Tuesday 13th May 2025
(2 days, 14 hours ago)
Lords ChamberEmployment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 81-III(a) Amendments for Committee (Supplementary to the Third Marshalled List) - (13 May 2025)
Lord Sharpe of Epsom
“(1) Statutory sick pay is payable by an employer to an employee—(a) at a rate of 60% of the employee’s normal weekly earnings for the first three qualifying days of any period of incapacity for work,(b) at a rate of 80% of the employee’s normal weekly earnings for subsequent qualifying days,subject to a maximum of £116.75 per week.(2) Subsection (1) applies regardless of whether the employee earns above or below any lower earnings limits that were previously set.”Member’s explanatory statement
This amendment adjusts the rates of Statutory Sick Pay (SSP), providing 60% of normal weekly earnings for the first three qualifying days and 80% for subsequent qualifying days.
Lord Sharpe of Epsom (Con)
My Lords, I shall speak also to Amendments 71B and 75 standing in my name.
According to the latest figures from the Office for National Statistics this morning, the number of payrolled employees fell by 33,000 in April, or 106,000 on the year, and the number of job vacancies also fell. Wage growth has slowed. This evidence suggests that the OBR was right and the provisions in the Bill are already creating a net negative impact. The Chartered Institute of Personnel and Development’s latest survey was widely cited at the weekend. It confirms that employers’ confidence is at the lowest level since the pandemic and that a quarter of employers are planning to make redundancies in the next quarter. The CIPD’s economist, Mr James Cockett, was quoted as saying:
“The Employment Rights Bill is landing in a fundamentally different landscape to the one expected when it formed part of the Labour manifesto in summer of last year”.
This picture was confirmed in KPMG’s and the Recruitment and Employment Confederation’s reports. Recruitment activity across the UK continued to weaken at the start of the second quarter. The chief executive of the REC, Neil Carberry, has said that
“it is time for real changes to address employers’ fears and boost hiring. A sensible timetable and practical changes that reduce the red tape for firms in complying with the Bill will go a long way to calming nerves about taking a chance on someone”.
Last week the noble Lord, Lord Fox, called for the Bill to go on vacation because we need to get it right. This raft of new statistics proves his prescience, and perhaps the vacation ought to be permanent. Instead, we are now being asked to consider further obligations on employers through changes to statutory sick pay. A number of businesses across sectors have made it very clear that, while they support the principle of statutory sick pay, they are concerned about the rate and structure being proposed. Many have called for the rate of statutory sick pay to be set at 60% rather than 80%, as a more sustainable and proportional figure. The Government claim to have consulted widely with businesses, trade unions and various stakeholder groups to try to strike a fair balance, but, based on the data and the concerns raised, we believe that the right answer, particularly for the initial days of absence, is 60%.
Let us look at some of the other evidence. In the British Chambers of Commerce 2024 workforce survey, a full 50% of respondents stated that they would be negatively impacted by the proposal for statutory sick pay entitlement from day one. That is a clear warning sign that the proposed structure may have unintended consequences. Further, in a survey by the London Chamber of Commerce, 38% of firms predicted that they would need to freeze hiring as a direct result of the statutory sick pay changes; 30% expected a reduction in profits; and 33% anticipated lower wage increases for their existing staff.
Baroness Lister of Burtersett (Lab)
My Lords, I am grateful to my noble friend Lady O’Grady and the noble Baroness, Lady Smith of Llanfaes, for their support for Amendment 72, and to the Safe Sick Pay campaign and the Health Foundation for their help. The amendment is a probing one, aimed at facilitating a debate about the future of statutory sick pay—from a rather different perspective than that of the noble Lord, Lord Sharpe of Epsom—to which the Bill makes very welcome improvements.
Nevertheless, the scheme will still fail to provide adequate protection in sickness, especially for workers on lower incomes and who belong to marginalised groups. The amendment would require the Secretary of State to review the rate of SSP prior to this year’s Budget and to ensure that no one is worse off as a result of the otherwise positive changes made in the Bill.
