Employment Rights Act 2025: What Logistics Businesses Need to Know

Logistics never stops. Continental shift patterns, seasonal surges, multi-drop routes running back-to-back, agency drivers filling gaps at forty-eight hours’ notice – this is the operational reality. It’s also the reality that makes the sector particularly exposed to what’s coming next.

Until now, most logistics operators have thought about employment law compliance risk primarily through the lens of tribunal claims. But individual tribunal claims are a nuisance, not the thing that should be keeping you awake at night. Many of the complexities around holiday pay, wage deductions and similar have been too small to be anything other than irritants, rarely leading to significant litigation.

What potentially changes the landscape is the Employment Rights Act 2025. Over the next two to three years, the ERA introduces two enforcement mechanisms that go well beyond the individual tribunal claim: the Fair Work Agency, and a significantly strengthened framework for trade union recognition and access. For logistics businesses, where complex pay structures, agency worker dependency and atypical working practices are common, these changes represent a meaningful increase in risk.

Holiday pay and the Fair Work Agency: a new enforcement reality

Since the Working Time Regulations came into force in 1998 holiday pay has always been a significant compliance trap for logistics operators: basic pay is only part of the picture. Drivers earn overtime, night premiums, shift allowances. Warehouse operatives pick up attendance bonuses and productivity payments. When any of those regular payments are left out of the holiday pay calculation, you have an unlawful deduction from wages.

The legal position is clear: holiday pay should reflect normal remuneration.  What counts as normal remuneration has been the subject of complex court judgements over the past fifteen years, but the direction of travel is consistently one-way: routine earnings are to be taken into account. If your HGV drivers routinely work overtime on trunking shifts, that overtime is part of their normal pay. If your warehouse team regularly earns a night premium, that goes in too. If the payment is sufficiently regular and settled to form part of what the worker normally takes home then it needs to be reflected in holiday pay.

Complexity, employee ignorance and the horrors of the tribunal system have meant that many organisations have felt comfortable taking a less generous approach to holiday pay than is strictly required.  However, the picture is about to change with the establishment of the Fair Work Agency. The FWA, established under the ERA and expected to be operational from April 2026, will for the first time bring state enforcement of holiday pay, effectively making it a regulatory burden rather than a litigation risk. This is a significant shift. Until now, the only route to enforcing a holiday pay underpayment has been for an individual worker to bring a tribunal claim, and most workers, understandably, don’t bother over relatively small sums. That changes when a government agency can investigate of its own accord, without any worker needing to stick their head above the parapet.

The FWA will have the power to inspect workplaces, demand records, and issue notices of underpayment going back up to six years. Penalties could be 200% of the sums owed, capped at £20,000 per worker. It will be a criminal offence to produce false documents or obstruct enforcement action. The FWA will also be able to bring tribunal claims on behalf of workers, removing the main barrier that has historically shielded employers from the consequences of getting holiday pay wrong.

Logistics businesses have complex shift patterns, and payroll practices have often evolved pragmatically rather than by design. A miscalculation of a few pounds per employee per week, compounded across the workforce and backdated up to six years, produces aggregate liabilities that can run well into six figures, even before the 200% penalty is applied.

The ERA also introduces a new statutory obligation to keep holiday records for six years, and failure to comply is itself a criminal offence. If your current record-keeping wouldn’t survive a request from the FWA to demonstrate how you’ve calculated every worker’s holiday pay for the last six years, you have a problem that needs fixing now, not when the inspector arrives.

How overtime feeds the FWA risk

Overtime is embedded in logistics. Peak season means longer shifts, additional routes, extended warehouse hours. Most operators manage this pragmatically – but pragmatism without proper documentation is exactly the kind of practice that could attract FWA attention.

If your drivers are asked to cover extra runs every week and they usually say yes, whether that’s because they need the income, because there’s an unspoken expectation, or because the rota effectively requires it, a tribunal (or the FWA) is likely to treat that as regular overtime forming part of normal pay.  If it’s part of normal pay then it needs to be taken into account in calculating holiday pay.

Record-keeping: from afterthought to legal obligation

Record-keeping has always mattered in tribunal proceedings: if you can’t produce records, the burden shifts to you, and the tribunal will draw inferences that won’t be in your favour. But the ERA takes this significantly further. The new statutory duty to retain holiday records for six years, backed by criminal sanctions for non-compliance, means record-keeping needs to be treated as a standalone legal obligation.

