This month, the Fair Work Agency published a report into breaches of workers’ rights in the UK labour market which was originally commissioned in 2022 by the former Office of the Director of Labour Market Enforcement: ‘Working lives: the scale and nature of labour market non-compliance and other work-based harms in the UK’. The report explores the breaches of employment rights which workers experience within the UK labour market, identifying the pervasiveness of non-compliance and the need for enforcement.
What is the Fair Work Agency?
The newly-formed Fair Work Agency (FWA) is a government body that was set up under the Employment Rights Act 2025 and is tasked with the enforcement of employment rights across the UK.
Its powers are an amalgamation of the functions possessed by the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate and the HMRC National Minimum Wage Enforcement Team.
It is envisaged that this amalgamated body will centralise and streamline enforcement of employment rights and tackle employer non-compliance, particularly in respect of lower income or more vulnerable workers.
The Report
The report examines survey data and qualitative research over the period from 2023 to 2025 and analyses the nature and scale of employers’ non-compliance in the UK labour market.
The report focusses particularly on:
- violations such as national minimum wage breaches; not receiving a payslip regularly (or at all); failure to provide a contract or a Key Information Document; and the unlawful charging of work-finding fees to agency workers. These 4 areas are described as being “of special interest” to the FWA and suggest that the temporary labour supply chain will be under particular scrutiny from the newly created enforcement body;
- financial harms such as unpaid overtime and unlawful deductions; and
- wider workplace harms ranging from workplace bullying to the negative impact of work on the mental health of employees.
The investigation included a deep-dive into non-traditional work arrangements including agency work, gig work and supply chain models involving intermediaries.
The report distinguishes between the “full workforce” and “precarious workers”, with the latter group being defined as those meeting at least 2 of the following 3 criteria:
- low income (under £24,000, or less than two-thirds of the approximate median pre-tax earnings of workers in the UK in March 2025)
- working in non-traditional work (defined as any paid work other than being an employee in a single job, such as having multiple jobs, being self-employed, agency worker, working in the gig economy, doing an apprenticeship, or any combination of these)
- coming from an immigrant or ethnic minority background and working at a small workplace (less than 50 people).
The key findings
Some of the key findings are as follows:
- At a minimum, 5.4 million workers experienced a breach of one of the 4 violations set out above in the 2 years prior to the survey (i.e NMW breaches; lack of payslip; lack of contract/KID and/or being charged work-finding fees);
- 54% of precarious workers and 23.3% of the full workforce did not receive contracts or Key Information Documents within the legally required timeframe;
- Around 25% of agency workers reported paying fees to agencies (most commonly work-finding fees), despite this generally being unlawful under the Conduct of Employment Agencies and Employment Businesses Regulations 2003;
- Around 15% of precarious workers experienced National Minimum Wage violations.
The report notes that there is some empirical evidence for industry-level targeted enforcement. Although industry itself does not explain the patterns observed, but rather the characteristics of workers and work within that industry, the report concludes that industry-focused enforcement may be a viable strategy for the FWA to pursue. In contrast, the empirical data did not support regional targeting, except in the case of unfair deductions and NMW violations specifically. Whilst the temporary labour supply chain is not specifically mentioned as a targeted industry, the nature of the main breaches identified (such as the unlawful charging of work-finding fees) and the sheer volume of worker payments flowing through the labour supply chain tend to suggest that an industry-focused enforcement approach is likely to include the recruitment and umbrella sectors.
Conclusions and key take aways
The report concludes that there is now a real opportunity to work towards a better future, in which workers’ rights are enhanced and widely respected, and breaches are acted on swiftly and decisively. This includes providing incentives for compliance, deterrents and sanctions for non-compliance, enhanced communications, and sufficient funding to enforce the law, in order to achieve the right mix of “carrots, sticks and sermons’”.
How can umbrella companies and agencies prepare?
The recruitment and umbrella market needs to be prepared for the inevitable increase in scrutiny.
It is recommended that umbrella companies and agencies take steps now to proactively audit their policies and payment practices, updating software and systems and making good on any underpayments owed to workers. It is also important to maintain comprehensive records of payments made and audits conducted, to serve as evidence in the event of a FWA inspection.
Ultimately, the FWA appears to be intent on proactive enforcement earlier than initially anticipated. It is vital that umbrella companies and agencies ensure their house is in order to avoid financial and legal consequences and reputational damage.
