Fair Work Agency - what schools need to know

What is the Fair Work Agency?

The Fair Work Agency (FWA) was established under the Employment Rights Act 2025. It consolidates several enforcement functions into a single body, improving the consistency and effectiveness of employment rights enforcement across the UK.

The FWA brings together HMRC’s National Minimum Wage enforcement team, the Employment Agency Standards Inspectorate (EASI), and the Gangmasters and Labour Abuse Authority (GLAA).

Enforcement powers

The FWA inherits existing enforcement powers from HMRC, EASI, and GLAA, enabling it to investigate and penalise non-compliant employers. Existing HMRC enforcement teams are transferring to the FWA to maintain continuity in NMW enforcement.

NMW compliance is a key early priority for the new agency. Enforcement activity will include audits, inspections, and the public naming of non-compliant employers. Schools found to have underpaid staff face not only back-pay obligations and financial penalties, but also significant reputational damage.

Why NMW compliance is a risk area for schools

While schools may not seem like high-risk employers, the pay arrangements commonly used for support staff, casual workers, apprentices, and term-time only contracts can present specific NMW compliance challenges.

One common risk area is failing to accurately record and pay for additional hours worked. While contracts may permit schools to require additional hours without pay (unless agreed in advance), a careful record of actual hours worked must still be kept to ensure pay remains NMW compliant.

Schools must also ensure that any deductions from pay do not reduce wages below the NMW threshold.

Steps schools can take to ensure compliance

Conducting a voluntary audit now is far preferable to responding to an FWA investigation later. To mitigate the risk of non-compliance, schools should implement robust systems for monitoring pay and working hours. The following steps can help:

• Conduct regular audits of roles most likely to be affected by NMW regulations, particularly lower-paid and term-time only positions. These audits should examine pay arrangements and working hours to identify any discrepancies.
• Pay close attention to younger workers and apprentices. The government is committed to lowering the National Living Wage age threshold from 21 to 18, and the 18-20 year old rate increased by 8.5% in April 2026 (compared to 4.1% for the adult NLW). Schools employing younger workers should expect significantly higher year-on-year pay increases and ensure their payroll systems can accommodate these changes.
• Update payroll systems to reflect the latest NMW rates, ensure that deductions do not cause pay to fall below the legal threshold, and train line managers on the risks associated with unpaid additional hours.
• Ensure that the hours of work for term time only (or other part year staff) can be ascertained (through clarity of working hours and weeks) to ensure that the NMW calculation can be smoothed out and an average taken across the year.
• For staff with boarding commitments ensure that there is a system for recording hours that they are disturbed and working overnight or outside of their usual working hours.
• Maintain comprehensive records of pay rates, working hours, and any deductions. Good record-keeping helps prevent breaches and provides evidence of compliance in the event of an audit or inspection.

The Fair Work Agency represents a significant shift in employment rights enforcement in the UK. Proactive compliance is always easier and less costly than dealing with an investigation. By auditing pay practices now, training managers, and maintaining accurate records, schools can address any issues before they attract regulatory attention.

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For further advice or assistance, please contact Alice Reeve.