The repricing, October 2024 to January 2027
Employment Tribunal Exposure in UK Hospitality
Until this year, a difficult dismissal claim was a relatively known quantity. The statutory cap put the worst case at £123,543, and the published average award in the Ministry of Justice's 2023/24 statistics was £13,749.1 A business could settle for maybe £12,000, and everyone in the room understood why.
Since October 2024, a successful harassment claim can carry an uplift of up to 25%. This October (October 2026), the legal test tightens from "reasonable steps" to "all reasonable steps". On 1 January 2027, the cap comes off, and the worst case becomes whatever the tribunal decides the claimant lost.
As of January 2026, there are 68,192 open cases with the tribunal, and the queue has grown every month for a year: up 49% since January 2025.2
| Month | Open cases |
|---|---|
| Jan 2025 | 45,751 |
| Feb 2025 | 46,430 |
| Mar 2025 | 47,365 |
| Apr 2025 | 48,292 |
| May 2025 | 50,310 |
| Jun 2025 | 52,034 |
| Jul 2025 | 53,667 |
| Aug 2025 | 55,161 |
| Sep 2025 | 57,433 |
| Oct 2025 | 59,757 |
| Nov 2025 | 62,217 |
| Dec 2025 | 64,871 |
| Jan 2026 | 68,192 |
October 2024: the harassment uplift
On 26 October 2024, section 40A of the Equality Act 2010, inserted by the Worker Protection Act 2023, came into force. It requires employers to take reasonable steps to prevent sexual harassment of their workers. Where a sexual harassment claim succeeds and the tribunal finds the preventative duty was breached, section 124A lets it uplift the entire compensation award by up to 25%. The tribunal must consider that uplift, whether the claimant raises it or not. Because the underlying discrimination award is uncapped, the uplift is uncapped with it.
The EHRC's worked example in its technical guidance takes a £40,000 award to £50,000. Apply the same maths to the Ministry of Justice's 2023/24 mean sex discrimination award of £53,403 (a cross-sector figure; MoJ doesn't publish a hospitality breakdown), and a single successful claim with a preventative-duty breach lands at £66,753. The Technical Guidance treats a risk assessment as the starting point of a reasonable-steps defence. Absence of a risk assessment materially weakens the defence and pulls the uplift into play.
Settlements move first because most tribunal claims settle before judgment, and every settlement is negotiated against the award a tribunal might make. Since commencement, that counterfactual has included a possible 25% uplift on an uncapped base. That pulls the floor on every offer upward.
The duty is economy-wide, but hospitality sits at the centre of its risk profile. EHRC risk factors read like an ordinary Friday shift, with alcohol on premises, lone working, late-night trading, customer-facing roles, power imbalances between senior staff who control rotas and tips and the workers who depend on them, a young and heavily female workforce, and a residual "customer is always right" culture that historically absorbed abuse as part of service.
The EHRC and UKHospitality announced a joint action plan to tackle sexual harassment in the sector in 2022, before the statutory duty existed.
The EHRC doesn't need a complainant before it acts. In February 2023 it signed a legally binding section 23 agreement with McDonald's on sexual harassment prevention, and in March 2025 it wrote directly to individual franchisees warning of enforcement. For a multi-site operator, the regulator is already on that footing with the sector whether or not an individual worker has filed anything.
October 2024: tipping claims
The Employment (Allocation of Tips) Act 2023 also took effect in October 2024. Industry research at launch put compliance below one in three hospitality businesses. There is no regulator, and the Fair Work Agency doesn't enforce tipping, so the Act is enforced one worker at a time, through tribunal claims.
Sections 27K to 27M of the Employment Rights Act 1996 give workers a 12-month window to bring a claim, unusually long by tribunal standards, with compensation up to £5,366 per worker from 6 April 2026. Awards can be adjusted up or down by 25% for non-compliance with the statutory Code.
Section 27K(6) carries more money than the per-worker cap because the tribunal can order a revised allocation and payment to workers who were not claimants in the original proceedings. One leaver with a good solicitor can force back-allocations for every member of the tronc (the staff-run pool that shares out tips) since October 2024.
