The Fair Work Agency, the labour market enforcement body created in April under Labour’s Employment Rights Act, responded to 2,741 labour abuse inquiries in the first quarter of this year, up 87 per cent on the same period a year earlier, according to its chief executive, Lisa Pinney.

National minimum wage inquiries rose 19 per cent to 2,933 over the same period. Pinney attributes the increase to “greater awareness” about workers’ rights and about the agency itself.

The agency asks itself two questions daily, Pinney says. The first: “How do we get money that’s owed back to individuals?” The second, in serious cases: “How do we make sure we take legal action to prevent it from happening again?”

Its remit is set to widen. The government has not yet fixed the date from which the agency will take responsibility for policing holiday and sick pay. A Department for Business, Innovation, Science and Trade consultation on holiday pay compliance and enforcement closes on 22 September.

The Resolution Foundation, a think tank, estimates that 900,000 workers a year have some holiday pay withheld, with the total owed worth about £2.1 billion. The Low Pay Commission estimates that about 371,000 people were underpaid the national minimum wage in 2024.

The agency has replaced the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority, which had a combined annual budget of £47 million. The merged body has a budget of £60 million, a team of 650, and works alongside the National Minimum Wage compliance team.

Last week, agency staff visited a fruit farm in Scotland alongside other government agencies following reports of poor working and living conditions, including mouse and rat infestations in caravans housing workers, inconsistencies relating to pay and hours worked, and excessive working hours. Some of those affected were foreign citizens working under the UK’s seasonal worker visa scheme. The farm owner has made improvements since the visit.

At the same time, minimum wage enforcement officials wrote to employers in Yorkshire and the Humber, Dorset and Hampshire to check payrolls ahead of planned investigations in those areas.

Businesses that identify underpayment of salaries, sick pay or holiday pay can avoid enforcement action by disclosing it and making good the arrears. Employers who are caught are likely to be fined and can be named and shamed. Last October, nearly 500 employers were fined more than £10 million for failing to pay the minimum wage, with £6 million received by 42,000 employees. The companies included Centrica, Cineworld and Holland & Barrett.

Pinney says she is open to extending naming and shaming to other areas, such as holiday and sick pay. “It does drive change,” she says.

Industry groups have raised questions about how the new rights will be enforced in practice. The Recruitment and Employment Confederation supports the agency’s creation and its pledge to help employers, but wants risk-based enforcement.

“It can be easy to find areas where there are unintentional errors or minor infringements, but it is really important to find those rogue operators who may not be so plainly in sight,” says Lorraine Laryea, the confederation’s chief standards officer.

Pinney says the agency will set out its approach before new powers commence. “As the various different powers are switched on there will be communications ahead of that so that businesses are clear what’s going to happen and how,” she says. “There won’t be any situation where we’re going to say ‘this power is switched on tomorrow, we’ll be on your doorstep’.”

The agency will take covert action where it has intelligence of serious breaches, working with bodies including the National Crime Agency. Its stated preference is otherwise to give notice. “We would much rather support and enable businesses to do their reviews, to do the right thing, to make any changes,” Pinney says. “We recognise most businesses want to do the right thing. We also recognise that people make mistakes.”

Its powers include civil penalties, legally binding undertakings, applications for director disqualification and recommendations to prosecute. It can fine employers who do not pay employment tribunal awards or Acas settlements, bring tribunal claims on behalf of individuals, and offer legal assistance in civil proceedings.

Social care and construction are the agency’s two priority sectors. The cash-in-hand “grey economy”, including hand car washes and nail bars, is also under scrutiny. Pinney has begun discussions with Companies House, HMRC and the Insolvency Service on directors who place companies into administration, leaving unpaid wages and tax, then restart the same business, a practice known as phoenixing.

The agency also has power to prosecute exploitation under the Fraud Act, which requires a lower evidential bar than modern slavery legislation. The Gangmasters and Labour Abuse Authority was reported to have dropped more than 100 cases involving the exploitation of migrant workers because they did not meet the legal threshold.

“Bad things are happening and we want to take action, but we haven’t been able to meet that bar for modern slavery previously,” Pinney says. “We think these new powers will help.”

Pinney joined in April from the Mining Remediation Authority, having previously been an executive at the Environment Agency. She plans a Fair Work Assembly in the autumn, bringing together academics, unions, government agencies and businesses. The agency is also working with Acas on a digital “shopfront” for employers. “Businesses want to get information from one place,” she says.

Jamie Young

Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk