If you run a small business and employ (or plan to employ) staff, there’s a major change coming that you need to keep on your radar: the establishment of the Fair Work Agency (FWA) under the new Employment Rights Bill.

In short, this is going to strengthen enforcement of employment rights across the UK, consolidate existing labour-law enforcement bodies into one central agency, and introduce more robust powers to check, inspect, and penalise non-compliance.

Here’s what small business owners need to know — plus practical steps you can take now to stay ahead of the curve.

What We Know So Far: Scope, Powers & Timing

1. What Will the FWA Cover?
   The FWA will take on enforcement of key employment rights, some of which were already policed by separate bodies. These include:

• National Minimum Wage (NMW) compliance and record-keeping
• Statutory holiday rights and holiday pay (this is one of the new additions)
• Statutory Sick Pay (SSP)
• Employment agency standards / regulations
• Modern slavery / labour exploitation enforcement etc.
• The ability to enforce unpaid tribunal awards and other labour market obligations

It’s worth noting that the Bill is designed so that the list of rights the FWA enforces may expand over time.

2. What Enforcement Powers Will It Have?
   The FWA is not just a “watchdog” — it will be an active enforcement body with significant powers:

• Inspect workplaces and demand relevant documentation or records
• Require employers to provide undertakings or compliance plans, with legal backing
• Impose financial penalties for non-compliance (e.g. underpaid holiday, unpaid wages)
• Recover enforcement costs from employers
• Bring employment tribunal proceedings on behalf of employees (even if they do not wish to pursue it themselves)
• Provide legal assistance to workers in cases and potentially recover costs if the employer loses

3. When Will It Start?
   The current expectation is that the FWA will begin in or around April 2026, as part of the implementation of the Employment Rights Bill. That said, some of the underlying legislative changes will roll out earlier (2026–2027) in phases.

Because the Bill is still going through Parliament, the exact details (scope, powers, timeframes) may shift, so it’s important to stay updated.

Why Small Businesses Should Pay Attention

You might think, “This sounds like it’s more about big employers or organised sectors.” But actually, small businesses are very much within scope — and for good reason:

• Even for very small employers, failing to issue correct contracts, pay minimum wage, calculate holiday entitlements properly, or keep required records may attract investigation under the FWA umbrella.
• The FWA can initiate proceedings on behalf of a worker who might not bring a complaint themselves — so “low-profile” non-compliance is more likely to be exposed.
• As enforcement is consolidated, there’s less fragmentation and perhaps faster response times than under the current patchwork system.
• The financial penalties and cost recovery powers increase the risk of non-compliance being expensive, rather than just a “risk” you take.

In short: The goal is to “level the playing field” so that businesses that comply are not undercut by those that don’t.

How to Stay Ahead — Practical Steps for Your Business

Here’s how to get your business ready now, so you’re not caught off guard when the FWA becomes fully operational:

1. Review & Clean Up Your Contracts & Policies

• Make sure employment contracts / statements of terms are issued to every employee on or before day one, as required.
• Ensure your contracts clearly state pay, hours, holiday entitlement, benefits, notice periods, etc.
• Develop and maintain up-to-date HR policies (holiday, sick pay, grievance, disciplinary, flexible working, etc.).
• Include clauses for rights that might become more tightly enforced (e.g. flexible working from day one, protections from day one).

2. Check Pay & Record-Keeping

• Verify that all staff are paid at least the National Minimum Wage / National Living Wage appropriate to their age and status.
• Ensure records of wages, hours worked, deductions, etc. are complete and retained for the legally required period.
• For holiday pay, review your method of calculating for regular hours, irregular hours, part-year workers, etc. The FWA will enforce holiday pay compliance.
• Ensure your holiday records (amount taken, pay, accrued entitlements) are well documented, ideally for at least six years (as the Bill would require record retention for holiday entitlements).

3. Set Up Proper HR & Compliance Structures

• Even if you are a small company, establish clear HR oversight (whether done internally or via external support).
• Create a compliance checklist covering key legal obligations (contracts, pay, holiday, SSP, right to work, record-keeping, etc).
• Conduct periodic audits (quarterly or annually) to verify compliance.
• Stay informed about changes in employment law as the Bill progresses through Parliament.

4. Document EVERYTHING

• If the FWA investigates, being able to show that you acted in good faith, had policies and procedures in place, and documented your decisions can be a strong defence.
• Keep logs of training, disciplinary proceedings, holiday calculations, flexible working requests, etc.

5. Seek Expert HR Support Early

• Don’t wait until enforcement is in full swing — get professional guidance now.
• Use external HR support to review your documents and processes, catch gaps, and put in place “future-proofed” systems.

How Tower HR Can Help You Get Ready

At Tower HR Services, we specialise in supporting small and growing businesses through exactly these kinds of transitional moments. Here’s how we can support you in preparing for the Fair Work Agency regime:

• Compliance audit & gap analysis: We’ll review your current contracts, policies, payroll practices, holiday calculations, record-keeping, etc. and highlight areas you need to fix.
• Document and policy drafting: We can provide or customise employment contracts, statements of particulars, HR policies (holiday, sick pay, grievance, disciplinary, flexible working, etc.) to make sure they meet current requirements and are adaptable as the law evolves.
• Ongoing remote HR support: As the legislation finalises, we’ll keep you updated and advise whether you need to tweak documentation or procedures.
• Payroll provider referral & oversight: If you don’t already have a payroll provider, we can help put you in touch with reputable ones and help ensure your payroll is set up to meet the new compliance demands.
• Training & guidance: We can support you (and your managers) with training on HR compliance and how to handle investigations or audits, so you’re confident.

We’re not about locking you into long contracts or tying you into services you don’t need. Our aim is to equip you with the right tools and support to navigate these changes with confidence—especially as a small employer.

If you’d like us to take a look at your current HR setup or help you get “FWA-ready,” drop me a message and we’ll talk through how we can help you be ahead, not behind.