Starting with the latter, I very much appreciate the time that my noble friend the Minister gave me and my noble friend Lady O’Grady to discuss the unintended consequences of the Bill’s welcome removal of the lower earnings limit and its replacement by the rule that employees will receive 80% of their average weekly earnings or the flat rate SSP, whichever is lower. The problem is that this new rule means that a small number of low-paid employees will be worse off than now.
Because of the also welcome removal of the waiting period, the loss will be limited to those who have been off work sick for more than three weeks. According to the DWP, we are talking about 13% of all sickness absences. I accept that this is a small proportion, but, by definition, we are talking about people with more serious illnesses. In its fact sheet, the DWP itself gives the example of a cleaner, working 11 hours across 5 days at the national living wage, who takes three months off for cancer treatment and who would lose £65 in total in SSP. The DWP assumes that the cleaner could potentially make up some of that in universal credit, but what if the cleaner were married to someone whose wages are not low enough to qualify for UC? She will lose some of her independent income. While £65 may not sound like that much to those on decent incomes, it could make a real difference to someone on a low income, particularly where a worker’s earnings are not shared fairly within the family. It is women in particular who are likely to lose out as a result of this unintended consequence.
I understand why the Government have rejected the alternative that has been put forward hitherto, but I would ask them to look again at the proposal made by a number of trade unions and charities that the formula use a 95 % rather than 80% replacement rate, which seems to be the most straightforward way of dealing with this. I believe that it is incumbent on the Government to come up with a solution to ensure that no one is made worse off due to the unintended consequence of the otherwise positive change made by the Bill. After all, Labour’s plan to make work pay promised that:
“We will ensure the new system provides fair earnings replacement for people earning below the current rate of statutory sick pay”.
On the rate of SSP, the final report of the Health Foundation’s Commission for Healthier Lives noted that the expansion of SSP under the Bill
“does not address a fundamental issue: statutory sick pay remains too low to provide meaningful financial security during illness”.
Last year, the Work and Pensions Committee similarly concluded that SSP
“does not currently provide adequate protection for those who most need protecting from financial hardship during periods of sickness absence. It consequently fails to perform its primary function of providing a basic level of income protection”.
At £118.75, it represents an earnings replacement rate of only 19% for an employee on average earnings, or 28% for an employee on a full-time minimum wage salary, one of the lowest rates in the OECD. The interim report of the Mayfield Keep Britain Working Review pointed out that our European counterparts typically pay around 70% to 80% of an employee’s wage when they are sick. The low rate of SSP in the UK all too often spells real hardship and financial insecurity, especially for lower-paid workers, including women, disabled workers and members of racially minoritised communities.
Analysis by Citizens Advice shows that four out of five households in the bottom three deciles would not be able to afford essentials such as bills and food after four weeks on SSP. The Work and Pensions Committee noted that there was
“almost complete agreement among witnesses that it was too low and not enough to live on”.
This included 90% of members surveyed by the Chartered Institute of Payroll Professionals.
Cancer charities have pointed to how far cancer patients fall below the minimum standard needed to live a dignified life at a socially acceptable standard as measured by my colleagues at Loughborough University. In a briefing, the charities quote a patient with leukaemia who says:
“What people don’t realise is that your costs also go up when you get cancer”.
Going on to SSP meant a “ huge drop” in his income that he was not able to replace with benefits. The result was, he wrote:
“I was an emotional wreck and it was a very, very bad time”.
Mind found that two in three people with a mental health problem surveyed who received SSP faced financial difficulties and that over one-quarter specifically mentioned that relying on SSP had affected their ability to pay bills and buy food, which hardly helps their recovery. Indeed, three-fifths of respondents believed that the reduction in their income as a result of receipt of SSP had had a negative impact on their mental health. This is illustrated by a research respondent quoted by the Health Foundation:
“If sick pay had been enough, I think I would’ve been able to return to work, but instead my condition worsened drastically ... and I ended up in the worst state, mental health-wise, that I have ever been in, forcing me to claim PIP … and be unemployed for the past year and a half”.
