Employment Rights Bill

Committee stage
Thursday 8th May 2025 Lords Chamber

Committee (2nd Day)

Relevant documents: 7th Report from the Constitution Committee, 20th Report from the Delegated Powers Committee. Northern Ireland Legislative Consent granted, Welsh and Scottish Legislative Consent sought.

13:03

Clause 1: Right to guaranteed hours

Amendment 18

Moved by

[Lord Sharpe of Epsom]

18: Clause 1, page 8, leave out lines 41 to 44
Member's explanatory statement
This amendment removes the Secretary of State’s power to make regulations specifying additional circumstances in which the duty to offer a guaranteed hours contract does not apply, or an offer may be treated as withdrawn.

[Lord Sharpe of Epsom (Con)]

My Lords, I begin by thanking the noble Lord, Lord Leong, for his letter explaining certain matters that were left over from the last day of Committee. The fact that the algebraic question required a three-page, detailed answer for one worked-up example rather illustrates our point that this adds a huge and possibly unnecessary level of complexity for small businesses in particular. But I will let that lie for now.

Amendments 18 and 19 standing in my name would remove the broad delegated power in new Section 27BD. This Bill continues the concerning trend of the steady transfer of legislative authority from Parliament to Ministers. As I noted at Second Reading, it contains no fewer than 173 delegated powers. The Government may, and probably will, argue that this is justified by ongoing consultation, but that is in effect an admission that this Bill is not yet complete or ready for full and proper scrutiny by this House.

Time and again, we have seen ill-defined powers handed to the Executive allowing for significant policy changes to be made by regulation without meaningful parliamentary oversight. Clause 1 exemplifies this problem. It inserts new sections into the Employment Rights Act 1996, establishing a framework for a new statutory right relating to guaranteed hours. However, through new Section 27BD(6), it grants the Secretary of State a remarkably wide power to make regulations specifying circumstances in which the duty to offer guaranteed hours does not apply or where an offer may be treated as withdrawn. There are no limitations, no criteria and no guiding principles. There is no requirement for a consultation or justification. In effect, the Secretary of State is given a blank cheque.

The Delegated Powers and Regulatory Reform Committee has been very clear that the power is “inappropriately broad” and should be

“restated with a greater degree of precision”.

While the Government’s memorandum refers to

“maintaining the original policy intent while allowing reasonable exemptions”,

the committee rightly points out that nothing in the Bill legally constrains the Secretary of State’s discretion in that regard. Moreover, as we raised on the first day of Committee, businesses need clarity on the operation of guaranteed hours. If there are to be sector-specific exemptions—and there may very well be a case for them—they should appear in the Bill, not be left to future ministerial discretion. Uncertainty benefits no one—not workers, not employers and not enforcement bodies. Allowing such fundamental aspects of the regime to be decided later by regulation undermines the transparency and stability of the framework that the Government are seeking to establish.

I remind the Minister that, during the passage of the Data Protection and Digital Information Bill, she rightly accepted similar concerns and tabled amendments which directly reflected the recommendations of the Delegated Powers and Regulatory Reform Committee. At the time, she said:

“I hope the Minister is able to commit to taking on board the recommendations of the Delegated Powers Committee in this respect”.—[Official Report, 27/3/24; col. GC 198.]


Why should that principle not apply here? If it is truly the Government’s intention that this power will be used only in limited and specific cases, then the legislation should make that clear. As it stands, any future Secretary of State could by regulation significantly weaken or disapply this statutory regime without the involvement of Parliament.

Regardless of one’s views on the underlying policy, that is not an acceptable way to legislate. When Parliament creates new rights in statute, they should not be left vulnerable to being hollowed out at the stroke of a ministerial pen. This amendment removes that overly broad delegated power and ensures that any substantive changes to the scope of the duty must be brought back to Parliament through primary legislation. Will the Minister now commit, as she has done before, to taking seriously the recommendations of the Delegated Powers and Regulatory Reform Committee and amending the Bill accordingly?

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, it is very good to return to the subject of zero-hours contracts as we start day 2 of Committee. As we debated last week, the Government are committed to ending one-sided flexibility and exploitative zero-hours contracts, ensuring that all jobs provide a baseline of security and predictability so that workers can better plan their lives and their finances.

Employers who already provide this security and predictability for their workers will benefit from a level playing field, but these measures will help drive up standards and eliminate undercutting across the board. Meanwhile, employees who enjoy the flexibility of their current zero-hours arrangements will not be pressurised into accepting a guaranteed-hour contract.

I thank the noble Lord, Lord Sharpe of Epsom, for tabling Amendments 18 and 19, which would remove the power to make regulations specifying circumstances in which the duty to offer guaranteed hours does not apply, or an offer may be treated as withdrawn. This power would allow the Secretary of State to react dynamically to changing employment practices that may arise, allowing for updates to maintain the original policy intent of providing a baseline of security and predictability so workers can better plan their lives. It could provide the required economic flexibility that businesses have been asking for, to ensure that the policy is working as intended while adapting to changing circumstances.

This power is separate to the power in the Bill to exclude categories of workers. Regulations made under the excluded workers power would allow specified workers to be taken out of scope of the right to guaranteed hours. Since the right to guaranteed hours is a new, novel right, it could be necessary to exclude certain workers in order to respond to the changing employment environment.

The power at issue here relates to specified circumstances where the right to guaranteed hours would otherwise apply but limited and specified circumstances justified an exception to the duty to make a guaranteed-hour offer. We envisage that any exceptions to the duty to offer guaranteed hours will be narrow and be applied in specified circumstances; for instance, where the measures would otherwise have significant adverse impacts, even when the employers and the workers act with good intentions and there is no other accepted way to mitigate the risk. Examples could include unforeseen circumstances such as a pandemic or a state of emergency.

Consultation is required to further determine which specific circumstances may justify a potential exemption. I assure the Committee that we will give full consideration to any representations made in this House and by respondents to that consultation. Gathering the views from those who will be impacted by the policy via consultation remains of the utmost importance to this Government. By removing the power, we would become unable to make such exceptions and to provide flexibility in those specific circumstances. The power will also be subject to the affirmative procedure, meaning that both Houses will have the opportunity to debate this matter.

Like the noble Lord, Lord Sharpe, I am, as ever, grateful to the Delegated Powers and Regulatory Reform Committee for its careful consideration of the Bill, including in relation to the power with which we are here concerned. The committee continues to serve your Lordships’ House well by providing a thoughtful analysis of the Government’s legislative programme, and I thank it for that.

As acknowledged by that committee, the need to respond to changing circumstances is an appropriate basis for such a power, but in the committee’s view, that power should be narrowed—whereas the amendment goes much further than what has been proposed by it. On that basis, I hope I have been able to set out more information on how the Government intend to use this power, and I of course look forward to responding more fully to the Delegated Powers Committee report in due course. I hope that reassures the noble Lord so that he feels able not to press his Amendments 18 and 19.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the Minister for her response to these amendments, but I have to confess that I am disappointed, not simply that the amendment is being rejected but that the Minister has chosen not to uphold the principle of parliamentary scrutiny which she championed herself only last year. At that time, she said

“the limits on effective scrutiny of secondary legislation are manifest”.—[Official Report, 27/3/24; col. GC 197.]


That is spot on; I could not agree more, so I have to ask: does the Minister still stand by those words, or does she now disagree with her own assessment—and indeed that of the Attorney-General? I will refrain from quoting again from the Bingham lecture that he gave last November, but we may have to return to that in due course.

Today, the Government are defending a delegated power that is not just broad but boundless. It is a power that allows a future Secretary of State to undo or dilute a statutory right without reference to Parliament and without any of the safeguards the Minister has previously endorsed. I am disappointed, and I regret that the Minister has chosen not to accept these amendments or to listen to the Committee, but it seems that she does not listen even to her own warnings. For now, I beg leave to withdraw my amendment.

Amendment 18 withdrawn.

Amendment 19 not moved.

Amendment 19A

Moved by

[Lord Hunt of Wirral]

19A: Clause 1, page 10, line 3, at end insert—
(c) in determining whether it was reasonable to enter into a limited-term contract, regard must be had to the employer’s operational circumstances and information available at the time the contract was made, including—(i) genuine short-term business needs or uncertainty,(ii) seasonal, project-based, or event-based fluctuations,(iii) relevant financial or staffing forecasts, and(iv) industry norms or practices relating to temporary contracts.(d) a decision to enter into a limited-term contract must not be considered unreasonable solely because subsequent business conditions changed in a manner not reasonably foreseeable at the time the contract was entered into.”Member's explanatory statement
This amendment clarifies that the reasonableness of entering into a limited-term contract should be assessed based on the employer’s operational context and the information available at the time of contracting. It lists specific factors that may be relevant to that assessment and states that unforeseeable changes in business conditions after the fact should not, by themselves, render a decision unreasonable.

[Lord Hunt of Wirral (Con)]

My Lords, with Amendments 19A, 20 and 21 in my name and in the name of my noble friend Lord Sharpe, we return to guaranteed hours. As drafted, our concern is that the Bill risks creating rigidity which does not properly reflect the real-world operational needs of businesses across key sectors of our economy, particularly retail, hospitality and tourism, all of which contain seasonal work.

13:15

Once a guaranteed-hours contract is accepted, the Bill provides no route —not even a limited one—for employers to respond if there is a significant change or shift in their operational circumstances. This means that if, for example, there is a sudden downturn in demand, overstaffing, a change in trading patterns or the loss of a major customer, the employer is, in effect, locked into an obligation that no longer matches the economic reality that they have to face.

I do not believe that is sustainable, nor is it in the interests of the long-term job security of workers themselves. If employers are unable to react and adapt to serious changes, the risk is not simply that guaranteed hours will become harder to manage but that businesses will become more reluctant to offer them at all, undermining, surely, the very purpose of this reform.

I will give some examples. In the retail sector, businesses often need to adjust staffing levels according to seasonal demand. Let us imagine a high street store that relies on a significant uptick in sales during the holiday season. If the business experiences a sudden dip in foot traffic or loses a key customer just after committing the business to guaranteed hours for workers, it would be illogical and ultimately detrimental for the business to carry on with overstaffed shifts, unable to scale back its hours to reflect real-time demand. If the Bill remains as it is, such businesses will be less inclined to offer temporary work in the first place, out of fear that they will be unable to make necessary adjustments.

Similarly, in the hospitality and tourism sectors, the cyclical nature of demand means that employers frequently adjust staffing levels. A hotel or restaurant that saw a sharp drop in bookings due to unexpected circumstances—whether a global event, local policy changes or even weather conditions—would find themselves in an untenable position if they were forced to maintain guaranteed-hours contracts for workers that no longer reflected the operational realities of the business. As a result, employers may become hesitant to offer any guarantees at all, or if they have offered such guarantees, they might face having to go out of business altogether.

I hope the Minister will accept that this is a problem that rigid legislation will force to come to the surface, because it ignores the practical challenges that businesses face in a dynamic, ever-changing environment. The inability to make necessary adjustments to staffing levels would not only harm businesses; it could lead to negative consequences for workers in the longer term. If businesses are unable to manage their staffing costs and remain financially viable, they will struggle to sustain job opportunities, let alone expand them.

There is another key consideration for many businesses—particularly small businesses—in areas such as retail and hospitality. Temporary or flexible workers are often an essential part of the workforce. The requirement to offer guaranteed hours to these employees may seem like a positive step for job security. However, in practice, many businesses will be left with a stark choice: either scale back on hiring or risk running into financial difficulties if they cannot adjust staffing levels to meet real-time demand. In sectors where business is often unpredictable, such as retail or hospitality, small businesses simply may not have the same resources or capacity as larger enterprises to absorb the costs of guaranteed hours. We fear that the incentives the Government are creating could well lead to fewer opportunities for temporary workers, fewer hires and, ultimately, less job security overall.

Many small retail businesses rely on flexible part-time staff during peak times, such as weekends or holidays. If these businesses are forced by this legislation to offer guaranteed hours to all workers, they may simply choose to reduce their headcount, offering fewer opportunities to temporary staff. That would reduce the flexibility that many workers rely on and undermine the Government’s intention of promoting stable employment opportunities for all.

My colleagues and I have received a considerable number of representations from this sector, but I will just mention the British Holiday & Home Parks Association, which gave advice to the Public Bill Committee. In its evidence, it highlighted the unpredictability of the holiday and touring park sector:

“Holiday and touring parks operate in an unpredictable environment and it would be impossible in some circumstances to run a viable business if employees were guaranteed a minimum number of hours per week when the level of trade is not substantial enough to cover staffing costs”.

I understand that holiday parks face a highly seasonal demand: they may experience a boom in the summer months but could see a dramatic fall in bookings in winter or during off-peak periods. Under the current provisions of the Bill, if such a business faces a downturn—for example, due to bad weather—it would be unable to adjust its staffing levels. This could lead to either business closures or, worse, fewer guarantees of employment. I hope the Minister will therefore understand that this amendment would allow businesses in unpredictable sectors, such as holiday parks, to respond flexibly to changes in demand. It would not open the floodgates for employers to escape their obligations; rather, it would provide a practical and necessary safeguard, ensuring that businesses can adapt to significant unforeseen changes, while still protecting workers’ rights.

The incentives that the Government seek to create, inadvertently or otherwise, would induce businesses to reduce hiring, and we are already beginning to see that happen. Small businesses in particular are becoming more cautious about offering guaranteed hours to new workers. The most worrying outcome of all this is that the groups relying most on flexible and part-time work—including young people, workers with a disability and others who need part-time employment to balance family or personal care commitments—will bear the brunt of these changes. These individuals are often the ones who rely on temporary or part-time work to gain employment, build experience and earn an income—and they will lose out.

Amendment 21 makes an important clarification to ensure that employers retain the ability to make genuine redundancies where there is a legitimate business need to do so. I hope the Minister will carefully consider the amendment, because it would ensure that the introduction of a new right to be offered guaranteed hours does not inadvertently create a chilling effect where employers fear that normal restructuring processes would expose them to allegations of unfairness simply because guaranteed hours had been agreed. Let me make absolutely clear that this amendment does not in any way undermine the provisions being introduced; we just need that clarification. In conclusion, the amendment strengthens the Bill by giving businesses greater confidence to participate fully and openly in the new framework without hesitation or defensive practices. I beg to move.

[Lord Moynihan of Chelsea (Con)]

My Lords, I welcome back the Minister and the noble Lords, Lord Sharpe and Lord Hunt, for another day on this important Bill.

To some extent, we are thrown back to the previous day’s debate, when we talked so much about flexibility. These amendments are designed to try to give more flexibility to the poor business owner who sits up late at night after the working day is done, trying to figure out, “How am I going to win? How am I going to succeed? How am I going to keep going?” It is of particular poignancy when one looks at what is happening to the high street all over this country, with shop after shop, particularly small businesses, closing down.

In last week’s debate, there was an interesting comment about the minimum wage. I am afraid that my memory is not good enough, but a noble Lord said, “Well, they all said that the minimum wage would be a disaster, but here it is: a triumphant success”. I think we are united, as a House, in looking for economic growth—that is the big objective. Economic growth comes only from jobs and businesses growing, so a triumphant success would be that there was more employment and that employment did not drop down.

Both sides of this House went for this higher and higher minimum wage, so I am not making a partisan attack here, but the impact is unknowable because we do not know whether employment would have been higher or lower if we had had no minimum wage or a lower one. We cannot actually tell; it is one of those mathematical enigmas. In America, the states that have no minimum wage, or a lower one, have higher employment, and people move from one state to another to find employment in the states with higher growth—but here we literally cannot tell whether employment went up or down.

What we can tell—this is a very interesting point—is that the introduction of the minimum wage and the higher minimum wage led precisely to what we are debating today: zero-hours contracts. A businessperson may be thinking, “Shall I hire somebody?”, and they have three choices. One is, “Yes, I can afford this on the minimum wage”—and great: a new job is created. The second is that they say, “No, I can’t afford that”. Particularly with a gormless youth—I remember back to my own gormless youth, when I was almost unhireable by anybody—they will say, “No, I’m not going to do it. My business will be less profitable if I hire this person and have to pay the minimum wage”. The third is: “Well, can I hire them but in some other, more flexible way?”—and here comes this whole zero-hours thing. Everybody denigrates it, but we find that a lot of people who are hired on these contracts say it is what they wanted—but, God bless, we can have different ideological views on that. The point was that zero-hours contracts created flexibility, and that must by definition have led to higher employment and economic growth, the thing that we are all trying to accomplish.

13:30

Now we are saying in this Bill: let us close that off. Therefore, there will be two more choices for the poor, benighted small business owner: “Well, I can’t afford to hire them under these current rules, so I’ve got the choice of not hiring them at all”—so no economic growth—or, “I’ll find some other way to flexibly slip through this legislation”, which we would not particularly want to happen, would we?

These amendments are trying to preserve flexibility for the poor business owner. We all know that many business owners are having to close down. With some it is because of employment law, and with others it is because of the very high rates that they have to pay on the high street; there are many reasons. But here is an opportunity for them to preserve flexibility. I hope the Minister will give very careful thought to these amendments as we work our way through the Bill, because the alternative is lower employment, lower growth and people out of work because we have been too prescriptive.

[Lord Londesborough (CB)]

My Lords, I will speak briefly to Amendment 19A in the names of the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, and offer my support for Amendments 20 and 21.

My main concern, as I expressed on the first day in Committee, is over the impact of guaranteed-hours contracts on the small and micro-business sector, specifically those with fewer than 50 staff. Amendment 19A is particularly relevant to start-ups and scale-ups, and we cannot ignore their high-risk operational context. Again, I declare my interest as set out in the register: I chair, advise and invest in a range of start-ups.

Clause 1’s right to guaranteed hours will inhibit job creation but also job mobility and flexibility, as we have heard, if applied to such businesses, to the detriment of both employer and employee. Rigidity—I think the noble Lord, Lord Hunt, used that word—is especially dangerous in a flat economy environment such as we have at the moment.

Small business planning requires agility and flexibility when creating new jobs. As we know, business circumstances will change, often on a month-to-month basis, given the natural volatility around budgeting, forecasting revenues, forecasting bookings and indeed anticipating demand. When we talk about

“the reasonableness of entering into a limited-term contract”,

we simply cannot afford to ignore the early-stage development of these companies and watch them avoid risk-taking.

The Member’s explanatory statement to Amendment 19A quite rightly points to

“unforeseeable changes in business conditions”,

and that is especially relevant to small businesses. As I know through bitter experience, as both an employer and an investor, there is often a huge delta between entrepreneurs’ forecasts and the actual outcomes. This is about not just seasonality, events or the weather but unpredictable customer demand.

We should therefore not handicap entrepreneurial risk-taking, which this economy so desperately needs to encourage, and specifically the creation of new jobs, by applying such blanket restrictions on limited-term employment contracts. We need a more nuanced approach, as this amendment suggests, and I ask the Government to give it serious consideration.

[Baroness Noakes (Con)]

My Lords, I support the amendments in this group in the names of my noble friends on our Front Bench. I have a number of concerns about the guaranteed-hours provisions in the Bill, one of them being that they are drafted almost wholly from the perspective of workers and pay little heed to the needs of employers. I do not believe that is a good way to create employment law to underpin a healthy economy.

On our first day in Committee, the noble Lord, Lord Barber of Ainsdale, who is not in his place today, and the noble Baroness, Lady Carberry of Muswell Hill, both spoke about the work of the Low Pay Commission on zero-hours contracts. I was grateful to them for being pointed in that direction. I have a great deal of time for the work of the Low Pay Commission, which is always balanced and very careful, so I went back and looked at the 2018 report. Unsurprisingly, I found that it does not provide the copper-bottomed support for the Bill that noble Lords opposite have claimed—I should also say that the employment bodies represented on the Low Pay Commission have told us that as well.

The Low Pay Commission did indeed recommend that workers should be offered guaranteed-hours contracts, but, importantly, it also recognised that there would be circumstances in which it would not be reasonable for the employer to have to do that. There is not a trace of that in the Bill. The Low Pay Commission was clear that the Bill should set out specific circumstances in which the employer would not have to offer guaranteed hours. The commission cited with approval some equivalent legislation which was at that stage going through the Irish parliament, which provided, among other things, that adverse changes in the employer’s business or the existence of temporary factors would allow employers not to offer guaranteed hours.

Like the noble Lord, Lord Londesborough, I believe that Amendment 19A is eminently reasonable in that context. It does not give an employer carte blanche to ignore guaranteed hours but allows for some genuine business circumstances to be taken into account by the employer when looking at whether guaranteed-hours contracts should be offered.

At the end of the day, if we do not have successful businesses, there will not be any jobs on any kind of contract available. As I said on our first day in Committee, I am particularly concerned, as is the noble Lord, Lord Londesborough, about small and micro-businesses, which really need to be allowed the flexibility if we are to protect the work opportunities of around half the private sector workforce.

Even if those small and micro-businesses survive the incredible bureaucracy associated with these guaranteed hours, they will potentially not survive the substantive impact of the hours if they are required in all circumstances to offer guaranteed-hours contracts. Of course, this is particularly the case in the hospitality sector, the largest user of zero-hours contracts; my noble friend Lord Hunt spoke about the problems in that sector. There are also very large numbers of small and micro-businesses in that sector.

Recognising some very limited flexibility, my noble friend’s Amendment 19A is actually very modest. It would go some way towards making this new requirement to offer guaranteed hours work in the context of businesses that have to face difficult circumstances, and at the moment the Bill pays no attention to that.

[Baroness Coffey (Con)]

My Lords, I support the amendments tabled by my noble friends. I am just thinking of my career. I have had quite a conventional career in many ways, but I have also had many extra roles, particularly when I was a student—I am conscious that we will come to Amendment 19B separately later. It is important to reinforce the challenges in starting up or expanding a particular business. It is well said that a coffee shop will know within the first week whether it will succeed. You could argue that there are different factors, but within the first month a business will certainly know whether the footfall and the sale per customer justify the number of people it is employing and adapt accordingly.

As my noble friend Lord Hunt of Wirral mentioned, there is also this extended element about things such as holidays. It may surprise your Lordships to know quite how many jobs are, frankly, based on whether it rains and people cancelling going out to do different things. That is one of the reasons why, in particular but not exclusively, many hotel chains have started having a price differential: basically, you get a better deal if you book up front, but you cannot cancel or get your money back. Indeed, it is why even more restaurants are, effectively, starting to pre-charge an amount of money that is expected so that people do not cancel. Having lived in touch of the coast for most of my life, I can assure your Lordships that the fluctuation in how many people actually turn up to a resort for the day in a town is real, and what that means for temporary jobs.

That is why I think my noble friend Lord Hunt has found a good way of trying to help the Government to consider some of the everyday decisions that employers have to make as to whether they open up in the first place, whether they try to expand, and whether they try to get the growth. If I go further on to Clause 20, at the same time that the Government are trying to encourage businesses to go into artificial intelligence and see all that can be embraced in that regard, they need to bear in mind that businesses will not invest in such technologies if they are concerned that the other costs will be so detrimental to them.

We keep having this Catch-22 situation: if the Government want growth, they need to recognise the success where employers have been given the chance to scope and to be flexible, although I understand entirely the Government’s intent that the employer should be reasonable with the people that they take on. It is for these reasons—and I will speak more in the next group—that I believe that the Government should seriously consider how they operationalise this. We keep hearing about more and more consultations. We have heard people from the British Retail Consortium, from retailers and from hospitality saying that these are the real issues. We are almost doing their consultation for them by putting forward these amendments, so I hope that the Minister will look on them carefully in his consideration.

[Lord Hendy (Lab)]

My Lords, I shall make four short points on these amendments, all of which I oppose. First, the noble Lord, Lord Hunt, suggested that employers would get locked into guaranteed hours. I remind him that all contracts of employment may be varied by mutual agreement or, if not, they can be terminated and there can be re-engagement on fresh terms.

Secondly, the noble Lord mentioned the industrial reality. The industrial reality of zero-hours contracts is a complete disparity of power: 80% of those on zero-hours contracts would prefer a permanent contract, but those on zero-hours contracts are completely at the mercy of the employer. They do not know how many hours they are going to work tomorrow, let alone next week, and they do not know how much income they will make at the end of any week. Therefore, a worker on a zero-hours contract does not want an argument, to fall out or have a disagreement with the employer. That is a vital component of the legislation my noble friend proposes.

13:45

Thirdly, the Bill already has escape routes for the employer, and these amendments are designed simply to increase the ways in which employers can evade the obligations of a guaranteed-hours contract. There are three that I notice. One is short-term contracts: we would see a deluge of short-term contracts introduced to evade guaranteed-hours contracts for zero-hours workers. Secondly, because these provisions relate only to employees, there would be an incentive for employers, in order to evade guaranteed-hours contracts, to re-categorise their workers. Again, the industrial reality is that it would be very difficult for the zero-hours employee to resist re-categorisation as a self-employed worker. Thirdly, there is the issue of the reference period itself. As I mentioned on the previous day in Committee, because the reference period is to be 12 weeks, we are already talking about more than a million workers who will never at any point reach that reference period and so be entitled to the benefit of a guaranteed-hours contract.

My fourth and final point is that reference is made to small and medium-sized enterprises—those with fewer than 50 and fewer than 250 workers respectively. I looked up the latest government statistics, which date from 2023. From those, we can see that 8,634,000 employees are employed in companies with fewer than 50 employees and 12,230,000 employees are employed in companies employing fewer than 250. So if there is to be any exemption for small companies, one is talking about a very significant proportion of the workforce—I think the noble Baroness, Lady Noakes, mentioned half the employed workforce in the private sector, which seems about right.

[Lord Fox (LD)]

My Lords, I was a little disappointed that the noble Lord, Lord Moynihan, did not welcome me back as well, but I am coming to terms with that disappointment. To briefly refer back to the first group, the noble Lord, Lord Sharpe, made some comments about the letter from the noble Lord, Lord Leong, and had I not had to leave before we got to that group, I fear I was going to subject the Minister to a somewhat satirical analysis of that particular amendment—but, frankly, the letter did a much better job than anything I could have done.

I ask the Minister and the noble Lord, Lord Leong, to take that letter and that response and discuss it with 10 people responsible for HR in businesses of different sizes to ask them what they think of it, then perhaps they could tell us what the result of those discussions were. I absolutely concur with the noble Lord, Lord Sharpe: it is beyond parody that that algorithm should lead to that sort of calculation that any company is expected to make. There has to be a simpler way of getting the same result; that is what we should be thinking about.

I was somewhat intrigued by the degrouping strategy. We have amendments on guaranteed hours in the previous group, this group and the next, which is why I reserved the small comments I have to just this group. I have tried to pick through the bones of what we heard. There are some bones, and I should like the Government to comment on them.

I point to the use of language by the noble Lord, Lord Hendy. On one side they are talking about flexibility and on his side they are talking about evasion and escape. Thereby hangs the problem of the debate that we might be having overall in your Lordships’ Committee. When we are talking about escape and flexibility, we are not using the same language. We have to try to find a way to bridge that divide in culture that we are dealing with. If we were doing conflict resolution, that would be the starting point.

Where I do agree completely with the noble Lord, Lord Hendy, is that we should not be looking to create a two-tier situation. We have to create a system that works for employers across the board. However, the noble Lord’s point was that it would extract a huge number of people from the benefits of the Bill were we to exclude. We have to work hard to ensure that the micro-businesses are not disadvantaged by what we are seeking to do, rather than exempt them from it. That is our view from these Benches.

