Report by the Institute of Employment Rights (IER)

An IER briefing that analyses the Government’s Fair Work Agency. It warns that the Government’s new workplace watchdog risks failing to deliver meaningful protections for workers unless urgent changes are made.

The briefing, authored by Prof David Whyte, Queen Mary University of London and Prof Ruth Dukes, University of Glasgow highlights longstanding weaknesses in the UK’s system of workplace enforcement and argues that the new Agency could repeat past failures without stronger powers and funding.

The Fair Work Agency brings together the functions of existing labour market enforcement bodies into a single organisation. However, the briefing warns that:

• The Agency will operate within a weakened regulatory system, with funding for enforcement bodies reduced by at least 58% in real terms
• Workplace inspections and enforcement activity have fallen sharply over the past 15 years

The briefing calls on the Government to:

• Ensure the Agency is properly funded, with ring-fenced resources to support its expanded remit
• Introduce a robust inspection regime without advance warning to employers
• Establish a credible threat of prosecution for non-compliance
• Give trade unions a central role in enforcement, including the ability to bring cases to court.

Extracts of the IER briefing are given below.

https://www.ier.org.uk/wp-content/uploads/Fair-Work-Agency-060426.pdf

As the Green Paper  [New Deal for Working People] noted, breach of employment law in this country is all too common, especially in sectors and workplaces where a large proportion of workers are low-paid and on precarious contractual arrangements. There is no labour inspectorate, as such, in Britain but instead a fragmented, complex and incomplete patchwork of different enforcement agencies with different responsibilities, remits and powers, all suffering from secular underfunding. At a time when the vast majority of workplaces have no trade union presence, the inadequacies of labour inspection mean that enforcement of employment law relies for the most part on the capacity and willingness of individual workers to take claims to the employment tribunals.

Over the decades, the tribunal system has become overburdened and is now widely understood to be in crisis in England and Wales.

The FWA replaces three existing agencies with inspectorate and enforcement powers in respect of employment rights. These are the National Minimum Wage Unit within HM Revenue & Customs (NMWU), the Gangmasters and Labour Abuse Authority (GLAA) and the Employment Agency Standards Inspectorate (EAS). The FWA also assumes the role of the so-called Director of Labour Market Enforcement (DLME), an office that was created in 2016 to coordinate the work of these three agencies.

From 7 April 2026, the FWA assumes the existing functions of these three agencies, and the DLME, all of which will then cease to exist. At a later date, not yet specified, the Government has said that it will extend the remit of the FWA to cover enforcement of holiday pay, statutory sick pay and the new Fair Pay Agreements for school support staff and social care. Under the Employment Rights Act, powers exist for the Secretary of State to expand the remit of the FWA further, to include additional employment rights.

[That seems to mean that there is no enforcement of the law regarding holiday and sick pay.]

The FWA comprises all the existing staff of the NMWU, GLAA, EAS and DMLE. This means that, initially, it will have around 600 inspectors in total working across the whole of the country. 

The first Chair of the FWA is Matthew Taylor. Matthew Taylor is a former political strategist, known for advising Tony Blair as Head of the Number 10 Policy Unit, and for other public sector and third sector roles. In 2017, he was asked by Prime Minister Theresa May to lead an independent review of working practices. The resulting Taylor Review drew criticism from experts for its failure to adopt an evidence-based approach and for its failure to recognise the importance of trade unions to enforcement and compliance.

IER Concerns

i. Fragmented regulatory system

The original intention behind the creation of a new enforcement body was that it should be a single enforcement body, with a remit encompassing health and safety and equality law as well as the minimum wage, agency work and worker exploitation.  As it stands, the FWA falls short of that, replacing three agencies, as already explained, but leaving in place several more, including the Equality and Human Rights Commission and the Agricultural Wages Inspectors. The enforcement field therefore continues to be characterised by some degree of fragmentation, complexity and potential inefficiencies.

ii. No formal role for trade unions

Experience in other countries – and in this country in previous decades – shows that state enforcement works best when enforcement agencies work together with trade unions.  While even the best-resourced agencies do not have the capacity to make regular inspections of every workplace in the country, trade unions can perform inspectorate-like functions through the presence in workplaces of shop stewards and other lay representatives, and they can act as a trusted body to which workers can report suspected breach of the law. They can inform workers about their legal rights and assist them with the logging and processing of complaints, and they can provide information to state agencies, helping them to decide how best to use the resources that they have.

In some countries, for example, Germany and Italy, the positive contribution of trade unions to employment law enforcement and compliance is formally recognised in law.

Unions may have legal duties in this regard and legal rights, for example, a right to bring cases to the courts and tribunals on behalf of members and other workers. In Britain, there has been little formal recognition, to date, of a trade union role in this context and there is no indication that the creation of the Fair Work Agency will do much to change that. The ERA [Employment Rights Act]  could have (but did not) introduce worker representation along the lines of the Safety Representatives and Safety Committees Regulations 1977 (or, in the absence of union recognition, the Health and Safety (Consultation with Employees) Regulations 1996). In fact, no provision is made in the ERA for any new rights or powers for trade unions or workers in respect of employment law enforcement. A new power to bring proceedings in the employment tribunal on a worker’s behalf, and to offer legal advice and assistance where someone is, or may be, party to civil legal cases related to employment or trade union law, is bestowed not upon trade unions but upon the FWA itself.

iii. Funding landscape

Previous research by the IER on the HSE has documented its declining funding base.

