The Fair Work Agency is here and your records need to be ready

Insight from an HR consultant in Ipswich on what the new Fair Work Agency means for your pay records, holiday calculations, and compliance risk.

Something shifted in April 2026 that most small business owners haven't fully registered yet.

The government created a single enforcement body for employment rights. It's called the Fair Work Agency.

It can inspect your business without waiting for a complaint. It can look back through six years of your records.

If you've been relying on the assumption that nobody checks, that assumption is now out of date.

Here's what you need to know.

What you should be doing right now

Let's start with the practical stuff, because that's what matters most.

If the Fair Work Agency turned up at your door tomorrow, could you show them exactly how you've calculated holiday pay for every member of your team over the past six years? Could you demonstrate how statutory sick pay was handled? Could you pull up records that prove your payroll figures are accurate?

For most small businesses, the honest answer is no.

Since April 2026, employers are legally required to maintain detailed records of annual leave and holiday pay going back six years. That means documenting:

• How much leave each person took

• How their holiday pay was worked out

• What was actually paid

If anyone on your team earns variable pay or commission, you also need to show precisely how those amounts fed into the holiday pay calculation.

Failing to keep these records isn't just a compliance gap. It's a criminal offence. The fines are potentially unlimited.

If your current system is a spreadsheet that someone updates when they get round to it, that's a problem. Proper HR software designed to track leave and entitlement is a sensible first step.

So what actually is the Fair Work Agency?

Before April 2026, enforcement of employment rights was split across several different bodies. Minimum wage sat with HMRC. Other protections were handled elsewhere. The result was patchy enforcement and very little proactive checking.

The Fair Work Agency brought all of that together under one roof. It now covers minimum wage, holiday pay, statutory sick pay, and agency worker protections.

It has the power to enter your premises, demand your records, issue financial penalties, and even bring employment tribunal claims on behalf of workers. Workers can also report concerns directly through an online portal, bypassing the tribunal process entirely.

The government has called 2026/27 a transitional year. HMRC is still managing day-to-day minimum wage enforcement for now, but under the agency's strategic direction. From April 2027, that responsibility transfers fully to the Fair Work Agency, along with holiday pay enforcement.

The window to get your house in order is closing.

Why pay and leave are the first targets

The agency's early priorities are focused squarely on pay and leave. There's a good reason for that: these are the areas where mistakes happen most often.

Most of the time, the errors aren't deliberate. You might be calculating holiday pay incorrectly for staff who work irregular hours or do overtime. Or you might still be running statutory sick pay under the old rules, when it's actually been payable from day one since April 2026.

A report published by the agency shortly after it launched found 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 significant number. And the agency was specifically set up to go and find these issues, rather than waiting for them to surface.

As part of my HR consultancy services in Ipswich, I regularly see businesses that are making these kinds of mistakes without realising it. The errors are usually small on a per-person basis, but they compound quickly.

The financial risk is real

When the agency identifies an underpayment, it can issue a Notice of Underpayment covering up to six years. On top of repaying what's owed, penalties can reach 200% of the underpayment, capped at £20,000 per worker. If you pay within the required timeframe, that drops to 100%.

Do the maths on that for a team of 15 or 20 people where a holiday pay calculation has been slightly off for a couple of years. The total adds up fast.

There's also a reputational risk. The agency can publicly name your business on a government list of non-compliant employers. That's the kind of thing a potential customer or client finds with a quick online search.

A checklist for your business

Here are the areas I'd recommend looking at first:

• Holiday pay calculations. Particularly for anyone whose hours or earnings fluctuate. Are you including overtime and variable pay correctly?

• Leave records. Will they stand up to six years of scrutiny, or are there gaps?

• Contracts. Do they actually reflect how your people work day to day?

• Statutory sick pay. Are you applying the new day-one entitlement correctly?

• Payroll documentation. Can you demonstrate how every figure was reached?

If your paperwork lives across email inboxes, filing cabinets, and half-updated spreadsheets, that's exactly the kind of setup that leaves you exposed. An inspector won't accept "we've always done it this way" as evidence of compliance.

Getting support before there's a problem

Sorting this out now is far less stressful and far less expensive than dealing with an enforcement notice after the fact.

I can review your contracts, pay records, and leave documentation to identify gaps before the agency does. It's a straightforward process and it gives you clarity on where you stand.

As an outsourced HR consultant in Ipswich, I work with small businesses to get these things right without the overhead of a full-time HR team.

If any of this has raised questions, get in touch for a confidential conversation.

We'll talk through your situation and figure out the right next steps together.