Back to those bones: I look to the Minister to recognise that there are businesses that have lumpy—perhaps I should say fluctuating—demand. Some of these businesses fluctuate predictably—they are cyclic. Christmas comes at the same time every year, so we always have roughly the same amount of bulge. However, as the noble Baroness, Lady Coffey, pointed out, for others that lumpiness can come with the weather. I want the Minister to recognise that these businesses exist and then for us to explain that a number of issues have already come up around how to manage a workforce fairly while being economically sensible to the business within this lumpiness and fluctuation. We had groups on the first day in Committee, we have these groups, and we will have more.

I would like to sit down with the Minister to understand how the Government envision the Bill allowing businesses that know that they will have lumpy, fluctuating demand to manage a workforce. What will be the fair approach, in the Government’s view, and the economic approach, in businesses’ view, to ensure that there is a win-win? This should not be seen as an evasion or a flexibility but as an opportunity to bring things together and make them better for business and employees, because the two are completely linked in this. We have to cross that divide and sit down with the Government, to work out how flexibility comes into this and how a business will manage this process properly, while delivering the fairness that the noble Lord, Lord Hendy, put forward.

Can those of us who are interested sit down with the Minister in a seminar where she explains how, if the Bill goes through as it is, businesses with lumpy and fluctuating demand, whether seasonable or variable, can manage that going forward?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the noble Lord, Lord Sharpe, for tabling Amendments 19A, 20 and 21 to Clause 1 on the right to guaranteed hours. I say to the noble Lords, Lord Sharpe and Lord Fox, that the detailed analysis of the algorithms by the noble Lord, Lord Leong, was presented only on the basis of a request for a detailed analysis of where those arguments came from. There was a much simpler version, which my noble friend gave in his verbal response, so there is more than one version of that challenge.

Amendment 20 seeks to allow employers to propose changes to permanent contracts issued after a guaranteed-hours offer within six months of acceptance, as long as there is a genuine material need in business operations. I am pleased to reassure noble Lords that this amendment is not required. As my noble friend Lord Hendy said, the zero-hours provisions in the Bill do not prevent employers offering their workers variations to their contracts following the acceptance of a guaranteed-hours offer as long as the variation does not amount to subjecting the worker to a detriment. I say to the noble Lords, Lord Moynihan and Lord Londesborough, the noble Baroness Noakes, and other noble Lords, that the Bill does have the flexibility that should reassure businesses that the zero-hours provisions can be changed. As we debated previously, when talking about zero-hours contracts in the context of, for example, individuals such as students or those with caring responsibilities, those who are offered zero-hours contracts will be able to turn the offer down and remain on their current contract.

Going back to Amendment 20, employers will still be able to propose and make changes to their workers’ contracts after they have accepted a guaranteed-hours offer, including in the sectors such as hospitality, to which the noble Lord, Lord Hunt, refers. This can be done following the usual process of negotiation and agreement between employers and workers. It would be subject to the terms of the workers’ contracts as well as existing and new legislation, such as the provisions on fire and rehire. Adding a provision stating that employers can propose variations—something that they will already be able to do—while considering only a limited number of matters may risk creating legal confusion. It may, for example, inappropriately suggest that variations can be proposed only in these circumstances or suggest that other provisions of legislation that do not include similar wording restrict employers’ ability to propose variations of contracts when this is not the case.

Amendment 21 seeks to make provisions that employers may still make redundancies where these are based on genuine business needs and not linked principally to a worker’s right to guaranteed hours. I am again pleased to reassure noble Lords that the amendment is not necessary. The zero-hours provisions in the Bill do not prohibit dismissals by means of redundancy following the acceptance of a guaranteed-hours offer. There are some restrictions on selecting an employee for dismissal by redundancy because they have accepted a guaranteed-hours offer, but this is not what the amendment seeks to address.

The Bill otherwise creates protection only against detriments and makes dismissals automatically unfair in very limited scenarios—including, for instance, where the principal reason for the dismissal is an employee accepting or rejecting a guaranteed-hours offer. If an employer wished to make an employee redundant, they would be required to follow the required processes in line with the terms of the employee’s contract and with employment law relating to individual or collective redundancies, to ensure that the dismissal is fair. This amendment would not substantially change the effect of the provisions, as the zero-hours measures in the Bill do not prohibit dismissal by reason of redundancy following the acceptance of a guaranteed-hours offer. But it could create unhelpful doubt as to how the legislation on redundancy already operates.

Amendment 19A seeks to list in the Bill a number of factors and circumstances that would need to be considered when determining whether it was reasonable for an employer to give a worker a limited-term contract. I emphasise that the right to guaranteed hours will not prevent employers using limited-term contracts. Under the guaranteed-hours provisions, it is reasonable for an employer to enter into a limited-term contract with a worker if the worker is needed only to perform a specific task and the contract would terminate after that task has been performed—for example, waiting at tables at a wedding—or the worker is needed only until an event occurs or fails to occur, after which the contract would terminate. This could include a worker covering another worker who is on sick leave or a worker needed only for some other kind of temporary need that would be specified in regulations, the contract expiring in line with the end of that temporary need.

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If it was reasonable for a contract that ended by a limiting event to have been entered into for a limited term, a guaranteed offer need not be made. For example, if a period of high demand is expected for 12 weeks, the limited-term contract is entered for this specific task and it ends after the 12 weeks, there would be no obligation for the employer to make a guaranteed-hours offer. We therefore consider that there is already ample flexibility for employers to engage workers on limited-term contracts, so we do not consider that listing further factors and circumstances is required.

The provisions that allow limited-term contracts until an event has occurred or a specific task has been completed will allow for the use of limited-term contracts for seasonal work. By way of just one example, fruit-pickers may be engaged on a limited-term contract until the end of the picking season, and it may well also apply to the example of holiday and touring parks to which the noble Lord, Lord Hunt, referred.

A number of noble Lords, including the noble Lords, Lord Hunt and Lord Fox, and the noble Baroness, Lady Coffey, mentioned seasonal workers. The noble Lord, Lord Fox, described the “lumpy” demand. We are aware of fluctuations in demand for seasonal workers, and we will take this into account when designing the regulations on the definition of temporary need. This is a novel right and, by defining temporary need in regulations, we will be able to react dynamically to changing employers’ practices and respond to circumstances where employers identify genuine temporary needs that are not covered by a specific task or the occurrence of an event.

[Lord Fox (LD)]

I thank the Minister for her partial response, but will she reveal the draft of those regulations while we still have an opportunity to debate them? Secondly, I think she was going to talk about consultation and so I ask what question that consultation will be asking.

[Baroness Jones of Whitchurch (Lab)]

I will write to noble Lords about when the regulations will be available. This may well be part of the implementation plan, which is still awaited. Noble Lords can genuinely take it from me that they will receive it as soon as it is available.

We will consult on the contents of the draft regulations and engage with a range of stakeholders, including trade unions and businesses. The noble Lord, Lord Fox, asked whether we could have further discussions about this. Of course I am happy to talk to noble Lords in more detail about how this might apply, because I want noble Lords to be reassured that the flexibility they seek is already in the Bill in its different formulations of wording. But I am happy to have further discussions about this.

I hope that that provides some reassurance to noble Lords. I therefore ask the noble Lord, Lord Hunt, to withdraw his amendment.

[Lord Lucas (Con)]

I join the noble Lord, Lord Fox, in saying that I would really appreciate the opportunity to look at how this Bill deals with lumpy demand— not only predictably lumpy but randomly lumpy. I ask the Clerk at the Table to transmit to the Clerk of the Parliaments a request to tell us how the Bill will affect the House’s employment practices, because we are a great generator of lumpy demand, not least on the Public Bill Office. I would really like that immediate understanding of how the Bill affects a substantial organisation, but one with a very unpredictable set of demands such as the Houses of Parliament.

This lumpiness is a characteristic of, say, the NHS, which may suddenly get a demand and have to do things. Suddenly something emerges and the pattern of working has to change. Will the Bill fix those longer hours so that they become set and cannot be rowed back from when the lump disappears? A good understanding, before we reach Report, of how the Bill will work in practice and interact with a range of real businesses would be really valuable, and I hope the Minister can offer it to us.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thought I had already offered to have further discussions, but I take the noble Lord’s point.

[Lord Hunt of Wirral (Con)]

My Lords, I think my noble friend Lord Lucas and the noble Lord, Lord Fox, were looking for the draft regulations. I do not think I need to remind the Committee of my declaration of interests; at Second Reading, I reminded the House that I am still a practising solicitor. It is no accident that, last week, City AM—a newspaper circulated widely through the City—said that the Bill is the biggest boost for the legal profession that anyone had ever seen. Many more lawyers will be needed to wade through the complexities of the Bill.

In particular, as my noble friend just pointed out, we are constantly debating the Government’s power to introduce regulations, but Parliament is not allowed to see those regulations when it passes the primary legislation that gives Ministers the power, after consultation, to do whatever they wish whenever they wish to do it. We are going to have this time and again in this series of debates. Surely it is right that, if the Government are taking the power to introduce detail—in particular by amending primary legislation—we should see that detail, if only in draft, before we decide to give that power to Ministers.

[Lord Fox (LD)]

I do not know whether I am allowed to intervene on this, but I wonder whether the noble Lord heard the Minister say that the Government are consulting on draft regulations. Perhaps he might ask the Minister to share those draft regulations with us during the process of consultation.

[Lord Hunt of Wirral (Con)]

I completely agree and am very grateful to the noble Lord, who introduced the whole concept of “lumpy”. As well as “lumpy”, we are all talking about “flexible” and he also said “fluctuating”.

This has been a very helpful debate. I particularly enjoyed my noble friend Lord Moynihan of Chelsea describing the history of the introduction of the minimum wage and how it gave rise to zero-hours contracts in the first place. It is a reminder that we have to be careful every time we take a key step down the road to creating more employment law, as we have to be mindful of the consequences.

I agree with the noble Lord, Lord Londesborough, that we have to keep thinking of the start-ups and scale-ups, and the effect that this legislation will have on them. It was good that my noble friend Lady Noakes reminded us of the truth behind the Low Pay Commission 2018 Report that small and micro-businesses, as she put it to the Committee, need flexibility. My noble friend Lady Coffey reminded us that one’s job quite often depends on whether it is raining, as she put it. I think it was Mark Twain who once wrote that, in England, everyone talks about the weather but no one ever does anything about it. It is a fact that demand often fluctuates according to the weather and this was a good reminder of that.

I welcome the speech from the noble Lord, Lord Hendy. His four points were key; I accept them and will carefully ponder each one—particularly his point about escape routes. Our purpose—mine and that of my noble friend Lord Sharpe of Epsom—is to ensure that we do not need escape routes, because we will get a law that fits the way in which the economy can grow and be more competitive. That is what it is all about. It is not about short-term contracts being the answer here and another form of contract being the answer there. Most employers want stability so that they can look forward with confidence.

How right the noble Lord was to remind us of the importance of small and medium-sized enterprises. It must surely be a worry in his mind as to the effect this onerous Bill will have on those small and medium-sized enterprises looking to grow and expand that do not have an HR department that can set out for them exactly the way ahead through all the bureaucratic routes they have to follow. They want to be able to grow and expand without carefully checking which rulebook applies. They, of course, always allow bereavement leave. All the employers I have known, when there was a tragedy in a member of their workforce’s family—I am not talking about just my clients but across the whole sector—did, of course, allow people time off. Therefore, we should not be establishing rigidity.

This is where I find myself in total agreement with the noble Lord, Lord Fox: we do not want a two-tier system. However, as my noble friend Lady Noakes pointed out on our previous Committee day, there are various tiers already in the tax system. The exemption I sought in Amendment 21 surely does not in any way undermine the rights of workers but gives the Bill the flexibility it needs to succeed in practice. We have heard in this debate and from businesses across the country that a rigid one-way system for guaranteed hours simply does not reflect the way in which large parts of our economy function. Retail, hospitality, tourism, logistics, seasonal industries—all rely on flexible staffing, and they operate in environments that can shift rapidly, sometimes overnight.

I plead again with the Minister that these amendments provide a narrow, principled route for employers to propose changes: not to walk away from commitments but to respond when there is a genuine and material change in business operations. No retaliation, no loopholes, just a basic safeguard to ensure that businesses are not locked into obligations that are no longer viable.

Let us be honest, if employers are not able to make changes in response to real pressures—a drop in demand, a loss of control, over-capacity—they are far less likely to offer guaranteed hours in the first place. That is not speculation; it is what we are hearing from so many of those making representations about the Bill at the present time. The result is clear: fewer jobs offered, fewer guaranteed hours and fewer opportunities, especially for the very people who rely on flexible and part-time work. That means young people, students—who we will come to in a moment—workers with disabilities, carers and, of course, those trying to get their foot on the ladder.

Finally, I agree with my noble friend Lord Sharpe that it would be helpful to sit down with the Minister and her colleagues to see if we can find a way through. Otherwise, we shall have to return to this on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment 19A withdrawn.

Amendment 19B

Moved by

[Lord Hunt of Wirral]

19B: Clause 1, page 10, line 26, at end insert—
“(13) The duty to offer guaranteed hours under Section 27BA(1) does not apply to workers who are full-time students.”Member's explanatory statement
This subsection provides that the duty to offer a guaranteed hours arrangement under Section 27BA(1) does not apply to workers who are full-time students.

[Lord Hunt of Wirral (Con)]

My Lords, as I indicated, we now return to students and the guaranteed-hours exemption for full-time students. Amendment 19B is in my name and that of my noble friend Lord Sharpe of Epsom.

At Second Reading, I heard the Government’s intention, as part of their growth agenda, to get young people back to work who are not in education, employment or training—referred to as NEETs. Retailers provide flexible and part-time jobs tailor-made for people coming off benefits and the nearly 1 million 16 to 24 year-old NEETs. However, the evidence available clearly shows that the guaranteed-hours reforms, as currently drafted, fail to realise the realities of student employment.

14:15

Recent polling conducted in October and November by Wonkhe, an organisation that specialises in higher-education policy, analysis and debate, highlights that two-thirds of students who work while studying are employed on zero-hours contracts. That type of contract is especially common in universities and student unions, where flexibility is paramount. These institutions depend on zero-hours arrangements to meet the fluctuating demands of student workforces during term time.

I recognise that the Government’s intention to provide guaranteed hours to workers who have met certain thresholds of hours worked is a well-meaning attempt to improve job security. However, the evidence suggests that students do not require or desire such guarantees. For students, flexibility is not a weakness, it is a strength. They value the ability to work when it fits around their academic commitments and personal lives, not the rigidity of guaranteed hours. Introducing guaranteed hours will strip students of the flexibility they need to thrive in both their work and their studies.

The core issue with the guaranteed-hours reforms is that they are fundamentally incompatible with the nature of student work. The proposed changes would force employers such as universities, student unions and seasonal businesses to provide guaranteed hours after a student worker meets the required threshold, over a 12-week reference period. While that sounds reasonable on the surface, it ignores the fact that students are employed seasonally, based on the academic calendar. Students typically work during term time and not during holidays such as Christmas, Easter or summer. The reference period proposed in the Bill would not account for the seasonal, term-time nature of student employment.

Once a student works enough hours in a reference period, their employer would be required under this legislation to guarantee them work during university breaks—times when they are not available to work or demand for student labour drops significantly. That would create a pretty serious problem for universities and businesses that serve students. They would be forced to offer hours to students during times when they simply cannot work, such as during the summer break or over Christmas. For many students, these periods are essential for rest, family time or travel. For businesses, this would result in unnecessary labour costs for no real benefit.

The broader impact of this policy, if left unamended, would be detrimental to both students and employers. Employers, particularly those in the student services sector, would be likely to reduce their reliance on student workers altogether. If universities and student unions are required to guarantee hours to students during breaks, they may choose to limit the number of students they hire in the first place, or even avoid hiring them altogether, rather than face that additional financial burden.

This would restrict employment opportunities. In our view, instead of the freedom to choose work based on their academic schedules, students would be forced into rigid contracts, risking their academic performance or personal well-being. For many students, the ability to opt in or out of work based on their academic calendar is far more valuable to them than the stability that guaranteed hours might offer.

I ask the Minister to consider this amendment in particular because the reforms, in their current form, fail to consider that full-time students do not fit neatly into a system designed for workers with more predictable schedules. The current design of the guaranteed hours proposal, without any exception for seasonal or term-time workers, ignores the nature of student work and, I am afraid, could ultimately drive employers away from hiring students altogether, and surely that is an outcome that no one would want to see.

There is a clear solution here. As currently written, the Bill offers some scope for exemptions to the duty to offer guaranteed hours, such as in seasonal work. However, I plead that that is, certainly at the moment, a vague provision, and we need explicit regulation to define full-time students as a category of workers who are exempt from this duty. The regulation could specify that students on zero-hours or low-hours contracts are excluded from the obligation to be offered guaranteed hours, thus ensuring that universities, student unions and seasonal employers are not burdened by requirements that simply do not fit into the nature of student employment. This would ensure that employers can continue to offer flexible work to students without the threat of penalties or unnecessary costs, and it would also allow students to continue working in a manner that fits their academic schedules and personal needs, rather than forcing them into fixed hours that they cannot meet. I beg to move.

[Baroness Lawlor (Con)]

My Lords, I strongly support this amendment in the name of my noble friend. I am an employer, and I have declared my interest in the register. I founded and was the executive director of a think tank for over the best part of a quarter of a century, and now I am research director there. We continue to employ students on a flexible basis. As your Lordships know, many universities have changed their timetables. Some are taking much shorter summer breaks, some have started working more flexibly and many work remotely for certain classes. Postgraduate and undergraduate students welcome the opportunity to train, get a foothold in the world of work and understand what happens there. They learn disciplines. They learn the discipline of work, timetabling and deadlines. But we have to be flexible. Terms can be busy. There can be things such as essay crises, or a postgraduate student may have an extra schedule to fit in, and of course we will accommodate that.

We have devised a good work programme. I am speaking only to give the Committee an example of the damage this will do, particularly to the students. We devise a work programme so they can work remotely and do research when they have free time. They want to earn money, and both parties are flexible. I, particularly as a former academic, recognise that their work in the university, their teaching and their essays come first. This suits all parties. We have had full-time staff who have come to us with good degrees, stayed three or four years and then gone on to do a professional training course, perhaps in law or accountancy. They, too, want to come back and continue with the work that they have brought to a high level, and they will be paid accordingly. There is no exploitation in this market; rather it is mutual gain.

It is a great pleasure for me to see young people. I have had students from inner London universities whose family had no habit of third-level or even second-level education, who came from families from abroad, who used to ask for time off during their time to take their granny to the hospital in order to interpret for her. We gave them opportunities, and it is a great pleasure to see that they have done very well as a result. Some of the work placements are organised directly with the university, and for others students write in themselves. I beg the Government to listen to this amendment and take heed, because the Bill will do untold damage to the life chances of students and their capacity to earn and keep afloat when they are paying for their studies.

[Lord Jackson of Peterborough (Con)]

My Lords, this debate takes me back to my own student days and the work that I did as a student. It was not very glamorous, I have to say. I did the overnight shift shelf-stacking at Gateway, which set me up, obviously, to be a Peer in your Lordships’ House. I also did a stint at McDonald’s. That was valuable experience in terms of socialising, learning life skills and the important opportunity to meet different sorts of people.

I believe that this Government are fair-minded and decent in the way they wish to protect the interests of working families who want the certainty of being able to put food on the table and earn a decent wage. I think we all believe that that is very important as an imperative. However, the mark of a good piece of legislation is the ability to answer the question, “What problem is this solving?” Another mark of good legislation is the ability to be flexible in carving out some parts of a Bill where the effect of the Bill will be disadvantageous to a group. I think that this is one such example and that the very important points made by my noble friend Lord Hunt of Wirral should be taken on board by the Government.

Remember that this is a student generation that has lived through the trauma of Covid. Many students and graduates have had to start their working career not being able to socialise in an office or a factory or out on site but at their kitchen table with their laptop. My problem is that employers who, broadly speaking, are not wicked and rapacious but want good people to join their business, make money for them and grow themselves as people and individuals and workers, will not take a risk with this legislation. This goes through the whole of this legislation. Employers are going to be significantly more risk-averse if they are going to be compelled to offer guaranteed hours to certain groups, including students. I think Ministers should give that consideration.

The reason that this is a good amendment is that it recognises that we have a very complex, fast-moving labour market and that young people are making decisions and value judgments about their work, employment, training, skills, knowledge and experience that I did not take 30 years ago and my parents certainly did not take, as you were generally in the same job for the whole of your working life, but—I would not use the word “promiscuous” necessarily, but I cannot think of a better word—younger people now are a bit more promiscuous in the decisions they take, and therefore they value that ability to enter into a flexible contract. In my time, I would not have expected a guaranteed hours contract. I would for someone aged, say, 35 or 40 who had a family and had to provide for them, but I think my noble friends have made a good point that this amendment would allow the Government to carve out this particular group. I do not think there is anything in the Explanatory Notes or the impact assessment that definitively makes the case for keeping students in this group, and for that reason I would like the Minister to give active consideration to this amendment. It is a sensible amendment. It is not a wrecking amendment. It is designed to improve the Bill. It recognises the real-life consequences and issues that may arise from the Bill: in other words, fewer young people having the opportunity to work and fewer long-term employment opportunities. For that reason, I am pleased to support my noble friend’s very good amendment.

[Baroness Coffey (Con)]

My Lords, I may also go down memory lane about aspects of employment—it was a variety of activities. Where I slightly disagree with my noble friend Lord Hunt, who moved the amendment, is that I expect the Minister will simply say that students are not required to accept a guaranteed-hours contract. She is absolutely right about that. However, if I were in a situation as a student getting a guaranteed-hours contract, happy days. I would lap them up wherever I could. I am trying to think back to my time doing my PhD. I think I worked for the university in two different jobs. I also managed to use some of my holiday to get extra work. It was a mixture of things, and we are seeing this trend increase. With the cost of living challenge that people across the country face, we are seeing a significant increase in students starting to take on quite long working hours, which is somewhat detrimental to their learning progress.

14:30

I can understand that people see a variety of routes through higher education—and we are not just talking here about degrees; we could be talking about master’s. Full-time students and those in education beyond the age of 16 could also be considering technical work, so it is fair to think about the real-life element for an employer.

The Government, it seems, are going to open up an EU mobility scheme. I think a lot of this is to do with the fact that many employers are concerned about what happened with Brexit. Although we ended up with nearly 5 million people getting EU settled status, a significant proportion of people decided not to come back to the UK after Covid, but still have that status and could. At the moment there is this huge gap for employers, who are concerned. It is extraordinary to think how many people are actively seeking work but still unemployed in London, given the number of vacancies in this capital city.

One of the things about full-time students is that there will be a fluctuation in demand and what is needed. For example, there will be a fluctuation of work in the holidays where—how can I put it?—with the other proposed changes in this Bill regarding statutory sick pay, it could be very easy for students to not necessarily turn up and still be guaranteed hours and guaranteed that wage regardless. We should recognise the different experiences that people have. I know that Oxford University does not allow its students to have a job; it bans it in university regulations and you can be expelled from the university.

With student visas, in term time students can work up to 20 hours, and in their equivalent of recess they can work full-time. You can see a variety of situations where it would be very convenient for students to lock an employer into guaranteed hours, which may not be beneficial for the employer, recognising also the need to provide long-term permanent work to people who are not students. That variability is an important factor. Perhaps I should not be so ungenerous.

There is precedent in legislation to restrict full-time students to accessing particular rights, and that is in universal credit. Full-time students are not allowed to have universal credit, apart from one very narrow exemption. This is a good example of where we are considering the legislation in detail and recognising that we are talking here about the approach that the Government are taking to families and households. I think this is a good exemption that would still allow the flexibility wanted.

[Baroness Jones of Whitchurch (Lab)]

My Lords, this has been a useful debate on the subject of those who may be made exempt from the scope of the right to guaranteed hours. First off, I say to the noble Lord, Lord Hunt, that it is quite right that the Government have a detailed plan to get young people into work and training. Of course, we want to provide new opportunities for all young people, and we are determined to do that.

Amendment 19B in the name of the noble Lord, Lord Sharpe, seeks to take workers who are full-time students out of the scope of the right to guaranteed hours. I say to the noble Lord, Lord Hunt, that the Government appreciate that zero-hours contracts or those sorts of arrangements can work well for many full-time students, who desire the flexibility that they provide. We have heard that from around the Chamber this afternoon. The noble Lord, Lord Hunt, talked about term-time or seasonal work, but I urge him to look back through the previous debates we have had and the comments I have made, because there are a variety of ways in which employers can offer that flexibility of contract and the limited-terms contracts that could address those term-time only or seasonal work issues. I am not persuaded of his argument in that regard.

I say to the noble Lord, Lord Jackson, and the noble Baronesses, Lady Lawlor and Lady Coffey, that there are workers who nevertheless are full-time students, and they can still experience that one-sided flexibility, similarly to the workers who are studying part-time. It seems disproportionate to exclude workers from the scope of that right simply on the basis that they are enrolled in full-time studies. Full-time students may value guaranteed hours to help them manage their job around their studies or arrange their childcare in the same way as those in full-time work.

I think there is an assumption in this debate that we are talking only about a particular age group of people and that it is a group of young people who are earning some extra beer money. This is far from the case. Many full-time students are mature students with family or other caring responsibilities, or even simply with rental or mortgage commitments. For those people, guaranteed hours can be a financial lifeline. According to a 2024 TUC poll, the majority—80% of students on zero-hours contracts—also reported that they had experienced difficulties managing study and education alongside their work. They certainly, in this generation, try to manage both of those a lot more than they did in my generation, and it is now much more expected that young people will work alongside their study. Many of those students want the opportunity to have regular hours to avoid the burden of incurring long-term student debt, which they would otherwise take into their ongoing working life. As we have said, it is entirely up to the student to say what is right for them, but there are very good reasons why the guaranteed hours should apply to all people and we should not make an exemption for students.

However, as we noted, flexibility for workers is important and the Government are not seeking to change that, where workers value that flexibility and have some benefit from a zero-hours contract. As I say, that is why workers who are full-time students and want to retain their zero-hours contracts or arrangements will be able to do so by rejecting the guaranteed-hours offer. They can accept it or reject it.

However, it is the Government’s view that they should be able to choose, based on their individual circumstances, whether to accept a guaranteed-hours offer, rather than being denied that right, as the noble Lord’s amendment seeks, purely on the basis of the fact that they are studying. I hope the noble Lord will look again at his amendment. I feel as if it is penalising young people and students in a way that feels quite unreasonable in the circumstances where everybody else is entitled to this right. Therefore, I hope he will be prepared to withdraw the amendment.

[Lord Hunt of Wirral (Con)]

My Lords, this has been a valuable debate; I agree with the Minister. Indeed, I welcomed her admission that zero-hours contracts work very well for students and are valued by them. I was interested in the TUC survey. All the surveys I have seen so far tell this Committee that full-time students do not want to lose zero-hours contracts.

It may be that the Minister will say, “Why is this amendment necessary, because they will not request full-time employment?” However, under the Bill, the employer has to work out how the business will be able to offer someone on a zero-hours contract full-time employment as and when they request it. It comes later, of course, when we are moving amendments, that we can say that it should not be the duty of the employer to give the opportunity of full-time employment; it should be the right to request full-time employment. What I think we are arguing about is whether all employers will have to go through the process in advance of any request being received. Under this legislation, they have to work out how they will be able to respond positively to an offer.

