Key takeaway: The Fair Work Agency (FWA) launched on 7 April 2026, consolidating HMRC’s National Minimum Wage enforcement into a powerful new body with expanded scope, unannounced inspection powers, and the ability to demand six years of payroll records. The FWA’s remit now extends beyond NMW to holiday pay and statutory sick pay — making compliance more complex and the consequences of failure more serious. For payroll bureaus, this is a signal to audit every client payroll for the technical errors that catch even well-run businesses out.
The Fair Work Agency is not simply a rebrand of HMRC’s NMW enforcement team. It is a significantly enhanced enforcement body with a broader mandate, greater resources, and a clear intention to increase the volume and intensity of compliance activity. From its first week, the FWA has the authority to carry out unannounced workplace visits, require access to premises, payroll systems, and records without advance warning, and demand documentation stretching back six years. Unlike a tax investigation that is typically triggered by a specific concern, FWA inspections can be initiated proactively — no complaint from a worker is required.
The scale of the compliance challenge should not be underestimated. Major household brands have appeared on HMRC’s previous NMW enforcement lists — not because they were paying poverty wages, but because they were caught by technical rules that interact in ways that are easy to miss. For payroll bureaus managing dozens or hundreds of employer clients, ensuring every payroll is clean across all the relevant rules requires both the right processes and the right software.
What the Fair Work Agency Can Investigate
The FWA’s enforcement remit covers three areas that payroll bureaus need to understand:
National Minimum Wage. Employers must pay at least the relevant NMW rate — £12.21 per hour for workers aged 21 and over from April 2026, with lower rates for younger workers and apprentices. The NMW calculation is not simply gross pay divided by hours. Deductions from pay — for uniforms, tools, accommodation, salary sacrifice arrangements — can reduce the effective hourly rate below the legal minimum even when headline pay rates appear compliant.
Holiday pay. The FWA can investigate underpayment of statutory holiday pay, which has been an area of significant legal development over recent years. Workers whose pay varies — commission earners, those who regularly work overtime — must have holiday pay calculated to reflect their normal remuneration, not just their basic contractual rate. Many employer payrolls still calculate holiday pay on basic pay only, which is non-compliant.
Statutory sick pay. SSP underpayments — whether through incorrect rate application, missed entitlement, or inadequate records — are also within the FWA’s scope. For employers with high turnover or complex shift patterns, SSP compliance requires accurate absence recording that links cleanly to payroll.
The Most Common NMW Traps for Employer Clients
Salary sacrifice and NMW. Where an employee has a salary sacrifice arrangement — most commonly for pension contributions, cycle-to-work, or electric vehicle schemes — the NMW assessment is made after the sacrifice, not before. An employee earning £13.00 per hour who sacrifices £1.50 per hour into a pension is effectively being paid £11.50 per hour for NMW purposes — below the £12.21 minimum. This catches employers who set up salary sacrifice arrangements without checking the NMW floor, particularly for lower-paid workers.
Deductions for uniforms and equipment. Any deduction from pay — even for items that benefit the worker — reduces effective pay for NMW purposes. A £30 monthly deduction for a uniform on a minimum wage salary produces a shortfall. Many employers are unaware that even voluntary deductions for items the worker has consented to can create NMW liability.
Working time not captured in the payroll. Time spent by workers travelling between sites, attending mandatory training, waiting to start a shift at the employer’s direction, or completing end-of-shift administrative tasks all counts as working time for NMW purposes. Where payroll is calculated only on rostered hours, and additional time is not captured, the effective hourly rate may be lower than it appears.
Sleep-in shifts in the care sector. The treatment of sleep-in shifts for care workers has been subject to extended litigation. The current position, following the Supreme Court’s ruling in Mencap, is that sleep-in time is not NMW working time unless the worker is required to be awake for the purpose of working. For care sector clients, payroll bureaus should ensure the treatment of sleep-in shifts is consistently applied and defensible.
How BrightPay Supports NMW Compliance
BrightPay is designed to surface NMW compliance issues before they become enforcement problems. It automatically flags where an employee’s calculated hourly rate — after applying the payroll deductions recorded in the system — falls below the relevant minimum wage for that worker’s age band. This check runs against each pay period, so salary sacrifice adjustments, mid-period deductions, and hours variations are all captured in real time rather than identified retrospectively in an audit.
For payroll bureaus, BrightPay‘s visibility across all client payrolls means that an NMW warning on any client’s payroll is surfaced to the bureau as part of the standard payroll run review, rather than remaining invisible until an FWA inspector arrives. The six-year record-keeping requirement is met through BrightPay’s audit trail of payslip calculations, payroll submissions, and RTI filings — giving bureaus a complete, dated record of every pay period that can be produced for inspection.
BrightPay’s holiday pay calculation supports the correct treatment of variable pay — capturing regular overtime and commission in the holiday pay reference period — so that holiday pay for workers with variable remuneration reflects their actual normal earnings rather than just a basic rate.
What Payroll Bureaus Should Do Now
The launch of the Fair Work Agency is the right moment to run a compliance review across all client payrolls, focused on the three areas most likely to generate inspection risk: salary sacrifice arrangements near the NMW floor, holiday pay calculation methodology for workers with variable pay, and time recording practices for workers in sectors with non-standard working patterns (retail, hospitality, care, logistics).
For clients where compliance gaps are identified, remediation should be documented — correcting pay going forward and, where appropriate, making good any historic underpayments before the FWA arrives. Voluntary correction before an inspection typically produces a better outcome than corrections made under enforcement pressure.
Frequently Asked Questions
What is the Fair Work Agency and when did it launch?
The Fair Work Agency is a new enforcement body that launched on 7 April 2026, consolidating HMRC’s National Minimum Wage enforcement functions. It has expanded scope to investigate holiday pay and statutory sick pay underpayments alongside NMW, the power to conduct unannounced workplace inspections, and the ability to demand up to six years of payroll records.
Does the FWA only investigate businesses following a worker complaint?
No. The FWA can initiate proactive inspections without a complaint from a worker. It uses risk profiling and sector intelligence to identify employers likely to have compliance issues, meaning any employer in a high-risk sector — retail, hospitality, care, logistics — is potentially subject to inspection regardless of whether any worker has raised a concern.
How does salary sacrifice affect NMW compliance?
Salary sacrifice reduces the pay on which NMW is assessed. An employee earning the minimum wage who enters a salary sacrifice arrangement for pension contributions, a cycle-to-work scheme, or an electric vehicle lease will have their effective hourly rate reduced below the NMW floor. Employers must check the post-sacrifice pay rate for all affected employees, particularly those on or near the minimum wage.
What records must employers keep for NMW compliance?
Employers must maintain records sufficient to demonstrate NMW compliance for six years after the end of the relevant pay reference period. This includes payslips, payroll reports, timesheets, rotas, and contracts. For workers with variable hours, detailed time records are essential.
How does BrightPay help bureaus identify NMW compliance risks?
BrightPay automatically flags where a worker’s effective hourly rate — after all recorded deductions — falls below the applicable NMW rate for their age band. This check runs each pay period, covering salary sacrifice deductions and other adjustments. The system maintains a full audit trail of payslip calculations and RTI submissions, meeting the six-year record-keeping requirement and providing a complete record for FWA inspection.
BrightPay calculates NMW compliance automatically across every client payroll, flags risk before problems escalate, and maintains the six-year payroll record the Fair Work Agency can request at any time. Find out more about BrightPay or speak to your account manager.
