Opening And Why This Matters

Picture this. It's a Wednesday afternoon. You're halfway through a sandwich. A polite knock at the door. A woman in a fleece holding ID says she's from the Fairwork Agency. She's not here because anyone complained. She's here because she can be. She'd like to see your records, pay slips, hours worked, holiday taken, contracts, right-to-work checks for everyone you employ and everyone you've employed in the last six years. She'd like the rest of her colleagues' afternoon to be quick and easy. She is very nice about it. You smile back, you say of course, you walk to your office, you close the door, and you sit very still on the edge of your desk while every spreadsheet, WhatsApp, scribbled note, missing pay slip, and I'll get to it next month, email floods through your head at once. How many holiday days has Liam taken since 2022? Did Sarah's right-to-work check ever get filed properly? Or did you just put yes on the system? When did you last update Tom's contract? Was it before or after he changed roles? Where is the working time record spreadsheet for the warehouse, the actual one, not the version Mike said he'd update? This is the new reality. The Fair Work Agency launched on the 7th of April, 2026. It does not need a complaint to walk through the door. It can ask, it can inspect. And if it doesn't like what it sees, it can recover six years of underpayments and slap on penalties of up to 200% on top. That sandwich you were halfway through? It can wait. Today we're going to talk about exactly what the agency is, what it can do, what it's likely to look at, and most importantly, how to be the business that has the boring, tidy, easy visit. Not the one that has the bad afternoon. Welcome to the Hive. Hey there, welcome back to Buzzing About HR, the podcast for small business owners and HR professionals who want straight talking, plain English advice. I'm Kate, your host, HR Queen Bee, and someone who has spent more hours than I'd like to admit pulling backdated employee data out of the wreckage of someone's filing system. With me as ever, supportive in spirit, useless in practice, is Hazel, our well-being officer, currently chewing the corner of a folder that I'm pretty sure had something important in it. Today's episode is about the Fair Work Agency. It launched on the 7th of April this year, and honestly, in my conversations with small business owners since, the responses have been one of three. Either, I have no idea what that is, or I've heard the name, I haven't actually looked at it. Or, and this is my favourite, I assume that doesn't apply to me because I'm small. Spoiler, it does apply to you, especially if you're small. So let's do this properly. Calm, clear, no panic, kettle on, let's go. The buzz. What is the Fair Work Agency? The Fair Work Agency is the new single enforcement body for employment rights in the UK. It rolls together what used to be done by several different bodies. HMRC's National Minimum Wage Team, the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate, into one larger body with broader powers and a louder mandate. It was created under the Employment Rights Act 2025. It came into force on the 7th of April 2026. It is real. It has people, it has budget, it has a remit. The government has published a strategic steer and an enforcement policy statement, both dated 7 April, calling 2026 and 2027 a transitional year for the agency. The plan is data-driven targeting, not blanket inspections, which sounds reassuring until you remember that data-driven means they already know which sectors and which size of business are most likely to be getting it wrong. They're not knocking on random doors. They're being strategic about whose door they knock on. What it covers includes, and this list is important, national minimum wage and national living wage compliance, holiday pay and leave, statutory sick pay, employment agency rules, modern slavery, gangmaster licensing, and a growing list of other employment standards. It will likely also pick up enforcement of new rights as they come in, predictable working patterns, day one rights, and so on. What's different about this body and why I'm doing a whole episode on it is the powers. Under the old system, an inspection from any of those bodies usually started with a complaint. Under the new system, the Fair Work Agency can launch a proactive investigation without a complaint, without a tip-off, without anything except deciding it would like to look at you. It can request records going back six years. It can issue notices of underpayment that recover everything owed, plus a penalty of up to 200% of the underpayment. And here's the bit that surprises small business owners. That penalty is capped at£20,000 per worker with a minimum of£100 per worker, not per business. So if you've got 10 people who've been underpaid for years, you're not looking at one fine. You're looking at 10 