Labour will create a watchdog with “real teeth” that has the power to prosecute and fine companies that breach the rights of their employees as part of its plans to strengthen workers’ rights. Angela Rayner, the party’s deputy leader, told the Observer that she would create a new body, the Fair Work Agency, to oversee her proposals. She said that millions of workers could be losing out on basic rights as a result of underenforcement. The agency would have “real teeth”, with the power to levy fines, inspect workplaces, lodge civil proceedings and bring forward prosecutions. It would enforce rights like holiday pay, sick pay and parental rights, which Labour has pledged to strengthen. “Under the Tories, the enforcement of workers’ rights is fragmented, overburdened and overstretched. That’s bad for workers, for businesses and for our economy,” Rayner said. “Allowing those who don’t even pay the national minimum wage off scot-free only encourages a race to the bottom. Employers who want to do right by their workers are being badly let down, finding themselves undercut by those who refuse to play by the rules. “Labour will act where the Conservatives have failed, establishing a Fair Work Agency to uphold and enforce rights and protections for working people.” Under the plans, the Gangmasters and Labour Abuse Authority, the National Minimum Wage unit and the Employment Agency Standards Inspectorate will all be amalgamated into the new body. The government had pledged to create a single workers’ rights body but later shelved the idea. It was proposed in a review of workplace practices ordered by Theresa May and overseen by Matthew Taylor, a former adviser to Tony Blair. Taylor said in 2021 that he had been confronted with a “deafening silence” from ministers on the issue. While the government briefly appeared to recommit to its creation after revelations of abuses in Leicester, ministers blamed Covid for running out of time to pursue the reforms. Rayner’s commitment to the watchdog is the latest sign that she is standing her ground over the reforms after the architect of New Labour, Lord Mandelson, called on party leaders to tread carefully and continue to consult business leaders. The Unite union has complained that Labour has diluted its workers’ rights plans, though other unions have backed the package. Recent analysis from the government’s Low Pay Commission found that 366,000 workers were underpaid the minimum wage in April 2023, though it said the data can give a misleading view of legitimate working practices. The figure represents more than one in five of all workers on the minimum wage. The Resolution Foundation thinktank has found that 1.8 million workers said they did not have access to their payslip, while 900,000 did not have their paid holiday entitlement. Labour said a single body would help good employers access help setting their employment terms. It comes as an analysis by the TUC and the Centre for Progressive Change suggested that 7.4 million workers would benefit from Labour’s pledge to make statutory sick pay available from the first day a person falls ill rather than them having to wait until the fourth day before receiving support. Statutory sick pay is currently worth £23.35 a day for an employee working a typical five-day week. “Nobody should be plunged into hardship when they become sick. But millions of workers face a financial cliff edge if they get ill,” said TUC general secretary Paul Nowak. “Making people wait three days before they get any support is just plain wrong – especially in the current cost of living crisis. “That’s why it is essential that statutory sick pay is available from day one and available to all. Being forced to work through illness is bad for workers and bad for public health.”