The Fair Work Agency (FWA) will be responsible for enforcing workers' rights to statutory holiday pay. On 30 June 2026, the government published a consultation on the FWA's proposed approach to holiday pay compliance and enforcement.
Background
The FWA was established on 7 April 2026, under powers granted to the government in the Employment Rights Act 2025 (ERA 2025). It will act as a single labour market enforcement body, taking over the functions of the various existing bodies that are responsible for enforcing the minimum wage, statutory sick pay and modern slavery. As noted above, it will also be given responsibility for enforcing workers' rights to statutory holiday pay.
The FWA will have wide ranging powers, including the power to impose notices of underpayment on employers who have failed to pay certain statutory payments, requiring them to pay the arrears to the worker and a financial penalty to the government, and the power to bring employment tribunal proceedings on workers' behalf.
Facts
The calculation of holiday pay is notoriously complex, and the consultation acknowledges that much non-compliance may be inadvertent. It also highlights data indicating that the level of non-compliance is much greater than the number of employment tribunal claims for underpaid holiday pay would suggest, meaning that many workers are not taking steps to enforce their rights. It therefore seeks information on workers' experiences of holiday underpayments, and employers' views on how easy or difficult it is to comply with the law.
The consultation makes clear that the FWA will enforce statutory holiday pay only. (As is the case now, any claims relating to additional contractual holiday entitlements would only be enforceable by the individual worker in the employment tribunals or the civil courts.) FWA enforcement will not replace the right for a worker to bring their own statutory holiday pay claim in the employment tribunal. The consultation does specify that a worker will not be able to recover the same arrears from both the tribunal and the FWA. However, it is not clear from the consultation how such double-recovery will be prevented in practice.
The government favours a supportive approach to enforcement, with the FWA focusing first on helping employers to comply with the law and only taking punitive action where necessary. The consultation therefore seeks views on what support, tools and guidance employers would find helpful to understand their obligations. In particular, the consultation asks whether employers and workers would welcome tools such as a detailed holiday pay calculator, a chatbot or digital assistant to enable interaction with the FWA, and/or more consolidated and centralised guidance.
The consultation seeks views on the period within which the FWA should be able to take enforcement action. The proposed period is six years, which aligns with the period for which employers are required to keep records of holiday pay. However, the consultation notes that the FWA will only be able to enforce holiday pay claims in respect of underpayments that occurred after the ERA 2025 received Royal Assent, i.e. from 18 December 2025. (The holiday pay record keeping obligation was introduced by the ERA 2025 and came into force on 6 April 2026. See our previous article for further details.)
Enforcement action is proposed to mirror the approach taken in relation to the national minimum wage, with notices of underpayment requiring the offending employer to pay any arrears to the worker plus a financial penalty to the government. There may also be a naming and shaming scheme to publicly identify non-compliant employers. The consultation proposes that the financial penalty amount is set at 200% of arrears per worker, reduced to 100% if the full arrears and half of the penalty amount are paid within 14 days. This would also be subject to a minimum penalty of £100 per case and a maximum penalty of £20,000 per worker.
The government intends the FWA to target its interventions at lower-paid workers and those in precarious employment. It seeks views on how this could be achieved, suggesting:
- A cap on the maximum arrears a worker can receive from FWA enforcement, to encourage higher paid workers to enforce their own rights in the employment tribunals rather than relying on the FWA
- Triaging complaints to focus the FWA's activity on lower-paid workers, again to encourage higher paid workers to use the employment tribunal route
- Targeting proactive compliance and enforcement activity towards geographical areas where there are higher concentrations of lower-paid workers or workers in precarious employment
Finally, the consultation seeks information on the extent to which employers have adopted rolled-up holiday pay for their irregular hours and part year workers since this became lawful under reforms to the Working Time Regulations in 2024.
What does this mean for employers?
The consultation closes on 22 September 2026. The government has stated that it intends for the FWA to begin holiday pay enforcement in 2027.
Practically, the impact of FWA enforcement will depend on how well it is resourced. However, given the complexity of the law on holiday pay, inadvertent non-compliance is not uncommon. If it receives a complaint, the FWA will be able to assess compliance for an employer's entire workforce, not just an individual worker. It will also be able to review an employer's compliance with multiple aspects of employment law at the same time, e.g. holiday pay and the minimum wage. Employers should therefore take steps to review their holiday pay calculations now and remedy any inadvertent non-compliance before the FWA's responsibility for enforcement takes effect.
Consultation: Make Work Pay: holiday compliance and enforcement
