A NEW government enforcement body, or ‘super agency’ — the Fair Work Agency (FWA) — launching today has attracted criticism from former Small Business Commissioner, Liz Barclay, who says small and micro businesses need “super support, not heavy-handed enforcement”.
The FWA, according to the Department for Business & Trade, will combine multiple regulators into one powerful agency that will support employers that want to comply with the law.
However, it will also “have strong powers to investigate and take action against businesses that flout the law, to level the playing field for compliant businesses”.
For example, where enforcement officers working for the FWA find that employers have underpaid their workers, they will be able to issue Notices of Underpayment that require the employer to pay workers their due and pay a penalty to the government.
The FWA will bring together the functions of the Gangmaster and Labour Abuse Authority, the Director of Labour Market Enforcement, the Employment Agency Standards Inspectorate and HMRC’s National Minimum Wage Unit.
One size does not fit all
Liz Barclay, Co-founder of Business111, a free advice platform for small and micro businesses, and former Small Business Commissioner, said the new agency could see unemployment increase further.
She said: “Small and micro-business owners make mistakes. They rarely set out to short change employees.
“We need to stop applying the same rules to small businesses as big ones with HR and finance departments. One size does not fit all and all we’re achieving is to drive people out of business and drive up unemployment. We need super support, not heavy-handed enforcement.”
The launch of the FWA follows increases to the National Minimum Wage at the beginning of April and comes a day after other changes that came into force on Monday under the Employment Rights Act.
They include Statutory Sick Pay (SSP) being made a “day one” right for all employees, regardless of income, day one right to paternity leave and unpaid parental leave and an increased protective award for collective redundancies.
Under the radar
Karen Watkins, Founder at management and HR consultants, Rowan Consulting, believes the myriad changes coming into force under the Employment Rights Act means the FWA has flown under the radar of most small and micro businesses.
She said: “While the updates coming into effect on 6 April are interesting and will undoubtedly add further administrative and cost burden for SMEs, there’s a much bigger issue that seems to be flying under the radar.
“Very little attention is being given to the introduction of the Fair Work Agency and the potential impact this could have on small businesses across the UK.
“Launching in April 2026, the agency has been designed to track down ‘non-compliant’ businesses. Inspectors will be able to visit workplaces, bring claims on behalf of employees and, to top it off, fines are going up.
“This shift could be far more consequential than the April changes themselves, particularly for smaller organisations that will undoubtedly already be stretched on compliance. The joy of owning a small business just got harder.”
Hiring a bigger risk
Meanwhile, small and micro business owners said the various employment law changes that have come into effect this month will see firms shelve their hiring and growth plans altogether, especially with the advent of AI.
Wesley Davidson, Director at Bristol-based FD Commercial, said: “Collectively, these changes make hiring a bigger risk for small businesses, full stop. Day-one sick pay, day-one parental leave, doubled compensation for redundancy failures and a minimum wage rise all hitting at once is a lot to absorb.
“I won’t pretend it doesn’t change the way you think about taking someone on. When the liability starts from day one, you think harder before you commit.
“The conversation around AI and automation in small businesses has shifted. It used to feel like something for bigger companies with bigger budgets. It doesn’t any more.
“When the cost and complexity of employing people keeps going up, the case for investing in technology that reduces that reliance gets stronger. That’s just the reality of where we are. The numbers are pushing small business owners in a direction, and it would be naive to pretend otherwise.”
State support
Ross Lacey, Director at Rayleigh-based Fairview Financial Management, agreed and said the taxpayer will ultimately pay: “With increased taxes on businesses and business owners, along with heavier regulation, it’s no wonder that many small businesses are more cautious when it comes to hiring and expansion.
“It feels as though there’s increasingly less incentive for business owners to grow or increase their workforce. Without small businesses creating more job opportunities, this has wider impacts on the reliance on state support from job hunters.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based Pattrn Data, added: “Small firms do not object to paying people properly. The real anxiety is unpredictability.
“When wage floors jump, sick pay becomes day one, and redundancy penalties double, every hire feels like a longer-term liability. That pushes cautious owners towards overtime, contractors, or simply doing less.”
Photo by Markus Spiske on Unsplash