In logistics, where shift patterns are complex, agency workers come and go, and operational pressures can make paperwork feel like an afterthought, gaps in records are common. But they’re also avoidable. Modern workforce management systems can automate much of this. The investment in getting record-keeping right is a fraction of the cost of an FWA investigation, let alone the penalties that follow.

We’d particularly flag 48-hour opt-outs. Many logistics businesses rely on these, but an opt-out that isn’t properly documented, or that was signed years ago and never reviewed, is a vulnerability that the FWA’s inspection powers could expose.

What’s coming: agency workers, guaranteed hours, and union access

If the FWA changes the enforcement picture for existing obligations, the coming waves of ERA reforms will significantly affect workforce structures in logistics. These provisions are expected in 2027, but the time to prepare is now.

Guaranteed hours and agency workers. The ERA will require employers to offer guaranteed hours contracts to qualifying workers – including agency workers – at the end of every reference period (expected to be 12 weeks), reflecting the hours they actually worked. For logistics businesses that rely heavily on agency labour to flex capacity around seasonal peaks, multi-drop demand and short-notice cover, the implications are considerable. Where an agency worker accepts a guaranteed hours offer, the end hirer takes on a direct employment relationship.

There will be exceptions for genuinely temporary needs, and the detail is still being consulted on. But the direction of travel is clear. Operators who depend on agency labour as a structural part of their workforce model, rather than a genuine flex arrangement, need to be rethinking that model now, not in late 2027 when the obligations come into force.

Trade union recognition and access. The ERA simplifies the statutory recognition process. The membership threshold for a CAC application is being lowered, the requirement to demonstrate likely majority support is being removed, and unions will only need a simple majority of votes cast to secure. Electronic and workplace balloting will make organising easier still. From October 2026, employers will be under a statutory duty to inform all workers of their right to join a union, and a new workplace access framework will allow unions to negotiate (or, through the CAC, compel) access to the workforce.

For logistics – a sector with large, often transient workforces, established patterns of informal practice, and a history of tension over pay and conditions – this is significant. Unions will find it materially easier to organise, gain recognition, and then use collective bargaining to scrutinise precisely the kind of pay and working time practices that many logistics operators have managed informally for years. A union with recognition rights and access to your workforce is a more persistent presence than an individual tribunal claim.

The practical implication is clear: every area of potential non-compliance discussed in this article becomes a potential trigger for union organising activity. Workers who feel short-changed on pay or pressured out of rest breaks are precisely the workforce most likely to respond to a union organising effort. Getting your house in order on these fundamentals is one of the most effective things you can do to manage both the regulatory and the industrial relations risk that the ERA creates.

Why this should be on your board agenda

Over the next few years the ERA will change the risk dynamic for logistics businesses in a way that warrants board-level attention. The enforcement gap that has historically protected operators with imperfect compliance – the gap between the law and anyone actually doing anything about it – is narrowing from several directions at once.

The FWA can investigate and penalise holiday pay failures without any worker bringing a claim. Unions will have easier access to your workforce and a simpler path to recognition. Guaranteed hours obligations will require a rethink of agency-dependent staffing models. And all of this lands on businesses that are already managing tight margins, driver shortages, and operational pressure.

The most effective logistics operators we work with treat employment compliance as an operational discipline, not a legal afterthought. They audit holiday pay calculations regularly. They review shift patterns against working time limits. They invest in record-keeping systems that work. They’re already planning for guaranteed hours and thinking about how to engage constructively with the prospect of union access. And when something doesn’t look right, they deal with it before it becomes someone else’s problem to solve.

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If any of this sounds familiar, now is the time to act. The Fair Work Agency may take time to become fully operational, but union access and recognition reforms are already being phased in, and guaranteed hours obligations are on the horizon.

A focused review of your contracts, payroll calculations, holiday pay methodology, shift patterns, agency arrangements and record-keeping can identify and address exposures now – when the cost and disruption are far lower than during an investigation, recognition application or coordinated group claim.

Our Transport & Logistics team works with operators across the sector, from regional fleets to national distribution networks. We understand the operational realities of the industry and provide pragmatic, commercially focused advice that works in the real world.

If you would like to discuss any of the issues raised in this article, please contact Matthew Cole at mcole@prettys.co.uk

You can also view our full range of legal services for the logistics sector here