A new enforcer, and a new sick pay rule, on the same day
On April 7, 2026, the UK's Department for Business and Trade switched on the Fair Work Agency, a single body created under the Employment Rights Act 2025 to take over enforcement work that used to sit across three separate organizations: HMRC's minimum wage team, the Employment Agency Standards Inspectorate, and the Gangmasters and Labour Abuse Authority. The same week, a separate set of changes took effect that has nothing to do with the new agency's structure but everything to do with what it will be checking: statutory sick pay became payable from the first day of illness instead of the fourth, and the lower earnings limit that had excluded the lowest-paid workers from SSP altogether was removed.
Three months on, the two changes have started to intersect in ways that payroll and HR teams are only now working through.
What the agency can actually do
The Fair Work Agency's enforcement policy statement, published on gov.uk alongside its launch, sets out powers wider than any of its three predecessor bodies held individually. It can inspect workplaces, demand payroll and leave records, issue Notices of Underpayment requiring repayment within 28 days, add a civil penalty of up to 200% of the underpaid amount capped at £20,000 per worker, and bring employment tribunal claims on a worker's behalf without the worker having to file one themselves.
Its initial remit, confirmed in the government's strategic steer for the 2026/27 transitional year, covers National Minimum Wage compliance, holiday pay, statutory sick pay, and modern slavery risk in labour supply chains. Full transfer of minimum wage enforcement from HMRC is not scheduled until April 2027, so this first year is explicitly framed as transitional: the agency is expected to match its predecessors' enforcement volume while building the case-management and data systems to run a combined regime.
The recordkeeping duty is the part hitting payroll systems now
Less discussed than the agency's headline powers is a recordkeeping requirement that took effect the same day. Employers now have a statutory duty to keep records of both annual leave entitlement and holiday pay calculations, and to retain them for six years. Failure to keep adequate records is a criminal offence carrying a fine, not just a civil finding.
For a UK-based payroll or HR team, that duty lands on top of the SSP change rather than beside it. The Association of Taxation Technicians and other advisory bodies covering the April changes have flagged that many payroll systems built to calculate SSP with a waiting period and a lower earnings threshold needed configuration changes to handle first-day eligibility for workers previously excluded entirely. Where those systems also generate the holiday pay records now subject to six-year retention and FWA inspection, a miscalculation on either side is no longer just a pay query. It is a record the agency is entitled to demand.
Why the transitional framing matters for vendors and employers
The government's own strategic steer describes 2026/27 as "enhanced business as usual" rather than a year of aggressive new enforcement, and advisory firms including PKF Francis Clark and Citation have echoed that reading: the agency inherited live caseloads from HMRC, EASI and the GLAA and is prioritizing continuity over expansion in year one. That is a narrower claim than some early coverage suggested when the FWA was first proposed, and it matters for how HR and payroll vendors should be pitching readiness to UK customers this year. The immediate compliance burden is less about a newly aggressive inspector and more about whether SSP logic, holiday pay records and retention periods are correctly built into the systems generating them, because those are the specific areas named in the agency's initial remit.
What to watch next
The agency's full move to Notices of Underpayment activity and its absorption of National Minimum Wage enforcement from HMRC are the two developments to track over the next year, since both will show whether the "business as usual" framing holds once the transitional period ends in April 2027. For now, the concrete change already live is narrower and more mechanical: SSP calculated from day one, holiday pay records held for six years, and a single agency with the legal standing to ask for both.