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The Government confirms plans for a Single Enforcement Body in the UK

  • United Kingdom
  • Employment law

09-06-2021

A vital component of the Government’s proposals to reform workers’ rights in the UK, through its 2018 Good Work Plan, was enhanced enforcement. The Government has now published a Response to Consultation and has confirmed that, as and when Parliamentary time allows, legislation will be brought forward for the creation of a Single Enforcement Body which will also deliver a significantly expanded remit.

Although it is likely to be some months yet before the new body is operational, the Response is a significant step and provides an opportunity for employers to review their operations and compliance before they face greater scrutiny and potential penalty. Particular  focus of the new Single Enforcement Body will be upon the most vulnerable, including modern slavery and supply chains, issues which affect certain sectors more than others. However, proactive enforcement in areas such as shortfalls in national minimum wage, holiday pay, sick pay and the rights of agency workers will prove significant for employers across the board.   

Background    

In July 2019 the “Good Work Plan: establishing a new Single Enforcement Body for employment rights” consultation was launched, to consider the case for such a body but also questions such as its core remit, how the new body might interact with other areas of enforcement, the approach to compliance and the powers the new body would need.

Currently, the three main UK enforcement bodies: the Employment Agency Standards Inspectorate (EAS), HM Revenue & Customs (HMRC) and the Gangmasters and Labour Abuse Authority (GLAA) operate separately. In recent years, these bodies have been increasingly active - for example, through HMRC’s pursuit of national minimum wage defaulters, the Government “naming and shaming” scheme and GLAA focus on Modern Slavery and abuses in supply chains. However, by bringing these bodies under a single umbrella, the Government’s aim is a more co-ordinated approach and a pooling of intelligence for targeted enforcement activity. New powers and sanctions are also intended to offer far greater flexibility in tackling a spectrum of non-compliance, from minor breaches to forced labour and serious or harmful cases.  

It is noteworthy also that the creation of a Single Enforcement Body is among other measures the Government is looking at to curb labour market abuses. For example, the garment sector has once more been highlighted as a sector of particular concern, following reports of serious problems in the industry. Options being examined going forwards include creating a Garment Trade Adjudicator to investigate companies’ supply chains, or extending the licencing scheme that currently operates in the agricultural sector (a step the Government has chosen not to pursue immediately).

Proposed authority of a new Single Enforcement Body

Under the proposals revealed in the Response and subject to Parliamentary approval in due course, the newly formed Single Enforcement Body will:

  • support employers to comply with the law, building on the compliance activity of the existing bodies
  • provide detailed technical guidance, as well as introduce a compliance notice system for lower harm breaches
  • be more effective at identifying non-compliance through better data use and analysis, as well as tackling the barriers that can prevent workers, third parties and employers from coming forward with information
  • have new powers to tackle non-compliance, with the introduction of civil penalties for underpayment for the breaches under the gangmasters licensing and employment agency standards regimes that result in wage arrears
  • have powers to enforce statutory sick pay, holiday pay and transparency in supply chains / modern slavery statement reporting

The role of the Single Enforcement Body in offering support for workers and information for employers on best practice, through a “one-stop-shop” and strong, recognisable single brand, will be important. A targeted approach to raising awareness amongst the most affected and vulnerable workers is also anticipated, including the low-paid and those in sectors like construction and agriculture that could be at higher risk of abuse.

In line with the existing enforcement of the national minimum wage, a compliance notice will ordinarily be issued in the event of breach of a legal obligation (unless this is deemed inappropriate in the circumstances). Civil penalties will also be available to the Single Enforcement Body, again in line with National Minimum Wage penalties i.e. 200% of arrears, with a minimum penalty of £100 and maximum of £20,000 per worker.

The Naming and Shaming of defaulting employers will continue and is likely to take on greater significance, once information sharing is co-ordinated and holiday pay shortfalls are more proactively enforced.

As regards failures to meet the statutory obligations under Section 54 of the Modern Slavery Act 2015, the Response clarifies that financial penalties will be available to the Single Enforcement Body (an issue that was held over from last September’s Response to Consultation on Modern Slavery reporting). What is less clear at this stage is the nature and level of those civil penalties in context but the Government has committed to continue to work with the Home Office to determine how these -and enforcement of transparency in supply chains - will be implemented by the new body, through legislation.  The Response also confirms Government rejection of joint responsibility on supply chains and “hot goods” embargoes.

Implications for Employers

The timing of creation of this new body is not yet known but could well be in the next few months. However, the Response confirms a Government commitment to more targeted and effective enforcement of employment rights in due course. The Single Enforcement Body should also allow for a more streamlined and efficient approach, although how much additional funding and resource will be available in a post-pandemic period remains to be seen.   

We anticipate that initial enforcement under a new Single Enforcement Body will be focused upon:

  • shortfalls in national minimum wage
  • shortfalls in holiday pay and statutory sick pay
  • transparency in supply chain abuses
  • modern slavery statement reporting
  • agency workers and regulating umbrella companies

Holiday pay, in particular, is likely to be a significant and contentious issue and to affect a variety of employers -many of whom will not yet have appreciated that they have an issue. Many employers have not taken action to ensure that normal pay is received for periods of holiday, either through error or misunderstanding but also because the back pay liabilities are usually quite low in light of the current two-year backstop and three month break rule. It will be interesting to see how the enforcement body approaches  this particular aspect of enforcement and the extent to which its activities will be preceded by a campaign of awareness and guidance.

For further information, please see:

Meeting the demands of an increased national minimum wage
Modern slavery/human rights compliance and supply chain risk