My noble friend Lady Lawlor shared the real-life experience and the way in which various students have taken advantage of these contracts. But what if they are not going to be offered them and given the opportunity of working as and when, in the flexible, lumpy way they want to organise their studies, as my noble friend Lord Jackson of Peterborough, pointed out? I thank him for going down memory lane; it was a fascinating glimpse of life as a stacker. I suppose all of us will remember what we did as students. I volunteered. I crossed Whiteladies Road in Bristol and offered my services to the BBC. The BBC took me on as a freelance newsreader.

[Lord Goddard of Stockport (LD)]

As everybody does.

[Lord Hunt of Wirral (Con)]

Yes. I had to turn up at 5 am and then read the news.

[Lord Fox (LD)]

I am excited by the noble Lord’s anecdote, as I was by other noble Lords’ anecdotes, but would he perhaps concede that that was several years ago and the employment market, and indeed the student body, might have changed somewhat since then?

[Lord Hunt of Wirral (Con)]

Sadly, yes. I was on a student grant and they were abolished, so I cannot draw too many analogies. My noble friend enticed me down memory lane.

I just wanted to see what the adverse effect of this amendment might be if we were to exclude full-time students. My noble friend Lady Coffey quite rightly reminded us that there is such an exemption in other legislation, such as that around universal credit. Therefore, the Minister will not be blazing a new trail; she will merely be responding to the very fact that, under legislation, full-time students do not necessarily fit into the pattern laid down by the Bill.

I am sure we will return to this. In the meantime, we can hardly wait for this meeting with the Minister, in which she will take us through the way this will all operate to cover flexible and lumpy employment. While reserving the right to return to the issue on Report, I beg leave to withdraw the amendment.

Amendment 19B withdrawn.

Amendments 20 and 21 not moved.

Clause 1, as amended, agreed.

Clause 2: Shifts: rights to reasonable notice

Amendment 21A

Moved by

[Lord Lucas]

21A: Clause 2, page 19, line 11, after “notice”, insert “of no more than 24 hours”
Member’s explanatory statement
This amendment seeks to define a reasonable maximum period of temporary work for agency workers in primary legislation will help remove any uncertainty for businesses worried about genuine temp work being caught in the new zero-hours regulations.

[Lord Lucas (Con)]

My Lords, I hope this amendment will come under the “lumpiness seminar” we have been promised. It is about what “reasonable notice” means in the Government’s intentions and how this will work in practice.

This again comes back to my request to the clerk. How did this work in the case of Parliament being recalled to deal with the Government’s rescue of the steelworks? How would it work in connection with the NHS’s response to a train crash in its neighbourhood? What about the need to change working patterns suddenly and quickly and for the workforce to be flexible? Although I have kept this amendment simple, I would like to reflect in our meeting on the equivalent provisions in Schedule A1, which deal with agency workers. How is this all going to work in practice?

14:45

Flexibility is such a key part of having an efficient economy. Those who choose to work in the flexible workforce, such as locum doctors and others, generally get a good return for doing so and a lot of flexibility in their lives. Where it works well, it works well. It is a vital part of keeping an economy going.

With this amendment, I am trying to discover what the Government mean by “reasonable notice”. This is another area where I imagine there are some draft regulations around, but if the Government could give us an insight into what that phrase means now, I should be most grateful. I beg to move.

[Lord Goddard of Stockport (LD)]

My Lords, I will speak to my Amendment 29 and support my noble friend Lord Fox’s Amendment 27. My amendment probes the Government’s intended meaning for the phrase “reasonably believed”, which relates to short-notice cancellation of shifts. This phrase may seem innocuous at first glance, but it carries considerable weight in determining whether workers—particularly those in insecure or temporary arrangements—are entitled to compensation when a shift is cancelled, shortened or otherwise fails to materialise. Without a clear understanding of what constitutes a reasonable belief in this context, we risk leaving both worker and employer in an uncertain and potentially contentious position. A test that lacks definition can quickly become a source of dispute rather than a resolution.

To be clear, my intention is not to impose overly prescriptive language on the Government, but rather to seek clarity on how this standard is to be understood and applied. For example, it is not enough for an employee to assert that they are expecting a shift to proceed even when the hirer has not provided written confirmation. What factors should we consider in assessing what is reasonable? Should they include previous patterns of communication, the urgency of the situation or a reliance on verbal assurances? Clarity is not a luxury that employment law has—it is a necessity. Vague thresholds serve no one, least of all those trying to navigate an already precarious labour market. I hope the Minister will take this opportunity to provide reassurance that the Government’s use of this term is underpinned by clear guidance, sound reasoning and a fair balance between the interests of workers and agencies alike.

[Baroness Lawlor (Con)]

My Lords, I speak in favour of Amendment 22, which would allow the duty to provide reasonable notice not to apply in certain cases, and Amendment 24, which would do likewise for the duty to provide compensation under new Section 27BP(1). The Bill’s approach is likely to damage the effective working of the labour market, for which any sensible law needs to take account of the delicate balance between the needs of a business, which needs a workforce, and those of a workforce, which depends on a business succeeding to provide work and income for the future.

If a Bill does not account for exceptional circumstances, it becomes a straitjacket on all parties. In the case of this Bill, in providing for exceptions to guaranteed-hours, reasonable notice and compensation obligations, it should take account of the difficulties businesses have to navigate to keep afloat and continue to make a success of things, as well as contribute to the whole economy and the country’s overall welfare, provide jobs for the labour market, and offer opportunities for people to work, earn and, sometimes, get their first job on the jobs ladder.

We understand that businesses have both quiet periods and busy periods—such as hospitality events—where they need extra hands. A business must allow for periods of extra business as a matter of course—some of these are predictable, others not. Businesses know there are times when cover is needed with no notice, such as when a team member is off sick or at a funeral, but by the same token they need to be able to avoid adding to their problems and costs when they are a victim of circumstances that unexpectedly change. Yet the Bill requires the employer to give notice of changes and make provision for compensation if a shift is cancelled, moved or shortened without sufficient notice.

These amendments simply ask that a Government can make regulations so that the duties under new Sections 27BI and 27BJ need not apply. That would give power to a responsible Government to ensure that there can be exceptions, so that businesses are not burdened with the costs and time involved in the tribunal process and potential compensation payments in cases where, due to unlikely and unforeseen circumstances, the guaranteed-hours work was not available at short notice.

We have already heard examples, but no business is exempt from the difficult changing circumstances with which they contend. Given the burden that the business sector will face under the guaranteed-hours clause, a Government will have few tools at their disposal to tackle what could be an unfair obligation—one that might be mitigated by circumstances in the normal course of events—to exempt the reasonable notice required for changes or cancellations that have an impact on the business, and the compensation obligation, which will add unfair costs to a business.

I will take three sectors—each very different—to illustrate a potential example. The first is the retail sector, where extra help is needed to deal with a delivery and prepare it for the shelves overnight. What if the delivery van does not arrive, or the motorway is closed due to an accident or roadworks? The business has little or no notice of the failure, yet it will lose custom and income on lost sales. None the less, there is no provision in the Bill to allow for it to give less than what, under the measure, will be reasonable notice, or to protect it from paying compensation.

In the care sector, extra hours may be needed to help with certain residents needing extra support, or someone due to arrive on a given day. What happens if the person dies or the resident falls ill, has a heart attack and must go to hospital right away? There is no notice of that, and the extra work does not materialise. The care home will lose income on its empty room and overhead, yet payment will be expected. Where is the money to come from—the local authority, the care recipient, or the estate if it is a death? What will the care home do to tide over an income shortfall when having to pay its suppliers for everything from food and cooking to linen, room cleaning and care?

The CEO of the Carers Trust explains that social care providers are often forced to rely on zero-hours contracts because of a “lack of funding” from local authorities. She says:

“If zero-hours contracts are banned”—


or, I would add, made more difficult or costly—

“social care providers must be given the funding to afford the increased costs that brings”.

The CEO of the National Care Forum says that

“these measures must be accompanied by the financial and wider support necessary for providers to implement them, as well as interim measures to boost care worker pay”.

These changes must be reflected in its funding so that it can continue to do its vital work. So are the Government prepared to make a commitment to cover the costs that will be incurred if these clauses go through unamended?

Another example would be a conference organiser where the IT system fails. Despite a service contract in place to repair it instantly, nothing can be fixed because the failure lies elsewhere: a cyberattack or an energy blackout. This can happen overnight. The business loses its data, it loses customers, who are unable to pay an entry price, and it loses an overhead. Depending on how long it is before the system can be got back to normal, it may lose so badly that, ultimately, if the problem recurs, it may have to curtail operations and overheads. Without the amendments allowing the Government to provide for exemptions from the clause, there will be higher costs that may ultimately lead to the failure of the business.

There are enough uncertainties and costs for employers without making these worse, but the obligations of the Bill and these clauses could add significantly to costs and complications. Who will pay these extra costs? We know that this Government have been in the habit of saddling the taxpayer with additional costs in respect of workers in the public sector but not for businesses or charitable trusts, or indeed independent schools in the case of imposing VAT. What about the care homes taking local authority work? What about the costs of the uncertainties of the Bill itself? Although the compensation clause stipulates that compensation will not exceed pay for the lost shift, we do not yet know what the amount will be, what “short notice” is supposed to mean and what is meant by “qualifying shift”. We have to wait for regulations.

There are good reasons for these amendments. If we want businesses and the labour market to flourish, and to enable businesses to navigate the unwelcome outcomes of unexpected problems preventing expected workloads without adding to their costs, there are good reasons for the Government to accept them and for the regulations to respect the spirit in which they have been made.

[Baroness Noakes (Con)]

My Lords, I will comment briefly on my noble friend Lord Sharpe of Epsom’s Amendment 28, which replaces the test of reasonable belief with that of formal confirmation. I mentioned earlier the work done by the Low Pay Commission on zero-hours contracts when it reported in 2018. It also examined the issue of compensation for short-notice cancellation of shifts. It emphasised in its report that there would need to be fairly rigorous record-keeping. It said that both employers and employees would need

“proof a shift had been offered”.

That speaks to the content of Amendment 28. It does not seem to me to be sensible to have something that rests solely on reasonable belief, because that is impossible to prove and would result in difficult questions being put to an employment tribunal. Although I am obviously not in favour of imposing bureaucratic requirements on employers, this is one area where the legislation should point towards there being some formality of record-keeping so that there can be no dispute about whether shifts have been offered or cancelled.

[Lord Fox (LD)]

My Lords, in the main, this is a reasonable debate—or, rather, a debate about “reasonable”. We have yet to hear the proposal from the noble Lord, Lord Sharpe, on Amendments 22 and 24, which sit outside the theme of the other amendments in this group, which I expect to be about Henry VIII powers. We shall see.

My noble friend Lord Goddard proposed his amendment, and I am here to speak to my Amendment 27. My amendment is about the definition of “reasonable notice”, and what that means. The noble Lord, Lord Lucas, proposes a different time for reasonable notice in his Amendment 21A. Either way, this is an opportunity for the Minister to walk us through what the Government are thinking around reasonable notice.

My noble friend set out a probing amendment to ask about “reasonably believed”, and in Amendment 28 the noble Lord, Lord Sharpe, essentially seeks to replace that. If the noble Baroness, Lady Noakes, is an official spokesperson for the noble Lord, Lord Sharpe, I can see many reasons for adopting something that is clear—albeit bureaucratic. I never thought that I would hear the noble Baroness speak to bureaucracy. However, somehow being able to show that belief is backed up by documentation may well prove to be essential in the good managing of workers’ relationships.

15:00

In the end, this is a further case of prematurely tabling the Bill. We do not have a sense of what the Government mean by this—so it is important for the Minister to set out how we will find out. If this is still in the process of consultation, we are back at exactly the same point that we were in previous groups. In general, we have passed the point of trying to demonstrate that work is lumpy, because the Minister has agreed that work is lumpy; this is about how that lumpiness is accommodated, as the noble Lord, Lord Lucas, set out. What is reasonable for employers to do, what is reasonable for employees to accept, and what is the Government’s view on that? That is what we need to know before we get to Report so that we can take this forward.

[Lord Sharpe of Epsom (Con)]

My Lords, I am very grateful to my noble friend Lord Lucas for introducing this group with his Amendment 21A. I could not agree with him more that flexibility is a key part of an efficient economy. That deserves to be written in stone. I am also grateful to my noble friends Lady Lawlor and Lady Noakes for their support for various amendments in this group and to the noble Lord, Lord Fox, for his positive comments.

I shall speak to Amendments 22, 24 and 28 in my name. There are many circumstances in which an employer has no choice but to make a request or cancel a shift on short notice—my noble friend Lady Lawlor gave us some very useful examples of that. But to go on a bit, for example, if a colleague calls in sick, which is something that is likely to increase in frequency with changes to statutory sick pay governed in other areas of this Bill, or if events beyond the employer’s control intervene, such as local flooding or public disturbances, payment for unworked cancelled shifts becomes an additional financial burden at precisely the time when a business is already experiencing a downturn. It is not simply about inconvenience; it is actually about viability.

To give another particular example, we have heard from the hospitality industry that the proposed rights around notice and cancellation of shifts could severely undermine existing staffing practices. For instance, in the case of pubs, which as we know are under pressure anyway, those with outdoor garden spaces in particular operate in a highly unpredictable environment. One representative of the sector made it very clear to us when he said:

“The new right to notice of shift allocation and cancellation could undermine a pub’s ability to offer voluntary overtime”.


During the course of the discussion, the examples were magnified to some extent—and to some extent the example that I am about to give is the flipside of the one that my noble friend Lady Coffey highlighted with regard to restaurants in a previous group, and the fact that they are pre-charging for tables. The representative of the industry pointed out to us that in many cases, for example, offering food in a pub Monday to Wednesday is a highly marginal business, and they often let their staff go early, and so on. He is of the opinion that, as a result of the Bill, much of that work will simply disappear; they will not bother to open, because it will be too complicated to administer. Not the least of it is that it is not just the administration but the costs of offering the compensation that is governed by this clause. That would obviously not be very good for consumer choice, plus of course there are implications for tax receipts and a whole host of other areas as well.

In practice, these businesses rely heavily on flexibility, which includes voluntary shift swaps and short-notice availability. As we have discussed on numerous occasions, if the weather turns—and in Britain, let us be honest, that is not a small variable—a pub expecting a busy day may suddenly find itself very overstaffed. Under the Bill, cancelling those shifts could result in mandatory compensation.

I turn to Amendment 24. Another flaw identified in the Bill is that it presumes that, in every instance, a cancelled, moved or curtailed shift entitles the employee to compensation. This rigidity, however, does not account for the unforeseen events which, as noble Lords across the House will know, are a common occurrence throughout the working world. We have heard many examples of those. The assumption that the employer is always somehow at fault does not reflect the realities of working life. Our amendment therefore seeks to clarify and incorporate a degree of flexibility into the Bill. As the noble Lord, Lord Fox, pointed out, we are proposing that the conditions that govern this entitlement to compensation should be subject to regulation in this case. There is a strong case to be made for this exception to our general principled dislike of the amount of regulation on which the Bill relies. As defined by the Secretary of State, this could be nuanced to ensure greater parity in the employer/employee relationship.

It is vital that we remember throughout these debates that we are discussing a piece of legislation that will profoundly affect workers and employers across the country. I am concerned that, in certain elements of this Bill, an ideological assumption is made about the relationship between the worker and the employer, which leads to absolute positions—another point that the noble Lord, Lord Fox, raised in a previous group. We all have a duty to ensure that the Bill meets the practical demands of the real workplace and does not just speak to such assumptions. This amendment would balance the relationship between the employer and the employee and would make sure that those who provide the work are protected, alongside those who undertake it. There is an essential symbiosis that needs to be maintained in order for us to have a thriving economy, with good jobs available for workers. We cannot fall prey to inflexible, absolute stances that upset this relationship. Our amendment seeks to correct this mistake in the text of the Bill.

I am very grateful to my noble friend Lady Noakes in particular for her support for Amendment 28, because she raised unarguable points. The reasonable belief test outlined in the Bill raises several concerns. One of the most substantial is that the term “reasonable” is incredibly broad and creates a great deal of uncertainty for both workers and employers. As noble Lords across the House will know, this part of the Bill is designed to make working entitlements clearer and provide greater clarity and certainty to workers about the shifts they are working and the sort of income they can therefore expect to receive. However, the text in its current form is wide open to a massive range of interpretations and fails to provide clarity or protection for either workers or employers. How is either party to know what constitutes a reasonable expectation? Redefining this element of the Bill so that a formal confirmation of a shift is required for entitlement to compensation will provide clarity for both parties and will create a mutual responsibility between the worker and the employer to make expectations and duties clear.

It is my understanding that the Government intend this section of the Bill to place an obligation on the employer to clearly communicate shift assignments to workers in order to avoid misunderstanding. We agree that this should be the case, although the current text of the Bill uses language that is far too vague. If the Government want to promote the clear communication of shift assignments, surely providing for a formal commitment of work, rather than the belief of being needed, is the way to make sure that that obligation is met. Our proposal of a formal confirmation requirement would mean that both employer and employee know where they stand and what is expected of them and would address the shortcoming in the text as it stands.

I will say just a few brief words on Amendment 27, in the name of the noble Lord, Lord Fox. Forty-eight hours seems to us a perfectly reasonable notice period regarding the time before a shift is due to start. A survey from the Association of Convenience Stores found that 90% of colleagues in the convenience sector report that they have never had a shift cancelled with less than 48 hours’ notice. Unless a reasonable notice period is reflected in the new requirements, it is likely to lead to a cautious approach to staffing by many hospitality and retail businesses. This would mean restricting operating hours and/or staff numbers during periods of uncertain footfall, rather than offering shifts that may ultimately be surplus to operational needs on the day, thus incurring compensation costs for late cancellations.

Moreover, there is a notable asymmetry in the Bill as drafted, because there are no reciprocal requirements for employees to provide notice when they are unable to work at a scheduled shift. That gap will have significant implications. One of the biggest challenges for employers, particularly in retail, is managing last-minute cancellations by employees due to illness, childcare needs or other issues. When employers must find cover at short notice, how are they to meet the same reasonable notice requirements that they themselves are held to?

We need common sense in this legislation, so I urge the Government to accept my and other amendments, or to be honest about why they will not.

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, before I address the amendments in this group, I take this opportunity to refer to the letter I wrote regarding the algebraic formula. There are existing formulae in employment rights legislation—for instance, in relation to the calculation of the amount payable to an agency worker as calculated in Section 57ZH of the Employment Rights Act 1996, so this is not something new. We will, however, publish full and comprehensive guidance in due course, which I am sure many noble Lords will find fascinating.

This has been a very useful debate, and I am very grateful for the contributions of all noble Lords. We have covered several areas in this debate related to the amendments tabled. The noble Lord, Lord Lucas, in his Amendment 21A, is seeking to make changes to the period of notice deemed reasonable for cancellation of or change to a shift for agency workers. The noble Lord, Lord Sharpe of Epsom, in Amendment 22, is seeking to make changes to the right to reasonable notice of shifts for directly engaged workers. The noble Lords, Lord Sharpe of Epsom, Lord Fox and Lord Goddard of Stockport, are seeking to make changes to the right to payment for short-notice shift cancellations, movements and curtailments in Amendments 24, 27, 28 and 29.

Before I address each of these amendments in turn, let me share some analysis that the Living Wage Foundation did in 2023. It suggested that 59% of workers whose hours vary from week to week, which includes zero-hours and low-hour workers, receive less than a week’s notice of shifts, with 13% receiving less than 24 hours’ notice. The vast majority of respondents—90%—stated that they do not receive full payment when their shifts are cancelled unexpectedly, 74% receive less than half, 51% receive less than a quarter and 26% receive no payment. Further analysis, from the Chartered Institute of Personnel and Development, suggests that approximately 33% of UK employers who use zero-hour contracts compensate workers for shifts that are cancelled with less than 24 hours’ notice, with 48% of employers responding that they do not.

I turn first to Amendment 21A. The noble Lord, Lord Lucas, says in his explanatory statement that this amendment

“seeks to define a reasonable maximum period of temporary work for agency workers in primary legislation”,

which

“will help remove any uncertainty for businesses worried about genuine temp work being caught in the new zero-hours regulations”.

The noble Lord seeks to achieve this by providing that the period of what is presumed to be reasonable notice for agency workers must be no greater than 24 hours. This would mean that it would be presumed reasonable if an agency worker receives 24 hours’ notice, but unreasonable if they receive less, so only in those latter situations would the agency or hirer have to prove that the period of notice was still reasonable in the circumstances.

I am not clear how this amendment would achieve this. The amendment would be made to Clause 2, concerning rights to reasonable notice for directly engaged workers, and appears to prevent workers being given more than 24 hours’ notice of cancellation or change to a shift. I reassure the noble Lord that the Bill provides for periods of notice “presumed reasonable” to be set in regulations for directly engaged workers and agency workers, as well as the factors that should be taken into consideration in individual cases.

Following consultation, it may be that the “presumed reasonable” periods of notice and the factors that should be taken into consideration will be different for agency workers and directly engaged workers. We intend to consult on what period is presumed reasonable, because it varies from case to case. Setting a period of reasonable notice in primary legislation would thus pre-empt consultation and not allow us to take into account stakeholders’ views.

15:15

In Amendment 22, I believe the noble Lord, Lord Sharpe of Epsom, wishes to provide a power for the Government to make exceptions to the right to reasonable notice. The Government resist this amendment. The design of the reasonable notice policy already allows significant flexibility for the consideration of individual circumstances, and introducing exceptions would essentially enable employers to act unreasonably. We will set out in regulations a timeframe that is presumed reasonable. We will also set out the factors that should be considered in each case which would mean that “reasonable notice” should be shorter or longer than this period. We believe this model provides the right balance between clarity for workers and for employers, while allowing for the flexibility to consider individual circumstances.

The Explanatory Notes provide an example of a shift given to a worker in less than the specified timeframe possibly being reasonable—namely, when another worker calls in sick and cover is required at very short notice. However, if a worker was asked on the day to work a shift to cover parental leave, for example, when the employer knew this would be required months in advance, we think this would likely be considered unreasonable. This Government are committed to engaging with all stakeholders on details such as this. If the noble Lord is concerned about clarity for workers and employers, I reassure him that there is more detail to come in regulations and further guidance. I also note that, if this amendment were accepted as drafted, it would not achieve its aims. It appears the noble Lord was using an old copy of the Bill when drafting his amendment, as the section references are not quite right.

In Amendment 24, I understand that the noble Lord, Lord Sharpe of Epsom, is seeking to create a power to make exceptions from the duty placed on employers to make a payment to workers when their shifts are moved, curtailed or cancelled at short notice, including in situations that are outside their reasonable control. The Government resist this amendment. A power to make exceptions in regulations to the duty to make short-notice payments is already contained in the Bill. We are committed to engaging with all stakeholders on what exceptions might be appropriate for those regulations. Accepting this amendment would thus pre-empt the outcome of any future engagement.

With Amendment 27, I believe the noble Lord, Lord Fox, wishes to set the period of short notice at 48 hours. This would mean that only workers whose shifts are cancelled, curtailed or moved less than 48 hours before they are due to occur would receive payments for short notice. The Government are committed to consulting with businesses, trade unions and all other stakeholders on the appropriate amount of time to be considered “short notice”. We will set in regulations the exact time period within which workers will be entitled to short-notice cancellation payments, but we have said in the Bill that it will not be more than seven days.

[Lord Fox (LD)]

These are probing amendments; they are designed not for us to tell the Government what we think, but for them to tell us what they think. Simply knocking our argument down does not really achieve that objective. Secondly, as I predicted in a sense, the Government have set up a consultation process, but they have already ruled out the offer of 24 hours from the noble Lord, Lord Lucas, and disparaged 48 hours. What other things have they ruled out before the consultation has been completed?

[Lord Leong (Lab)]

To a certain extent, we are not ruling anything in or out. We are basically saying that we will be consulting with all stakeholders. I take the noble Lord’s point—yes, the amendment says that, and I am responding to the amendment by saying that we will be undertaking further consultation and bringing forward regulations in due course.

I believe the noble Lord wishes instead to provide that a right to short-notice payment will arise only where the worker has received formal confirmation that they will work the shift from their employer, or, in the case of agency workers, hirer or work-finding agency. The Government’s view is that it would be overly prescriptive to specify that the right to short-notice payments arises only in cases where formal confirmation has been provided. While in many cases, a reasonable belief will arise only where the worker has received confirmation in writing from the employer that they will work the shift, different businesses have different practices when arranging shifts, and it would not be appropriate to adopt a universal, one-size-fits-all approach.

For example, when a worker agrees to work the shift after being contacted individually to work it, they would likely reasonably believe that their agreement corresponds to them being needed to work the shift, if it is standard practice that they will be needed to work despite additional confirmation not being provided. So, it is fair that the worker in this scenario should receive a payment if the shift is then cancelled, as they expected to work it and may have incurred costs preparing to do so. It would also be overly burdensome for the employers to have to provide confirmation where this would not otherwise be needed in order to be confident that they will have staff for that particular shift.

The Government believe that, in most cases, it will be clear to both the worker and the employer, or the agency worker and the agency or hirer, whether the worker was expected to work a shift. The Government will also publish guidance to help with interpretation. As a last resort, where disputes cannot be settled, employment tribunals will be able to determine whether a worker had a reasonable belief that they were needed to work a shift with a result that is fair. We wish to retain this flexibility to allow for the broad range of circumstances that may arise.

[Lord Fox (LD)]

I apologise for intervening again. That is a really helpful response, because it confirms my fears. The less specific the supporting documentation is around what is reasonable, the more likely it is that this is going to go to a tribunal in order to define what is reasonable. We all know that this will take a great deal of time and a lot of money, and it will leave uncertainty probably for years before such time as a case is heard. Do the Government accept that, by being more specific in the first place, they can avoid this greater, costly uncertainty?

[Lord Leong (Lab)]

I am not sure about that. Basically, we do not want to be too prescriptive and define what reasonableness is, because it varies from case to case and company to company. There needs to be that flexibility there.

Amendment 29 is a probing amendment from the noble Lord, Lord Goddard of Stockport, which seeks to add a power into the Bill to make regulations setting out factors that determine whether a worker reasonably believed they would be needed to work the shift. The Government tabled an amendment during Commons Report stage to ensure that a worker will not be entitled to a payment for a short-notice cancellation, movement or curtailment of a shift unless at some point prior to that they reasonably believed they would be needed to work the shift. This is considered appropriate because it is only where a person reasonably believes that they will work a shift that it is reasonable for them to prepare to work and incur costs as a result.

This amendment was necessary to eliminate the risk of workers taking cases to tribunals and making claims for shifts they did not reasonably believe they needed to work. This is particularly important in situations where an employer offers a shift out to multiple people, for example if they organise shifts through a large WhatsApp group. In cases like this, we want to be clear that people should receive cancellation payments when they are told they are not needed at short notice only if they reasonably believed they would work the shift in the first place.

For example, as set out in the Explanatory Notes, if there is an established practice of “first come, first served”, and an individual says they will work a shift after they have seen that another individual has already done so, they should probably not expect to work that shift. Even where a shift is offered only to one worker, they should still reasonably believe they will work it in order to be eligible for a short-notice payment. For example, if an employer offered a shift four weeks in advance, and the worker accepted the shift only two hours before the shift, it seems less likely they should expect actually to work that shift.

These are the kind of scenarios the Government considered when making the amendment; however, there are other scenarios where issues about this may arise. The Government wish to avoid being overly prescriptive by setting out factors in regulations, given the range of scenarios where this may be relevant. Instead, the Government consider it more appropriate to leave it to tribunals to determine on a case-by-case basis and we want to ensure that tribunals maintain flexibility to do so as they consider appropriate.