The hardship associated with receipt of SSP, particularly for those on lower incomes, can result in presenteeism—people coming into work when sick and, where it is contagious, potentially spreading sickness. This is bad for them, bad for their fellow workers and bad for employers. According to government analysis, presenteeism costs businesses 44 days of lost productivity per year. Poor sick pay undermines the Government’s overriding objective of economic growth. Analysis by WPI Economics suggests that improved SSP could boost the economy by over £4 billion a year and would reduce the pressure on the NHS.
The Health Foundation warns that inadequate SSP can create an incentive for some workers to move quickly into the social security system without a clear route back into work, the very opposite of what government policies are trying to achieve. It points out:
“When workers are financially supported during sickness absence, they are more able to recover, take part in rehabilitation and return to work safely and sustainably”.
The implications of presenteeism became horribly visible during the pandemic, which, as my noble friend the Minister told the Committee only last week,
“exposed just how precarious work and life are for those on low incomes, with many forced to choose between their health and financial hardship”.—[Official Report, 8/5/25; col. 1789.]
Far too many people felt that they simply could not afford to stay at home when they were infectious. Countries with more generous sick pay saw higher isolation compliance and better health outcomes. We are told by the experts that it is only a matter of time until the next pandemic. One way we can prepare is by ensuring that SSP is adequate now.
This amendment merely asks the Government to look again at how to ensure that no one loses out as a result of the Bill’s welcome improvements to SSP, and to undertake a quick review of its level. I am sure this would be welcomed by a wide range of charities, the TUC and major trade unions, as well as the more than 185 parliamentarians who support the Safe Sick Pay campaign.
A New Deal for Working People stated unequivocally:
“Labour will raise Statutory Sick Pay”.
The amendment builds on the much weaker assurance in the Commons from the Minister for Social Security and Disability that the Government would monitor how effectively the Bill’s SSP reforms will support employees. We do not need monitoring to tell us that SSP is simply too low, especially in view of the recent Work and Pensions Committee inquiry. The Commission for Healthier Working Lives calls for a review that will result in an increase in SSP
“to a fairer level while giving businesses the time and support they need to adapt”.
I hope my noble friend the Minister will at least be able to provide some assurances on both issues.
Baroness Coffey (Con)
My Lords, I rise to speak to Amendment 73 in my name regarding SMEs and an SSP rebate scheme. I have made a drafting error by calling it four days when it should have been three days, in compliance with the law today.
Occupational health is a key factor in both helping people to stay in work, to try to prevent some of the illnesses, and to get back into work quickly, and for some time it has been a key part of the strategy of a successful business to do that. But I am also very conscious that SMEs in particular are not always well displaced currently to access, which is why expanding that capability has been a key part of DWP’s more recent strategies, which the present Administration have continued.
Sickness rates are significantly lower in the private sector than in the public sector, but what is common to both is that there is an increasing prevalence of the primary reason for sickness pay: people being off sick due to mental well-being. I am conscious that this is often not an easy situation to challenge or interact with if you do not have the experience to do so, and that is why increasing occupational health is needed.
Why is occupational health so relevant to this? It used to be the case that with statutory sick pay you could reclaim from the Government the amount of money that you had paid out. You might have paid out a lot more—100% of earnings or similar—but all businesses used to be able to get a rebate for the statutory sick pay element. I know that because I used to fill out the claims myself when I was working in industry. Over time that was whittled down, and it was finally abolished in 2014. Instead, the Government at the time created the Health and Work Service, which was designed to be referred to by SMEs for people who have been ill for a few weeks—again, almost as a provision facilitated by government.
