Enforcement

Policy

Single Enforcement Body

Currently, most employment rights are enforced by the individual through an employment tribunal and only a limited number of (mainly pay-related) rights are enforced by the state on behalf of workers.

The Government has promised to establish a new single enforcement body (or ‘Fair Work Agency’), which is intended to improve and expand the system of enforcement of employment rights.

The Employment Rights Bill:

• Paves the way for the establishment of the Fair Work Agency as an executive agency of the Department for Business and Trade. It contains provisions permitting the Secretary of State to delegate labour market enforcement functions to a public authority and to appoint enforcement officers. The Next Steps Paper confirms that this will be the new Fair Work Agency, which will bring together existing enforcement functions such as the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement (which will both be abolished) and other certain enforcement functions including those of HMRC (who currently enforce national minimum wage).
• Sets out the enforcement functions within the Fair Work Agency’s remit, in respect of relevant labour market legislation, including national minimum wage and statutory sick pay; employment agencies and employment businesses; the unpaid employment tribunal award penalty scheme; labour exploitation (gang masters) and modern slavery; introduces the enforcement of holiday pay and annual leave, the new obligation to keep records for annual leave (see the Annual leave records section) and certain offences of fraud under the Fraud Act 2006 when committed in relation to a worker or work-seeker.
• Gives powers for the enforcement functions listed above to be expanded in the future to include other relevant labour market legislation. This fact sheet indicates that the Fair Work Agency will take on enforcement of a wider range of rights over time.
• Includes detailed provisions setting out broad enforcement powers, including: to appoint enforcement officers; to obtain documents or information from individuals and to enter premises to obtain documents for any enforcement purpose; certain police powers (such as search, arrest and enter premises with a warrant) for specific circumstances; and to request labour market enforcement (‘LME’) undertakings or in some circumstances apply to the court for LME orders to ensure compliance with prohibitions, restrictions and requirements.
• Provides for criminal penalties so that non-compliance by a person (or by corporate bodies, partnerships etc) with an LME order, or providing false information or obstructions as part of this enforcement is a criminal offence (which can on lead to imprisonment, a fine or both).
• Extensive new enforcement powers. On 5 March 2025 the Employment Rights Bill was amended to introduce significant new enforcement powers including to:
  • Issue notices of underpayment, which are based on the existing national minimum wage enforcement regime. The Fair Work Agency will be able to issue an underpayment notice to remedy a failure to pay certain payments under labour market enforcement legislation (see enforcement functions above, but this includes national minimum wage, statutory sick pay and, most notably, holiday pay). The notice will specify the amount that will be payable by the liable party to the individual within 28 days of the notice. In addition to the sums due, the notice of underpayment must also impose a penalty, to go into the Government’s Consolidated Fund, of 200% of the sum payable in the notice (up to a maximum of £20,000 per individual). This new power could have potentially significant implications for employers who have miscalculated holiday pay or have misclassified workers/employees as self-employed contractors and so have failed to pay holiday pay correctly or at all.
  • Bring proceedings in the employment tribunal on a worker’s behalf where it appears that a worker is not going to bring those proceedings.
  • Provide or arrange for legal advice, legal representation, or assistance to someone party to any proceedings that are related to employment, trade union or labour relations law.
  • Recover the costs incurred by the Fair Work Agency in connection with the exercise of any enforcement function against an employer.
  • Enforce a new requirement for employers to keep records to demonstrate their compliance with rules on annual leave and pay (see the Annual leave records section).

The Next Steps document suggests that the Fair Work Agency will also be a ‘one stop shop’ for help and resource for employers to help provide clarity on employment rights.

The Employment Rights Bill sets some of the framework of this new enforcement agency and requires the set-up of an Advisory Board to provide enforcement function advice, with membership made up of persons representing trade unions, employers and independent experts. The Secretary of State will be required to consult the Advisory Board in its preparation and publication of its three-yearly labour market enforcement strategy and its annual reporting requirements.

The creation of a new enforcement body with such significant new powers may move the dial from an emphasis on the enforcement of individual workers’ rights to proactive state enforcement of certain fundamental rights on behalf of workers. For example, existing non-compliance risks in respect of holiday pay are likely to be magnified as the new agency could proactively investigate and enforce (for example using its powers to issue notices of underpayment or by bringing proceedings) such rights to holiday pay without the need for an individual worker to bring a claim.