The written-request mechanism under section 27J allows a worker to demand tipping records once every three months, covering consecutive months going back up to three years, with a four-week response deadline.
Reviews keep finding the same traps. "Fair" and "equal" are different tests. Tronc independence has to be real or the NIC exemption collapses. Mandatory service charges carry NICs. Tips can't count towards NMW. Cross-site pooling is prohibited, and agency workers get tips from day one. Our employment records resources cover the full tipping obligations.
2024 and 2025: immigration enforcement
The headline civil penalty rate tripled on 13 February 2024, to £45,000 per illegal worker for a first breach and £60,000 for a repeat within three years. A single visit finding three workers without a statutory excuse produces a £135,000 exposure before any mitigation.
The Home Office then ran 12,831 illegal-working visits in calendar year 2025, the highest calendar year in the published series, and made over 9,000 arrests.
| Year | Visits | Arrests |
|---|---|---|
| 2019 | 6,006 | 3,153 |
| 2020 | 1,732 | 696 |
| 2021 | 1,345 | 507 |
| 2022 | 3,768 | 1,714 |
| 2023 | 6,464 | 4,428 |
| 2024 | 8,122 | 5,647 |
| 2025 | 12,831 | 9,008 |
Within those 2025 visits, restaurants, takeaways and cafés took 3,559 and accounted for 2,523 of the arrests, more than any other sector. Food, drink and tobacco retail took another 2,570 visits, and the beauty industry, third on the list, 1,865. Hospitality, defined broadly, is the single largest target of Immigration Enforcement activity in the UK.
| Sector | Visits | Arrests |
|---|---|---|
| Restaurants, takeaways and cafés | 3,559 | 2,523 |
| Food, drink and tobacco retail | 2,570 | 823 |
| Beauty industry | 1,865 | 1,052 |
| Residential | 1,331 | 993 |
| Car washes | 808 | 664 |
| Warehousing, distribution and delivery | 796 | 1,106 |
| Retail (non-food) | 574 | 226 |
| Construction | 290 | 588 |
| All others | 1,038 | 1,033 |
The civil penalties followed. 2,438 were issued in 2025, totalling more than £130 million. In the first half of 2025, 117 firms in London were penalised, more than a third of them restaurants and bars, and their penalties came to around £6.7 million in that period.
The mitigation structure rewards disclosure and records. Reporting a suspected illegal worker with a Unique Reference Number removes £5,000 from the penalty. Active co-operation during the investigation removes another £5,000. Where both reductions apply, the breach is a first one, and the employer has effective checking practices on file, the penalty can be substituted with a Warning Notice. A 30% reduction is available on first-breach penalties paid early. None of this is available to employers without a paper trail showing competent checks were being done before the visit.
Section 179(1A) of the Licensing Act 2003 gives immigration officers warrantless entry to any licensed premises. A finding on that visit can lead to a licence review by the local authority.
Royal China in Westminster was hit with £470,000 in Home Office penalties across three visits involving 20 illegal workers, with Westminster Council asked to revoke the premises licence. Café Diana in Kensington took a £135,000 penalty on 24 April 2025 and a licensing committee process with it. For most operators, the premises licence review is a larger loss than the civil penalty. Our right-to-work checks briefing covers the mechanics, including the follow-up check on time-limited visas, which is where many hospitality breaches originate.
The same pressure has reached sponsor licences. Between July 2024 and June 2025, the Home Office revoked 1,948 sponsor licences; the prior 12 months saw 937, and the 12 months before that 247 (Home Office transparency data, analysed by Fragomen). Hospitality is among the most-affected sectors. The most common grounds are underpayment of sponsored workers and breaches of sponsor duties, including failing to provide the work the visa was sponsored for.
| Period | Revocations |
|---|---|
| July 2022 to June 2023 | 247 |
| July 2023 to June 2024 | 937 |
| July 2024 to June 2025 | 1,948 |
A single revocation removes the business's statutory right to employ its sponsored workers and starts a 60-day clock for each of them to find a new sponsor or leave the country. For a restaurant group with sponsored chefs, or a hotel with sponsored housekeeping leads, that can remove a significant portion of an operational team overnight.
