Enforcement

Single Enforcement Body and Enforcement Powers

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

The ERA 2025 does this by giving the Secretary of State certain new powers to enforce employment rights and the ability to delegate most of those powers to a public authority and to appoint enforcement officers. This will called be the new Fair Work Agency which will be established as an executive agency of the Department for Business and Trade.

The Fair Work Agency will combine and take over 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). Significantly, the ERA 2025 also introduces new enforcement powers and functions, which are explained in more detail below.

What laws will the Fair Work Agency enforce?

The ERA 2025 sets out that the Fair Work Agency will enforce certain ‘relevant labour market legislation’ listed in a Schedule to the ERA 2025. Notably for employers this includes:

• Current enforcement areas carried out by different agencies, 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; and
• New areas of enforcement including 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.

The ERA 2025 also gives powers for the current scheduled list of relevant labour market legislation to be expanded in the future and the Government fact sheet indicates that the Fair Work Agency will take on enforcement of a wider range of rights over time.

What powers will the Fair Work Agency have?

The ERA 2025 includes detailed provisions setting out the enforcement powers, including:

• General Powers: The Fair Work Agency will be able to require any individual to attend meetings and answer questions or provide documents or information if it believes that the person is able to provide information necessary for any enforcement purpose. Enforcement officers will have the power to enter premises (including dwellings subject to a warrant) to exercise certain powers including to inspect documents, and to access computers.
• Issue enforcement undertakings and apply for orders: The Fair Work Agency will have the power to request labour market enforcement (‘LME‘) undertakings and further to apply to the court for LME orders to ensure compliance with prohibitions, restrictions and requirements. Non-compliance with an LME order, or providing false information or obstructions, is a criminal offence (which can on lead to imprisonment, a fine or both).
• Issue notices of underpayment: The Fair Work Agency will have the power to issue notices of underpayment (in a similar way to the existing enforcement regime for the National Minimum Wage). The Fair Work Agency will be able to issue an underpayment notice to remedy a failure to pay certain payments under relevant labour market enforcement legislation (which we explain above) which 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(s) 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 a worker has the right to bring employment tribunal proceedings in England and Wales, or Scotland, and it appears to the Fair Work Agency that a worker is not going to bring those proceedings then the Fair Work Agency may bring proceedings in place of the worker. Notably, it seems that this power extends to any employment tribunal proceedings and not just proceedings in respect of the more limited relevant labour market legislation set out above.
• Provide or arrange for legal advice, legal representation, or assistance: Although, the ERA 2025 indicates that this will not be an enforcement function to be given or delegated to the Fair Work Agency, the ERA 2025 also introduces powers for the Secretary of State to provide or arrange for legal advice, legal representation, or other form of assistance to someone party to any civil proceedings that are related to “employment or trade union law or the law of labour relations.”
• Recover the costs incurred by the Fair Work Agency: New provisions (subject to details in regulations) will require a person to pay a charge as a means of recovering enforcement costs incurred in connection with the exercise of any enforcement function.
• Enforce a new requirement for employers to keep records: This will be 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 ERA 2025 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 significant new state powers to be carried out by a single enforcement body 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, the effectiveness of the Fair Work Agency 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. It has been announced that Matthew Taylor has been appointed as chair.

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Timing and developments

Included in the ERA 2025.

The Government’s updated timeline indicates that the Fair Work Agency will be established on 7 April 2026 and the Government Factsheet states that implementation will follow in phases, with further details expected to be published in due course.

In respect of holiday pay, the Government’s Guidance for Businesses currently states that the Fair Work Agency will take on enforcement of additional rights such as holiday pay “over time”, so it is currently unclear when these enforcement powers will come into force.

Commencement regulations have been made to bring into force on 6 January 2026 the Government powers to make regulations or directions related to labour market enforcement and to bring into force provisions dealing with some of aspects to help establish the Fair Work Agency.

Regulatory Enforcement Unit for Equal Pay

The Next Steps document indicates that the Government will implement an Equal Pay Regulatory and Enforcement Unit, which will be detailed in the Equality (Race and Disability) Bill. A call for evidence launched on 7 April 2025, states that the Government is considering carefully how enforcement of the equal pay scheme could be improved, including through the establishment of the Equal Pay Regulatory and Enforcement Unit with the involvement of trade unions. It is considering the best ‘home’ for the unit, as well as its functions. We wait to see the outcome of the call for evidence.

The impact of this will depend on whether the Government decides to set up such unit and, if so, what will be the extent and remit of such unit (including how this will interact with the Fair Work Agency).

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Timing and developments

Not included in the ERA 2025 and will instead likely be included in the Equality (Race and Disability) Bill following closure of the call for evidence. Timing for implementation is currently unknown.

Employment Tribunal

Tribunal reform:

The Employment Tribunal remains the primary way for individuals to enforce individual employment rights for complex cases or contract disputes. The Plan to Make Work Pay suggested 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. Indeed, concerns have been raised throughout the bill’s passage about delays and under-resourcing of the tribunal system and whether reforms under the ERA 2025 will simply magnify this.

Reforms here are not set out in the ERA 2025 but have been discussed throughout the passage of the ERA 2025 and the Government indicated that it is intending to look at making improvements to Employment Tribunals and to Acas during the final debates on the bill. How the Government plans to make improvement to tribunals and Acas await to be seen.

Time limits:

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. The ERA 2025, amends 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.

Fair Work Agency:

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).

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Timing and developments

Changes to time-limits are in the ERA 2025.

The Government’s updated timeline indicates that this measure will take effect in October 2026. 

Details of reforms to the tribunal system and timings for implementation are unknown.

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 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. 

Depending on the nature of any change, this could be significant as grievances currently are managed on an individual basis between employer and employee. 

In the original New Deal (the iteration before the Plan to Make Work Pay), Labour mentioned removing the caps on compensation that workers receive. The ERA 2025 and recent publications had been silent on this. Despite this the Government made a last minute change to the ERA 2025 which will remove the cap on compensation for unfair dismissal (see Unfair Dismissal for more information).

In addition, 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).

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Timing and developments 

Collective grievances

Not included in ERA 2025.

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

The removal of the compensation cap for unfair dismissal is in the ERA 2025. The Government Factsheet and the updated timeline indicated this measure will take effect on 1 January 2027.

The increase to the maximum protective award if an employer is found to not have properly followed the collective redundancy process is also in the ERA 2025. This change will take effect on 6 April 2026 (see Fire and Rehire and Redundancy Collective Consultation).