Earlier this year, the Department for Business and Trade launched a call for evidence in respect of the labour market enforcement strategy, and last month published their report: United Kingdom Labour Market Enforcement Strategy 2025 to 2026. This publication was presented to Parliament in July 2025 and is potentially the final strategy before the establishment of the new Fair Work Agency (FWA) under the Employment Rights Bill.
Key Findings from the Labour Market Enforcement Report
The report’s findings reveal the scale and nature of non-compliance with UK employment rights within the labour market. It is based on the collective input of several enforcement bodies, statutory organisations, call for evidence submissions, and published data.
Consistent High-Risk Sectors
A significant finding was that the risk model of the Office of the Director of Labour Market Enforcement (ODLME) highlights consistent high-risk sectors and areas.
The analysis identified several key reasons for non-compliance with employment rights in the UK, including:
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Low-margin businesses where increased employment costs are difficult to absorb, such as adult social care and agriculture.
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Low-pay sectors experiencing labour shortages, such as retail and adult social care.
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Physically demanding roles, both indoors and outdoors, such as construction, agriculture, and warehousing.
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Uncertain work schedules, such as zero-hours contracts and irregular shift patterns, particularly in hospitality and adult social care.
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Lack of collective worker representation, such as unions or effective workers’ councils.
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Visa arrangements that may unintentionally facilitate exploitation, including those tied to a sponsor or involving debt bondage, particularly in agriculture, adult social care, and among overseas domestic workers.
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Informal recruitment and cash-in-hand working, such as in nail bars and hand car washes.
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Isolated workplaces, where workers are less visible, including in cleaning, domestic work, construction, and agriculture.
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Incomprehensible payslips, which may not account for all hours worked or deductions – notably in agriculture and adult social care.
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Employment arrangements where housing is linked to the job.
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False self-employment, where workers are misclassified, denying them rights and exposing them to unexpected tax bills, especially in construction and retail.
High-Priority Sectors for Labour Market Non-Compliance
The report also identified specific sectors considered high priority for tackling labour market non-compliance:
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Agriculture: High risk of severe non-compliance, particularly involving seasonal workers unfamiliar with UK employment practices.
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Hand Car Washes: Persistent high-risk area, with issues such as non-payment of the minimum wage and the employment of illegal workers. An estimated 80% operate unlawfully.
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Construction: Despite minimal activity from enforcement bodies due to limited resources, the sector displays significant risk indicators.
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Adult Social Care: Despite reduced visa issuance, exploitation of international recruits remains an issue, often falling below the modern slavery threshold. Funding shortfalls contribute to poor employment practices, including failure to pay for all working time (e.g. travel between appointments).
The New Fair Work Agency (FWA)
The Employment Rights Bill, currently progressing through Parliament, will establish a new enforcement body: the Fair Work Agency (FWA).
Stakeholder Views
As part of the call for evidence, stakeholders expressed mixed views on whether the FWA should focus primarily on compliance or enforcement. However, most agreed that a balanced approach is necessary for effectiveness.
Employers who responded generally advocated for a proportionate approach that emphasises education, compliance support, and targeting the worst offenders.
Recommendations for the Fair Work Agency
Key recommendations for the creation and operation of the FWA include:
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Formation of the FWA by consolidating the functions of HMRC National Minimum Wage, GLAA, EAS, and the DLME team. The DLME role would be abolished. The FWA should also absorb enforcement responsibilities for holiday pay and statutory sick pay, with the potential for future expansion.
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Granting the FWA a single set of powers to investigate and take action against non-compliant employers.
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The Secretary of State should have an overarching enforcement role, delivered through the FWA.
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Establishment of an advisory board, equally representing trade unions, employers, and independent experts, to guide enforcement strategy and contribute to annual reporting.
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Granting the FWA powers to issue civil penalties, order employer compensation, and bring cases to an employment tribunal when workers cannot do so themselves.
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Providing FWA officers with authority to issue ‘special warnings’.
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Ensuring the FWA is equipped with substantial resources, including a significant budget.
Conclusion
The introduction of the Fair Work Agency, along with the findings of the UK Labour Market Enforcement Strategy 2025 to 2026, marks a pivotal moment for improving worker protection and addressing non-compliance across key sectors. With proper resourcing and a balanced approach, the FWA has the potential to become a vital instrument in enforcing employment rights and raising standards across the UK labour market.