April 2026: the Fair Work Agency
The Fair Work Agency launched on 7 April 2026 as an executive agency of the Department for Business and Trade. It absorbed the Employment Agency Standards Inspectorate and the Gangmasters and Labour Abuse Authority at launch, and legal responsibility for National Minimum Wage enforcement moved across on the same date, although HMRC continues to run NMW casework on the agency's behalf until the full handover in April 2027.
The FWA inherits the NMW Act 1998 civil penalty model, meaning Notices of Underpayment with a six-year lookback. It acquires a statutory power to bring tribunal proceedings in its own name on behalf of workers, and it can enter private dwellings with a warrant. ERA 2025 creates novel criminal offences for false documents and for obstruction of FWA enforcement, carrying up to 51 weeks' imprisonment and personal liability for corporate officers. Holiday pay enforcement has been legislated but not yet commenced.
The FWA published its enforcement policy statement on 7 April 2026, the day it launched, and updated it on 19 May 2026. The Labour Market Enforcement Strategy 2025-26 names agriculture, adult social care and construction as priority sectors in Annex B. Hospitality isn't on that list. In practice, year-one FWA enforcement in hospitality is likely to be reactive and complaint-driven rather than proactively targeted.
Workers filed 4,409 NMW complaints in 2024/25. HMRC opened 5,207 cases in the same year and identified £5.8 million in arrears owed to more than 25,000 workers. The average owed per underpaid worker, £229, was the highest on record.
Employers caught underpaying are also named in periodic public lists. The most recent naming round (Round 23, 19 March 2026) named 389 employers. The round ran to £7.3 million in back pay, with a separate £12.6 million in penalties. It was the first release co-published by DBT, HMRC and the FWA.
Two other employment liabilities are already live. For collective redundancies, the maximum protective award has doubled from 90 days' gross pay to 180 days for dismissals on or after 6 April 2026. Separately, the Supreme Court's decision in Agnew in October 2023 already settled that a three-month gap doesn't break a series of unlawful deductions, so backdated holiday pay and wage claims can run up to two years.
26 October 2026: all reasonable steps
The Employment Rights Act 2025, which received Royal Assent on 18 December 2025, escalates the harassment regime again on this date. The Act shifts the statutory test from "reasonable steps" to "all reasonable steps."
"All reasonable steps" is a completeness test. It asks whether any further step could have been taken, measured against the EHRC guidance current at the date of the hearing. The fallback argument that the employer took some steps and should be judged on effort doesn't work anymore.
The same commencement date reinstates third-party harassment liability, absent from the law since the original right was repealed in 2013. For hospitality, where customers are a major source of harassment complaints, this is the bigger of the two changes. A worker harassed by a customer or by a contractor will have a direct cause of action against the employer for failing to prevent the conduct, without the three-incident prerequisite that used to apply.
The same October 2026 package extends tribunal time limits for most claims from three months to six months. A grievance triggered by a late-December 2026 incident that previously had to be filed by the end of March 2027 will instead have until late June 2027.
ERA 2025 also adds a consultation duty to the tipping regime: mandatory worker consultation when the tipping policy is developed or revised, from October 2026, with a three-year review cadence.
The heightened harassment standard changes what counts as a defensible risk assessment. A document sitting in a head-office drive from 2023, built around a ten-page policy and a generic e-learning module, is unlikely to carry the burden under a completeness test.
The EHRC guidance expects the assessment to identify sector-specific risk factors at site level, to document the control measures put against each one, and to record refresh dates. For a multi-site operator with the 67% annual staff turnover UKHospitality reports for the sector, that implies a review cadence tighter than annual.