Before I conclude, I will answer the questions from the noble Baroness, Lady Lawlor, and the noble Lord, Lord Sharpe, about reasons outside of employers’ control. With better planning, employers need not cancel as many shifts, but it is not right that, when there is uncertainty, the entire financial risk rests with the workers. We really need to have a fair balance, and the Bill offers exemptions as a possibility for that. We will consult on that; however, any exemptions are likely to be narrow, as we do not believe that workers should take the whole financial hit.

I hope that I have been able to persuade all noble Lords and provide assurances on the Government’s wider commitment to consult with stakeholders and businesses. I therefore respectfully ask noble Lords not to press their amendments.

[Lord Sharpe of Epsom (Con)]

Is the Minister really saying that the points that we were making are related only to employers’ bad planning? How on earth are they supposed to plan for natural disasters, floods and so on? Secondly, I apologise for using the wrong reference to the Bill, as the Minister helpfully pointed out. He also helpfully pointed out that much of the Bill is being written on the hoof, so I would be very grateful if he would commit to stop producing new iterations of the Bill, which are ever expanding.

[Lord Leong (Lab)]

I am sure that the noble Lord will be happy to hear that I will consult with everybody as widely as possible, including him. We can have further conversations to explain the purpose of the Bill and why we are doing it. We are not doing this in isolation. I believe that the Bill is pro-business and pro-worker, and we need to get that message across to him and other noble Lords.

[Lord Fox (LD)]

On a number of occasions, the Minister set out that the Government are consulting. What is the timetable for that consultation, and when can we expect the results from it?

[Lord Leong (Lab)]

Although the noble Lord expects me to give him a specific timeframe, I cannot do so now. I will consult with my officials and come back to him.

[Lord Hunt of Wirral (Con)]

On the first day in Committee, we already discussed the implementation plan of the Minister, the noble Baroness, Lady Jones of Whitchurch. We then moved on to discuss the draft implementation plan, and the noble Baroness gave us a commitment. Can the the noble Lord, Lord Leong, update that commitment? By when will we see the draft implementation plan?

[Lord Leong (Lab)]

I give the noble Lord my commitment that it is very much a work in progress.

[Lord Sentamu (CB)]

I want the Minister to explain something. He has refused to set the definite hours in which this needs to be done. He said that that would be prescriptive and that the tribunal will determine whether the matter is reasonable. Is it not quite odd to rely on the tribunal to execute what noble Lords are trying to suggest in their amendments? Should not the Bill itself include those hours? If you do not want to be prescriptive, you can say, “Up to 24 hours”, or, “Up to 48 hours”, which means that they do not have to go all that way—that is slightly less prescriptive. I am baffled that the Minister wants the tribunals to enter into these matters. He and I know that they take a long time and cost a lot of money. Why is he legislating to open a door in this area to tribunals, which everybody should try to avoid?

[Lord Leong (Lab)]

I thank the noble and right reverend Lord for his intervention. I can say only that I thought we were all agreed that flexibility is a good thing, and I am sure we do not want anything in the Bill that would restrict either an employee or an employer from making a reasonable judgment on a case-by-case basis. On that, I rest my case.

[Lord Lucas (Con)]

My Lords, I am grateful to the noble Lord for his analysis of my amendment. I certainly do not intend to press it today, but I very much look forward to taking up the issues when we sit down with the team to discuss lumpiness.

On the noble Lord’s preference for keeping “reasonable” broad, I can see the attractiveness of that. If a business is wiped out by a flood, postponing employees’ work for the next day at zero notice but saying, “We’ll want you in the day afterwards so you can start the clean-up” would presumably be reasonable. At the same time, giving very little notice when it is obvious that more notice could have been given would obviously be unreasonable. But allowing the whole pattern of this to be developed slowly through individual cases in tribunals does not seem to be the right way of going about it.

15:30

In other circumstances, the Government set out guidance as to what they would consider reasonable in particular circumstances, so that at least the whole process of people going to tribunal and tribunals dealing with things can start from some fixed point. I very much hope that the Government will choose to take that route. For now, I beg leave to withdraw my amendment.

Amendment 21A withdrawn.

Amendment 22 not moved.

Clause 2 agreed.

Clause 3: Right to payment for cancelled, moved and curtailed shifts

Amendment 23

Moved by

[Lord Leong]

23: Clause 3, page 22, line 32, after “description” insert “that requires the employer to make some work available to the worker”
Member’s explanatory statement
This amendment is being made to bring the amended provision into line with other provisions in the Bill.

Amendment 23 agreed.

Amendment 24 not moved.

Amendments 25 and 26

Moved by

[Lord Leong]

25: Clause 3, page 23, line 20, leave out from “given” to end of line 25 and insert “—
(i) less than a specified amount of time before the earlier of when the shift would have started (if the shift had not been moved, or moved and curtailed) and when the shift is due to start (having been moved, or moved and curtailed);(ii) on or after the start of the shift;”Member’s explanatory statement
This amendment is consequential on my amendment to clause 3 that expands the meaning of the movement of a shift.

26: Clause 3, page 24, leave out lines 7 to 10 and insert—
“(9) For the purposes of this Chapter, references to the movement of a shift (however expressed)—(a) are to any change to the time at which the shift is to start that is a change of more than a specified amount of time;(b) include—(i) where a shift is in two or more parts, a change of more than a specified amount of time to the time at which the second (or a subsequent) part is to start, and(ii) a division of a shift into two or more parts where the time between the parts is more than a specified amount of time,but only if the change or division (as the case may be) results in the shift ending later.”Member’s explanatory statement
This amendment expands the meaning of the movement of a shift for the purposes of the provisions inserted into the Employment Rights Act 1996 by clause 3 of the Bill so as to deal with changes to the start time of a part of a shift or the division of a shift into parts.

Amendments 25 and 26 agreed.

Amendments 27 to 29 not moved.

Amendment 30

Moved by

[Lord Leong]

30: Clause 3, page 26, leave out lines 19 to 25 and insert—
“(6) The duty in subsection (2) is to be taken not to have applied if—(a) the employer pays to the worker an amount in relation to a number of hours that is at least equal to the amount of the payment that the employer would have been required to make to the worker under section 27BP(1) in relation to the same number of hours but for regulations made under subsection (1)(c), and(b) the payment is made on or before the day on which the payment under section 27BP(1) would have had to be made if the employer had been required to make it.”Member’s explanatory statement
This amendment changes the date by which a payment must be made in order for the duty to give a notice under proposed section 27BR(2) of the Employment Rights Act 1996 to be disapplied.

Amendment 30 agreed.

Clause 3, as amended, agreed.

Clause 4 agreed.

Schedule 1: Agency workers: guaranteed hours and rights relating to shifts

Amendments 31 and 32 not moved.

Amendment 33

Moved by

[Lord Hunt of Wirral]

33: Schedule 1, page 167, leave out lines 28 to 30 and insert—
“(2) Determining whether reasonable notice of a shift was given must include an consideration of—(a) whether the work-finding agency offered the shift to the agency worker as soon as reasonably practicable after receiving confirmed information about the shift from the hirer in accordance with Regulation 18 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (S. I. 3319/2003);(b) any time reasonably required by the agency to carry out suitability assessments in accordance with those Regulations.”Member’s explanatory statement
This amendment clarifies how “reasonable notice” should be assessed for agency workers. It ensures that the work-finding agency must offer the shift to the worker as soon as reasonably possible after receiving confirmed details from the hirer, and after the agency has conducted suitability assessments, in line with relevant regulations.

[Lord Hunt of Wirral (Con)]

My Lords, as we now move to consider reasonable notice in agency work, I will speak to Amendments 33 and 36 to 38.

Unfortunately, and despite all their show of consultation, I believe the Government have failed to realise how agencies operate in the labour market, so once again the drafting of the Bill shows the failure of a one-size-fits-all approach. The challenge we face in the context of the Bill is clear. Work-finding agencies operate in a highly dynamic and often unpredictable environment, where the flow of information from hirers is essential in matching workers to available shifts.

This brings us to the core concern. Agencies often rely on information from hirers about the availability and cancellation of assignments. Without timely and sufficient details from hirers, agencies cannot predictably or properly fulfil their role. Therefore, any new obligation to provide reasonable notice for agency workers must consider the time taken for agencies to receive this confirmed information and make the necessary arrangements and assessments.

Regulation 18 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 lays down that an agency cannot

“introduce or supply a work-seeker to a hirer unless the agency or employment business has obtained sufficient information”

to assess the suitability of the worker for the role in question. The issue here, therefore, is straightforward. Agency workers often find themselves without income as a consequence of cancellations initiated by hirers, yet agencies are held financially liable for those decisions, even though they have no control over the cancellations.

To illustrate the risk, let me provide a scenario. A work-finding agency places an agency worker with a hirer for a shift. However, due to unforeseen circumstances, the hirer cancels the shift at short notice. The agency, having no control over the cancellation, is still required to compensate the worker. The financial burden therefore falls on the agency, despite the cancellation being the decision of the hirer.

How will this amendment help to ensure that small and medium-sized agencies are not disproportionately impacted—that is what we seek to do here—bearing in mind the financial responsibility associated with hirer-induced cancellations, particularly when the business in question may already be financially vulnerable? Do the Government believe that it is justified to place the financial burden of a cancellation or curtailment on the agency when the failure to provide notice lies entirely with the hirer?

I believe that the Minister understands the complexities of the agency-worker relationship, but the Bill in its present form does not make proper allowance. How do the Government propose to monitor and enforce the full accountability of hirers for failures in notice arrangements? This is an issue that has to be faced, given the rigidity of the legislation we are required to consider under this Bill. I beg to move.

[Lord Goddard of Stockport (LD)]

My Lords, I am pleased to speak to this group of amendments, which seek to clarify the framework governing agency workers, and I have some sympathy with the views of the noble Lord, Lord Hunt, on this matter. It seems to me that a third person looking into this process will see the Labour Party trying to protect employees and give them 100% rights and the Conservatives trying to ensure that small and other businesses have a level playing field to employ, create jobs and grow the economy, which I thought was the Government’s objective. I wonder why, with this employment Bill, we cannot get a little closer to dealing with the mechanics.

The answer that the Minister gave to my probing amendment baffled me. I wanted to get up to ask him to explain what he said to me. Millions of people who listened to it or who read Hansard tomorrow will not have a clue. As my lumpy noble friend has said in previous debates, we seek clarity before the Act comes into power. We need to know these things. I spent four years on the Secondary Legislation Scrutiny Committee. The watchword on that committee was quite clear: do not give Ministers unfettered powers. What is in the tin of a Bill is what it says on the front of the tin of a Bill. I wonder whether this tin will say “tomatoes” but when you open it, you will have carrots—a problem for somebody that does not eat carrots.

Running through this group of amendments, we on these Benches are trying to bring the parties together to understand that it is a two-way thing. I have been a committed trade unionist for 25 years. I have also run a business and employed 20 people. Those two things are compatible, but they are complicated, because you have different pressures from a different standpoint. As with all legislation, we try to move it through by being sensible and finding common ground for what the trade union movement wants, what the Government want and what employers want. I had guests in yesterday who were asking about the Bill. I roughly outlined it, and they could not believe it. They employ 30 people. They said, “We can’t afford HR, we can’t afford lawyers, we can’t afford for people to take us to tribunals. We just want to employ people, make a small profit and grow the business”. I cannot understand how this has become so complicated.

On Amendment 33, concerning the interpretation of “reasonable notice” when shifts are offered to agency workers, the aim appears to be to require agencies to make offers promptly once details are confirmed by the hirer and all the checks have been completed. While this may be an attempt to bring greater clarity, I question whether that proposal and that language fully address the practical realities of agency work. The intention may be sound, but there is a risk of replacing one form of ambiguity with another. That said, for agency workers some degree of predictability and transparency is important and long overdue.

Amendment 36 introduces the idea of joint liability between work-finding agencies and hirers when a shift is cancelled or curtailed at short notice. There is merit in exploring whether a shared responsibility could lead to fairer outcomes, particularly when neither party should be able to shift all risk on to the other. Equally, it is important to consider how such provision would work in practice and whether it risks disincentivising the use of agency labour altogether.

Amendment 37 proposes that compensation should be triggered only when a shift has been formally confirmed, rather than relying on the more subjective “reasonable belief” test. I appreciate the effort to bring objectivity to a murky area, but workers should not be left guessing whether an assurance from an agency amounts to a genuine commitment. We need to understand how this might interact with the fast-moving nature of some temporary staffing such as seasonal work or that connected with the weather. Ambiguity in the current framework serves no one, least of all the workers.

Finally, Amendment 38 provides that the agency would not be liable to pay compensation where the hirer fails to give appropriate cancellation notice. This is arguably a fairer allocation of risk, as agencies should not be penalised for the failure of others. However, it must be clear that such changes would not weaken the overall protections intended for the worker.

While these amendments raise important issues around the treatment of agency workers, I am not yet convinced that they strike the right balance in all aspects. There is a risk that in seeking to impose clearer structures, we introduce new complexities and unintended burdens. I think that this is what the Government are trying to say. Nevertheless, the underlying objectives—clarity, fairness and accountability—are ones that we should continue to pursue. Any changes to the framework must support clearer obligations and deliver fairer outcomes, for the workers and for the agencies and hirers. If these amendments highlight anything, it is the pressing need for the Government to offer clarity and consistency in this area.

[Lord Leong (Lab)]

My Lords, I thank the noble Lords, Lord Hunt and Lord Goddard, for their contributions, and the noble Lord, Lord Sharpe of Epsom, for tabling the amendments in this group, covering Amendments 33 and 36 to 38.

Before I speak to these, I reassure all noble Lords, especially the noble Lord, Lord Goddard, that the Government respect and appreciate all the amendments tabled by noble Lords. The whole purpose of this is to address individual amendments and see where the Government are coming from and how we can find a way forward. There are some things in noble Lords’ amendments that may not be required because the Bill already covers them elsewhere. We are trying our very best to address every amendment and we welcome noble Lords’ scrutiny of the Bill. I reassure noble Lords that we are not being flippant about any of these amendments.

15:45

The amendments in this group seek to make changes to the duty for employers to provide agency workers with reasonable notice of shifts, make changes to the right to short-notice payments for agency workers and introduce a framework for joint liability between agencies and hirers for payments for shifts cancelled, moved or curtailed at short notice.

Amendment 33 pertains to how “reasonable notice” should be assessed for agency workers, including requiring the work-finding agency to offer shifts to agency workers as soon as reasonably practicable after receiving confirmed details from the hirer and carrying out suitability assessments in line with the relevant regulations. This amendment would replace the provision for a period of notice “presumed reasonable”, to be set in regulations for agency workers. Giving a presumption of what is reasonable notice provides the right balance between clarity and flexibility for employers and workers.

We will, following consultation, set out in regulations factors to be considered when determining reasonable notice. These could include whether the hirer could reasonably have been expected to plan shifts sooner. This amendment would pre-empt consultation and not allow us to take stakeholders’ views into account. It would also impact tribunals’ ability to maintain flexibility to determine whether the notice was reasonable on a case-by-case basis.

In Amendment 37, I believe the noble Lord is seeking to remove the requirement for an agency worker to reasonably believe that they are needed to work the shift in order to receive short-notice payments. The Government’s view on this matter is the same as in the previous group: we believe that it would be overly prescriptive to specify that the right to short-notice payments arises only in cases where formal confirmation has been provided.

In Amendments 36 and 38, I believe the noble Lord wishes to introduce a new framework of joint liability between the agency and the hirer when an agency worker is due a payment for a shift cancelled, moved or curtailed at short notice under paragraph 21 of Schedule 1. I believe the noble Lord wants the agency and hirer to be able to agree how to share liability, and for the agency to be exempt from any payment where the hirer accepts full responsibility. He also suggests a power for the Secretary of State to make provisions to determine liability in case of dispute.

The Bill requires the agency to make such payments to agency workers. This is to help avoid delays in the worker receiving payment. A system of joint liability could lead to significant delays in the agency worker receiving payments, in particular where there is a dispute between the agency and the end hirer. The Government see that, in many cases, the hirer will be responsible for cancelling, moving or curtailing shifts at short notice. We agree that hirers should be expected to bear the costs of these payments to the extent that they are responsible. This is why the Government believe that agencies have to make the payment to agency workers, but that they should be able to recoup some or all of the cost from the end hirers. This position is in line with consultation responses on this matter.

Employment agencies and hirers will continue to be able to negotiate between them how liability for short-notice payments is allocated between them. We are aware that some pay arrangements between agencies and hirers may already exist when the requirement for agencies to cover the cost of short-notice payments comes into force. Such arrangements may not include any mechanism for the agency to be able to recover short-notice payments from hirers, and agencies might not have agreed to enter into such arrangements had they known that they would be required to make those payments.

So, the Bill includes provisions in new paragraph 27 to enable agencies to recover costs from the hirer, but only where the arrangement between the agency and hirer was entered into no later than two months from Royal Assent and not modified since. The Government consider this the right approach to protect contractual freedom while ensuring timely payments for agency workers. It will protect agencies in existing arrangements from being liable for payments that they were not responsible for incurring. I hope those responses reassure the noble Lord and that he can withdraw his amendment.

[Lord Hunt of Wirral (Con)]

My Lords, this has been a helpful short debate. I join with the noble Lord, Lord Goddard of Stockport, in seeking clarity, fairness and consistency. The Minister has given us some answers to the questions we posed, but it is just another example of where it is so important to think through the issues, as they affect all those who are in any way covered by the Bill. We will need to return to this matter during the further passage of the Bill to ensure that my objective and that of the noble Lord, Lord Goddard, is fulfilled—namely, that the provisions offer a fair and workable solution for all the parties involved.

Lastly, in an unguarded moment, the Minister, in responding to the previous amendment, said that the draft implementation plan was “a work in progress” and that he was considering it with his colleagues. I make an offer on behalf of all in the Committee: we would be willing to help this work in progress by looking carefully through the first draft of the implementation plan, while accepting that it may not be the final draft. At least it would give us an idea of what is in the Government’s mind as to implementing rather complicated provisions in the Bill, which are currently shrouded in some degree of mystery as to what they will bring forward in secondary legislation.

I just repeat what we have said several times in the debate so far: when you amend primary legislation through secondary legislation, it is far better, in our view, to have those amendments in the Bill rather than being left to some further process—admittedly, consultation—that would then amend that primary legislation through secondary legislation. Like the noble Lord, Lord Goddard, I too have served on the other committees of this House, which find that Governments perhaps do not give secondary legislation the priority it needs but should never seek to amend primary legislation through secondary legislation. Many of our committees have said that time and again. If we could see the first draft of the implementation plan, we could assist the Minister and his colleagues to get this Bill right. I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

Amendments 34 and 35

Moved by

[Baroness Jones of Whitchurch]

34: Schedule 1, page 171, line 37, leave out from “given” to end of line 2 on page 172 and insert “—
(i) less than a specified amount of time before the earlier of when the shift would have started (if the shift had not been moved, or moved and curtailed) and when the shift is due to start (having been moved, or moved and curtailed); (ii) on or after the start of the shift;”Member’s explanatory statement
This amendment is consequential on my amendment to Schedule 1 that expands the meaning of the movement of a shift.

35: Schedule 1, page 172, leave out lines 19 to 22 and insert—
“(5) For the purposes of this Part of this Schedule, references to the movement of a shift (however expressed)—(a) are to any change to the time at which the shift is to start that is a change of more than a specified amount of time;(b) include—(i) where a shift is in two or more parts, a change of more than a specified amount of time to the time at which the second (or a subsequent) part is to start, and(ii) a division of a shift into two or more parts where the time between the parts is more than a specified amount of time,but only if the change or division (as the case may be) results in the shift ending later.”Member’s explanatory statement
This amendment expands the meaning of the movement of a shift for the purposes of Part 3 of proposed Schedule A1 to the Employment Rights Act 1996 so as to deal with changes to the start time of a part of a shift or the division of a shift into parts.

Amendments 34 and 35 agreed.

Amendments 36 to 38 not moved.

Amendments 39 to 41

Moved by

[Baroness Jones of Whitchurch]

39: Schedule 1, page 174, line 17, after “(4)” insert “(b)”
Member’s explanatory statement
This amendment corrects a cross-reference, bringing paragraph 23(5) of proposed Schedule A1 to the Employment Rights Act 1996 into line with the equivalent provision (section 27BR(3)) inserted by clause 3.

40: Schedule 1, page 174, leave out lines 34 to 40 and insert—
“(8) The duty in sub-paragraph (4) is to be taken not to have applied if—(a) the work-finding agency or another person pays to the agency worker an amount in relation to a number of hours that is at least equal to the amount of the payment that the work-finding agency would have been required to make to the agency worker under paragraph 21(1) in relation to the same number of hours but for regulations made under sub-paragraph (1)(c), and(b) the payment is made on or before the day on which the payment under paragraph 21(1) would have had to be made if the work-finding agency had been required to make it.”Member’s explanatory statement
This amendment makes provision for agency workers that is equivalent to the provision made for non-agency workers by my amendment of clause 3 that leaves out lines 19 to 25 on page 26.

41: Schedule 1, page 178, line 3, at end insert—
“(6) Where an employment tribunal finds as described in sub-paragraph (5)(c), the hirer is to be treated for the purposes of section 12A and Part 2A of the Employment Tribunals Act 1996 (financial penalties) as an employer and as having breached the right of the agency worker to which the complaint under paragraph 25(1)(c) relates.”Member’s explanatory statement
This amendment provides for provisions of the Employment Tribunals Act 1996 concerning financial penalties to apply in relation to a hirer who is added to proceedings under paragraph 25(7) of proposed Schedule A1 to the Employment Rights Act 1996 and who has a finding made against them in those proceedings.

Amendments 39 to 41 agreed.

Schedule 1, as amended, agreed.

Clause 5: Collective agreements: contracting out

Amendment 42

Moved by

[Lord Sharpe of Epsom]

42: Clause 5, page 30, line 35, leave out from “independence,” to end of line 36 and insert “or
(ii) an employee representative body or staff association that—(A) has been formally established for the purpose of consultation or negotiation with the employer,(B) represents a defined group of the employer’s workers or the workforce generally, and(C) operates independently of the employer in its decision-making, andthe worker’s employer.”Member’s explanatory statement
This amendment expands the definition of an appropriate representative to include employee representative bodies or staff associations that are formally established, represent the workforce or defined groups of workers, and operate independently in decision-making. It ensures that workers can be represented by legitimate and independent collective structures beyond traditional trade unions.

[Lord Sharpe of Epsom (Con)]

My Lords, I will speak to my Amendments 42, 43 and 44, which address a crucial gap in the Employment Rights Bill as currently drafted. The Bill, in its present form, assumes that collective agreements and the important rights that attach to them can be made only through trade unions. The assumption is problematic, as it fails to reflect the diverse and evolving landscape of employee representation in the United Kingdom.

Across a wide range of sectors, there are effective forms of employee representation that operate independently of trade unions. For example, many large employers across the UK have implemented formal employee forums, staff councils and other representative bodies that play a critical role in negotiating terms, improving working conditions and ensuring that workers have a voice. These bodies operate with transparency and independence; they often work closely with management but are not subject to the control of the employer. In sectors such as retail, hospitality and technology, companies have established these independent bodies to provide workers with a platform to express concerns, suggest improvements and engage with senior leadership on workplace issues. These bodies, although not unions, are trusted and valued by workers as genuine vehicles for consultation and negotiation.

Likewise, in industries such as financial services, employee representation often takes place through staff associations and other internal bodies that focus on consultation, transparency and communication between employers and employees. These bodies are instrumental in maintaining a constructive dialogue between workers and management, and they often handle issues such as pay, conditions and workplace policies without the need for union recognition.

The current draft of the Bill fails to accommodate these vital forms of representation. It risks excluding workers who are represented by such independent bodies from accessing the protections associated with collective agreements, including important provisions on guaranteed hours. This approach undermines existing employee engagement practices that have proven to be effective in fostering good relations between workers and employers. The Government have spoken repeatedly about the need to modernise our economy and bring employment rights into the 21st century. A key part of that modernisation must be acknowledging that trade unions are not the only legitimate means through which workers can be represented. Properly constituted employee forums and staff bodies can and do play a vital role in today’s diverse and evolving workplaces. By recognising this, the Government have an opportunity to align this legislation with the modern realities of work and deliver on their commitment to updating our employment framework.

Moreover, the Bill raises serious concerns about freedom of association. The principle of freedom of association is about not just the right to join a union but the right not to be compelled into union membership as a condition for accessing fair treatment at work.

If we want to strengthen the relationship between employers and employees, we must ensure that the Bill is inclusive of all legitimate and independent forms of worker representation. These amendments are designed to achieve that. They would extend the recognition of collective agreements to properly constituted employee representative bodies, such as staff forums or associations that operate independently from the employer in their decision-making. They would ensure that these bodies meet clear governance standards, including transparency, accountability and independence.

The Government’s aim is to promote better workplace relations, and these amendments support that aim. They would recognise the wide range of ways in which workers and employers engage with each other constructively. By recognising diverse forms of representation, we can build trust, enhance co-operation and create workplaces where both workers and employers can thrive. I urge the Government to support these amendments, which would reflect the realities of modern employee representation and strengthen the protections available to all workers, regardless of whether they belong to a traditional trade union. I beg to move.

[Lord Davies of Brixton (Lab)]

I totally oppose these amendments. This is the first time I have spoken in the progress of this Bill. I have amendments coming up later. I think the noble Lord’s amendments illustrate the complete difference in mental framework between those who support and work with the trade union movement and those who do not. I should be clear that, although I do not have any formal interest to declare, I have spent most of my working life working in or for the trade union movement. The trade union movement and what it has achieved is based on 150 years of struggle.

16:00

Nobody gave trade unions the power and influence they have. The power and influence were not enshrined in some three amendments in a Bill being passed through this House. They were based on the efforts of individual workers working together to achieve better conditions of work. The idea that you could substitute other bodies out of the blue when this is based, as I say, on 150 years of struggle is a delusion and a misunderstanding of how we have got here.

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, I am very pleased to follow my noble friend Lord Davies because I absolutely agree with what he says. I would add, just from my own experience, that, early in my working life, I worked in a retail organisation where there was a staff forum and where I and colleagues were organising to establish a trade union. The difference is this: that staff forum was set up by the employer. It was not set up by workers. That staff forum was funded by the employer; it was not funded by workers. That staff forum was not democratic, whereas the whole point of a trade union is that it is a democratic organisation of working people. I would hope that one of the aims we could share across this House is to see an increase—an expansion—of genuine collective bargaining, because the evidence is very clear that, internationally, we see that the demise of collective bargaining has been associated with growing inequality, worse conditions at work, a poorer share of the wealth that workers help produce and no independent democratic voice.

I would hope that, in this country, we recognise that there are many, many working people who feel they have been denied a genuine voice—an independent voice—at work and in society, and they are rightly fed up about it. If we want to tackle that—if we want to tackle inequality and the sense of powerlessness that many people feel—it is collective bargaining through the route of independent, democratic trade unionism that we all need to see grow.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I was not intending to speak in this group and I am torn between both sides. I have some cynicism about the Opposition’s attempt at recognising non-trade unions and staff associations. I entirely understand the point that the noble Baroness, Lady O’Grady, has just made about employer-led staff clubs, which I have been, over the years, invited to join. While they have been very pleasurably good social forums, they are very different from trade unions.

