Why employers must get to grips with new Fair Work Agency’s powers
Anya Duncan says UK employment law is undergoing a major overhaul
Employment law is perhaps the one area of law where there are frequently significant legislative changes. Historically employment rights have fluctuated depending on the political party in power. However, the Labour government is set to introduce a “once-in-a-generation” overhaul of UK employment law.
At the end of 2025 the Employment Rights Bill ricocheted between the House of Commons and the House of Lords until on 18 December 2025, the Employment Rights Bill received Royal Assent to become the Employment Rights Act 2025. Employees are an integral part of almost all businesses. Having the right talent and retaining that talent is a challenge facing a number of industries and sectors. With the legislative changes being introduced, it’s a challenge that’s set to remain.
The new Act brings forward 28 individual employment reforms, including a reduced six-month qualifying period for unfair dismissal, new measures on “exploitative” zero hours contracts and new “day one” rights to statutory sick pay and paternity, parental and bereavement leave. It also proposes legislation to strengthen trade union rights. Implementation will be phased over the next two years and will take place in April 2026, October 2026 and during 2027, following various consultations. Much of the detail of the new reforms is yet to be decided.
One change which perhaps hasn’t had the attention it warrants is the establishment of the Fair Work Agency, a new single enforcement body for employment rights. It aims to transform how employment rights are enforced across the UK.
The work of existing state enforcement bodies to oversee compliance with the national minimum wage, the regulation of employment agencies, licensing standards for gangmasters and enforcing unpaid employment tribunal awards will be brought together by the Fair Work Agency. But that’s not all. There will be new powers to enforce failure to pay statutory holiday and statutory sick pay. From 2027, the Fair Work Agency will oversee the regulation of umbrella companies. In addition, over time, it will have the power to enforce a wider range of employment rights.
The Fair Work Agency will have a wide range of powers including the power to inspect workplaces and to require employers to produce relevant documents and evidence demonstrating compliance with employment law. Non-compliance with an enforcement requirement without reasonable excuse, knowingly or recklessly producing false documents and information, or intentionally obstructing enforcement action will be criminal offences. There will also be a civil penalty regime allowing enforcement officers to issue notices of underpayment (going back up to six years) to employers for any non-payment or incorrect payment of any statutory payment (for example, SSP, holiday pay or national minimum wage).
Notably, where a worker has a right to bring a claim in the Employment Tribunal, the Fair Work Agency will be able to bring those proceedings in place of the worker, as well as give legal advice or provide representation in employment, trade union or labour relations cases. Whereas currently expenses are only awarded in Employment Tribunal proceedings in limited circumstances, the Fair Work Agency will be able to recover state enforcement costs from employers not complying with the law.
With an increasing trend in Employment Tribunal claims the Fair Work Agency may add to the burden on employers. Now, more than ever, employers need to ensure they are compliant and keep abreast of the changes.
Anya Duncan is an Employment Partner, Addleshaw Goddard