of them. It can publish names of non-compliant employers. In serious cases, it can refer for criminal prosecution. Its inspectors also have the power to force entry into business premises and to arrest in cases of serious labour abuse. That was confirmed in the regulations laid in early April. So the polite knock at the door is the easy version. The version where they don't have to be polite is also on the table. This is not a paper tiger. It is meaningfully bigger and more capable than what it replaced. And small businesses are absolutely on the radar. There's no lower threshold below which it doesn't apply. If you employ one person, the agency can come and look at how you're employing them. The hive check, the numbers. Let me give you some numbers because this is the bit that usually shifts the room. On March 19th this year, just weeks before the Fair Work Agency formally launched, the government published its latest naming and shaming list. 389 employers. Around 60,000 workers affected. And before you tell yourself this is just rogue operators in dodgy industries, on that list were Booper, Costa Hovis, and Norwich City Football Club. Big names, brands you'd assume had it sorted. They didn't. Previous rounds have caught Centrica, Holland and Barrett, Hugo Boss, Genting Casinos. The average underpayment per worker was around£750. The penalties on top were running at 200% of the underpayment. Now scale that up. The new Fair Work Agency has been given a remit and a budget that is significantly larger than that. Industry estimates suggest its enforcement activity will increase by between 30 and 50% in its first two years, with a particular focus on sectors that have historically had compliance issues: such hospitality, care, beauty, cleaning, retail, agriculture, and warehousing. But also, and this surprises people, professional services and small offices. Why? Because that's where the unpaid overtime, the holiday not given properly, and the salaried staff doing an extra eight hour stuff lives. You don't have to be a stereotypical, risky employer to fall foul. In fact, lots of small, well-meaning businesses fall foul because they've never sat down to check. The Fair Work Agency knows that, so it's going to look. The Sting, where small businesses trip up. Let me tell you the things I see most often in real small businesses that would not survive an inspection. 1. Minimum wage by mistake. And remember, from the 1st of April this year, the rates went up again.£12.71 an hour for everyone aged 21 and over.£10.85 for 18 to 20 year olds. If your payroll didn't move on the 1st of April, you've already got a problem. And the age bans trip people up more than anything else. If someone had a birthday last month and moved from the 18 to 20 rate to the 21 plus rate, did your system actually catch it? Most don't until somebody checks. Someone is on the minimum wage, they are salaried, they work an extra hour every Friday because that's just how the business runs. Do the maths on their hours and they're below NMW for that month. It's not malicious. It's not exploitation. It's just the spreadsheet maths catching up with you. 2. Holiday taken, but not properly recorded. Someone took a Friday off in March 2024. Was it holiday? Was it unpaid? Was it given on the boss's discretion? Nobody can quite remember. The notes lost. The system's been changed. Now the agency wants the records for six years. You don't have them. 3. Pay reference periods. If you have anyone on irregular hours, and most small businesses do, calculating holiday pay correctly post the 2024 reforms involves a 52-week reference period, ignoring weeks with no pay. Most small businesses have not done this calculation correctly. Some are still doing the old 12-week method. Some are using a flat percentage. Most are guessing. 4. Right to work, checks not properly done. A photo of a passport on someone's WhatsApp is not a right-to-work check. A copy of a library card or spoiler alert, a UK driving license in a folder somewhere, is not a right-to-work check. The check has to be done in a specific way, recorded and stored. And post-April 2026, the cost of getting this wrong has gone up. 5. Written statements of employment particulars. By law, every employee must have a written statement of particulars from day one, not when the offer letter feels nice and ready. Day one. In the small businesses I work with, when I do an audit, somewhere between 30 and 60% of staff don't have something that meets the legal minimum. I'm not telling you this to make you feel bad. I'm telling you because the agency knows where to look. And if the agency walks in next Wednesday, you don't get to say, we were going to tidy that up next month. The waggle dance, your calm action plan. Right, now the bit that helps. I want you to do four things over the next four weeks. Not all today, not in a panic, just steadily, one a week. Week one, pay audit, pull a