New Fair Work Agency to have wide enforcement powers
New Fair Work Agency to have wide enforcement powers
The Employment Rights Bill will create a new state enforcement agency, the Fair Work Agency (FWA), to enforce the employment rights of vulnerable workers. Is there anything that you need to worry about here?
Remit of Fair Work Agency (FWA)
The FWA will bring together existing state enforcement functions, including national minimum wage, NMW and statutory sick pay (SSP) enforcement, the Employment Tribunal penalty scheme and modern slavery. It will also add the enforcement of statutory holiday pay rights to its remit; this is not currently subject to state enforcement and overtime it may take on the enforcement of other employment rights.
The FWA will additionally have some major new enforcement powers, including to:
* Issue notices of underpayment to employers requiring back-pay to workers in respect of failures to pay SSP and holiday pay. This is based on the existing NMW enforcement regime, i.e. in addition to paying the underpaid amount to the worker, there will also be a financial penalty imposed of 200% of the sum due, up to a maximum of £20,000 per worker, payable to the government and payment must be made within 28 days. This will be reduced to 100% if the arrears and penalty are paid within 14 days.
* Enforce employers' failure to comply with the forthcoming new duty to keep records of statutory annual leave and holiday pay.
* Recover its enforcement costs from employers who are not complying with the law, including by failing to pay the NMW, SSP or holiday pay correctly. The method of calculating and charging for these costs will be set out in regulations.
* Bring employment tribunal proceedings on behalf of a worker, if the worker has the right to bring a claim but it appears they are not going to do so. If the claim is successful, any award would still go to the worker.
* Provide legal assistance and representation to any party in employment-related proceedings.
Practical implications
These will be significant new powers that you cannot ignore. The 200% financial penalty for underpaid holiday pay could have major implications if you are making accidental mistakes in staff holiday pay calculations or you have yet to address issues of holiday pay underpayment within your business. If the FWA's costs are then charged on top of a penalty, this could prove even more expensive.
The number of employment tribunal claims is also likely to increase, and you would be at risk of a claim being brought by the FWA on behalf of a worker. Note that the FWA's ability to bring tribunal proceedings seems to cover any type of claim, not just those falling within its enforcement remit.
Tip. How significant the FWA is will depend on its resources and funding. Given its proposed new powers though to charge enforcement costs and impose penalties, it will likely generate its own revenue to some extent, so is likely to be more proactive than existing state enforcement agencies.
Tip. The FWA is unlikely to be operational before late 2026 at the earliest and implementation will be done in phases.
The FWA will have some major powers including to issue notices of underpayments and penalties, bring tribunal proceedings on behalf of workers and provide legal assistance in employment claims. It will also be able to recover its enforcement costs from employers. The main concern is holiday pay as FWA enforcement will represent a major change.