One of the challenges is that this is continuing to be part of an issue. Many businesses, particularly small businesses—certainly in submissions made to me—are particularly worried about this starting from day one of people being unwell. As a consequence, it is important that we should investigate the opportunity to get a rebate scheme for SMEs to try to keep the status quo as it is today.
It is in the interests of government to support SMEs. As we have already heard, the statistics show that, unfortunately, payroll employment is falling. When in office I was very pleased that we saw it increasing. Indeed, I am certain, in wanting the Government to succeed in their ambition to get to 80% employment rate, that they need SMEs to be taking on people to work. As I have explained, I do not think the Bill will help with that, but one modest way to go towards alleviating some of the issues would be to introduce a straightforward rebate scheme for SMEs.
Lord Davies of Brixton (Lab)
I speak in support of my noble friend Lady Lister of Burtersett, and in support of more being done on statutory sick pay. I welcome the Government’s commitment to strengthen statutory sick pay by removing the lower earnings limit and the waiting period, but they must go further to ensure that people with mental health problems have a secure safety net when they need time off work, and a pathway back into work when they recover.
The UK has one of the least generous sick pay schemes in the OECD in terms of rates and length. It forces people to remain in work while they are unwell, which risks them becoming more unwell and eventually falling out of work. Because statutory sick pay is inadequate, people who rely on it often carry on going into work when they are unwell. This can risk them becoming more unwell, to the point where they fall out of employment altogether. We need a sick pay system that provides real security, is more compassionate, gives people the time they need to get better and supports them to return to work when they are ready.
Reforming statutory sick pay is beneficial to the economy, to businesses and to people with mental health problems. As my noble friend has emphasised, presenteeism—going to work when unwell—is costing UK employers £24 billion a year, according to figures produced by Deloitte. It reduces productivity and business competitiveness, as well as aggravating a person’s illness. Introducing a flexible statutory sick pay model that allows for partial payments alongside wages would help people to gradually return to work after a period of sickness, or allow them to reduce their hours when needed without being signed off completely. Not only is this beneficial for the employer, as employees are able to return to work sooner part-time, but it keeps the employee connected to their workplace and reduces the likelihood that they will fall out of employment altogether.
Extending the length of statutory sick pay being paid from 28 weeks to 52 weeks will enable more people to stay in employment, reduce rehiring costs for businesses and prevent people falling out of employment and needing support from the benefits system. Ultimately, we need to see a higher level of statutory sick pay, and I see no reason why, when you are sick, you should get any less than the national minimum wage.
Baroness Noakes (Con)
My Lords, my main concern with the changes to statutory sick pay in this Bill is the impact on smaller businesses, which is why I support the amendments in this group in the names of my noble friend Lady Coffey and the noble Lord, Lord Fox, which provide for rebates for SMEs. Of the two amendments, I prefer that of my noble friend Lady Coffey because it clearly undoes the harms that Clause 10 will cause.
I could not find much data on how much businesses actually pay in statutory sick pay, but I suspect that, unless an employer is unlucky enough to get an employee who has long-duration sickness, most will be paying relatively little at present, because absences are mainly for less than four days. What the data does show is that most sickness absences are for minor illnesses, which are unlikely to exceed three days. The average days lost per worker per year in 2023, which is the most recent data I could find, is just short of eight days. Among smaller and micro-businesses, that falls to around five days.
Extending the days for which payment is made is likely to increase the number of days lost to sickness, as the current incentive to work if the illness is mild will simply disappear. The Government say they have no idea what the behavioural impact of the changes will be—whether positive or negative—but I am prepared to bet that there will be far more short-duration absences, which will qualify for statutory sick pay, than there were before.