However, I am afraid that there is a danger that we can romanticise what contemporary trade unionism is, based on the very fine history of 150 years of struggle. I do not actually think that trade unions at the moment should take for granted that workers will be loyal to them, because there have been far too many instances of trade unions not being fit for purpose. Indeed, there is often a huge gap between trade union leaders and trade union members. Many members are leaving unions or not joining them, and that is not always because of evil bosses in a kind of caricatured way.

At Second Reading, I made the point—and I am only repeating it here now—that, for example, the Darlington Nursing Union has been set up because the nursing unions have abandoned female members of staff who were nurses and who have been attacked by their HR departments and their employers for their political views in relation to gender and sex. As it happens, we now can appreciate that they were simply reiterating their right to privacy as biological women—something that the Supreme Court has now at least acknowledged is the law—but they have been harassed and bullied and so on, and the trade unions abandoned them.

I made a point about the Free Speech Union. I appreciate that it is not a trade union, and nobody, least of all me, is suggesting that the noble Lord, Lord Young, who is in his place, will become the noble Baroness, Lady O’Grady, of future negotiations. Despite the fact that that is an unlikely role for the noble Lord, Lord Young, the Free Speech Union has been forced into existence and has represented workers who have been done over by their employers when their trade unions have abandoned them. That is the point I am making.

The UCU is one example of a university union. I was a NATFHE rep for many years in the further education sector and I have watched in horror the way that that union has degenerated and sold out its members. So, for the record, I would prefer that we did not caricature each other in a way that does not represent the contemporary time. The trade unions today are not the trade unions of old. They could do with upping their game. Similarly, I do not think the trade unions are the evil enemy of employers, as is sometimes implied by people sitting closer to me on this side of the House.

[Lord Moynihan of Chelsea (Con)]

My Lords, I would like to add to what the noble Baroness, Lady Fox, said. We are having a good debate and I very much hope to keep it friendly. What the noble Lord, Lord Davies, and the noble Baroness, Lady O’Grady, said, was really rather flying pigs.

I, obviously not like most of the Committee, am old enough to remember the 1970s. I remember the destruction of the British automobile industry by the trade unions. London docks was destroyed by the trade unions. This led, through the 1970s, to the “winter of discontent”, which led to the necessary emergence of a Government under Margret Thatcher who sought to control the trade unions and do something about the destruction they were wreaking on the British economy. We all remember that; I am not fantasising about this. This 150-year story of the great things wrought by the trade unions is really difficult to let go by without saying something.

Right now, only 22% of workers in the UK belong to unions. Why is that? It is because of the destructive nature of those unions. Let us remember that, of that 22%, most are in the public sector. Public sector workers have a monopoly in the areas they occupy and in return are being rewarded by a Labour Government. We saw the sorts of rises, which were completely unjustifiable compared with what people in the private sector were earning, that the Labour Government awarded many public sector trade union workers when they came to power.

We saw how there is—I am not saying anything we do not all know—a wonderful relationship between the unions and the Labour Party. I saw a number—I do not stand here asserting it is true, but I saw it and it seems reasonable—that, since 2011 the trade unions have given £31 million to the Labour Party. Whether that is true or not, we know the figure is of that order. This is wonderful, but it increases the size of government, because of the deals the Labour Government have to make with these trade unions. It increases the cost and complexity of government, and it increases in general the cost of regulation to all employers.

All those things destroy the economic growth which, as the noble Lord, Lord Goddard, said earlier, we are all trying to achieve. I ask the Government please not to give us guff—I hope it is not unparliamentary to say that—about the positive effects of the trade unions. They are destructive.

[Lord Deben (Con)]

My Lords, I wonder whether we are having a discussion for 2025, or one that is deeply mired in history. I find myself in some difficulty listening to either side of this discussion. I say very strongly that trade unions have been, and are, very important, but I also hope that people who watched the annual conference of the National Education Union, all of whose officers have the support of the Socialist Workers Party, may ask why a union like that should have spent more time talking about Gaza than it did about school attendance. We cannot be entirely happy about the circumstances of all trade unions, and this Government are going to have to face those trade unions pressed from that way.

On the other hand, I deeply disagree with the attitude we have just heard about trade unions being destructive. Trade unions have been very constructive in many circumstances, and this is something we should recognise. My problem with the Bill, and my reason for coming to this debate to support my noble friend’s amendments, is related to what the noble Lord, Lord Davies of Brixton—who opened the Back-Bench remarks—said about trade unions: that they were not forced on anyone. They were created by people coming together to work for better attitudes, better conditions and better pay for working in those circumstances.

If people want to do that but want to be independent and not subject to their employers—as the noble Baroness, Lady O’Grady, fears—and if they do not want to be called a trade union, then we ought, in 2025, to give them the powers to make the same kinds of arrangements with employers as a trade union. If we do not do that, this is going to be the one area where this Government will say there shall be no competition or opportunity for people to make a different decision about their future.

We ought to give people that opportunity, and we ought to protect those people by making sure that it is given to them only if they are independent, pay for it themselves and have chosen that particular mechanism. I say to the Labour party Front Bench that none of us who work—as I still do, happily—right across the board with all kinds of companies can think of today’s industry and commerce as if it were like yesterday’s. There are new circumstances and new ways of doing things, and the Bill ought to recognise that. If all it does is solidify the past, we will have missed a great opportunity.

[Lord Davies of Brixton (Lab)]

Before the noble Lord sits down, let me just explain that if an organisation meets the requirements to be free and independent, it is a trade union. Anyone can set up a trade union. If it does not meet the standards—many of which have been set by the party opposite—it is not a trade union and it is not capable of collectively representing its members. There is an illogicality in suggesting that an organisation that is not meeting the standards of a trade union can represent its members.

[Lord Deben (Con)]

If that is so, it is very simple: we can all agree to this amendment, with such alterations as are necessary, to make sure that they are independent. Then we can all feel that we have created an answer that suits today. Can we please get out of this yah-booing from both sides—and I mean both sides—about these issues? We have to find a way in which the whole of society can come more effectively together, without constantly determining that we have to do it like we did 100 years ago.

16:15

[Lord Hendy (Lab)]

I endorse what my noble friend Lord Davies said a moment ago. A trade union is defined by Section 1 of the Trade Union and Labour Relations (Consolidation) Act, and it is an organisation of workers the primary purpose of which is to regulate relations between employers and workers. That is the only definition. Any body that does that is a trade union. So the sorts of organisations identified in these amendments will be trade unions. But, as trade unions, they have consequential obligations. For example, they have to elect their general secretary and their national executive committee by ballot every five years, and so on. So there are consequences to these amendments. By the way, a trade union defined by Section 1 is not necessarily independent. There are independent trade unions listed by the certification officer and non-independent trade unions. “Independence” has a specific meaning under the legislation.

[Baroness Jones of Whitchurch (Lab)]

Phew—I do not know whether I want to join in this philosophical debate because, clearly, we have heard strong views on both sides, and they have strayed way beyond the amendments we are trying to moderate today. But I would say that the Bill overall seeks to find the right balance between workers, unions and businesses, recognising that each has an important role to play. Our aim in the Bill is to modernise those arrangements for the 21st century so that we are not playing “Yah-boo, you did that back in 1953” but are actually looking to the future. We hope that is what the Bill will deliver.

These amendments aim to broaden the provisions in the Bill to allow employee representative bodies or staff associations to collectively agree to modify or opt out of the zero-hours measures. The Bill already allows these collective agreements to be made, but only by trade unions. As we are allowing for modification of statutory employment rights, it is vital that the appropriate safeguards are in place. This includes that only trade unions that have a certificate of independence, and are therefore free from employer control, can agree with employers to modify or opt out of rights, and that rights are guaranteed in exchange and incorporated into a worker’s contract.

I make it clear that staff associations and employee representative bodies, some of which we have heard described this afternoon, can do really good work, and we welcome engagement between employers and workers in all forms. However, we do not think it is appropriate for these associations and bodies to be able to modify statutory employment rights. This is not least because they may not have sufficient independence from the employers—a point well made by my noble friend Lady O’Grady—unlike independent trade unions, which do have that independence and which offer high levels of protection to workers. Furthermore, there is a well-established framework for trade unions, including recognition, independence and incorporation of terms, and the provisions build off these provisions.

I can see that the noble Lord’s amendments suggest a framework of requirements that staff associations and employee representative bodies would need to meet in order to modify or exclude zero-hours rights. These include requirements around independence, recognition, elections and record-keeping.

However, as my noble friends Lord Hendy and Lord Davies have said, the more you incorporate those requirements, the more you add to a staff association or employee representative body, the more similar it appears to be to an independent trade union. Given that the trade union framework is well established, historically and legally, it is not clear to me that it makes sense to establish a similar but different structure just for the purposes of the zero-hours measures. I am grateful to my noble friends Lord Davies, Lady O’Grady and others for reminding us of the hard-won rights that we have achieved through organisations within the trade union movement. Trade unions already serve to protect and advance the interests of workers.

I felt that the noble Lord, Lord Moynihan, presented a caricature of the unions. For every criticism he has, we could come back with all the advantages that trade unions have delivered for working people over the years in pay and conditions and in some of the fantastic campaigns—for example, around the environment, women’s rights, and so on. They have already contributed enormously to modernising workplace rights, so I do not feel that it would be appropriate or proportionate to try to recreate them. The trade unions already provide the constructive dialogue with employers to which the noble Lord, Lord Sharpe, refers, and membership of trade unions remains voluntary for employees.

I say, too, to the noble Lord, Lord Sharpe, that there is a technical issue around all this. If his amendment was accepted as drafted, it would not achieve the aims that he intends. Collective agreements have a specific definition in the Employment Rights Act 1996, which the zero-hours provisions are being inserted into. The definition, referring to the definition in the Trade Union and Labour Relations (Consolidation) Act 1992, provides that collective agreements are ones between independent and certified trade unions and employers’ or employees’ associations, so there would not be scope in the way that the noble Lord has worded his amendment for a wider definition of employee representatives.

We have had a debate which I have a feeling we are going to return to on some of the other trade union issues, but, for the time being, with this set of amendments in mind, I hope that the noble Lord, Lord Sharpe, will consider withdrawing his amendment.

[Lord Sharpe of Epsom (Con)]

That was a short but most interesting debate, and I am grateful to all noble Lords who participated. I am particularly grateful to the noble Lord, Lord Davies of Brixton, and the noble Baroness, Lady O’Grady, for their comments. No one on this side is denying that trade unions often have a proud history. As my noble friend Lord Deben pointed out, they have a very strong history in securing workers’ rights which has been constructive for our country over many years—no one is denying that. However, as the noble Baroness, Lady Fox, pointed out, not all modern trade unions support that history. I am sure that noble Lords would accept that.

The fact is that the world has evolved, and these amendments simply respect that evolution. My noble friend Lord Moynihan points out that only 22% of workers are currently unionised. The latest figure that I can find for the private sector is 12.3%. The other 88% have not been prevented from joining a trade union; they have exercised a choice not to, a democratic choice, so trying to argue that this proposal is somehow undemocratic makes no sense in the context of the rest of the Bill. Why, for example, does the Bill later on scrap the 40% turnout requirement for statutory recognition? That seems profoundly undemocratic.

Having said all that, I am obviously very grateful to the Minister for her response, and I accept that there are probably technical issues with my amendment. With that helpful hint, I shall improve them for the next time that we debate these measures. However, on the first day in Committee, we heard the Government argue that, in relation to guaranteed hours:

“Unions can make these deals based on their knowledge of the industry and with a holistic view on what is best for their workers”.—[Official Report, 29/4/25; col. 1203.]


If the Government are willing to accept that logic for trade unions, surely the same reasoning must be extended to independent staff bodies and employment forums, many of which are embedded deeply within the day-to-day life of a company and have even greater practical knowledge of their specific industries and workplaces. In some cases, those bodies are closer to the operational realities of individual businesses than remote union structures, and they are more trusted by the employees themselves.

The debate should ultimately be about respecting individual workers and their choices. The Government’s stance suggests a lack of trust in individual workers and the belief that, unless a worker is represented through a traditional trade union, their voice is somehow less valid or less informed. Fundamentally, it appears that the Government do not believe in the individual and do not trust workers to know what works best in their own context; instead, they insist on a one-size-fits-all approach, even when that model may be entirely foreign to a smaller business or industries where union involvement has never been the norm.

What about the many employees who are content with their current representation? Will they now be told that their structures are not good enough and that they have to change, bring in new frameworks, hire experts and prepare for union-led negotiations, whether they want them or not? Will industries that have long enjoyed stable relations be pushed into more adversarial models, creating the very tensions that this Bill should be seeking to avoid? Can the Minister perhaps enlighten us as to how smaller businesses and those that have never operated within a unionised environment will adapt to rigid models such as this, which assume that union involvement is the only valid route to collective agreement?

These amendments do not challenge the value of trade unions—very far from it. They simply recognise that unions are not the only route to fair and effective representation. If the Government are truly serious about modernising employment rights, we must begin by acknowledging the diversity of how workers organise today. For now, I am of course content to withdraw the amendment.

Amendment 42 withdrawn.

Amendments 43 and 44 not moved.

Clause 5 agreed.

Clause 6: Amendments relating to sections 1 to 5

Amendment 45

Moved by

[Baroness Jones of Whitchurch]

45: Clause 6, page 34, line 14, at end insert—
““work-finding agency” has the meaning given by section 27BV;”Member’s explanatory statement
The definition of “work-finding agency” in proposed section 27BV of the Employment Rights Act 1996 applies for the purposes of Part 2A of that Act. This amendment adds reference to the definition to the Part 2A interpretation provision in proposed section 27BZ2 of that Act.

Amendment 45 agreed.

Clause 6, as amended, agreed.

Schedule 2: Consequential amendments relating to sections 1 to 5

Amendments 46 to 61

Moved by

[Baroness Jones of Whitchurch]

46: Schedule 2, page 178, line 27, at end insert—
“Insolvency Act 1986
A1 In the Insolvency Act 1986, in Schedule 6 (categories of preferential debts), in paragraph 13(2), before paragraph (a) insert—“(za) a payment under section 27BP(1) of, or paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996 (payment for a cancelled, moved or curtailed shift);”.”Member’s explanatory statement
This amendment will make payments under proposed section 27BP(1) of, and paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996 (payments for cancelled, moved or curtailed shifts) preferential debts for the purposes of the Insolvency Act 1986.

47: Schedule 2, page 178, line 29, leave out “In the Employment Tribunals Act 1996,” and insert—
“The Employment Tribunals Act 1996 is amended as follows.1A (1) Section 12A (financial penalties) is amended as follows.(2) In subsection (11), in the definition of “employer”, after paragraph (a) insert—“(aa) in relation to a right conferred by Chapter 3 or 4 of Part 2A, or section 47H, of the Employment Rights Act 1996, includes a person who is an employer by virtue of section 27BJ(7) or (as the case may be) 27BP(8) of that Act;(ab) in relation to a right conferred by Part 1 or 2 of Schedule A1 to the Employment Rights Act 1996, or Chapter 6 of Part 2A of that Act so far as relating to Part 1 of Schedule A1 to that Act, includes the hirer within the meaning of the relevant Part of that Schedule;(ac) in relation to a right conferred by Part 1, 2 or 3 of Schedule A1 to the Employment Rights Act 1996, includes (where it would not otherwise do so) the work-finding agency within the meaning of the relevant Part of that Schedule;(ad) in relation to a right conferred by section 47I of the Employment Rights Act 1996, includes (where it would not otherwise do so) a person who is a relevant person within the meaning of that section;”.(3) In that subsection, in the definition of “worker”, for the words from “includes” to the end of the definition substitute “—(a) includes an individual seeking to be employed by a person as a worker;(b) in relation to a right conferred by Chapter 3 or 4 of Part 2A, or section 47H, of the Employment Rights Act 1996, includes an individual who is a worker by virtue of section 27BJ(7) or (as the case may be) 27BP(8) of that Act;(c) in relation to a right conferred by—(i) Part 1, 2 or 3 of Schedule A1 to the Employment Rights Act 1996,(ii) Chapter 6 of Part 2A of that Act so far as relating to Part 1 of Schedule A1 to that Act, or(iii) section 47I of that Act,includes (where it would not otherwise do so) an agency worker within the meaning of Part 2A of that Act (see section 27BV of that Act).””Member’s explanatory statement
This amendment inserts an amendment of section 12A of the Employment Tribunals Act 1996 that is consequential on provisions of the Employment Rights Act 1996 to be inserted by clauses 2, 3 and 5 of, and Schedules 1 and 2 to, the Bill.

48: Schedule 2, page 178, line 29, before second “in” insert—
“1B “(1) Section 16 (power to provide for recoupment of benefits) is amended as follows.(2) In subsection (1), after paragraph (d) insert—“(da) payments under section 27BP(1) of, or paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996,”.(3) At the end insert—“(7) In the application of this section to payments which are the subject of proceedings under Chapter 2, 3 or 4 of Part 2A of the Employment Rights Act 1996, or Chapter 6 of Part 2A of that Act so far as relating to Chapter 2 of that Part, and which are compensation for loss of wages (see subsection (1)(a))—(a) references to an employer are to be read as if they were references to an employer within the meaning of the relevant Chapter of that Part;(b) references to an employee are to be read as if they were references to a worker within the meaning of the relevant Chapter of that Part.(8) In the application of this section to payments which are the subject of proceedings under Part 1, 2 or 3 of Schedule A1 to the Employment Rights Act 1996, or Chapter 6 of Part 2A of that Act so far as relating to Part 1 of that Schedule, and which are compensation for loss of wages (see subsection (1)(a))—(a) references to an employer are to be read as if they were references to a hirer or (as the case may be) a work-finding agency within the meaning of the relevant Part of that Schedule;(b) references to an employee are to be read as if they were references to an agency worker within the meaning of Part 2A of that Act.(9) In the application of this section to payments under Part 5 of the Employment Rights Act 1996 (see subsection (1)(c)(i)) by virtue of section 47H of that Act—(a) references to an employer are to be read as if they were references to an employer within the meaning of that section;(b) references to an employee are to be read as if they were references to a worker within the meaning of that section.(10) In the application of this section to payments under Part 5 of the Employment Rights Act 1996 (see subsection (1)(c)(i)) by virtue of section 47I of that Act—(a) references to an employer are to be read as if they were references to a relevant person within the meaning of that section;(b) references to an employee are to be read as if they were references to an agency worker within the meaning of Part 2A of that Act.(11) In the application of this section to payments under section 27BP(1) of the Employment Rights Act 1996 (see subsection (1)(da))—(a) references to an employer are to be read as if they were references to an employer within the meaning of Chapter 4 of Part 2A of that Act;(b) references to an employee are to be read as if they were references to a worker within the meaning of that Chapter.(12) In the application of this section to payments under paragraph 21(1) of Schedule A1 to the Employment Rights Act 1996 (see subsection (1)(da))—(a) references to an employer are to be read as if they were references to a work-finding agency within the meaning of Part 2A of that Act;(b) references to an employee are to be read as if they were references to an agency worker within the meaning of that Part.””Member’s explanatory statement
This amendment inserts an amendment of section 16 of the Employment Tribunals Act 1996 that is consequential on provisions of the Employment Rights Act 1996 to be inserted by clauses 1 to 3 and 5 of, and Schedules 1 and 2 to, the Bill.

49: Schedule 2, page 180, line 3, at end insert “(whether or not the worker referred to the possibility of bringing such proceedings)”
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 2, page 180, leaving out lines 7 to 18.

50: Schedule 2, page 180, leave out lines 7 to 18 and insert—
“(3) It is immaterial for the purposes of subsection (1)(d) or (e) whether or not the proceedings were, or would have been, well-founded provided that the worker acted in good faith in bringing the proceedings or alleging the existence of the circumstance.”Member’s explanatory statement
This amendment, together with my amendment to Schedule 2, page 180, line 3, replaces the current subsections (3) and (4) of proposed section 47H of the Employments Rights Act 1996 so that they work correctly for all categories of proceedings mentioned in subsection (1)(d) of that proposed section.

51: Schedule 2, page 181, line 25, at end insert “(whether or not the agency worker referred to the possibility of bringing such proceedings)”
Member’s explanatory statement
See the explanatory statement for my amendment to Schedule 2, page 181, leaving out lines 30 to 44.

52: Schedule 2, page 181, leave out lines 30 to 44 and insert—
“(3) It is immaterial for the purposes of subsection (1)(d) or (e) whether or not the proceedings were, or would have been, well-founded provided that the agency worker acted in good faith in bringing the proceedings or alleging the existence of the circumstance.”Member’s explanatory statement
This amendment, together with my amendment to Schedule 2, page 181, line 25, replaces the current subsections (3) and (4) of proposed section 47I of the Employment Rights Act 1996 so that they work correctly for all categories of proceedings mentioned in subsection (1)(d) of that proposed section.

53: Schedule 2, page 184, line 26, leave out “or (5)” insert “, (5) or (7)(b) or 27BY(5)”
Member’s explanatory statement
This amendment adds to the types of dismissal that are to be regarded as automatically unfair under proposed section 104BA of the Employment Rights Act 1996.

54: Schedule 2, page 184, line 28, at end insert “(whether or not the employee referred to the possibility of bringing such proceedings)”
Member’s explanatory statement
This amendment is consequential on my amendment to Schedule 2, page 184, line 26.

55: Schedule 2, page 184, leave out lines 31 to 37 and insert—
“(4) It is immaterial for the purposes of subsection (3) whether or not the proceedings were, or would have been, well-founded provided that the employee acted in good faith in bringing the proceedings or alleging the existence of the circumstance.”Member’s explanatory statement
This amendment is consequential on my amendment to Schedule 2, page 184, line 26 and, together with my amendment to Schedule 2, page 184, line 28, reflects the approach taken in other of my amendments to Schedule 2 by replacing the current subsections (4) and (5) with provision that works for all the categories of proceedings.

56: Schedule 2, page 185, line 31, at end insert “(whether or not the employee referred to the possibility of bringing such proceedings)”
Member’s explanatory statement
This amendment is for consistency with the change made by my amendment to Schedule 2, page 184, line 28.

57: Schedule 2, page 185, leave out lines 34 to 39 and insert—
“(4) It is immaterial for the purposes of subsection (3) whether or not the proceedings were, or would have been, well-founded provided that the employee acted in good faith in bringing the proceedings or alleging the existence of the circumstance.”Member’s explanatory statement
This amendment is for consistency with the change made by my amendment to Schedule 2, page 184, leaving out lines 31 to 37.

58: Schedule 2, page 187, line 8, at end insert—
“13A In section 184 (debts to which Part 12 of the Act (insolvency of employers) applies), in subsection (2), before paragraph (a) insert—“(za) a payment under section 27BP(1) or paragraph 21(1) of Schedule A1,”.”Member’s explanatory statement
This amendment will make payments under proposed section 27BP(1) of, and paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996 (payments for cancelled, moved or curtailed shifts) subject to the provision in Part 12 of that Act about insolvent employers.

59: Schedule 2, page 187, line 8, at end insert—
“13B “(1) Section 202 (national security restrictions on disclosure of information) is amended as follows.(2) In subsection (2), after paragraph (a) insert—“(aa) Chapters 2 to 6 of Part 2A (including Schedule A1),”.(3) In subsection (2)(b), for “and 47C” substitute “, 47C, 47H and 47I”.(4) In subsection (2)(g)(i)—(a) for “or 103” substitute “, 103, 104BA or 104BB”;(b) after “application” insert “in relation to rights conferred by Chapters 2 to 6 of Part 2A (including Schedule A1) or”.(5) In subsection (2)(g)(ii), for “or (6)” substitute “, (6), (7BZA) or (7BZB)”.”Member’s explanatory statement
This amendment will prevent information from being disclosed under provisions inserted into the Employment Rights Act 1996 by clauses 1 to 3 and 5 of, and Schedules 1 and 2 to, the Bill, or in court or tribunal proceedings relating to those provisions, if its disclosure would, in the opinion of a Minister of the Crown, be contrary to the interests of national security.

60: Schedule 2, page 187, line 24, at end insert—
“14A “(1) Section 206 (institution or continuance of tribunal proceedings) is amended as follows.(2) In subsection (2), after paragraph (a) insert—“(aa) Chapters 2 to 6 of Part 2A (including Schedule A1),”.(3) After subsection (9) insert—“(10) In the application of this section and section 207 in relation to Chapter 2, 3 or 4 of Part 2A, or Chapter 6 of Part 2A so far as relating to Chapter 2 of that Part, references to an employee are to be read as if they were references to a worker within the meaning of the relevant Chapter of that Part.(11) In the application of this section and section 207 in relation to Chapter 3 or 4 of Part 2A, references to an employer are to be read as if they were references to an employer within the meaning of the relevant Chapter of that Part.(12) In the application of this section and section 207 in relation to Chapter 5 of Part 2A (including Schedule A1), or Chapter 6 of Part 2A so far as relating to Part 1 of Schedule A1—(a) references to an employer are to be read as if they were references to— (i) a hirer, or(ii) a work-finding agency, and(b) references to an employee are to be read as if they were references to an agency worker,within the meaning of Chapter 5 of Part 2A (including Schedule A1).(13) In the application of this section and section 207 in relation to section 47H—(a) references to an employer are to be read as if they were references to an employer within the meaning of that section;(b) references to an employee are to be read as if they were references to a worker within the meaning of that section.(14) In the application of this section and section 207 in relation to section 47I—(a) references to an employer are to be read as if they were references to a relevant person within the meaning of that section;(b) references to an employee are to be read as if they were references to an agency worker within the meaning of Part 2A.””Member’s explanatory statement
This amendment amends section 206 of the Employment Rights Act 1996 so that that section, and section 207, apply with appropriate glosses in relation to proposed Chapters 2 to 6 of Part 2A, and proposed sections 47H and 47I, of that Act.

61: Schedule 2, page 188, line 21, at end insert—
“Bankruptcy (Scotland) Act 2016
19 In the Bankruptcy (Scotland) Act 2016, in Schedule 3 (preferred debts), in paragraph 10(2)—(a) before paragraph (a) insert—“(za) a payment under section 27BP(1) of, or paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996 (payment for a cancelled, moved or curtailed shift),”;(b) in paragraph (a), for “the Employment Rights Act 1996” substitute “that Act”.”Member’s explanatory statement
This amendment will make payments under proposed section 27BP(1) of, and paragraph 21(1) of Schedule A1 to, the Employment Rights Act 1996 (payments for cancelled, moved or curtailed shifts) preferred debts for the purposes of the Bankruptcy (Scotland) Act 2016.

Amendments 46 to 61 agreed.

Schedule 2, as amended, agreed.

Clauses 7 and 8 agreed.

Amendment 62

Moved by

[Lord Hunt of Wirral]

62: After Clause 8, insert the following new Clause—
“Impact assessment: sections 1 to 8(1) The Secretary of State must conduct a review of—(a) the impact of sections 1 to 8 on the operation of employment tribunals, and(b) the ability of employment tribunals to manage any increase in applications resulting from those sections.(2) The Secretary of State must lay the review made under subsection (1) and the Government’s response to the review before Parliament.”Member’s explanatory statement
This new clause would require the Secretary of State to conduct a review of the impact on the employment tribunals of the Bill’s provisions on zero hours workers.

[Lord Hunt of Wirral (Con)]

My Lords, we now move to consider the impact assessments, or lack of them. Amendment 62, which I will speak to first, considers the impact on employment tribunals of the zero-hour contract provisions. Amendment 63 would require an impact assessment within six months, specifically for the hospitality sector, the retail sector and the health and social care sector. I greatly welcome the noble Baroness, Lady Fox of Buckley, who has kindly given her name to that amendment, along with my noble friend Lord Sharpe of Epsom.