On the flip side, having a ‘one stop shop’ for employment guidance and support could help an already fragmented and complicated system where employers must go to multiple agencies for assistance.

Regardless, it will no doubt take a while for the Fair Work Agency to be set up and its effectiveness will largely depend on how it is resourced – although the recent additions enabling the recouping of enforcement costs from liable parties may help with its ongoing funding.

Regulatory Enforcement Unit for Equal Pay

One notable omission in the current version of the Employment Rights Bill in respect of the Fair Work Agency’s remit is in respect of equality and discrimination matters, currently falling within the Equality and Human Rights Commission’s remit. Prior to the Employment Rights Bill there had been a suggestion that this would be included within the Fair Work Agency’s remit.

The Next Steps document indicates that the Government will implement a Regulatory Enforcement unit for equal pay, which will be detailed in the Equality (Race and Disability) Bill. It is unclear currently if this will sit within the Fair Work Agency (for example by this remit being added to the current remit set out in the Employment Rights Bill).

Employment Tribunal

The Employment Tribunal will remain the primary way for individuals to enforce individual employment rights for complex cases or contract disputes. The Plan to Make Work Pay suggests that the Government will work further to digitise the employment tribunal process but it has not suggested that it will increase investment in the tribunal system, which gives rise to a concern that the expansion of employment rights will slow down the tribunal process significantly and add to the backlogs, causing more delays in dealing with claims. This is not set out in the Employment Rights Bill.

Currently, the time limits for filing most Employment Tribunal claims are three months, save for some claims such as equal pay, which have a six-month period to bring a claim. A Government amendment to the Employment Rights Bill, agreed at Committee Stage, will amend the time limit for all types of employment tribunal claims in Great Britain from three to six months – which is not an insignificant change for employers (and employees) alike. Whether or not this will lead to an increase in the number of claims being brought as employees who were previously timed-out will have longer to bring a claim, or a decrease as it gives employers and employees longer to settle any issues, waits to be seen.

In addition, there is now a new power for the Fair Work Agency to step into the shoes of a worker and bring proceedings on the worker’s behalf (see the ‘Single Enforcement Body’ subsection above).

Collective Grievances and Compensation Caps

The Government has previously proposed to make it easier for workers to raise workplace grievances by enabling employees to “collectively raise grievances” about conduct in their place of work to Acas. This would be a big change as grievances currently are managed on an individual basis between employer and employee. This reform is now part of the Government’s longer-term plans to consult with Acas on enabling employees to collectively raise grievances about conduct in their place of work. 

In the original New Deal (the iteration before the Plan to Make Work Pay), Labour mentioned removing the caps on compensation that workers receive. Recent publications have been silent on compensation caps, as is the Employment Rights Bill. However, the maximum protective award for failure to collectively consult will be doubled to 180 days (see sections on Fire and rehire and Redundancy collective consultation) and the Government has promised to consult on the compensation regime for successful unfair dismissal claims during the new statutory probation period (or IPE).

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Timing and developments

Fair Work Agency

Included in the Employment Rights Bill. The powers to set up the agency are set out and have been significantly increased following amendments published on 5 March 2025, and would require commencement regulations to come into force. However, setting up the new agency will involve transfers from existing bodies and so may take some time to do.  

Regulatory Enforcement Unit

Not included in the Employment Rights Bill and will instead likely be included in the Equality (Race and Disability) Bill.

Await developments.

Employment Tribunal

Changes to time-limits have been included in the Employment Rights Bill.Implementation is currently anticipated no earlier than 2026, though firm details on timing have not yet been provided.

Await developments.

Collective grievances

Not included in Employment Rights Bill.This reform will be part of the Government’s longer-term plan – as the Government recognises that it will take longer to consider how to make changes and implement them. The Government has committed to consulting with Acas. Await developments.

Compensation caps

Not included in Employment Rights Bill.However, the increase to the maximum protective award if an employer is found to not have properly followed the collective redundancy process has been added by way of amendment to the Employment Rights Bill on 5 March 2025.

Await developments.