The Employment Rights Bill is set to make 2025 a landmark year for employment law, with sweeping changes that will redefine workplace rights and employer responsibilities.
The FWA will be granted authority to ensure that businesses fulfil their employment law obligations, with employers potentially facing increased scrutiny in areas such as holiday pay compliance. Businesses that fail to adhere to current regulations or are found in violation could incur substantial fines or legal repercussions.
Read more: Employment Rights Bill: HR reacts
While the FWA is unlikely to take effect until two years after a consultation period (autumn 2026), businesses must be proactive in compliance.
What will the FWA cover?
The proposed FWA will be responsible for the following employment areas:
● National minimum wage
● Statutory sick pay
● Holiday pay – this includes rolled-up holiday pay rights for part-year and other non-typical workers
● Employment agency rules
● Failure to pay compensation orders or settlement sums by an employment tribunal.
The FWA is also expected to acquire the responsibilities of agencies like the Gangmasters and Labour Abuse Authority and the Director of Labour Market Enforcement. This means that it will act as a single body to enforce workers’ rights, and be responsible for issues such as modern slavery and immigration.
The FWA is designed to be a robust and recognisable single body to support businesses to comply with rules and regulations, and to tighten enforcement action against those who fail to do so. Currently, state enforcement of some employment rights is spread across different employment areas, which can be complex.
The FWA is set to also provide support and guidance to workers, and aims to improve and simplify the process of finding information and guidance on enforcement action for workers’ rights. Individuals are to have a single point of contact to raise complaints and manage issues.
Read more: Labour market enforcement needs a single body, report finds
Powers are provisional and may change as the FWA goes through parliament. However, the FWA is likely to have powers of investigation and the ability to take action against businesses exploiting their workers and not complying with the law, for example, by failing to pay the national minimum wage. Representatives of the FWA may also enter businesses and request documents for inspection. Officers could seize documents if necessary. If a business is suspected or found to be non-compliant, the intention is for the FWA to issue penalties and order employers to compensate workers.
What can businesses do to prepare?
Employers should already be complying with the workers' rights proposed to be enforced by the agency. However, since holiday pay is not currently covered by an existing enforcement agency, it may pose additional challenges for businesses. Although the bill seeks to weed out employers perceived to be exploitative, all companies must ensure thorough compliance.
Be proactive
While businesses have until 2026 before the bill takes effect, don’t delay. Familiarise yourself with its requirements and review and update your employment practices accordingly.
Review holiday policies
The implementation of enforcement of holiday pay by the FWA is likely to have the most significant impact on businesses. While there is no existing criminal offence of failing to pay holiday pay, nor any civil penalties, these are likely to be created in the near future and modelled on the regime which applies to the national minimum wage. This could mean, for example, employers having to pay 100% of any unpaid holiday pay to the FWA if a breach is uncovered – potentially more if the penalty is not paid promptly. Review your policies and procedures for calculating holiday pay, taking advice where necessary.
Ensure compliance
Ensure compliance across wages, working hours and employment contracts. The FWA may conduct inspections, and non-compliance could result in financial penalties.
By taking proactive steps now, businesses can mitigate the risks associated with the FWA's enhanced enforcement powers and ensure compliance. Preparing for these changes will not only safeguard employers against potential penalties but also foster a workplace culture that prioritises fairness and transparency.
Robin White is legal director and head of insured employment at law firm Rradar