Earlier this week we heard, and it was reported in the Financial Times, that the UK employment tribunal backlog had hit record levels. Some 49,800 cases were waiting to be heard by an employment tribunal at the end of the final quarter of last year, up from 39,000 in the same period of 2023. That is according to data from HM Courts & Tribunals Service. Earlier this afternoon, the Government refused to accept Amendment 21, which I spoke to and which would allow businesses to make a dismissal in the case of genuine business needs. By rejecting this amendment, as well as any suggestion from businesses throughout their consultation, I think that the Government are risking overloading the employment tribunal system even more than is the case today.

Moreover, it is worth noting that the Government have previously tabled so-called technical amendments that would have required employers to make work available to zero-hour workers. This alone highlights how impractical the current zero-hour contract provisions are when viewed through the lens of tribunal risk. It is deeply concerning, in particular, that the Regulatory Policy Committee has given a red rating to the Government’s impact assessment on day-one rights over unfair dismissal.

16:30

The impact assessment has a number of other deficiencies. It overlooks cost implications for businesses, ranging from salary costs during performance processes and disputes to higher settlements driven by tribunal risk aversion. There is no serious examination of whether these changes will have different effects depending on job type—lower skilled versus professional—or the reputational risks professionals face when bringing claims. Nor does it address wider labour market impacts such as recruitment, turnover or retention.

On Amendment 63, I begin with a point that goes to the heart of responsible policy-making and lawmaking. The Regulatory Policy Committee is the independent body tasked with scrutinising the quality of government impact assessments, and it has chosen to deliver a damning verdict on the Government’s own assessment of these proposals. The RPC gave the Government’s impact assessment on the guaranteed-hours offers a red rating under two critical categories: “Identification of options” and “Justification of the preferred way forward”. In plain terms, that committee has judged the impact assessment to be not fit for purpose. The Government have failed both to explore alternative approaches and to provide a sound evidence-based rationale for the one they have chosen.

Even more striking, and here I quote from the Regulatory Policy Committee:

“The IA needs to address”—

the comments that the RPC made earlier—

“on options to justify the preferred way forward. The IA also needs to provide a clear assessment against the counterfactual and assess more fully the potential for the policy to increase unemployment/worklessness, and how far this risk is mitigated by ZHCs remaining potentially available”.

This is not a technical footnote. This is a fundamental flaw. We are being asked to legislate not only in the absence of robust evidence but in defiance of expert advice. Yet these reforms will impose new legal duties, operational burdens and real financial risk on businesses across the country. That is why we are bringing these amendments forward. The Government may have failed to conduct a rigorous assessment, but this House—the House of Lords—need not.

I now turn to the sectors most affected. Hospitality businesses face £3.4 billion in additional annual costs from April. Research from CGA by NIQ shows that just 14% of businesses feel optimistic about the market. Hospitality, as colleagues will know, is the single largest user of zero-hours contracts, with 32% of such arrangements in the UK workforce found in this sector alone, according to the House of Commons Library briefing last September.

Hospitality is highly seasonal. A worker might put in full-time hours during the 12-week run-up to Christmas, when pubs, hotels and restaurants are at their busiest. Under this legislation, that surge in hours would form the basis for a guaranteed-hours offer. But what happens in January or February, when footfall drops dramatically? That business may no longer need that level of staffing, yet it will be legally obliged to offer a contract based on peak demand.

The Government have tried to address this seasonal issue by allowing businesses to introduce fixed-term contracts “where reasonable”. What qualifies as reasonable has yet to be defined in a way that accounts for the complex nature of hospitality work. While this may seem to be a solution, the reality is far more complicated. The multitude of circumstances in which it would be deemed reasonable to offer a fixed-term contract is so varied that it will take years to establish a reliable body of case law on its use, particularly through the already stretched and overburdened employment tribunal system.

This will add significant administrative burden to businesses, in particular small businesses. Employers will be required to track when statutory thresholds are triggered, calculate average hours and issue formal offers. The cost associated with administering and calculating these contract offers on a rolling basis whenever additional hours are worked will be disproportionate and provide no clear benefit to workers. Businesses will face substantial administrative costs, which will ultimately harm the workers whom the legislation is trying to protect. The idea that this will lead to better outcomes for workers is, frankly, misguided.

Employers will likely start to restrict voluntary overtime to avoid inadvertently triggering a contractual obligation that they cannot sustain in the longer term. This would mean fewer opportunities for workers who rely on those extra hours. The cost of compliance for businesses, particularly those in hospitality, will be significant and ultimately counterproductive for workers.

The health and social care sector also faces significant challenges under these reforms. It employs a large proportion of zero-hours contract workers, many of whom provide care on a flexible basis. The flexibility to increase or decrease working hours based on patient need is essential. These reforms risk imposing rigid contractual obligations on a sector that depends on being able to respond to fluctuating care demands.

According to Skills for Care’s latest report on the adult social care workforce, published just yesterday, 21% of all adult social care posts, which equates to approximately 340,000 roles, were employed on zero-hours contracts in 2023-24. More specifically, 29% of care worker posts and 43% of home care worker posts are filled by workers on zero-hours contracts. These statistics show just how reliant the sector is on this form of employment and why the flexibility of zero-hours contracts is vital to ensuring that care needs are met as they fluctuate.

If the Government’s reforms force employers in social care to offer fixed hours or face penalties for failing to meet these new requirements, I believe it will undermine the flexibility they need to respond to changing care needs. The challenge is not simply administrative but fundamental to the whole nature of social care work. It is about being able to respond to the variability of the demand for care, whether due to seasonal illnesses, outbreaks or other changes that require flexible staffing.

Furthermore, as the social care sector is already struggling with staff shortages, imposing additional obligations that reduce flexibility will make it even harder to fulfil these roles. The increased administrative burden will also divert those precious resources away from front-line care. Social care workers and managers will be forced to spend more time tracking hours and calculating offers instead of providing the care that vulnerable individuals so desperately need.

Finally, I must address one of the Government’s arguments that I find particularly disingenuous. The Government have suggested that workers may be afraid to ask for guaranteed hours under the current system. This is, I believe, nonsense. It is quite something to claim to be pro-worker and have such a low opinion of those workers and their ability to ask for a contract. The idea that workers cannot or should not be able to request guaranteed hours is an insult. Workers can understand their own needs and they are making informed decisions about their employment.

I believe the Government should trust workers to take responsibility for their own employment decisions. If workers want to request guaranteed hours, of course they should have the right to do so, and the freedom to ask without fear of discrimination or retribution. By undermining this basic principle of worker autonomy, the Government are sending a dangerous message on the real value they place on workers’ rights. I beg to move.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, until my earlier rant on trade unions, I had not been available to speak consistently in the debates on Clauses 1 to 8, although I have been listening in or following them. I have not been able to be here because of the problems of contemporary work: a portfolio career running from one job to another and never having time to do everything I want to do.

One of the reasons I am very keen on an impact assessment on the impacts of Clauses 1 to 8 on these sectors—the subject of the amendment to which I added my name, looking at hospitality, retail and health and social care—is that I feel as though the modern employment landscape has changed so dramatically. Despite the fact that we have a Bill about modernising employment rights, I have sometimes felt that there has not been an adequate recognition of how things have changed. As I hinted at earlier, there is a rather caricatured view on a variety of sides of the Committee, as though we were stuck in the 1970s and every employee and every worker was a public sector worker with a nine-to-five job. That is just not what it is like. The contemporary workplace often needs flexibility, for the sake of the workers as much as anything. But it is an argument, and I am not going to go into the details.

I thank the noble Lords, Lord Sharpe of Epsom and Lord Hunt—of wherever—for allowing me to put my name to this amendment. The noble Lord, Lord Hunt, explained well the different issues that have been raised in the debates until now, as I understand them. On different Bills I have raised the problems in these sectors, so I will not repeat them. But I note that, in a debate on Martyn’s law—which has now become an Act of Parliament as the Terrorism (Protection of Premises) Act—I raised the real problems that the hospitality sector is facing at the moment because it is under the cosh and overregulated. People who work in that sector feel that it is not going to survive. There are the national insurance contributions and the regulations being brought in. The retail sector, such as convenience stores, will now face a whole barrage of assaults in the Tobacco and Vapes Bill; I talked about that at great length, so I will not repeat that.

I fear that the health and social care sector has exploited care workers via zero-hour contracts; I have talked about that in the past. A modernisation of the health and social care sector is required, and I am disappointed that the present Government have not brought that forward. The one thing that I would like a Bill on is the modernisation of the health and social care sector, instead of these other Bills, which I think do some damage. Despite that, all that the amendment I am supporting calls for is an impact assessment of Clauses 1 to 8.

16:45

The introductory thoughts of the noble Lord, Lord Fox, and the speeches of a variety of noble Lords who followed him, have been pleas to the Government to acknowledge that there are so many gaps in the Bill that have not been filled in. I cannot see how we can pass it unless we have impact assessments of what its damage might be. Also, we need to be open to the possibility that some of what is done in a well-intended way to help the workers will actually cause some serious damage to them. I have heard very reasonable speeches from all sides here, saying, “Can’t you see that this could affect ordinary workers’ ability to live the lives they want to live and work in the way they want to work?”. The Government have just said, “No, we’re not having that”, or, “We’re going for consultation”.

At the very least, to test the water, can we not say that we will have an impact assessment on whether the Bill will be positive to sectors that are absolutely drowning, in many instances because of things that this Government and the previous Government have done? Surely we have to ensure that something that is well intentioned to help workers does not do more harm than good. Therefore, we should support an assessment of what the impact will be.

[Lord Londesborough (CB)]

My Lords, I will speak to Amendment 63. I agree that the impact of Clauses 1 to 8 will be especially felt by these three sectors: hospitality, retail and social care. But, to be frank, I would not stop there; I advocate expanding this impact assessment, not only to small businesses and micro-businesses—noble Lords would expect me to say that—but to all key sectors in the economy. There will be huge employment variations sector by sector, and they need to be analysed and understood. As we keep hearing, one size does not fit all—although the Bill has a different view on that—and we have the issue of “mind the gap”.

Two other industries that certainly deserve such assessments are the creative industries, which we will debate on another day, and the gig economy. Some very disturbing numbers are already coming out of membership surveys from bodies such as the Federation of Small Businesses and the Institute of Chartered Accountants. I will share two bits of data from the ICAEW’s latest quarterly business survey for the first quarter of this year. It says that 53% of its members expect that the Bill will

“reduce their plans to hire permanent staff”,

and that 40% anticipate greater use of outsourcing because of the Bill—that is a very significant number.

What does this mean? It means—it is already happening—that employees will be coming off payroll and going into freelance and self-employed roles. We have an amendment coming up in many days’ time, or probably weeks; I will not read out the names of my noble friends who are behind it, but it is Cross-Bench and Liberal Democrat-sponsored and relates to the establishment of a freelance commissioner office. I think the Government may have very little choice on this, because the demands for the services of that office are going to go up exponentially, partly because of this Bill and also because of the national insurance contributions Bill. I will not repeat all those arguments.

I come to the second unforeseen consequence—although, frankly, these are not unforeseen, are they? They are foreseen. We can actually say with some certainty that the Government are encouraging the offshoring of jobs from the UK. This trend has been going on for decades, but is it really the objective of the Government, particularly for lower-paid and entry-level roles, to see a percentage of those jobs going off to countries such as India, Vietnam, the Philippines, Romania or Moldova? I am not against offshoring, but I think you have to be very careful about being seen to be encouraging it, and I believe the Bill is guilty of that.

On the assessment, which we hope will happen, the area that should be looked at in greatest detail is the impact on part-time jobs. We have heard already about the young graduates and students, but I will speak up also for older workers. Those of us here who sit on the Economic Affairs Committee—I see the noble Lord, Lord Davies, here—will be aware that we are conducting an inquiry on the economics of an ageing society. If the Government are to achieve their noble objective of raising the economic activity rate from 75% to 80% across all age groups, they will have to tackle the 50 to 70 year-old cohort.

In order to get people back into work, not just those who took premature retirement but those who have been on benefits for a long time, we will have to be far more flexible about creating part-time work, and I am afraid that the Bill is likely to deter the creation of part-time roles. So that is another area that I believe the impact assessment should be looking at, which is not just by sector but by type of job.

I am told by my friends in the recruitment industry, if I can call them that, that there is already a shift in hiring from permanent to interim, and that trend started at the beginning of this year and is accelerating. Again, national insurance contributions have pushed employment in that direction and the Bill threatens to do the same.

My final point, talking about assessments, is that HMRC may well want to conduct one to discover that its projected national insurance contribution tax revenues will, as a result of the Bill, take a significant hit as employees start being taken off payroll and moved into self-employed, part-time or even offshored roles.

[Baroness Stowell of Beeston (Con)]

Perhaps I might intervene briefly on this group. I support Amendment 63 but, like the noble Lord, Lord Londesborough, I wonder whether it is too modest in scope. As I said when I spoke on the last day in Committee, I am sympathetic to the kinds of effects that zero-hours contracts or some of the different kinds of practices that we see now have on employees in these businesses, which are often at the lower end of the pay scale.

However, I am very struck, by listening not just to this debate but to the debates on the various different things that we have been discussing this afternoon, that what we do not seem to be taking account of—or rather, to be more specific, what the Government do not seem to have taken account of in bringing forward this legislation—is that a lot of the practices that they are trying to remove or mitigate are the consequence of other things that have been introduced in the past which have been well intentioned in support of low-paid workers but are now creating other things. For instance, although it is going back some time now and various other things have happened since, I think about the arrival of tax credits when Gordon Brown was Chancellor. That led to people wanting to reduce their contracted hours because of the impact on their various benefits.

So when I hear people say that some of these measures—or, rather, the removal of some of these practices and various other things in the Bill—start to disincentivise people either being offered more hours or whatever, I worry that, given the way in which the Bill has been introduced and what feels like inadequate assessment through the proper stages—Green Paper, and all that sort of thing—we are creating yet more problems, which will then lead to the need for yet more legislation, which will never get to the heart of what we are trying to do here, which is to create an employment economy that is fair for employees and people do not feel that they are being exploited but have the flexibility that they need, and where employers, too, have the freedom and independence that they absolutely need to be able to employ workers and grow their businesses to contribute to the fundamental agenda, which is a growing economy that is fair to everybody concerned.

[Lord Fox (LD)]

My Lords, this is another one of those divided-off groups. I am going to speak to impact assessments and reserve what I say on tribunals for the next group. There is a danger when talking about the existence of and the need for impact assessments that we start providing our own impact assessments. I am afraid that many of your Lordships fell into that trap. I will try to avoid it, so I will not be commenting on what should be in an impact assessment; I will be commenting on why we need improved impact assessments. Some of the Government’s amendments have already been debated. I was not able to be here during that part of the process, but, on reading the debate, I saw that it further illustrated that, with each layer of new amendments, changes are coming to the Bill and complications and reflections are being added.

The noble Lord, Lord Hunt, before he gave us his impact assessment, made I think his most important point, which was to bring up the findings of the RPC on the existing impact assessment. That is before all the changes that have come and before the Bill changed substantially between the Commons and your Lordships’ House, and therefore, unscrutinised to this point. I am very much in the camp of the noble Lord, Lord Londesborough: if we are going to redo an impact assessment, we should do it properly. We should go back and produce one that is meaningful, that the RPC can endorse and that we can use meaningfully in the next stages of this Bill.

I am not sure how many of your Lordships worked on the then Professional Qualifications Bill. I suspect that the noble Baroness, Lady Neville-Rolfe, may at least be one. Sometimes the then public procurement Bill is used as an example of Bills that come half-baked—or, in that case, not even in the cooker—but actually the best example is the Professional Qualifications Bill. That Bill differed from this one in that it started in your Lordships’ House, but it came to your Lordships’ House full of things that needed to change, full of drafting points and full of extensions and amendments, and the noble Lord, Lord Grimstone, who was the Minister, stood where the Minister is today and said, when we came to the end of Committee, “Well, my Lords, it is clear that we have to take this Bill on a holiday”. And that is what he did. He took it away for four months and came back with a Bill that was properly drafted. The “i”s had been dotted and the “t”s crossed and we were able to make a reasonable piece of legislation to pass to the Commons for its work.

We have some time. This is a flagship Bill. It had to be introduced within 100 days because that is what the Government told the world. I understand that. But it is very important that we get this right. The Minister should start thinking about vacation plans for the Bill between Committee and Report, so that things such as the impact assessment can be delivered to your Lordships’ House. Those of us who want the Bill to succeed will then be sure that it has a chance to succeed.

17:00

[Lord Leong (Lab)]

My Lords, I thank the noble Lords, Lord Hunt, Lord Fox and Lord Londesborough, and the noble Baronesses, Lady Fox and Lady Stowell, for their contributions, and thank the noble Lord, Lord Sharpe of Epsom, for tabling Amendments 62 and 63. These amendments cover the impact of the Bill’s zero-hour contracts provisions on the employment tribunal system and on specific sectors.

Let me place on record that the Government recognise the vast contribution that the hospitality, retail and health and social care sectors make to the nation’s economy, and that they employ millions of people. I will give some examples. The hospitality sector currently employs 330,000 people on zero-hours contracts, which makes up 28.9% of the workforce. The retail and wholesale sector employs close to 90,000 people, equating to 7.8% of the workforce. The health and social care sector employs 190,000 people, contributing 16.5% of the workforce.

Zero-hours contracts offer flexibility for some workers, but evidence indicates that they have been exploited by certain UK companies, leading to job insecurity and limited work rights. This pro-business, pro-worker Bill aims to address these issues by effective enforcement and by closing the loopholes, to ensure fair treatment for all workers so that we can grow our economy.

Amendment 63 seeks to insert a new clause requiring the Secretary of State to publish an assessment of the impact of the zero-hours provisions in the Bill on specific sectors of the economy within six months of the passage of the Bill. As the Committee will know, the Government have already published a very comprehensive set of 27 impact assessments, spanning close to 1,000 pages. These are based on the best available evidence of the sectors likely to be affected by these measures. As mentioned by the noble Lords, Lord Hunt and Lord Fox, the RPC’s opinions refer to the evidence and analysis presented in the impact assessment and not to the policy itself. Our impact assessments provide initial analysis of the impacts that could follow. We will therefore be updating and refining them as we further develop the policy and continue consultation and engagement.

[Lord Hunt of Wirral (Con)]

Can the noble Lord respond to the red rating which the RPC has given the Government’s impact assessment? Are the Government continuing discussions with the Regulatory Policy Committee to try to reverse that red rating, to meet the necessary requirements that the Regulatory Policy Committee imposes on all Governments? When will we see an end to the red rating and an acceptance that the Government have learned from the experience and judgment of the RPC?

[Lord Leong (Lab)]

I thank the noble Lord. This impact assessment will continue. I will be mentioning later in my speech that there will be further impact assessments. Regarding his specific point about the RPC’s rating, I will write to him.

We recognise the importance of ensuring that the impacts of these policies on workers, businesses and the economy are considered, and that analysis is published outlining this. We already intend to publish further analysis, both in the form of an enactment impact assessment when the Bill secures Royal Assent and further assessments when we consult on proposed regulations, to meet our Better Regulation requirements. In addition, we are committed to consulting with businesses and workers ahead of setting out secondary legislation, as we have said on previous groups, including those from the sectors listed in the amendment.

Amendment 62 would insert a new clause to require the Secretary of State to undertake and publish a review of the impact on employment tribunals of the zero-hours provisions in the Bill. The detailed package of analysis, to which I referred a moment ago, also includes an illustrative impact assessment of the Bill’s measures on employment tribunal cases. We intend to refine this over time by working closely with the Ministry of Justice, His Majesty’s Courts & Tribunals Service, ACAS and wider stakeholders. We recognise the importance of assessing the impact of these policies on the enforcement system and have worked in partnership with these organisations throughout policy development.

We already intend to publish further analysis, both in the form of an enactment impact assessment when the Bill secures Royal Assent and further assessments when we consult on proposed regulations, as I mentioned earlier. In the meantime, the Government are taking various steps to increase capacity within the employment tribunal system. For example, ACAS currently provides information to employees and employers on employment law, and early conciliation for potential employment tribunal claims. It also offers post-claim conciliation. The Government have taken various steps to increase capacity, such as the deployment of legal caseworkers and recruitment of additional judges.

HMCTS continues to invest in improving tribunal productivity through the deployment of legal officers to actively manage cases, the development of modern case management systems and the use of remote hearing technology. We are committed to looking at what more we can do in this area, working with the Ministry of Justice and wider stakeholders such as ACAS, as I just mentioned. We are already helping many employers and workers to reach settlement before they need to go on to a further hearing.

Our work will also include looking at opportunities for the fair work agency to take on enforcement, where that would help both workers and businesses reach resolution more quickly without needing to go to an employment tribunal.

I refer to the point from the noble Baroness, Lady Fox, about gaps in the Bill. The Bill does not have any gaps. Some elements of the Bill await engagement or future engagement and consultation with stakeholders, so that we can ensure that the policies work for all involved.

I hope I have reassured your Lordships and that the noble Lord, Lord Hunt, will withdraw his amendment.

[Baroness Fox of Buckley (Non-Afl)]

I am delighted that consultations are occurring but, as legislators, we are asked to vote on a Bill without having seen the consultations. The Minister can tell me that there are no gaps because it will all be done for us. I do not know why we do not sack ourselves; what are we doing, sitting here, reading through line by line in Committee and discussing a Bill that we are told not to worry our little heads about? Those are the gaps.

[Lord Leong (Lab)]

First, I did not say “little heads”. It is important that we continue to have conversations with stakeholders. Most noble Lords know, and I am sure the noble Baroness knows, that employment law includes a lot of regulations. Previous employment legislation puts further regulations in place. It is important and right that we speak to a wide group of stakeholders, businesses, workers, trade unions and everybody involved in this, so that we get it right.

[Baroness Fox of Buckley (Non-Afl)]

One last thing: to be frank, I want the Government to speak to wider groups of stakeholders than the official bodies that represent people. It is simply that it should have been done before the Bill was brought to us. I want it to be noted on the record that wide consultation work should have been done, but the Government should not have brought legislation that could have unintended consequences that damage workers’ rights, while they proclaim that it will save workers’ rights. If they had not done the consultations, they should never have brought it to Parliament to be discussed.

[Lord Leong (Lab)]

I hear what the noble Baroness has said. The Bill has gone through the other House and been scrutinised line by line. We have also taken the point on board here and we will continue with further consultation.

[Lord Fox (LD)]

When I talked about taking the Bill on a holiday, I was not joking; I was serious, and it would be quite nice if the Minister would take it seriously and respond.

[Lord Leong (Lab)]

I take the noble Lord’s point. At the rate the Bill is going, we may reach recess before we come back again to discuss it further.

[Lord Hunt of Wirral (Con)]

My Lords, that was a very significant admission by the Minister, for which we thank him. We will need the recess to rethink quite a lot of the Bill.

I agree with the noble Baroness, Lady Fox of Buckley, that this is a gap-filled Bill. I know that the Minister is told in his brief to say there are no gaps, but there are gaps. Wherever you look in the Bill, there is further work to be done before the Government will say what they will do. It takes huge powers—Henry VIII powers—to amend primary legislation through statutory instruments. That is a hugely significant step, and we as a reasonably sensible Chamber cannot possibly allow the Government to get away with that.

You cannot get away with saying to Parliament, “We’re not going to give you the detail of what we’re going to do. Indeed, we’re not going to tell you what we’re going to do, because we’re going to consult and then we will do it by statutory instrument”. That is not the way to legislate. The contribution of the noble Baroness, Lady Fox of Buckley, has been very helpful. I also thank the noble Lord, Lord Londesborough, for reminding us about the creative industry—the gig industry.

As the noble Baroness reminded us, we have to have a relevant impact assessment so that Parliament can see what effect the Bill will have on a rapidly changing workforce. The workforce has changed dramatically over the last 15 to 20 years and the modern landscape has changed substantially.

[Lord Leong (Lab)]

I thank the noble Lord for giving way. I appreciate what he has said. We are all for parliamentary scrutiny of the Bill—we welcome it. We welcome every single amendment and clause being scrutinised. The Government believe that the delegated powers in the Bill are necessary. I am pleased, as the noble Lord will have noted, that the DPRRC found it

“heartening that in a Bill with so many … powers it has only found four on which to raise concerns”.

The Government will respond formally in due course to the DPRRC.

[Lord Hunt of Wirral (Con)]

I just happen to have the report of the DPRRC here, and it does raise serious concerns. One of the concerns it has constantly raised about all Governments is that they should not amend primary legislation by secondary legislation. They should be upfront about what they are going to do, and change.

It may well be that the Minister will take great comfort in the fact that there are only 18 black lines of criticism—18. I hope that he will take the advantage that has been given to him on all sides to take the Bill away and try to find a better solution.

We must not forget that the Bill I originally saw at Second Reading in the House of Commons has changed substantially: 160 amendments were tabled on Report in the Commons. They were not scrutinised line by line—they could not be, because they were produced at the last moment.

The Government have to recognise that, as my noble friend Lady Stowell said, it may well be that the Bill is going to disincentivise a whole range of employment situations, which is going to have a massive impact on the whole employment scene. It may well be that my noble friend is right that it is going to create more problems. I recognise that the noble Lord, Lord Fox, has already got a major concession concerning the utilisation of the recess, but we need to pause and say to the Government, can we now see the overall impact assessment and, in particular, have an undertaking that they will continue to scrutinise carefully the effect of all this legislation on the employment market before it is too late?

17:15

[Lord Leong (Lab)]

I just want to clarify that we are still sticking to seven days, and the recess I mean is the Whitsun Recess at the end of this month. It will come back.

[Lord Hunt of Wirral (Con)]

I was looking to a longer holiday for us all to scrutinise the Bill. There is no need for the Minister to keep clarifying his comments. I just take them at face value, and it is an undertaking on his part to reflect on all the issues that have been raised, particularly the impact assessment. In the meantime, I beg leave to withdraw the amendment.

Amendment 62 withdrawn.

Amendment 63 not moved.

Clause 9: Right to request flexible working

Amendment 64

Moved by

[Baroness Penn]

64: Clause 9, page 35, line 35, at end insert—
“(1A) In section 80F, for subsection (8)(a)(i) substitute—“(i) has received a job offer, and”.”

[Baroness Penn (Con)]

My Lords, I rise to move Amendment 64 in my name. This amendment makes a simple change to the right to request flexible working. In 2023, the Employment Relations (Flexible Working) Act amended the right to request flexible working so that it applied from the first day of employment. Previously, employees needed to wait for 26 weeks as a qualifying period before making a request. That was a good move forwards, but in practice, this still means that when finding and taking a new job, an employee might need to leave a role that offers them the flexibility they need without knowing whether their new employer can accommodate their responsibilities outside work. If that request is then denied, the employee may find themselves in an impossible situation, forced to choose between their work and their responsibilities outside work. Employers might also find themselves having gone through a whole recruitment process, having waited for their new recruit to work a notice period for their previous employer, only to find that they cannot accommodate their new employee’s request and potentially having to start the recruitment process again. To me, that is a lose-lose situation, leaving both the employee and the employer worse off.

TUC research shows that two in five mothers do not feel comfortable asking for the flexible working they need during a job interview, for fear that they will face discrimination or have their offer withdrawn. Changing the law to allow flexible working requests from the job offer stage would give candidates vital protection. As I have said, the change would also benefit employers. It would create a legal framework for an open, honest conversation about working patterns before contracts are signed, ensuring that both parties can agree on arrangements that genuinely work for them. It does not change employers’ need to consider a flexible working request, nor their right, having given it proper consideration, to say that it does not fit with their business needs. Such a change would and could support fairer hiring, greater inclusion and better long-term retention.

