The much-anticipated Employment Rights Bill was introduced by the government on 10 October 2024 and is effectively, some may deem, to be the biggest shake up to Employment Rights in decades. Whilst most of the headlines have revolved around the changes to zero hour contracts, fire and rehire and unfair dismissal protection, the Bill also includes the creation of a new state enforcement agency, which is likely to be known as the Fair Work Agency.

The Fair Work Agency will be a single authority tasked with improving and enforcing employment standards, consolidating existing oversight functions, and will cover areas such as holiday pay, statutory sick pay and the enforcement of minimum wage regulations. The agency, at least initially will not enforce areas such as discrimination law or family rights, however the government will have broad powers to extend the remit of the Fair Work Agency to cover a wider range of employment rights over time.

Angela Rayner, the deputy leader has insisted that the agency would have “real teeth” with the power to inspect workplaces, levy fines and lodge civil proceedings and help balance out the millions of workers that could be losing out on basic rights as a result of underenforcement.

How will the Fair Work Agency operate?

The Fair Work Agency will bring together several enforcement functions that were previously dispersed across multiple government bodies by abolishing two current public bodies, the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement and adding the current enforcement role operated by the HMRC (in relation to the national minimum wage).

The expectation is that it would become a single place where both workers and employers can turn to for help with an aim to resolve issues upstream by supporting employers that want to comply with the law.

The Employment Bill confers a single set of powers to investigate and take action against business that do not comply with the law, with the powers based on the powers of existing enforcement bodies as well as some additional enforcement powers that will be added during bill passage. These powers include:

• Enforcement of Minimum Wage: The agency will oversee compliance with minimum wage laws, ensuring that workers receive the correct pay rates based on existing national standards.
• Oversight of Statutory Sick Pay and Holiday Pay: The agency will ensure that employers provide statutory sick pay and holiday pay as required by law, with the authority to investigate cases of non compliance and the ability to take corrective actions.
• Protection Against Labour Exploitation: The agency will have powers to prevent labour exploitation including oversight over forced labour and trafficking.
• To ensure the agency is able to be effective in enforcing the above, they will have the ability to;
• obtain documents or information (including the power to enter business premises to inspect or examine documents);
• remove and retain documents or information;
• request labour market enforcement undertakings are provided (this is an undertaking by the person giving it to comply with any prohibitions, restrictions and requirements set out in the undertaking); and
• apply to the appropriate court for a ‘labour market enforcement order (this is an order which prohibits or restricts the person in relation to whom it is made from doing anything set out in the order.

What does this mean for Employers and Employees?

For employers, the Fair Work Agency signifies an emphasis on proactive compliance. Employers may need to review and update their employment practices as the agency is expected to strictly enforce statutory requirements and apply penalties where non compliance is identified. As noted above, the agency is also expected to help employers by offering a central hub for guidance, reducing confusion and ensuring they have access to comprehensive information on their legal obligations.

The Guardian has reported that recent analysis from the government’s Low Pay Commission found that 366,000 workers were underpaid the minimum wage in April 2023, though it said the data can give a misleading view of legitimate working practices. The figure represents more than one in five of all workers on the minimum wage, whilst Citizens Advice notes that higher paid workers are 50% more likely to bring an employment tribunal claim compared to lower-paid individuals, despite lower-paid individuals being more likely to have their rights violated.

It is hoped that the establishment of the Fair Work Agency will mark a significant move towards protecting worker rights by providing stronger wage protection, enhancing safeguards against exploitation and simplifying the reporting process for issues such as unpaid wages and incorrect holiday pay.

As with the remainder of the proposals in the Employment Rights Bill, the implementation of the agency is expected to take some time and be subject to consultation, with the earliest timeframe being considered as Autumn 2026.