Notices will generally require payment within 28 days and may be issued even where payment has since been made, provided no related enforcement proceedings are ongoing. Notices may uncover underpayments arising in the six years prior to the notice (subject to potential regulatory reduction), although - save for certain NMW-related entitlements - they cannot relate to sums due before 18 December 2025. A single notice may cover multiple underpaid individuals.

In addition to arrears, notices will usually impose a civil penalty payable to the Secretary of State. This will be set at 200% of the underpaid sum per individual, subject to a £20,000 maximum and £100 minimum. Payment must be made within 28 days, with potential reductions for early payment.

Employers may appeal to the Employment Tribunal within 28 days, but appeals are tightly circumscribed: challenges to the notice itself are limited to whether sums were due, paid on time, or fell outside the permitted period; challenges to sums or penalties focus on calculation errors or non-compliance. Successful appeals can result in cancellation or rectification of the notice.

Powers Not Yet in Force

Power to Bring Employment Tribunal Proceedings

Section 116 of the ERA 2025 will allow the Secretary of State to bring Employment Tribunal proceedings on behalf of a worker where the worker appears unlikely to pursue a claim themselves. Claims would be brought in the worker’s name, with any awards made in the worker’s favour. While the Government has indicated that consent would usually be sought, it may not be required where workers face barriers such as fear of reprisal, language difficulties or lack of awareness. Further guidance is waited on how this power will be used in practice.

Power to Provide Legal Assistance

Section 117 introduces a further novel power enabling the Secretary of State to provide legal assistance, including advice and representation, in civil proceedings related to employment, trade union law or labour relations. The power does not extend to the facilitation of settlements and not an enforcement function. Further detail is awaited in secondary legislation.

Power to Recover Enforcement Costs

Finally, section 143 enables regulations requiring non-compliant parties to pay charges reflecting enforcement costs incurred by the state. Charges may be fixed or time-based and will be paid into the Consolidated Fund. This represents another significant shift in the enforcement landscape, though the practical impact will depend on regulations that have yet to be published.

Action You Should Be Taking

The ERA 2025 and the establishment of the FWA are emblematic of a decisive move towards active enforcement. Employers can no longer rely solely on assertions of compliance; they must be able to evidence it.  

Key steps employers can take include:

• ·Check holiday and SSP compliance:

o  Underpayments can attract penalties of up to 200%. SSP changes took effect from 6 April 2026: SSP is now payable from day one of sickness and the lower earnings limit has been removed. Payroll systems should be audited and updated accordingly.

• Plan for longer liability periods:

o With most Employment Tribunal time limits extending from three to six months (from around October 2026), retaining HR and payroll records for longer will reduce risk.

• Adopt an inspection-ready mindset
• Identify and correct historic or outstanding underpayments where possible, ensure HR and payroll teams are aligned, and prepare to produce records quickly if required