Flexible working can unlock economic opportunities for growth. Indeed, the post-implementation review of the Flexible Working Regulations 2014, which extended the right to request flexible working to all employees, not just those with caring responsibilities, showed that flexible working can reduce vacancy costs, increase skills retention, enhance business performance and reduce staff absenteeism rates. It has the potential to bring people back into economic activity who would otherwise have left the labour market.

The noble Lord, Lord Londesborough, spoke about the importance of bringing older people back into work, along with people with disabilities and those who have been on benefits for a period of time. These are people whom the Government are spending a lot of time and effort trying to re-engage into the workforce for their own good and for the good of economic growth. This change could help do that.

On these Benches, we have emphasised the benefits of having a flexible labour market, and, in my view, that means one where people are able to move easily between employers. I think this amendment would support that, so I would be interested to know what the Minister thinks of this proposal. I beg to move.

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Penn. I shall speak to Amendment 66 in the name of my noble friend Lord Watson, who is unable to be in his place today due to a long-standing family commitment.

Clause 9, on flexible working, will make a huge difference to working people, including those with caring responsibilities. Many of us know all too well and very personally the daily juggling-act miracle that working mums especially are expected to perform. Anything that makes their lives easier has to be welcome. Flexible working has the added benefit to business and for the wider economy of making it easier for carers to both enter the workforce and stay there. This will help close the gender pay gap, reduce child poverty and help keep mothers and babies healthier.

Amendment 66 seeks to address the concern that, to be effective, those new rights must have teeth. I know that my noble friend Lord Watson would want to acknowledge the support of Maternity Action and the National Education Union in preparing this amendment. Amendment 66 would require the Business and Trade Secretary to review and publish a statement on the adequacy of the maximum compensation which an employment tribunal can award where an employer has not followed its obligations in dealing with an employee’s flexible-working request.

Currently, employees have the right to request flexible working, but employers can refuse on a wide range of listed grounds. Clause 9 boosts employees’ rights by introducing a reasonableness requirement, meaning that employers will be permitted to refuse a statutory flexible-working request only if it is reasonable to do so on one or more of the listed grounds. This new requirement is a positive step towards making flexible working the default. The problem is about the maximum compensation which an employment tribunal can award when it upholds an employee’s complaint about how an employer has treated their flexible-working application.

Currently, the maximum compensation that an employment tribunal can award is eight weeks’ pay, capped at £719 per week, which is a total of £5,752. This low compensation cap does not reflect the devastating cost to a worker where that flexible working has been unreasonably refused. Maternity Action and trade unions have documented how unreasonable refusals effectively force employees—particularly many new mothers and other carers—out of their job, often into lower-paid and less secure work or out of work altogether.

Flexibility should be a two-way street for the employer and worker, but in the real world too often it is mothers who are paying a high price. Set against the expense of legal representation, the low level of compensation available deters mothers from pursuing a flexible-working complaint through an employment tribunal. Their only meaningful recourse may be an indirect sex-discrimination claim against their former employer for which compensation is not capped. However, such claims are often long, complicated and extremely stressful. It is much better to send a signal that the Government are serious about enforcing flexible working rights so that employers are encouraged to do the right thing in the first place.

In the Bill’s impact assessment, it is stated that an aim of the changes in Clause 9 is to allow an employment tribunal to scrutinise whether the decision to reject a flexible working request was reasonable. For that to be effective, penalties should be introduced that reflect a substantive failure to act in accordance with a new reasonableness requirement. The Government’s aim of making flexible working the default is very welcome, but I hope my noble friend the Minister will consider bringing forward an amendment on Report or provide reassurance that other routes will be taken to ensure that the new right to flexible working is one that will be enforced in practice and that workers who are unreasonably refused such arrangements get adequate compensation.

[Lord Ashcombe (Con)]

My Lords, I support my noble friend Lady Penn. I declare an interest that I work for Marsh, a very large insurance broker in this country and around the world. I run a team of between 30 and 40 people. Within that team, I have all sorts, sizes and cultures—you name it. Of that team, all the married women—I should say, the women with children—have some sort of flexible way that they work with us. I can tell noble Lords from my own experience that unhappy staff do not do good work; it is 101. Happy staff are very likely to do very good work. One of my main jobs is to keep my team happy, and I am given immense flexibility to do it. Without this amendment, it is less easy. I rest my case.

[Lord Jackson of Peterborough (Con)]

My Lords, I rise to oppose the amendment in the name of the noble Lord, Lord Watson of Invergowrie, which was so ably enunciated by the noble Baroness, Lady O’Grady. I think that the amendment is neither fish nor fowl really. It is perfectly possible, as I understand it, for the Government to have already addressed this issue and, by statutory instrument, to set differential rates for compensation at employment tribunal. It seems rather a waste of time, and not necessarily a good use of ministerial time, to put in primary legislation another review.

My substantial issue is also that this, again, tips the balance are much more towards the worker, unreasonably, and away from the employer. I think that is to be deprecated, because that is what we have seen in so many aspects of this Bill. This leads me to conclude something else as well. On a risk-based assessment of whether you would wish to employ a person, an employer may very well conclude—it may, unfortunately, be an encumbrance of being a female employee or potential employee—that “We do not wish to employ that person because she may apply for flexible working, and it is better to employ someone else”. This is particularly because of the risk that, in going to an employment tribunal, after already having believed they had behaved in a reasonable way, they would be subject to a potential substantial monetary fine, which will impact on their bottom line. That is not good for those workers. It is not for the women who wish to work and have flexibility.

I broadly agree with the idea of reasonableness in applying for flexible working. That is how our jobs market and employment regime works now. Many women do want flexible working, and it is absolutely right that employers reasonably consider that. But I think this amendment is a step too far, because it will have the unintended consequence of making it more likely that women will not be employed because they may ask for flexible working. I think it is otiose: it is unnecessary, and it will not add to the efficacy of the Bill.

[Lord Fox (LD)]

My Lords, just when I was getting worried that everybody was going to agree, the noble Lord, Lord Jackson, popped up to rescue us. In his objection, it seems that the noble Lord has second-guessed the findings of the impact assessment that we have not had yet, which will add to the level of fines if his point that it will help workers more than employers is correct. On that basis, he was admitting that the fine is already too low, so I am not sure where he was going on that. He then drifted into a critique of the principle of flexible working.

17:30

[Lord Jackson of Peterborough (Con)]

Will the noble Lord give way?

[Lord Fox (LD)]

I will not give way. I apologise to the noble Baroness, Lady Penn. Had I been a little more organised, I would have signed her amendment.

[Lord Jackson of Peterborough (Con)]

Will the noble Lord give way?

[Lord Fox (LD)]

Will the noble Lord stop interrupting me?

[Lord Jackson of Peterborough (Con)]

Will the noble Lord give way very briefly at this juncture?

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

Order. It is clear that the noble Lord, Lord Fox, is not going to give way, and that is his prerogative.

[Lord Fox (LD)]

If I get to a point where I feel like it, I will. At the moment, I would like to develop my point.

The issue in Amendment 64 was dealt with very well by the noble Baroness, Lady Penn, and then picked up subsequently by the noble Baroness, Lady O’Grady. This is commonly thought of as a soft policy—a one-sided policy about giving people things—but both speakers touched on the harder edge to this, and I would like to emphasise it too. This is good for the economy. It is an economic hard edge. We have millions of people who are not working and not able to work. Some of them will never work, but many, with more flexibility and the right amount of help, will be able to work. It is, quite rightly, the Government’s objective to bring as many of those people into the workforce as possible, and flexible working is one of the important tools that will enable us to do that.

I am broadly sympathetic to the amendment from the noble Lord, Lord Watson; there is no problem in assessing the impact of tribunals. But during the debate on the last group I promised to bring in a wider point on tribunals: unless we clear up the tribunal system, it will not matter what the level of sanction is, because it is going to be years before that sanction is brought. It becomes a meaningless activity, particularly for the employee but also for the employer. As I have said before, every time we go into a tribunal, both sides lose. We have to find ways of moving the system faster and eliminating issues within the system that are clogging it. That is why I asked the Minister for a proper meeting to go through the whole issue of what the Government are planning to do with tribunals—not on just what the Bill does but on how they are going to flush the system through and get it working properly.

If the Government do not do that, a huge lump of the Bill will fail, because it will be years and years before any of the sanctions are brought and before—as we heard from the noble Lord, Lord Leong—case law becomes an important element of how we define what “reasonable” means. If we have to wait two or three years before we get that ruling, how many more unreasonable things are going to happen in the meantime? This is a vital point, and I very much hope that the Minister responds to it. I will now give way to the noble Lord, Lord Jackson.

[Lord Jackson of Peterborough (Con)]

I thank the noble Lord. Not for the first time, he has mischaracterised what I said. It is very clear, and I was quite emphatic, that I support reasonable requests for flexible working. So I would be obliged if the noble Lord did not wilfully misrepresent what I said barely five minutes ago, although I know that, being a Liberal Democrat, he is not always acquainted with the actuality.

[Lord Fox (LD)]

I was about to, but I clearly will not now, so the noble Lord can fly for that one.

Flexible working is an important tool for getting people back in the workplace and keeping them there. We should be grateful for the amendment that the noble Baroness, Lady Penn, tabled, and I hope the Government are sensible enough to adopt their version of it at the next stage of the Bill.

[Lord Sharpe of Epsom (Con)]

My Lords, I join the general praise and congratulations for my noble friend Lady Penn for her Amendment 64. There is not much more for me to say, other than that I echo the comments of the noble Lord, Lord Fox. I hope the Government are listening and will address the issue raised by my noble friend as we get to the next stage. If they do not, I would be more than happy to support my noble friend in her future endeavours.

Amendment 66 in the name of the noble Lord, Lord Watson, was expertly spoken to by the noble Baroness, Lady O’Grady. I was going to echo very much the same points about the employment tribunals. An awful lot will be expected of them but, as we know, the simple fact is that the backlog is increasing, there is a shortage of funds and the waiting times are increasing—they are up to two years. It does not seem very plausible to expect that employment tribunals will be able to cope with the amount of work that is coming their way—I am afraid that will probably include work with regard to that amendment. I look forward to hearing the noble Baroness’s comments.

[Lord Katz (Lab)]

I am afraid the noble Lord will not; he will hear from me. I thank my noble friend Lord Watson of Invergowrie in absentia for tabling Amendment 66 and my noble friend Lady O’Grady of Upper Holloway for so ably speaking to it. I also thank the noble Baroness, Lady Penn, for tabling Amendment 64. This has been a broadly helpful debate, if somewhat spicier than expected, on flexible working.

This group and the next deal with flexible working. I agree with many of the comments that noble Lords across the Committee made in highlighting how important flexible working is in helping people to balance work with responsibilities in their personal lives, particularly caring responsibilities. As the noble Lord, Lord Ashcombe, pointed out, flexibility can lead to happier, healthier and more productive employees. He is absolutely right on this point. It is good for employees, good for businesses and, in turn, good for the economy.

As the noble Baroness, Lady Penn, outlined in some detail, along with the noble Baroness, Lady O’Grady, a primary benefit of flexible working for families is that being able to work part-time, or having flexible start and finish times, can make it easier for parents to balance work and childcare needs. Similarly, for those caring for a vulnerable adult or a child with a disability, flexible working can help people to manage their caring responsibilities while remaining in work.

I echo some of the comments of the noble Lord, Lord Fox, about how we regard flexible working. To be clear, flexible working is not solely about working from home—something on which, post pandemic, we have become somewhat focused. Indeed, the ACAS guidance sets out eight examples of flexible working, and working from home is only one of those eight. It talks about compressed hours, staggered hours, remote working, job sharing and part-time hours as well as working from home.

According to the 2023 flexible jobs index, although nine in 10 want to work flexibly, only six in 10 employees are currently working flexibly and only three in 10 jobs are advertised with flexible working. Equally, the Government recognise that business needs vary and that not all flexible working arrangements are possible in all circumstances. That is why the Government are increasing access to flexible working by making it the default, except where not reasonably feasible. I concur with the comments of the noble Lord, Lord Fox: this is not a soft policy but an important economic and human management tool, and we should regard it as such.

Amendment 66 in the name of my noble friend Lord Watson would require the Secretary of State to review and publish a statement on the adequacy of the maximum compensation that an employment tribunal may award to an employee with a successful claim related to flexible working. The maximum compensation award is currently set at eight weeks’ pay for an employee bringing a claim to a tribunal.

Section 80I of the Employment Rights Act 1996 already means that the Government may review the maximum number of weeks’ pay that can be awarded to an employee. If they consider it appropriate to do so, they can then use this power to change the specified number of weeks’ pay by which the maximum amount of an award of compensation is set. It is therefore not necessary to include anything further in the Bill. It is worth pointing out to noble Lords that the maximum has risen every year since its introduction, from £250 in 2002 to £719 now—so this is not something that is caught in aspic. Therefore, we would argue that a statutory review on the maximum compensation award within six months of Royal Assent could create uncertainty across the board and detract from some of the other important reforms that employees, employers, trade unions and the wider economic and business community will need to prepare for.

Before leaving this, it might be helpful to speak to the wider points from the noble Lord, Lord Fox, on tribunals. I cannot speak in any great detail on this issue, but I understand that the Ministry of Justice is undertaking a review of the employment tribunal system. I would hazard that it has not been sufficiently invested in in recent years, and the slowness of that system is certainly something that we should seek to address.

Before leaving Amendment 66, it is worth pointing out that there is a risk in creating uncertainty for both businesses and workers alike by creating the possibility of differing awards for different types of claims. As things stand, a number of types of claims—for example, relating to redundancy and unfair dismissal—face the same maximum award as those relating to flexible working. It might be undesirable to create confusion and undue complexity through in effect having a two-tier system.

I turn to the amendment proposed by the noble Baroness, Lady Penn, Amendment 64, which would extend the right to request flexible working to candidates with a job offer. In practice, the Government believe that this is already the case. The right to request flexible working, which is being strengthened in this Bill, is already a day one right. This means that employees can request flexible working from their first day in a role. We know that, in practice, many employers and employees will begin discussions about working arrangements before the candidate starts work.

As the noble Baroness said, before joining an organisation, informal and constructive discussions can offer a more effective way in which to identify working arrangements that work for employees and employers than a one-off formalised request and response might otherwise achieve. Mandating through legislation a right to request flexible working prior to appointment would not account for the fact that not all job offers come to fruition, for a number of reasons. However, candidates with a job offer have some limited rights. Discrimination and contractual rights are among those. The hypothetical example that the noble Baroness cited in her contribution would indeed be taken care of; discrimination based on protected characteristics is currently outlawed during the recruitment process. However, we would contend that it is not a status that we would want to overformalise at this point.

Additionally, under this proposal, employers would still have up to two months to consider and respond to a request. If the intention of this amendment is to significantly bring forward in time people’s ability to have a flexible working request accepted, it would not succeed in this respect. While the Government encourage employers to start conversations about flexible working with new starters at an early stage, it would not be appropriate to extend the legal framework for flexible working to all candidates under offer.

Lastly, to respond to the point made by the noble Lord, Lord Jackson, on sex discrimination, I contend that this form of discrimination would actually carry a higher risk of penalty and payout than unreasonable refusal of flexible working, so it is probably a little out of place in the debate on this amendment.

To close, I therefore seek that noble Lords do not press their amendments in this group.

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, my noble friend is absolutely right that the maximum cap applies to a number of areas, and many people believe that it is too low on those areas as well. Is he at least able to write to me or to the noble Lord, Lord Watson, and explain when the next review of the cap will take place, and the opportunities there will be for organisations such as Maternity Action and trade unions to make their case that the maximum cap should be higher?

[Lord Katz (Lab)]

I thank my noble friend Lady O’Grady for that; I would of course be very happy to write to her and my noble friend Lord Watson on this. The point that we are making is that there is already a mechanism in place to upgrade. That does not mean that it is not something that organisations concerned about the limit of compensation can lobby on, but the amendment as tabled is superfluous; it would not add any powers that are not already in law or in the Bill already.

[Lord Hendy (Lab)]

Perhaps I could add something on that subject. I think that my noble friend suggested that there was one overall cap and that consistency was required, which is the point that my noble friend Lady O’Grady has developed. In fact, there is a range. Unfair dismissal is subject to a maximum per week for two years. Redundancy, which the Minister mentioned, is on a different basis; it is, essentially, one week’s pay for each year of employment up to a maximum of 20. Discrimination is dealt with on a different basis altogether, with no cap at all—it is the amount of compensation. So I do not think that consistency is really an answer. A general review would be very helpful, though.

17:45

[Lord Katz (Lab)]

I thank my noble friend for that. I certainly will not try to better his knowledge of employment law and, indeed, compensation for penalties in employment law. What I will say is that the basic principle that this amendment is calling for is not necessary. We have the powers to do what is behind the amendment already in the Bill. Indeed, it is up to individual organisations to engage if they think that that power needs to be used more frequently or to a greater extent.

[Baroness Penn (Con)]

My Lords, I thank all noble Lords for their participation and support and my noble friend Lord Ashcombe in particular for his comments, which demonstrated very practically the benefits of flexible working to businesses and in running teams effectively. I also thank the noble Lord, Lord Fox.

Just to emphasise further the potential benefits of flexible working for businesses and in terms of getting people re-engaged in the workplace, research conducted by the Behavioural Insights Team has shown that offering flexible working can attract up to 30% more applicants to job vacancies, and work by the ONS revealed that older workers working flexibly would be more likely to plan to retire later. Those are just two further specific examples.

I will speak just briefly to the other amendment in this group. I heard how well put the noble Baroness’s argument on behalf of her noble friend was, but I also hear the nervousness around increasing the number of issues that go to employment tribunals and then, across this Bill, the burden that will be placed on tribunals and the delays for both employers and employees caught in that system. The Minister said that perhaps it had, in recent years, been underinvested in, and that that was something the Government would seek to address. I would therefore be interested to know from Minister whether that is something that the Government will seek to address, whether he can say what additional investment will go into the employment tribunal system to prepare for the Bill and whether he will also commit to that investment going in ahead of the commencement of the Bill, so that we have the system in place to deal with some of the changes that we have heard about. He may wish to return to that point at a later point in the debate—he is not leaping to his feet right now.

I acknowledge that, although my amendment would change the legislative framework for flexible working, it is really about changing the culture to one where you can have the conversations as early and openly as possible. However, in how we have approached flexible working in legislation, we have underpinned those changes with legislative rights, so that people have rights to come back to.

I was slightly confused by the noble Lord’s response to my amendment. He said that, in practice, it is what happens anyway, but it would not be appropriate to underpin it with legislation. I was not totally clear why not, when we underpin the rest of the system of the right to request flexible working with legislation. He also said that if someone had their job offer withdrawn because they had made a request for flexible working, that would be covered by existing discrimination legislation. I do not believe that would be the case. It would be the case if their job offer had been withdrawn because they had a protected characteristic.

Actually, I think that one of the important things about the shift in flexible working that we have seen in recent years, and the 2014 move to extend that right to request to everyone, not just mums, dads or carers, is the changing of the culture around what flexible working means. It is really important for those people with caring responsibilities and other responsibilities in their lives, but it is really important for a whole host of other reasons, and we cannot second-guess people’s individual circumstances when they request flexible working. If someone has been made a job offer and they request flexible working, I do not think that current legislation will protect them if that job offer is withdrawn on that basis.

[Lord Katz (Lab)]

I would be very happy to write to the noble Baroness to clarify our understanding of the way that the discrimination order would operate in that scenario. Perhaps the way that I was explaining it was not clear enough, but we think that it is the case that a lot of what she is asking for in the amendment will be covered.

[Baroness Penn (Con)]

I thank the noble Lord for that offer; I really appreciate it. Just to touch on the points made by my noble friend Lord Jackson, I absolutely heard his support for flexible working. In fact, one of the points I just made is that I am really keen, as noble Lords will hear from me on later amendments on paternity leave, that we shift some of the assumptions around who might need and use flexible working and other kinds of flexibility in the workplace, so that we do not assume that it is just the women or the mums. Then they might actually face less discrimination, because an employer cannot look at someone and say, “I think this person’s going to make a particular request of me and I’m a bit nervous about that: how’s that going to work?”

The whole basis of this, and the whole success behind it, will be in having the support of employers. This is an area where culture has shifted. There is further to go among some employers, but they really see the benefits of this in their workplaces, so although I have tabled an amendment to provide a legislative underpinning to things, I think it is about changing culture and having a more open conversation. With that, I beg leave to withdraw my amendment.

Amendment 64 withdrawn.

Amendment 65

Moved by

[Lord Sharpe of Epsom]

65: Clause 9, page 36, line 9, at end insert—
“(1AZA) But where the employer is— (a) the Security Service,(b) the Secret Intelligence Service, or(c) the Government Communication Headquarters,subsection (2)(b) does not apply, and the notification under subsection (1)(aa) need not explain why the employer considers that it is reasonable to refuse the application on the ground or those grounds.”Member’s explanatory statement
This amendment would exclude the security services from the Bill’s provisions on flexible working.

[Lord Sharpe of Epsom (Con)]

My Lords, in moving Amendment 65 I shall speak also to Amendments 65A and 67. Amendment 65 is necessary because it lies at the very heart of the nature of the work that is performed by these agencies. The Security Service, the Secret Intelligence Service and the Government Communications Headquarters, collectively known as the intelligence agencies, are at the heart of the United Kingdom’s national security apparatus. Their roles involve highly sensitive operations, often conducted in real time and under exceptionally stringent conditions. They work to protect the nation from terrorism, espionage and cyberattacks, among other threats. The national security landscape is dynamic and fast-moving, and it requires the utmost flexibility, discretion and responsiveness from their employees.

In this context, the introduction of provisions for flexible working could unintentionally create significant risks to national security. The need for immediate action, tight schedules and often secretive operations simply cannot be fully compatible with the predictability that flexible working arrangements might demand. We think it is essential that we avoid the unintended consequences of applying the Bill’s flexible working provisions to the intelligence services. Arguably, this list of services could be expanded, of course, to other operations that have implications for national security. As I said, these services operate in highly confidential environments and their work often involves time-sensitive operations that demand secrecy and agility.

This is obviously a probing amendment: I want to ask the Minister what conversations the Government have had with the Security Service, the Secret Intelligence Service and the Government Communications Headquarters regarding the potential impact of the flexible working provisions on their operations.

On Amendment 67, again I join in the broad support for flexible working that we have just heard in the last group, but this amendment presents an important opportunity to better understand the implications of introducing such a right. We think we ought to approach it with a slightly critical eye: specifically, we need to consider the Regulatory Policy Committee’s feedback on the clause, which has raised several concerns that cannot be overlooked. The RPC rating for this clause was red across all three core areas of rationale for intervention, identification of options, and justification of preferred way forward.

The RPC has stated that there is a lack of sufficient evidence presented to justify the need for this intervention. In particular, it highlighted that there is little evidence to suggest that employers are rejecting flexible working requests unreasonably. This is a key point that must be addressed. The committee’s wider concerns suggest that, without strong evidence of a widespread issue with employers rejecting requests, the Government are introducing a policy that is based on assumptions rather than concrete data. What problem are the Government trying to solve by introducing the right to request flexible working if the case is as the committee has described? Do they in effect believe that the RPC’s assessment is incorrect? What data or evidence do they have to demonstrate that employers are systematically denying such requests in a way that harms workers?

One of the most important questions that this clause raises is whether the intervention is justified. The RPC has pointed out that the rationale for introducing the right to request flexible working has not been sufficiently established, so the purpose of tabling this amendment is to find out what the Government have done in this area and to suggest that the overall environment around this debate would be enhanced by a broader understanding of the situation under consideration.

Amendment 65A seeks to provide clarity and fairness regarding the refusal of flexible working applications in roles where such flexibility would fundamentally alter the nature of the job or undermine critical operational needs. Clause 9, as drafted, is obviously well intentioned but is ultimately a blunt instrument. New subsection (1ZA) sets out a list of what are deemed reasonable grounds to refuse a flexible working request, but they are largely subjective and difficult to quantify in practice. For example, how can an editor reasonably be expected to prove that a journalist’s writing has deteriorated because they are working from home? How does one assess the decline in creative spontaneity that often arises when collaboration in the newsroom is replaced by isolated remote working? This ambiguity could create a climate of uncertainty for employers. Rather than making legally risky judgments, many may simply acquiesce to requests even where remote work may compromise essential aspects of the role. I go back to the example of journalism: this could disrupt the delicate balance of the newsroom and undermine quality, editorial cohesion and the development of junior reporters through in-person mentoring, and so on.

This is precisely why we think that sector-specific exemptions are needed. A one-size-fits-all approach, as is implied in the current drafting, is simply not adequate. This amendment provides a clearer and more realistic framework, recognising that in certain sectors and occupations physical presence is not optional but essential. To expect employers in some of these sectors to navigate the current subjective standards is both unfair and, we think, unworkable. This amendment seeks to offer a constructive alternative by allowing a reasonable refusal where the core nature of the role would be compromised, and by specifying sectors where that risk is most acute.

As I have said, we support flexible working in principle, but flexibility must be implemented with common sense and a clear-eyed understanding of operational realities. We do not believe that the current drafting provides that assurance. We urge the Government to take serious note of these amendments, because we may have to return to them on Report. I beg to move.

[Lord Murray of Blidworth (Con)]

My Lords, I support the amendments in the names of my noble friends Lord Sharpe and Lord Hunt. I notice that Clause 9(3) inserts a subsection into the Employment Rights Act which allows for the refusal of a flexible working application in conditional circumstances under two criteria:

“only if … the employer considers that the application should be refused on a ground or grounds listed in subsection (1ZA), and … it is reasonable for the employer to refuse the application on that ground or those grounds”.

A double test is being applied for the decision to refuse an application for flexible working.

Then, the list that the Government have provided in the Bill, at subsection (1ZA) lists grounds from (a) to (i). One might think that this list had been prepared by the unions, because it sets out perhaps a very one-sided view of what the flexible working application might apply. It is indeed pretty abstruse in its expression. It sets out that the grounds mentioned are

“the burden of additional costs”,

the

“detrimental effect on ability to meet customer demand; … inability to re-organise work among … staff; … inability to recruit additional staff”.

All of this is going to be the subject of considerable debate, one would anticipate, in any future employment tribunal claim, and has an air of unreality about it.

18:00

In the amendments my noble friends have laid, there is a much clearer solution that excludes various obvious sectors. I ask His Majesty’s Government to confirm that they accept these are sectors where it is much more likely that flexible working will not be as fruitful an avenue for an employee to explore as it might in other sectors. It is worth setting out these sectors in the Bill. They are, obviously,

“journalism and news publishing, … emergency services, … healthcare delivery, … construction and on-site engineering, and … any other sector where … core duties require … collaboration, physical presence, or real-time operational responsiveness”.

All of these, plainly, should be squarely in the Bill.

It will be simply not good enough if the answer that I suspect will come from the Front Bench is, “Well, we can rely on the good sense of the tribunal to squeeze these obvious categories into the vague words that we presently have in (1ZA) or, in the alternative, we have allowed ourselves another power to set out in regulations any other grounds that we fancy”. That, I am afraid, is just not good enough.

