ERA reforms in depth: Other key reforms

A new ‘Fair Work Agency’ (FWA) is set to be established in April 2026 to enforce certain employment law rights, including National Minimum Wage (NMW), holiday pay and statutory sick pay. It will bring together several existing enforcement bodies and powers, in order to create what the government describes as a ‘single brand’ so that workers know where to go for help.

The Act sets out broad powers that the government intends to delegate to the FWA, including a range of investigative powers such as the power to inspect documents or enter business premises to obtain documents. The Act also includes extensive enforcement powers that are due to be delegated to the FWA. These include the powers to issues notices of underpayment (which can include a penalty payable in addition to the underpayment amount), as well as the ability to bring tribunal proceedings in place of a worker or provide legal assistance to a party in employment tribunal proceedings.

The FWA could herald a real change of approach to the enforcement of employment rights – to date, state intervention has been limited, and enforcement has largely been driven by individuals bringing employment tribunal claims. The powers contained in the Act would give the FWA real teeth to enforce employment rights, but it remains to be seen what resources and level of funding it will ultimately receive.

The Act introduces a new requirement for employers to keep records that demonstrate compliance with their Working Time Regulations obligations on annual leave. Employers will need to make and retain records to show that they have provided workers with their statutory holiday entitlement and complied with holiday pay obligations for that leave, including in relation to pay in lieu on termination. Employers will be required to retain the records for six years from the date on which they were made.

There is some flexibility in this new requirement as it will be for the employer to decide on the format and manner of its records (provided that its approach is reasonable). Nonetheless, this new requirement could create a significant administrative burden for some employers, particularly if they have complex annual leave or holiday pay arrangements for their staff or if their existing systems and records are piecemeal.

Employers should start thinking now about how they record workers’ annual leave entitlement and pay and consider where there may be gaps in this information that would need to be rectified once this new duty comes into effect (on a date not yet known).

Currently the time limit for bringing a claim in an employment tribunal is usually three months. There are some limited exceptions to this, such as equal pay claims, which instead have a six-month time limit.

The Act contains provisions to extend the time limit for all claims from three months to six months. The government plans for this change to come into effect in October 2026.

As well as creating a longer period of uncertainty for employers before they know whether a claim has been brought, this could increase the time it takes for cases to get to hearing and could impact on document retention procedures.

If the change results in more claims being brought (and it is unclear if that will be the case), it could put the employment tribunal system under even more pressure.

The Act mandates that employers consult with workers when developing or revising their tipping policies with the aim of giving a stronger voice to trade unions and workers.

Employers will be required to consult with trade union or worker representatives or, where there are no such representatives, workers directly. This requirement applies when the employer first introduces the policy and when it carries out a review of the policy. 

Employers will also be required to review their policies ‘from time to time’. As a minimum, they must review the policy at least once during the first three years of the operation of the policy and at three-year intervals after that. The statutory code of practice on fair and transparent distribution of tips currently recommends that the approach to tipping is regularly reviewed, and that staff are consulted on any updates to the policy. However, the provisions in the Act take this a step further and introduce a statutory obligation for employers to conduct reviews at set intervals and to consult with representatives when doing so.

Whenever an employer has carried out consultation in accordance with these new obligations, it will be required to produce a summary of the views expressed during consultation and make that summary available in an anonymised form to all workers at their place of business.

These reforms are expected to take effect in October 2026, with consultation into these changes taking place in early 2026.

The Act will amend the Procurement Act 2023 to enable regulations to be issued that would require outsourced contracts to contain provisions ensuring that workers of the contractor are treated no less favourably than those transferred from the public sector. The aim is to prevent two-tier workforces, where staff employed by the private sector employer directly are on less generous pay and other terms than those staff who have transferred across from the public sector.

These regulations will cover contracts for services that are, or have previously been, performed by a public authority. The Act also provides for a code of practice to be issued in relation to outsourcing contracts. Public authorities will be required to have regard to the code of practice and to take all reasonable steps to ensure that the contractual provisions regarding no less favourable treatment are complied with.

Contractors regularly working with relevant public authorities will need to keep a close eye on this reform, as it could impact on the commercial terms that they enter into and the terms and conditions they put in place for their existing staff and for inherited staff transferring under TUPE. This reform is expected to come into effect in October 2026.