The Fair Work Agency Is Here: How BrightPay Helps Payroll Bureaus Keep Every Client NMW Compliant

The Fair Work Agency (FWA) launched on 7 April 2026, bringing together labour-market enforcement functions previously split across the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority into a single body. Enforcement of the National Minimum Wage is expected to transfer from HMRC to the FWA from April 2027, and the FWA’s remit is set to extend to holiday pay and statutory sick pay as it is rolled out in phases through 2026 and 2027 — making compliance more complex and the consequences of failure more serious over time. 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 a new enforcement body with a broader eventual mandate, established under the Employment Rights Act 2025. 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 — initially in respect of the functions it inherited from EASI and the GLAA, with National Minimum Wage enforcement due to transfer from HMRC during the 2026/27 transitional year. Unlike a tax investigation that is typically triggered by a specific concern, FWA inspections can be initiated proactively, so 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.

This blog is part of our series on Payroll Processing and Management: Scaling Your Bureau.

What the Fair Work Agency Can Investigate

The FWA’s eventual enforcement remit covers three areas that payroll bureaus need to understand:

National Minimum Wage. Employers must pay at least the relevant NMW rate — £12.71 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. NMW enforcement currently remains with HMRC and is scheduled to transfer to the FWA from April 2027.

Holiday pay. The FWA’s remit is intended to extend to 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 intended to fall within the FWA’s eventual 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 £12.71 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 applies the correct NMW rate for each employee’s age band when calculating pay, and maintains payslip and payroll submission records that support the records bureaus are required to keep. Reviewing each client’s effective hourly rate after deductions — particularly following

salary sacrifice adjustments, mid-period deductions, or hours variations — remains a check bureaus should build into their standard payroll run review, and BrightPay’s payroll data supports that check.

The six-year record-keeping requirement is supported by BrightPay’s retained payslip, payroll submission and RTI filing history for every pay period — giving bureaus a dated record they can produce for inspection. BrightPay also has a dedicated audit trail specifically for the bureau-client payroll entry and approval request workflow, automatically updated at each step and unable to be altered after the fact.

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.

Want to improve your payroll bureau profitability? Check out our blogs on How to scale your payroll bureau profitably, how payroll bureaus can scale with cloud payroll software and How Should Payroll Software Deliver ROI for a Bureau?

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This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.