The idea that was mentioned in earlier groups by the noble Lord, Lord Leong, that this can all be sorted out by the tribunal down the line, is not good enough, for two reasons. First, the employment tribunals service is struggling under a massive backlog as it is. Secondly—this is perhaps an even more fundamental point—the employment tribunals are not a court of record. One tribunal may make a decision that a certain flexible working request was reasonably refused, but that is not going to be a binding precedent on the interpretation of those provisions. It is simply another first-instance decision that is not from a court of record and not capable of reliance upon in a subsequent tribunal. It would become a precedent only if it were appealed, it went to the Employment Appeal Tribunal and the Employment Appeal Tribunal made a ruling upon it. I suggest that it will not be economic for many employers to appeal those sorts of cases. I therefore very strongly support the amendments advanced by my noble friends.

[Baroness Bousted (Lab)]

My Lords, Amendment 65A refers to

“any other sector where the core duties require in-person collaboration, physical presence, or real-time operational responsiveness”.

That could well be argued to be teaching, of course.

As my noble friend Lord Katz said, flexible working is not just working at home—it has a whole range of other alternatives and ways of doing it. The lack of the ability to work flexibly has real consequences for the delivery of a profession that I know a lot about, which is teaching. Some 76% of teachers are women. The biggest proportion of teachers who leave the profession every year are women in their 30s.

I declare an interest in that I am chairing the commission on teaching. We have commissioned some independent research on this issue from the Key foundation, which finds that women in their 30s with children leave teaching in huge numbers. It was 9,000 last year, the biggest number on record of women leaving the profession. They leave when they have children because their requests to work part-time or flexibly are denied.

The noble Lord, Lord Sharpe of Epsom, asked whether employers were just routinely refusing flexible working. Well, in education, yes, they are. The rate of flexible working among graduate professions is about 46%. In teaching, 2% of teachers last year asked whether they could work flexibly. Those requests are routinely denied by employers who have a very poor understanding of what flexible working involves and, frankly, by employers who refuse flexible working because of a one-size-fits-all policy and then find that the teachers who are so precious to them leave the profession.

Last week I spoke to a young teacher with two children who asked whether she could have two registration periods off a week—she would make up the time in other ways—because her youngest child, who is three, was finding it difficult to settle at nursery. That was refused and she has now given in her resignation.

Work on this has been done by the Key foundation and by the Missing Mothers report from the New Britain Project, authored by Anna McShane. When she looked at the reasons for women leaving the profession in their 30s, she found that overwhelmingly they leave because they do not feel that they can manage the demands of the job full time and the demands of bringing up a family. The main recommendation in that report was that flexible working should be supported and encouraged. So, if an amendment that refers to

“any other sector where the core duties require in-person collaboration, physical presence, or real-time operational responsiveness”

were to be included in the Bill, it would be used up and down the land by education employers as a “get out of jail free card” for flexible working requests. As the Minister said, that means all sorts of things, including the right to flexible working—and the DfE defines flexible working as flexible and part-time.

We have to get out of the idea that there are whole swathes of the economy—education being the one I know most about—where flexible working is just not possible. We have to start thinking differently about this. If this amendment were agreed, it would make doubly difficult the right to request and to engage in flexible working, which would have such an effect on retaining teachers in the profession and on raising educational standards in our schools. So I think it is a very poor amendment.

[Baroness Neville-Rolfe (Con)]

My Lords, I will ask one simple question: what is flexible working? Perhaps the Minister could reply to that. I have a lot of sympathy with what has been said; I have always encouraged people who want to work part time, dual workers and so on. I have worked at a senior level in business and in government, both as a civil servant and as a Minister, and the truth is that you have to show some flexibility when things are difficult. That is what my noble friends are trying to capture in the amendment they have put forward.

We need to try to find a way through on this, to encourage flexible working. However, we also have to consider the needs of the employer. That will be true in the business sector—which I know—in the enterprise sector, in the charities sector and of course in government. It is a very important debate and any light that can be thrown on it by either the Minister or my noble friend Lord Murray, with his legal hat on, would be very helpful.

[Lord Fox (LD)]

My Lords, this debate has been more interesting than I expected. In looking at Amendment 65, we should acknowledge that the noble Lord, Lord Sharpe, with his former ministerial responsibilities, had considerable interaction with the services that he described, so we should take him seriously.

In Amendment 65A, he sets out certain sectors. However, in seeking to deliver unambiguity, I think he has introduced new ambiguity. Sector-specific exemptions are bringing their own problems. I asked the noble Lord, Lord Murray, what a journalist is. Is it a card-carrying member of the NUJ or is it someone who blogs and calls themselves a journalist, or a group of people? That is just one example of the ambiguity that a sector system brings in. So I am drawn to the idea that we have something like subsection (1ZA) in Clause 9(3).

If noble Lords are worried about the wooliness of it—I am not sure that was the word that the noble Lord, Lord Murray, used—we can work to firm that language up. But to describe the job, rather than try to think of every single job title we want to include in primary legislation, is a better way of going about it. If the description is too difficult to nail, I am sure it is not beyond the wit of us all to find a better way of describing it.

Had the noble Lord, Lord Murray, been here a little earlier, he would have heard the shortcomings of the tribunal system being well exercised, and some comments from the noble Lord to the effect that the MoJ is looking at it. To return to that point, in my speech on the last group I asked for a meeting, so perhaps the Ministers could facilitate a meeting with interested parties on the Bill and the MoJ to find out how it is moving forward on tribunals; we need some line of sight on that. It is something of a capitulation if we say, “The tribunals are no good, so we’re not going to make the right legislation because they won’t be there to uphold it”. We have a duty to make the right legislation, to put it in place and to make sure that the tribunals can deliver.

[Lord Murray of Blidworth (Con)]

I share much of what the noble Lord, Lord Fox, says. But the point I was making was that the answer from the Government is, “We’re going to provide imprecision in this legislation, and we’re going to let the employment tribunal sort it out and tell us what it means”. My point was twofold. First, that will take far too long because of the chaos in the tribunal system, and secondly, structurally, the employment tribunal cannot give an answer to that at first instance because it is not a court of record.

[Lord Fox (LD)]

Those are good points. Again, had the noble Lord seen an earlier episode of the soap opera of this Committee, he would have heard noble Lords from all around talk about firming up imprecision, which is why I talked about firming up the imprecision of that list of attributes rather than trying to produce a list of businesses and activities that somehow should come into this—an impossible job, frankly. Of course we should have a war on imprecision but, in the end, there are going to be some things that tribunals rule on that will be important, and we need to have the tribunals active and quick to do so.

To some extent, there is an element of creativity around the fungibility of some of these criteria—I think the noble Baroness, Lady Bousted, made that point. If we have some flexibility of interpretation, schools and other organisations that want to hang on to valued colleagues will find a way of using it in order to do that. If we start to rule out professions or rule in very hard and fast rules, we lose the opportunity to retain and attract certain groups of people. I understand the point made, that the more of that fungibility there is, the more so-called imprecision, and there is a balance between the two. That is why I still think that if we have ideas around new subsection (1ZA), that is the way forward on this rather than a list of jobs.

[Lord Katz (Lab)]

I thank the noble Lord, Lord Sharpe of Epsom, for tabling this group of amendments related to flexible working.

Amendment 65 would exempt security services from the flexible working measures we are introducing through the Bill. These measures include ensuring that employers refuse a flexible working request only where it is reasonable to do so, on the basis of one of the business grounds set out in legislation and requiring that they explain the basis for that decision to their employee. I draw the noble Lord’s attention to the existing provision the Government have made to safeguard national security in relation to flexible working.

I will explain the measure taken in the Bill. Clause 9(7) brings the flexible working provisions into the scope of Section 202 of the Employment Rights Act 1996. Section 202 states that if in the opinion of a Minister the disclosure of information would be contrary to national security,

“nothing in any of the provisions to which this section applies requires any person to disclose the information, and … no person shall disclose the information in any proceedings in any court or tribunal relating to any of those provisions”.

By bringing the flexible working provisions under the scope of Section 202 of the 1996 Act, the Government have already taken the necessary and proportionate steps to protect national security. To respond directly to the question of the noble Lord, Lord Sharpe, we have indeed engaged with, discussed and agreed this approach with the intelligence services.

18:15

This amendment proposes a blanket exemption for the security services, which I feel would be a retrograde step, as flexible-working powers have always applied to the security services. This would, indeed, prevent all security service employees from benefiting from strengthened flexible working rights, and it is not necessary in order to manage the risks to national security. The measure that the Government have included in Clause 9 is reasoned and sensible, in that it uses an already established provision to both protect national security in instances where disclosure would be harmful and ensure that flexible working remains an option for thousands of security service employees.

I take this opportunity to say how much we value the work these employees do and how crucial they are to our national security, not least on the day when we are commemorating the 80th anniversary of Victory in Europe. Where possible, they deserve the opportunity to have improved employment rights. As I say, we trust them, and indeed all the security services, to keep our country safe, so I think we can trust them to use these rights responsibly. The amendment proposed by the noble Lord would prevent these employees accessing flexible working via the enhanced right to request delivered through this Bill, whereas the measures we have taken leave this option available in the vast majority of cases where national security is not involved.

It is also worth noting that for many of these employees, certain forms of flexible working, such as remote or hybrid working, may not be feasible, but other forms, such as part-time working, may be available. For example, a security service employee in a desk-based job may be able to arrange an agreement which allows for earlier start and finish times to manage childcare responsibilities.

Amendment 65A would create an exception allowing reasonable refusal of flexible working requests where they disrupt the nature, working environment or training requirements of a role in particular sectors. We had quite a lengthy debate on this, and we heard in a very impassioned and clear way from my noble friend Lady Bousted about the potential impact and knock-on effect. We had a discussion earlier, in considering other amendments from the Opposition, about unintended consequences. In considering this amendment, we have heard about another unintended consequence on a sector that has not been considered.

I agree with the noble Lord, Lord Fox—although I am not entirely sure I would be so highfalutin as to use the term “fungible”—that the prescription this sets out would create some hostages to fortune. I apologise for not seeing the noble Baroness, Lady Neville-Rolfe, when she came in; but perhaps I was doing my Two Ronnies impersonation of answering a question before it has been asked. In speaking to an earlier group, I did indeed quote ACAS’s eight examples of things that can be described as flexible working. It can be compressed hours, hybrid working, part-time, or differing start and finish times. There are a range of things, not just working from home, which, as I said in the debate on the previous group, has become a bit of an idée fixe when we talk about flexible working.

Currently, there are eight broad business reasons why an employer can reject a flexible working request. These were originally set out in 2003 and were restated as part of the renewed ACAS guidance in April 2024. Indeed, they are basically what is set out in the section that the noble Lord, Lord Murray of Blidworth, was talking about. These are not new or cooked up. They cover a wide range of examples and give businesses a huge amount of scope, in the Government’s opinion, to make a reasonable refusal of flexible working. They include extra costs; where work cannot be reorganised among other staff; where performance or, indeed, quality would be affected; where you simply cannot recruit people to do the work in those conditions; when you cannot meet customer demand; when there is a lack of work during the requested proposed working times; or, indeed, when the business is already planning changes to the workforce.

That swift canter through will, I hope, persuade noble Lords that this is already quite well established on the statute book. These reasons include but are not limited to detrimental impact on quality or performance, which is at the heart of Amendment 65A. The Bill will certainly not change those reasons.

It is worth pointing out that the rationale for flexible working and the reasonableness test that we are introducing, which we hope will increase access to flexible working, is an economically justifiable one. There are 370,000 workers currently out of the labour market because they are looking after their family, but they want a job. These measures will help people to access and remain in work, including vulnerable people such as carers and disabled people.

Labour is the party of getting people back into work when they are not working. We want to use these measures to promote that and, in turn—to quote the noble Lord, Lord Ashcombe, in our previous debate—to promote economic growth as a consequence.

These business reasons deliberately strike a balance between protecting employer discretion to legitimately refuse flexible working requests where they are not reasonably feasible and ensuring that employees can access flexible working where they are. The previous Government’s consultation on the 2024 changes to flexible working legislation found that 63%—nearly two-thirds—of employers and business representatives agreed that these eight broad reasons remain valid. This amendment concentrates on sectors which are particularly dependent on employee presence at a workplace. We acknowledge that not all flexible working arrangements will be feasible in all circumstances.

This legislation, and the changes that we are making to it, are not about mandating home working or any other flexible arrangement. It is bizarre for us to have to tell the Conservative Party this, but it is not the Government’s job to determine where flexible working is and is not appropriate. Rather, the intention is to encourage dialogue between employees and their employers to find an arrangement that works for both parties. In sectors and roles where remote or hybrid working is not feasible, an employee may still reasonably negotiate a time-based flexible arrangement, such as part-time or compressed hours. Such arrangements can make work more accessible to underrepresented groups, including, as I have said, disabled people and those with caring responsibilities. This amendment could therefore prevent thousands of these employees accessing time-based flexible working arrangements. This is not something that this Government, or this House, could accept.

Amendment 67 seeks to require the Government to make an assessment of the impact of the Bill’s provisions on flexible working and to produce it before the clauses can be commenced. While I agree with the underlying intention, that the changes to flexible working must be thoroughly assessed, as we have discussed in earlier groups, the Government have already produced a comprehensive impact assessment. The Making Flexible Working the Default impact assessment was published alongside Second Reading in the other place and provides analysis based on the best available evidence on the potential impact on business, workers and the wider economy. We will take the opportunity to refine the analysis where necessary as policy development continues.

As per the process in the Better Regulation Framework guidance, we will publish an enactment impact assessment following Royal Assent, to account for any amendments made to the primary legislation during passage which materially affect our previous assessment of policy impacts. We intend to undertake proportionate monitoring and evaluation of the reforms consistent with the wider Bill measures. Once the reforms have had sufficient time to establish themselves, we will undertake a post-implementation review; again, in line with the Better Regulation Framework process.

The noble Lord, Lord Sharpe, raised the RPC’s opinion of the assessment. The RPC’s opinion refers to the evidence and analysis presented in the impact assessment and not to the policy. The impact assessments provide initial analysis of the impacts that could follow. We will review them as we further develop the policy and continue consultation and engagement. A legislative framework that does not address the challenges that Britain faces today or include up-to-date employment protections has cost Britain’s workers and businesses dearly. The “making work pay” initiative and the Employment Rights Bill are a pro-growth, pro-business and pro-worker package. It supports the Government’s objective to boost growth and improve living standards for all.

The Government continue to engage with, and take timely and expert feedback from, a range of stakeholders, including business, and we will regularly consult with them to provide this important source of evidence. Alongside the legislative changes, a code of practice will be published to assist employers to consider requests and meet their obligations under the new reasonableness test. This is not in the Bill, as the Government have existing powers. It is an important part of our plan to ensure that more flexible working requests are agreed where feasible.

The noble Lord, Lord Fox, requested a meeting to discuss employment tribunals. I apologise for not responding to this during the previous group. I would be very happy to facilitate such a meeting with Peers across the House.

I hope that the noble Lord, Lord Sharpe, is reassured and feels able to withdraw his amendment.

[Lord Sharpe of Epsom (Con)]

I thank all noble Lords who participated in this very interesting debate and I thank the Minister for his detailed answer. I accept and am somewhat reassured by his answer on Amendment 65; it is good to know that the security services employers have been properly consulted and are content with this legislation. That is to be welcomed, and I thank the noble Lord for it.

I was most interested in the comments from the noble Baroness, Lady Bousted. I believe she said—I apologise if I am misquoting—that employers have a poor understanding of what flexible working involves in education. I am sure they do, and that a lot of parents and people who are involved in education do. It rather makes the case for why Amendment 67 is necessary. The RPC’s opinion may not have related to the policy, but it still remains red: the fact is that the impact assessment was not good enough.

My noble friend Lady Neville-Rolfe raised a very good point about what flexible working is. We agree that flexibility is to be encouraged, but I noticed that the noble Lord has now relied twice on the eight types of flexible working identified by ACAS. I suspect that that is not widely understood in the public domain. The proposed impact assessment would go a long way to make it much clearer what people could and should be asking for, what employers should be thinking about, the likely economic impacts and the more societal impacts from the right to request flexible working.

This would help the noble Baroness, Lady Bousted, as well, because people would have a much broader understanding of what it means in teaching. Obviously, 100% of teachers cannot work from home—that goes without saying—so what does this actually mean in practice? I do not think that anybody has much clarity about that, including, by the sounds of it, employees and many teachers themselves.

[Baroness Bousted (Lab)]

I am chairing a commission that will be very clear about what it means and how it can be employed in schools. I hope that will enlighten lots of people.

[Lord Sharpe of Epsom (Con)]

I look forward to being enlightened.

The noble Lord, Lord Fox, again made some very good points about the need to describe the job; I accept that that was an imperfect way of tabling that amendment. However, I leap into the defence of my noble friend Lord Murray of Blidworth from his attacks by the Fox. As I heard it, my noble friend was not saying that employment tribunals are no good; he was saying that there is a backlog, that they are probably underresourced and underfunded and that, because of their structural nature, they do not necessarily resolve things. An increasing reliance on them to resolve things will not necessarily have the desired effect. That is an incredibly important point that we should return to in the discussion that the Minister offered the Committee because, as I said in my last summary, we are placing an increasing reliance on employment tribunals to resolve an awful lot of the unanswered questions that are being discussed as a result of the Bill. For things not to be resolved even after they have got to an employment tribunal, after a long delay, seems a little short-sighted.

For now, as I say, I am somewhat reassured on Amendment 65, and I am grateful to the Minister for his answers. We should return to the idea of Amendment 67 and a much broader impact assessment, but for now I am content to withdraw Amendment 65.

Amendment 65 withdrawn.

Amendments 65A and 66 not moved.

Clause 9 agreed.

Amendment 67 not moved.

Clause 10: Statutory sick pay in Great Britain: removal of waiting period

Amendment 68

Moved by

[Lord Hunt of Wirral]

68: Clause 10, page 37, line 9, leave out paragraph (b) and insert—
“(b) in subsection (2), for “four” substitute “two”.”

[Lord Hunt of Wirral (Con)]

My Lords, I will speak to Amendments 68, 69, 70 and 71 standing in my name. I will speak to Amendment 68 first. It concerns the removal of the three-day waiting period for statutory sick pay. While we recognise the principle of supporting workers during periods of ill health, we also have to acknowledge the pressures that this places on employers, particularly small businesses which, unlike the state, bear the direct cost of statutory sick pay.

The original waiting period served as a guard-rail, ensuring that statutory sick pay was reserved for genuine and sustained periods of incapacity. Its removal would risk increasing claims for short-term absences, many of which might previously have gone unclaimed or been resolved informally.

The proposal in the Bill to abolish waiting days for statutory sick pay for all workers, including those on temporary contracts and working via employment agencies, introduces an additional cost burden for many small and medium-sized recruitment firms in particular, especially in a period of stagnant growth.

18:30

My concern, and that of many of the organisations to which I have spoken across the recruitment and small business sector, is that this change risks creating a perverse incentive, encouraging an increase in sporadic but regular short-term absences, which are notoriously difficult to manage or verify, especially in sectors where workers are supplied for temporary roles at short notice. For recruitment agencies and the employers they serve, such changes impose operational and financial uncertainty. Recruitment firms already operate within narrow margins, absorbing employer liabilities under agency worker regulations. The imposition of statutory sick pay from day one would only add to those pressures without due consideration of enforceability or fraud prevention.

While we recognise the principle of ensuring support for genuinely ill workers, the blanket removal of waiting days ignores the real-world dynamics of flexible and agency working and employment generally. It shifts further costs and risk on to firms that are, in many cases, already struggling with tight cash flows, rising labour costs and post-pandemic recovery.

Amendment 70 reflects our reservations about proceeding too far, too quickly in lowering eligibility thresholds. Where evidence supports a more cautious approach, particularly for new hires and agency workers, as we will come to in the next amendment, we believe that that distinction is warranted.

Amendment 71 seeks to limit the application of Section 155(1), which imposes limitations on entitlement to statutory sick pay to cases where the employee is employed by one or more employment businesses, as defined in Section 13(3) of the Employment Agencies Act 1973. This provision is designed to clarify the specific circumstances under which these limitations will apply.

We must be mindful that agency workers, who often work on temporary short-term assignments, present a unique set of challenges. Employment businesses are intermediaries between the worker and the employer, which means they lack the close working relationship that a traditional employer has with their employees. These businesses are responsible for ensuring the worker receives payment and benefits, but they do not have the same ability to assess the veracity of sickness claims, particularly when workers are placed across different client companies. By limiting the application of Section 155(1) to workers employed by employment businesses, we believe that we are addressing these practical challenges.

In agency work, where a worker’s sickness absence can be difficult to verify, it is essential that limitations on entitlement to statutory sick pay are applied in a way that acknowledges all those complexities. Without this safeguard, we risk creating a situation where employers within the agency sector are exposed to undue costs, which could lead to higher recruitment costs, reduced hiring in the sector and ultimately dampened job creation, a situation that we have to avoid at all costs, especially in the light of the current economic climate.

Amendment 71 would add a new subsection (2A) to Section 155, which would ensure that an employee who holds multiple jobs during a single period of sickness is not entitled to claim more statutory sick pay than they would receive if employed by only one employer. This provision is particularly important in preventing the duplication of statutory sick pay claims, where an individual could potentially claim statutory sick pay from multiple employers at once, leading to a higher total amount than they would have been entitled to had they been employed by only one. This could become a serious problem as workers increasingly hold multiple part-time or temporary jobs to supplement their income. While this reflects the changing nature of modern work, which we discussed earlier today, it also opens the door for potential overpayment of statutory sick pay benefits—a situation that could be exploited.

The purpose of statutory sick pay is to provide a temporary financial safety net for workers when they are unable to work due to illness and not to allow workers to accumulate more benefits than they would have earned had they been able to work. This amendment seeks to close that loophole by ensuring that no employee can claim more than the maximum entitlement they would receive from a single employer during a period of illness. Our aim is not to deny sick workers their rightful support but to ensure that they do not receive excessive benefits by claiming across multiple jobs. I beg to move.

[Lord Fox (LD)]

My Lords, the minute hand of legislation is approaching the blessed relief of adjournment, so I am going to reserve what I have to say about statutory sick pay to when I speak to Amendments 73 and 74 in the next group, in which I think some issues of the costs are addressed. I know the noble Baroness, Lady Coffey, and I have come up with amendments that are broadly similar, and I think it would be more appropriate to speak there.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am pleased that we have moved on and that we are now debating the Bill’s important provisions to improve the provision of statutory sick pay for millions of people across the country. I therefore thank the noble Lords, Lord Sharpe and Lord Hunt, for tabling Amendments 68, 69, 70 and 71 on this topic and speaking to them. These amendments would significantly change the statutory sick pay measures in the Bill.

The pandemic exposed just how precarious work and life are for those on low incomes, with many forced to choose between their health and financial hardship. Strengthening statutory sick pay is part of the Government’s manifesto commitment to implement our plan to make work pay, ensuring that the statutory net of sick pay is available to those who need it most. These changes are important. Estimates indicate that up to 33% of influenza-like illnesses are acquired in the workplace. One sick employee coming into work can lead to 12% of the workforce becoming sick, according to WPI Economics’ modelling.

The changes to remove the waiting period and lower earnings limit from the SSP system will therefore benefit employers by reducing presenteeism, which in turn can lead to overall productivity increases and can contribute to a positive work culture that better helps recruit and retain staff. This can help to reduce the overall rate and cost of sickness absence to businesses, and also contribute to reducing the flow of employees into economic inactivity.

I will turn first to Amendments 68 and 70. Removing the waiting period is essential to ensure that all eligible employees can take the time off work they need to recover from being sick, regardless of whether they are an agency worker. Removing the waiting period will also better enable phased returns to work, which evidence shows can be an effective tool in supporting people with long-term health conditions to return to and stay in work. This change should help to reduce the overall rate and cost of sickness absence to businesses, contributing to reducing the flow of employees into economic inactivity.

I regret that the noble Lord’s amendment would make this more challenging, as it would mean that employees would have to take two consecutive days off to be eligible for statutory sick pay. I do, however, understand the noble Lord’s concerns about the impact of the waiting period removal on businesses, but if employers have the right policies and practices in place—and most good employers do—the risks of inappropriate absenteeism can, of course, be mitigated. Crucially, the additional cost to business of the SSP reforms is around a relatively modest £15 per employee. We have been lobbied from both directions on these provisions because, for example, many on our own Benches would say that the rates we are proposing here should be much higher. I am sure they will make their concerns heard at some point during the passage of the Bill. It is not a great deal of money—as I say, it is £15 per employee—and it is certainly aimed at the lower rate that could be available.

On Amendment 69 regarding agency workers, one of the fundamental principles of the Bill is to ensure that people who work through employment agencies and employment businesses have comparable rights and protections to their counterparts who are directly employed. Amendments that limit the entitlement of agency workers would undermine this objective and have no reasonable justification. The noble Lord, Lord Hunt, said that employment agencies have more of an arm’s-length arrangement with their agency workers, but I would say the opposite: in fact, employment agencies are in a powerful relationship over their agency workers, meaning that those workers are less likely to abuse such a scheme.

Amendment 71 seeks to limit the maximum entitlement of SSP for employees with multiple employers so that they would receive no more statutory sick pay than they would be entitled to if they worked for only one employer. However, this would be administratively very complicated to deliver for businesses, particularly SMEs, and carries a high risk of SSP being miscalculated and employees being underpaid. It would particularly harm the very lowest-paid people who are working a limited number of hours. I also question the necessity of such an amendment. As it stands, employees with more than one job can already receive SSP from their employers if they earn above the lower earnings limit. The measures in the Bill will not change that, and I regret that this amendment would impact only the lowest-paid employees.

That is all I have to say on this issue at this stage, and I therefore ask the noble Lord to withdraw his amendment on the basis of the assurance I have given.

[Lord Hunt of Wirral (Con)]

My Lords, I recognise that the Minister says that she understands the concern that has been expressed. We are aware too that many agencies have raised with the Government the serious impact on small businesses and the risk of increased absenteeism. I believe their concerns are valid and I hope the Minister will continue to keep an open door for those agencies to perhaps respond in more detail directly to the Minister.

18:45

I will leave the Minister with some critical questions. First, do the Government recognise the potential loophole created by the removal of waiting days for statutory sick pay, where workers could begin to take sporadic short-term sick leave, making it so much harder for employers to manage and verify? Secondly, do the Government justify the increased cost burden on recruitment agencies, particularly small and medium-sized enterprises, at a time when they are already struggling with rising costs and stagnant growth? Thirdly, will the Government consider the practical implications of multiple statutory sick pay claims by workers with several employers, enabling them to double-dip and receive more than the maximum entitlement? Fourthly, why have the Government chosen to ignore the heartfelt and well-informed warnings from the recruitment sector about the risk of unsustainable financial pressure on businesses, which are already providing much-needed jobs in a challenging economy?

I believe these are not small matters. The Government’s decision currently risks undermining the integrity of the statutory sick pay system and could have serious consequences for businesses, workers and the economy. I hope the Minister will reconsider but, in the meantime, I beg leave to withdraw the amendment.

[Baroness O’Grady of Upper Holloway (Lab)]

Before the noble Lord sits down, it would be very helpful if he could confirm and clarify that, in expressing a concern that removing the waiting days would lead to more and sporadic absenteeism, it is not being implied that workers are swinging the lead. If it was being implied, where is the evidence?

[Lord Hunt of Wirral (Con)]

Of course it is not being implied. It is outrageous that the noble Baroness should think so and voice so in this debate, which has seen a very calm and careful consideration by the Minister, who sets a good example for us all. I hope the noble Baroness will follow it. I beg leave to withdraw.

Amendment 68 withdrawn.

Amendments 69 to 71 not moved.

Clause 10 agreed.

House resumed.

House adjourned at 6.48 pm