If I am right that most SMEs do not currently pay much in the way of statutory sick pay, the changes in the Bill will straightforwardly increase their costs. An average small business of between 10 and 49 employees has about 20 employees, which means that the average for a small business will be to pay for at least 100 days of sickness that they do not currently have, which would amount to around £2,000 in additional costs each year, even if no additional sick days were taken, which I doubt. That is not a huge amount per business, but it adds up to many billions of pounds across the whole economy. It also, of course, comes on top of the jobs tax and the very significant increases in the national minimum wage, which leads me to the likely real consequences of this change on top of the others. Put simply, SMEs will not hire workers unless they absolutely have to. We can already see evidence of that from the surveys of smaller businesses and in the weakening labour market—my noble friend Lord Sharpe of Epsom gave us an up-to-date view on that. It is only going to get worse.
Furthermore, all those groups that we as a nation want to get back into work, in particular those who are long-term sick, will simply not be attractive to employers. Any hint of an illness record in a job applicant’s background will count against them, because no employer would want to take on the additional costs that would automatically come with that employee.
I am sure that I do not need to remind the Committee that SMEs employ nearly half the private sector work- force. A reluctance to hire among SMEs will kill growth and opportunities for many of the groups that we need to be employed in this country. There is a simple way to solve this problem, set out in Amendments 73 and 74. The Government would be wise to go down that route.
Baroness Lawlor (Con)
My Lords, I shall speak in support of Amendments 71A and 71B in the name of my noble friend Lord Sharpe of Epsom, Amendment 73 in the name of my noble friend Lady Coffey, and Amendment 74 in the name of the noble Lord, Lord Fox, for a rebate scheme.
Amendments 71A and 71B propose a sensible modification to Clause 11 and strike a more affordable approach for a business paying the employee for time not worked, as well as for the compliance and record-keeping involved. I say “more affordable” rather than “fair” because many businesses—particularly small and micro-businesses, as we continue to hear in Committee —will struggle to stay afloat and in business, given the juggernaut of additional costs, burdens and increased obligations imposed by this Bill. That includes those in this clause and those in previous clauses that we have discussed.
In Clause 11, such costs are to be imposed for those below the lower earnings limit, as we have heard, which will add to the extra costs paid by employers. They will potentially open further problems raised in the impact assessment, the modelling for which suggests a rosier picture for business than the available evidence warrants but also raises questions of behavioural response. Indeed, that consideration was a fundamental principle addressed in the welfare state proposals by Sir William Beveridge in his blueprint Social Insurance and Allied Services in 1942. The original National Insurance Act was framed as a contributory scheme with strict conditions on benefit to avoid creating perverse incentives.
The impact assessment for this measure—which models outcomes on the basis of a variety of factors, including some unproven assumptions—contends that there is evidence suggesting that overall sickness absence may be reduced but, on the basis of evidence considered from other countries, says that it is
“possible that regulation changes induce a behavioural response”
and that
“studies from other countries have found that the incidences of sickness absences are higher when sick pay is more generous. There could be an increased number of sickness absence days taken due to improved financial protection”.
We can read that in whatever way we like, and we have heard different interpretations of more generous statutory sick pay, but it is incumbent on the Government to return to some of the original principles in the national insurance system in this country and to think further about not creating perverse incentives. There will now be days for which the employer will pay for which there is absolutely no productivity gain.
Baroness O’Grady of Upper Holloway (Lab)
My Lords, I support the noble Baroness, Lady Lister, and Amendment 72, and I add my thanks to the Safe Sick Pay campaign, the Health Foundation and other organisations. I heartily welcome the Labour Government’s commitment to strengthening SSP by removing the lower earnings limit and the waiting period.
A nationally representative survey conducted for the TUC found that around half of employees get their full pay as usual when sick, but that around 28% were forced to rely on SSP alone. It also found a clear class divide when it comes to who gets what: eight in 10 of higher earners—over 50 grand a year—got full pay when off ill, compared with only one-third of lower earners.
The Covid pandemic exposed just how precarious life is for those in insecure, low-paid work, and we do not know how many preventable illnesses were caused by people struggling into work and spreading the virus because they could not afford to stay home. But we do know, as we have heard, that forcing people back to work when they are ill is bad for workers and bad for business, puts pressure on the NHS and is costly for the economy.