Since 2009, HSE funding has been reduced significantly: falling from £239 million in 2009–2010 to £121 million in 2019–2020.12 When inflation adjusted, this amounts to a real-terms reduction of 58% in central government funding. These funding cuts inevitably affected

staffing numbers. Between 2010 and 2020, total HSE staff fell by 36%, with frontline staff, including all inspectors, declining by 28%.14 The unrelenting and uneven assault on local authority funding has led to a similar vacuum in enforcement.15 According to those localauthorities which recorded this data with HSE, in 2009/10, there were 1050 FTE localauthority health and safety inspectors; by 2019/20 there were just 454, a decline of 57%.

Indeed, by 2019/20, in some local authority areas there was no bespoke health and safety enforcement regulatory coverage whatsoever: 35 of the 353 local authorities which provided data —that is, one in ten—reported having no full-time-equivalent (FTE) health and safety environmental health officer. We should note, in this respect, that local authorities have responsibility for regulating some significant industrial sectors, including shops, retail and wholesale, warehouse and call centres, offices, hotel and catering, consumer and leisure premises.

While health and safety currently falls outside of the scope of the FWA (although see our comments above), the HSE is Britain’s largest workplace regulator and for this reason offers an important contextual example of the regulatory milieu. These figures indicate the context within which the FWA will operate – namely, in a regulatory eco-system in which there are major enforcement gaps, and where other regulators have a severely reduced capacity. The experience of the HSE also provides a warning to the FWA of the dangers of under-funding.

iv. The erosion of credible scrutiny and enforcement

The declining enforcement capacity of the HSE and of local authority health and safety regulators can lead to a tendency whereby primacy is given to the protection of employers’ interests over those of workers.

Work by IER experts has tracked a dramatic erosion of workplace health and safety inspections. In summary, this work has found that:

• total HSE Field Operations Directorate inspections fell by 72% between 2009/10 and 2019/20.

• if we take the number of inspections by HSE (less than 18,000 each year) in the context of the numbers of premises for its inspectors have enforcement responsibility (around 900,000), we can surmise that the average workplace can now expect an inspection much less than once every 50 years.

• the total number of health and safety visits by local authorities fell by 80% between 2009/10 and 2019/20. Preventative visits fell by 94% over the same decade.

v. Employer-friendly enforcement

Any credible system of regulation requires three conditions to be in place: first, that inspectors actually have a credible presence within workplaces (to inspect routinely, to investigate incidents etc); second, that escalation towards greater punitiveness on the part of inspectors is possible and, where the circumstances demand it, likely; and third, that sanctions formally at the disposal of both regulators and thus the courts are credible ones. Where those conditions are not met, employers are given free rein to flout the law.

Our evidence base shows that regulatory strategies in the HSE changed under conditions of severe funding cuts set out in section iii. above. In order to deal with this crisis, the HSE not only eviscerated physical visits and formal enforcement, but to make up for this enforcement gap, it also pivoted towards less stringent and less labour-intensive forms of regulatory intervention, and implemented new, intelligence-driven forms of ‘targeted intervention’. As IER evidence demonstrates, those strategies deepened the regulatory crisis and effectively expanded the number of workplaces with no regulatory cover.

From 2011, onwards, the Coalition government took a series of Ministerial-level decisions that created a new category of ‘low risk’ workplace which effectively removed the majority of workplaces in Britain – including some where the most deadly classifications of work are carried out – from routine, unannounced, inspections. Indeed, when Hazards Magazineinvestigated where deaths caused by sudden injury in the workplace actually occurred, it found that 53% of such deaths were in government defined ‘low risk’ working activities.

IER Proposals

i. Restoration of funding across the workplace regulatory system

• The FWA and other workplace regulators must have their funding restored to previous, pre-2010 levels, and must be funded to take up the FAW’s new functions set out above. Given the severity of the austerity-driven assault on public funding of regulators, this would mean an immediate 40-50% real terms restoration of funding across the board.

• Funding for workplace regulators must be ring-fenced and index-linked.

ii. A credible inspection and enforcement regime

• Planned inspection regimes in which employers can expect a proactive, unannounced inspection with a reasonable interval between visits (as anticipated in New Deal forWorking People.)

• A credible threat of prosecution and enforcement action for all those who are found to have breached the law. This means key performance indicators which include targets for both inspections and regulatory enforcement.

iii. A central role for trade unions

• Workers and their trade union representatives should be fully involved in the setting of enforcement targets.

• Workers and their trade union representatives should be given a right to bring cases to the courts and tribunals on behalf of members and other workers.

iv. A central role for workers

• Where there is no trade union recognition agreement, trade union representatives should be given access to workplaces in order to strengthen regulatory scrutiny, encourage compliance and document breaches of law.

• Elected trade union representatives should be given the power to issue ‘Provisional Improvement Notices’ (similar to the system used in Australian workplaces) that would automatically trigger investigation by the FWA.

• An immediate reform which ought to be implemented is the requirement that employers produce a ‘Fair Work Compliance Statement’ which workers can verify.

This proposal was set out in an earlier IER pamphlet on the National Minimum Wage regulations.

v. Protection for workers

• Anonymity for workers following any FWA contact must be guaranteed; anonymity cannot be the reason an incident is not investigated or followed up (as anticipated in New Deal for Working People).

• As part of this guarantee, the FWA must have full administrative separation from any agency responsible for immigration and border control. In order to prevent mission creep and avoid jeopardising the protection of migrant workers, this separation must include a strict administrative and operational firewall across agencies.