Fair Work Agency Launches April 7: What UK Small Businesses Need to Know

Q: Statutory Sick Pay — Day One

From April 6, SSP is payable from the first day of illness. The current three-day waiting period, in place since 1983, is abolished.

Published: 28 March 2026
Author: ComplianceAlert
Category: Employment Law, UK Compliance
Slug: fwa-launch-april-7-2026
Target keywords: Fair Work Agency April 2026, Fair Work Agency launch date, Fair Work Agency small business, FWA 200% penalty, Fair Work Agency NMW enforcement
Meta description: The Fair Work Agency launches April 7, 2026 — replacing HMRC with tougher NMW enforcement, 200% penalty surcharges, and powers covering sick pay and holiday pay. Every UK employer needs to read this before Tuesday.
Internal links: /hospitality, /retail, /construction, /features, /pricing
Word count: ~1,100

On April 7, 2026, the UK's approach to employment law enforcement changes permanently.

The Fair Work Agency launches — and if you employ anyone in Britain, your compliance risk just went up.

This isn't a minor administrative change. The FWA replaces HMRC's National Minimum Wage enforcement team with a standalone body that has significantly greater resources, broader legal powers, and an explicit mandate to target non-compliant employers across hospitality, retail, and construction.

This week, HMRC publicly named 400 UK employers who owe a combined £7.3 million in wage underpayments. From April 7, that naming power passes to the FWA — along with new financial penalties that didn't exist before.

Here's what every small business employer needs to know.

What Is the Fair Work Agency?

The Fair Work Agency is a new statutory enforcement body created under the Employment Rights Act 2025. It formally comes into existence on April 7, 2026.

It absorbs and replaces HMRC's National Minimum Wage compliance team — but its mandate is far broader. Where HMRC only enforced wage rates, the FWA enforces:

National Minimum Wage and National Living Wage — including all categories of worker
Statutory Sick Pay (SSP) — a new enforcement power; HMRC previously had no SSP remit
Holiday pay entitlements under the Working Time Regulations and ERA 2025
Tips and gratuities distribution under the Employment (Allocation of Tips) Act 2023

The FWA also has an enhanced naming and transparency function: it will publish employer non-compliance findings more frequently and more prominently than HMRC's annual naming rounds.

The 200% Penalty: Why This Changes Everything

Under HMRC's existing enforcement regime, employers found to have underpaid workers faced:

An order to repay arrears to workers
A civil penalty of up to 200% of total arrears (already in statute but rarely applied at maximum)
Possible public naming

From April 7, the FWA applies a 200% surcharge as standard for substantiated underpayment cases.

In plain terms: if you owe a worker £500 in wages, you will pay:

£500 back to the worker (arrears)
£1,000 to the government (200% penalty)
Total: £1,500 for a £500 underpayment

The maximum civil penalty per underpayment case is £20,000 per worker. For a hospitality or retail employer with 20 staff, that's up to £400,000 in potential penalties from a single investigation.

This is not a new maximum in statute. What's new is that the FWA has indicated it intends to apply penalties at this level as a matter of enforcement policy — not as an exceptional outcome.

This Month: 400 Employers Named, £7.3 Million in Fines

The scale of existing enforcement gives context for what the FWA is inheriting.

A survey by RSM (reported in Retail Gazette on March 27) confirmed that HMRC named 400 UK employers this month alone for a combined £7.3 million in NMW underpayments. The named employers span retail, hospitality, leisure, and professional services.

Retail is explicitly identified as the primary enforcement target for the FWA's first year of operation. Hospitality follows as a close second. Construction is third, particularly in the context of the CIS changes also taking effect on April 6.

The common thread: sectors with high concentrations of hourly, part-time, zero-hours, and seasonal staff — and, correspondingly, high rates of (often inadvertent) wage compliance failures.

What Changes on April 6 — One Day Before

The FWA launch is April 7, but April 6 brings its own set of mandatory changes under the Employment Rights Act 2025:

Statutory Sick Pay — Day One

From April 6, SSP is payable from the first day of illness. The current three-day waiting period, in place since 1983, is abolished.

Every employee — including part-time, zero-hours, and casual workers — qualifies from day one of absence. The lower of 80% of average weekly earnings or £123.25/week applies.

For small employers with staff who take intermittent single-day absences, this is a material payroll cost increase. The FWA's SSP enforcement mandate means underpayments here carry the same penalty exposure as NMW failures.

Holiday Pay Records — Now Mandatory

Employers are required to maintain complete holiday pay records from April 6. In any FWA investigation, absence of records creates a presumption of non-compliance. The burden of proof shifts to you.

Collective Redundancy Protection — Doubled

The protective award for failure to collectively consult on redundancies doubles from 90 days' pay to 180 days' pay per affected employee. For any retail chain, care group, or hospitality operator planning restructuring in 2026, this is a significant increase in liability exposure.

Which Sectors Are Most at Risk?

The FWA's published enforcement priorities for Year One identify:

Retail as the primary sector, based on the volume of NMW investigations, the complexity of promotional/seasonal staffing patterns, and evidence from the RSM survey that 29% of retailers are already cutting entry-level roles — often a signal of NMW compliance pressure.

Hospitality as the second priority, given the combination of tipping law compliance (Tips Act 2023), NMW complexity around service charges, and the combined impact of business rates changes and NLW increases from April 1.

Construction third, particularly given the CIS supply chain liability changes taking effect April 6 (which the FWA will coordinate with HMRC to enforce).

There is no sector in which the FWA has no enforcement interest. Professional services firms, care providers, and office employers should not assume they are lower priority indefinitely.

What You Need to Do Before April 7

For most small businesses, the practical steps are straightforward:

1. Confirm your NLW rate is correct from April 1
The National Living Wage rises to £12.71/hr on April 1. This is not a FWA change — but the FWA will enforce it from April 7. If you haven't updated payroll, do it today.

2. Check your payroll handles SSP from day one
Most payroll software will update automatically — but verify with your provider that the April 6 rule change is applied. Manually processing SSP without updating the waiting period creates liability.

3. Audit your tip distribution process
If you operate a tronc or manage tip allocation, review whether your arrangements comply with the Employment (Allocation of Tips) Act 2023. The FWA's tipping enforcement mandate is new territory — many employers are non-compliant without realising it.

4. Update your sick pay policy documentation
Remove all references to the three-day waiting period from your employee handbook, contract templates, and HR policy documents. An out-of-date policy is evidence of non-compliance.

5. Start maintaining holiday pay records now
If you don't already track holiday pay per employee with a clear audit trail, implement something before April 6. A spreadsheet with dates and amounts is better than nothing.

The Bottom Line

The Fair Work Agency's launch on April 7 doesn't change what you owe your workers. The law on minimum wage, sick pay, holiday pay, and tips has been in place for years.

What changes is the enforcement architecture. The FWA has more investigators, more powers, a broader mandate, and an explicit directive to be more active than its predecessor.

The 200% penalty surcharge means the cost of a single underpayment finding is three times the underlying wages owed. For a 10-person business at minimum wage, a successful FWA investigation could realistically cost you six figures.

The businesses that will be fine are the ones who know their obligations and keep records that prove it.

ComplianceAlert monitors Fair Work Agency enforcement updates, NMW rate changes, and every UK employment law deadline in real time. We alert you when something relevant to your sector changes — so you know before the FWA does.

Free 14-day trial at compliancealert.co.uk

Last updated: 28 March 2026. The Fair Work Agency formally launches 7 April 2026. Information accurate as of publication date.