I am very grateful to the Minister for taking time to meet me and the noble Baroness, Lady Lister, to discuss our concern that the formula adopted by the Government could leave low-paid workers who earn just above the lower earnings limit worse off. The DWP’s answer has been that abolition of the waiting days before a worker receives SSP ensures that, for the first three weeks, those losses will be offset. But, surely, the policy intention of the Government’s commitment to abolish the waiting days is not to make up for losses caused by its own formula. The policy intention should be to ensure that every worker who relies on SSP is, in fact, better off, and we need to protect those on longer- term sickness who are, for example, receiving cancer treatment.
I note the Government’s concern that the formula must be designed in a way that avoids workers getting more in sick pay than they would in wages, and avoids a cliff edge. I remain unconvinced, however, that it is beyond the wit of the DWP to come up with an approach that protects that position without penalising a group of low-paid workers.
Secondly, as we have heard, this amendment seeks a review of the rate of statutory sick pay. As the Resolution Foundation has pointed out, unlike many other European countries, the rate is not linked to earnings. Currently at £118.75, SSP equates to 27% of the national minimum wage. In 1999, SSP was equivalent to 43% of the national minimum wage. That is a big drop. For a decade and more, SSP has failed to keep up with the cost of living or increases in the living wage.
The Work and Pensions Select Committee has confirmed that the SSP rate is not enough to live on. At the Covid public inquiry hearing in December 2023, Matt Hancock was quizzed by Sam Jacobs, who is counsel for the TUC. The former Health Secretary agreed that the rate of SSP should be higher. How could he argue otherwise, when the UK languished at the bottom of the OECD league for statutory sick pay under the previous Government and when we know that such a low rate of SSP is a danger to public health?
I understand that perfection must not be the enemy of the good, but an SSP rate that works out at around £3 per hour is some way short of either perfection or good. This amendment implicitly recognises that this woeful legacy of neglect in tackling it will not be remedied overnight. It would, however, be welcome if the Minister could reassure us today that both the formula and the rate of statutory sick pay will be reviewed before the Autumn Budget, and rightly so.
Baroness Cash (Con)
My Lords, I start by declaring interests. I am an employer, the founder of a listed business, MindGym, which is a behavioural science business, and an expert in corporate training to improve employee well-being and productivity. I am also a commissioner at the EHRC.
I support the Opposition’s amendments in this group: Amendments 71A, 71B, 73, 74A, 74B, and 74C. At the outset, I would like to note for the record that everyone here is driven by compassion for those who need protection. I pay tribute to the speeches by noble Lords from the Benches opposite, but I am very concerned about these proposals by the Government.
I am grateful to the noble Baroness, Lady O’Grady, for drawing our attention to the Resolution Foundation report, which has identified some of the points that support the amendments from this side of the Committee. I will return to those.
The Government have said on record that they want growth. We support that goal. They want businesses to succeed. We support that goal. They have also said on the record that they want to reduce the number of people who are out of the workforce on long-term sickness—currently running at 2.8 million. We support that goal. What we do not understand is how on earth the Government believe that this legislation and these proposals are going to achieve any of that. They are based in compassion, I have no doubt, but the Government are pursuing a culture of incapacity and dependency that will impede the stated aims.
Baroness Smith of Llanfaes (PC)
My Lords, I support Amendment 72 from the noble Baroness, Lady Lister, which I and the noble Baroness, Lady O’Grady, have signed. This amendment would require a review of the rate of statutory sick pay ahead of His Majesty’s Government’s 2025 Autumn Budget. It requires the Secretary of State to determine, following that review, whether the rate should be changed and to publish a Written Statement setting out the reasons for that determination.