report. Pick three employees, ideally the ones nearest minimum wage. Add up every hour they actually worked in a recent month. Divide their pay by those hours. Are they above minimum wage? If yes, great. Document the math somewhere, save it. If no, fix the pay now. Back date if appropriate. Write down what you did and why. Week two, holiday audit. And here's the kicker. As of the 6th of April this year, keeping records of annual leave and holiday pay is a statutory duty under the Employment Rights Act. Leave taken, carry over, holiday pay calculations, payments in lieu. The record keeping bit is no longer good practice. It is the law. So this week isn't a tidy up, it's compliance. Pick three employees. For each one, write down how much holiday have they accrued this year? How much have they taken? What's the running total? Where is this stored? In one place that everyone can see? If you have a holiday tracker that lives in WhatsApp messages, you have a problem. This week, give it one home. Week three, contract and statement audit. Pull every employee record. Does each one have a signed contract or written statement of particulars? Is it dated within their employment period? Does it match what they actually do? If anyone is missing one, fix that this month. Week four, right to work audit. Pull every employee record again. For each one, do you have a clear dated right to work check? Done in line with current Home Office guidance, stored properly? If anyone is missing one, get it sorted. Four weeks, four checks. Boring. But this is what the agency will look at. So this is what you check. The swarm, Mythbuster Parade. Right. Myth one, they only go after big employers. Wrong. The big employers usually have HR departments and lawyers. The agency knows that. The compliance gap, the actual money lying around uncollected for workers, is in small and medium businesses. You are on the radar. Myth two. If I don't have any complaints, I'm fine. Wrong. The agency does not need a complaint to inspect. Proactive inspections are part of the model. The first you'll know about it is when they're at the door. Myth three, I'll just say I didn't know. Saying you didn't know is not a defense. It might affect penalties at the margins, but it does not change whether you owe the money. Six years of underpaid holiday is six years of underpaid holiday, whether you knew about it or not. Myth four, my accountant is dealing with all of this, some of it possibly. However, your accountant is handling payroll mechanics, not employment law compliance. Pay slips being produced correctly is not the same thing as pay being calculated correctly. That's on you, not them. The honeycomb, your quick action list. Seven things to do this week. One, find out where your last 12 months of payroll records are actually stored, not somewhere, specifically. 2. Confirm that your holiday records are in one place, not three. 3. Check that every current employee has a signed contract or written statement of particulars on file. 4. Pick the lowest paid person in your business and check that on their last pay slip the actual hourly rate worked out above minimum wage. 5. Confirm right-to-work checks have been done for everyone you've hired since April 2024 in line with current Home Office guidance. 6. Write yourself a one-page summary of what you'd do if a fair work agency officer arrived tomorrow. Where would you take them? What would you give them? Who would help you? 7. Read my blog post on the Fair Work Agency, linked in the show notes. The legal detail lives there. Flying the hive. Right before I go. I know this episode might have ramped up your blood pressure a bit, it's meant to. A bit. But here's the truth. The businesses that get hurt by the Fair Work Agency will not be the ones that are slightly behind. They'll be the ones that did absolutely nothing when they were warned. If you listen to this episode, do the four-week plan and tidy the obvious things, you will almost certainly be fine. The agency is not out to crush small businesses. It is out to make sure that workers are paid properly, treated properly, and given the rights they're owed. Most of you, I know, want exactly that anyway. You just haven't quite got round to writing it down or checking the spreadsheet. This is your nudge. Calm, steady. This week, this month, not perfect, just better than yesterday. If this episode was useful, please share it with another small business owner. They probably haven't heard of the Fairwork Agency yet either. Find me at kateunderwoodhr.co.uk or email buzz at kateunderwoodhr.co.uk. Subscribe so you never miss an episode. And if you haven't left a review yet, it takes 30 seconds, it genuinely helps, and it is easily the cheapest good deed you'll do all week. More satisfying than a biscuit with your tea. Not quite as good as cake, but nearly. Until next time, keep buzzing and take care of your people. Kettle on, standards up.