Resolving disputes and enforcement

The time limit for bringing Employment Tribunal claims will be extended in most cases from three months to six months.

Implementation Status

• Expected in force October 2026.
   

Action

• Factor in any increase in time limits to internal "risk" management processes and strategic considerations when dealing with workplace issues and potential claims. Any increase will also impact on disclosure requirements on any corporate disposals or acquisitions.

• Ensure the employer's position is protected so far as possible in respect of any future litigation, for example by ensuring a paper trail is in place, securing cooperation from any potential witnesses who may leave the organisation prior to a hearing (or ensuring that their recollections are accurately recorded).  

• Consider the organisation's general strategy in the event of potential claims and options for early resolution, settlement strategy etc., particularly given the reforms to unfair dismissal protection. 

In detail

• The time limit for bringing an Employment Tribunal claim will be extended in most cases from three months to six months.

Impact

• Extending the time limit would bring other claims in line with the six month time limit which currently applies on claims for statutory redundancy and equal pay.
• While the increase would bring more uncertainty for employers, it may provide more opportunity for issues to be resolved internally or settled, without the stakes being raised by an individual protecting their position by triggering the Employment Tribunal process.
• The extension to the limitation period does not currently apply to any breach of contract claim which falls within the Employment Tribunal jurisdiction (i.e. once employment has terminated and with compensation limited to £25,000).                                                                                                                                                            

The government will establish a Fair Work Agency which will deal with enforcement of the National Minimum Wage Statutory Sick Pay, holiday pay, Employment Tribunal penalties and some aspects of the Modern Slavery Act.  

Implementation Status

• ERA: Due to be established 7 April 2026. However, the timeline for when its enforcement powers come into effect has not yet been an
• Consultation and regulations to determine its power and remit.
• Dependent on resources available to discharge its duties.
   

Action

• The Fair Work Agency highlights the government's desire for a more targeted compliance approach to enforcement of employment laws. While there is already active enforcement on NMW, holiday pay may be more complex.

• It is unlikely that the new Fair Work Agency will be active in the near future given the detailed consultation needed and the financial cost involved. However, it is proposed that it will have significant investigatory and enforcement powers which could lead to fines and criminal liability for senior executives. Employers should audit their current pay practices and supply chains in these areas to identify and address any current areas of non-compliance and any historic liabilities.
• It will be important to ensure that processes provide for the maintenance of clear records and that managers are trained to understand their responsibilities in respect of those areas which will come under scrutiny from the FWA, as well as the process for dealing with any investigations, including attendance by FWA officials at the premises.  
   

In detail

• The proposed Fair Work Agency will deal with enforcement of the National Minimum Wage Statutory Sick Pay, holiday pay (including the new obligation to keep adequate records of holiday pay), Employment Tribunal penalties and some aspects of the Modern Slavery Act.   

• It will have a range of inspection and enforcement powers, including powers to obtain documents or information, enter business premises and remove or retain documents, request "labour market enforcement undertakings" are provided and apply to a court for a "labour market enforcement order" prohibiting or restricting certain actions (or require certain actions to be taken)

• Where a person provides false information or documents, obstructs enforcement, fails to comply with a requirement of the agency and/or fails to comply with a labour market enforcement order, they will commit a criminal offence punishable by a fine or imprisonment. There is also provision for senior individuals in the company to be guilty of a criminal offence where an offence is committed by a company and the offence was committed with their consent or was attributable to any neglect on their part.

• The ERA gives the Fair Work Agency further enforcement powers including the power to issue notices of underpayment and require the payment of penalties, the power to bring Employment Tribunal proceedings on behalf of a worker, the power to provide legal assistance and the power to recover costs of enforcement. 

Impact

• Currently most employment rights need to be enforced by individual workers through the Employment Tribunal system. A limited number of rights enforced by the State on behalf of workers namely by the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate and HMRC's National Minimum Wage Enforcement team. By bringing together the enforcement of these rights, the government is seeking to "create a strong, recognisable single brand so individuals know where to go for help and lead to a more effective use of resource".

• The Next Steps paper states that "the body will take a balanced approach to upholding workers' rights, with better support for the majority of employers who want to comply with the law, and tough action against the minority who deliberately flout it".

• In relation to holiday pay, the Resolution Foundation suggests that 900,000 UK workers per year have their holiday pay withheld, with the Trades Union Congress estimating 2,000,000 affected individuals. 

• While it is not currently proposed that work of the Equality and Human Rights Commission would fall under the remit of the Fair Work Agency, the government has promised to give careful consideration to the potential for joint working between the two bodies to promote equality across the economy.