Training records, incident logs, the tronc-independence paper trail, the rota system's audit function, and the records behind every manager escalation all become evidential once a tribunal is applying the all-reasonable-steps test to what existed before the incident.
1 January 2027: unfair dismissal uncapped
From 1 January 2027, the qualifying period for ordinary unfair dismissal falls from two years to six months. The day-one right originally proposed did not survive the Lords.
The statutory compensatory cap, currently the lower of 52 weeks' pay or £123,543, is abolished outright. The basic award structure is retained. For a hospitality operator, the area manager dismissed for performance reasons after eight months now has a claim where they didn't before.
Settlement offers were priced against that cap. From January 2027, the worst case is the claimant's full loss, over whatever period the tribunal accepts as reasonable.
Fire-and-rehire for restricted contractual variations becomes automatically unfair from 1 January 2027, with no qualifying service required.
Pricing a bad quarter
Consider what a single quarter of adverse events looks like for a multi-site operator that hasn't kept up. Everything below applies current enforcement rates to regimes that are already running or have a start date on the statute book. The award averages run conservative: the Ministry of Justice's 2023/24 figures were collected before section 40A took effect, so none of them reflect the uplift, the uncapped dismissal award, or the reinstated third-party liability.
| Date | What changes |
|---|---|
| Feb 2024 | Civil penalties triple |
| Oct 2024 | Harassment uplift, Tipping Act |
| Apr 2026 | Fair Work Agency, protective award doubles |
| Oct 2026 | All reasonable steps, third-party liability, 6-month time limits |
| Jan 2027 | Dismissal cap abolished, 6-month qualifying period |
Take a sexual harassment claim landing in late 2026, decided under the "all reasonable steps" standard with no site-level risk assessment on file: with the uplift, the average-sized award is £66,753. If the harasser was a customer, third-party liability exposes the employer again on the same facts. An unfair dismissal claim filed in February 2027 against the dismissal of a nine-month employee becomes viable for the first time, with no cap on the award.
A right-to-work visit in the same quarter compounds it. Two workers without a statutory excuse produces around £90,000 in civil penalties before mitigation, plus a premises licence review at the local authority that is frequently the more damaging of the two outcomes.
A tipping claim from a departing front-of-house worker, brought within the 12-month window, opens back-allocation to every tronc member since October 2024 under section 27K(6); the cost scales to headcount rather than to a per-claim cap.
An NMW investigation triggered by one of the 4,409 worker complaints sitting in the FWA's inbox runs a six-year lookback, and a £229 average arrears per worker across a forty-strong team produces around £9,160 in arrears before penalty uplift and naming.
What stays fixed
Nothing in the sequence above changes what a tribunal or an inspector reads first. The harassment duty is anticipatory, so the evidence that counts is the risk assessment, the training records and the escalation trail that existed before the incident. The right-to-work mitigation ladder only opens for employers who can show competent checks were running before the visit. The tipping regime turns on records a worker can demand going back three years, and a tronc's NIC treatment survives only as long as its independence is documented. An NMW investigation reaches back six years into time and pay records.
None of this can be assembled after the letter arrives. The file either exists that morning or it doesn't, and a version put together afterwards reads exactly like what it is.
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Employment Tribunal and EAT tables, 2023/24, published with Tribunal Statistics Quarterly, April to June 2024: mean awards for 2023/24, unfair dismissal £13,749 and sex discrimination £53,403 (both cross-sector; MoJ publishes no sector breakdown).
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HMCTS management information, January 2026, published 12 March 2026: employment tribunal open caseload, January 2026. The same table puts the January 2025 caseload at 45,751, a 49% rise over twelve months. HMCTS amalgamated its employment tribunal case systems from Q2 2025/26, correcting earlier overcounting, and notes the measure may still overcount by roughly 3%.
This report is based on published enforcement data, sources available at publication, and original analysis. It is for general information only and doesn't constitute legal advice.
Produce the record when you're asked, not a week later.
The average NMW penalty is £5,545 and the naming rounds are public. Duty Room keeps right to work, working time, and tipping records current per site.