The UK government consults on enforcement of statutory holiday pay by new Fair Work Agency

As many look forward to their summer holiday, the Department for Business and Trade has published a consultation paper, Make Work Pay: holiday pay compliance and enforcement, seeking views on the Government's proposed approach to statutory holiday pay compliance and enforcement by the Fair Work Agency ('FWA') from 2027.

The FWA was established on 7 April 2026. Its purpose is to bring together various enforcement functions that were previously exercised by multiple bodies, including enforcement of the national minimum wage, statutory sick pay and holiday pay.

Currently, statutory holiday pay (i.e. holiday pay that a worker is entitled to under the Working Time Regulations 1998) can only be enforced via a claim by a worker to an employment tribunal. From 2027, the FWA will carry out enforcement alongside the tribunal system. The intention is for the FWA to take a ‘whole employer’ approach and look at an employer’s compliance with holiday pay law in relation to all their workers, rather than only dealing with a worker’s complaint in isolation.

The consultation document, which was published on 30 June 2026, states that the focus of the FWA will be on supporting employers to comply with the law and only to take punitive enforcement action where necessary. It notes that holiday pay can be difficult to navigate, even for well-intentioned employers, and can lead to accidental non-compliance and underpayment. The FWA will therefore raise awareness and offer guidance to employers, as well as providing opportunities for employers to correct any underpayment rather than moving straight to penalties.  

With the above in mind, the Government is consulting about what support and guidance the FWA can provide to help support compliance. Suggestions include a more detailed calculator or self-assessment tool to help employers and workers work out holiday entitlement and holiday pay, and a chatbot or digital assistant to help users navigate holiday pay support interactions with the FWA.

The Government is also seeking views on a number of other important features, including how compliance and enforcement should be targeted, how far back the FWA can enforce claims, and how penalties should be set. The key proposals are as follows.

• Holiday claims will not be enforceable by the FWA if they occurred before the date on which the Employment Rights Act 2025 received Royal Assent, i.e. 18 December 2025.
• The claim period for FWA enforcement of holiday pay will be set at a maximum of six years (which aligns with the six-year period for which employers must keep holiday pay records).   
• The civil penalty settings for holiday pay enforcement (which align with those for minimum wage compliance and enforcement) will be: 
  • a penalty amount of 200% of arrears owed per worker;
  • a maximum penalty of £20,000 per worker; and
  • a minimum penalty of £100 per case (whether involving one or multiple workers).

The consultation also asks for views on three options for how the FWA can focus holiday pay enforcement on lower-paid workers and those in more vulnerable or precarious employment. They are: (1) setting a cap on the maximum arrears a worker can receive from FWA enforcement; (2) triaging holiday pay complaints from lower-paid workers to focus on them; or (3) proactively targeting compliance and enforcement by geographical area. 

Finally, the Government is seeking views on rolled-up holiday pay, including how it is being used in practice. In particular, in 2024, changes to the Working Time Regulations 1998 introduced the option for employers to use rolled-up holiday pay for workers with irregular hours or part-year working patterns. The Government wants to know how this is working.  

Comment

While the consultation covers a lot of ground, it does not address a number of practical issues. For example, it is apparent that workers may bring claims in the employment tribunal in addition to them being enforced by the FWA. Indeed, those who have missed the tribunal time limit may still be able to have underpayments enforced by the FWA. However, it is unclear how enforcement will work when both avenues are pursued, e.g. will employers end up having to defend themselves in the employment tribunal and then have to deal with the FWA? How will double recovery be policed? As ever with the Employment Rights Act 2025, we await further information, but employers should check that their holiday pay systems, contracts and policies stand up to scrutiny. 

The consultation closes at 11.59 pm on 22 September 2026. If you have any views that you would like the employment team to express on your behalf, please don't hesitate to get in touch. If you would prefer to respond directly you can do so using the link above.

This article is authored by Melissa Paz, Special Counsel in the UK employment team.