It is important to remind ourselves what this amendment entails. As noble Lords are aware, statutory sick pay is a government scheme requiring employers to provide most employees in the UK who are absent from work due to sickness with a minimum level of pay during that period of absence. Statutory sick pay —SSP—is £118.75 per week, following an increase last month, which an eligible employee can receive for the days that they are ill and not working, except for the first three days of that sick leave. To be eligible, one must be classed as an employee and have done some work for the employer, earn at least an average of £125—previously £123—per week, and have been ill for more than three days in a row. It is only on that fourth day that they receive SSP.
The scheme as it stands is ineffective and causes hardship. As we have heard from the noble Baroness, Lady O’Grady, according to the TUC, 28% of employees receive only basic SSP when ill, meaning that they are reliant on this very small weekly amount during that period of illness. The TUC adds that
“there are 1.1 million workers earning below £123 per week who are not eligible for SSP”,
with most of those workers being women.
Considering also the penalty of a three-day delay until an eligible employee can claim SSP, it is clear that reforming SSP is both necessary and overdue. I therefore welcome the provisions under the Employment Rights Bill that will see SSP payable from the first day of incapacity to work by way of Clauses 10 and 12, and the removal of the lower earnings limit—that is, the requirement to earn at least £125 per week—through Clauses 11 and 13. However, Clauses 11 and 13 also set in legislation that the rate of SSP will be set at the lower of £118.75 or 80% of the employee’s normal weekly earnings. That payment is extremely low by international standards, as we have heard from many noble Lords. It is one of the lowest rates in the OECD.
If you were to divide this amount by a typical 40 hours worked by full-time employees in a week, this would provide under £3 per hour to employees who are ill. Of course, many workers work more than 40 hours per week, decreasing this hourly amount even further. But in the context of rising housing costs, food prices, energy bills and household bills, such a small payment is inadequate to meet basic living standards. I ask your Lordships: do we believe that those people can survive on £3 an hour? That is an important question that we must consider when we look at this amendment.
In fact, in the context of universal credit, the Joseph Rowntree Foundation estimates that to afford the basic household essentials, a single adult requires at least £120 a week and a couple £205 a week. It is clear that a review of the adequacy of the SSP rate is crucial to ensure people are not plunged into poverty just for becoming ill, which is something that happens to all of us. Proposed new subsection (7), in Amendment 72, makes provision for the Secretary of State to ensure that no employee receives less statutory sick pay than they would have received before the Bill’s enactment, as a result of changes under Clause 11. This is important because according to the TUC, an 80% replacement rate as under the Bill will see 300,000 workers entitled to a lower rate of SSP than currently. Many of these individuals work for multiple employers, work part-time and receive low wages. According to the Safe Sick Pay campaign, three-quarters of those impacted will be women. Disabled people will be disproportionately affected, almost half of whom are aged between 20 and 54.
Using the SSP amounts in place before April, the Safe Sick Pay campaign outlined the example of an employee who will now lose out. That employee, working for multiple employers, earning £123 a week, would have received £116.75 a week of statutory sick pay because they earned above the lower earnings limit. Following the Bill as it stands, that same employee will see a 16% reduction in their entitlement and receive only £98 a week, as this would represent 80% of their earnings. Many workers, particularly those in low-pay positions, already struggle to afford the shortfall caused by SSP when ill. Increasing that shortfall will make it more unlikely that workers will have adequate savings to mitigate the loss of income. Proposed new subsection (7), in Amendment 72, provides a way for the Secretary of State to rectify this situation and ensure that no one is worse off as a result of SSP changes made by the Bill. It is vital that His Majesty’s Government do not intentionally or unintentionally cut sick pay for hundreds of thousands of workers.
I will now briefly turn to some of the other amendments and the debate on this group so far. Amendment 73 in the name of noble Baroness, Lady Coffey, and Amendment 74 in the name of the noble Lord, Lord Fox, call for the establishment of a scheme for reimbursement of statutory sick pay costs incurred by companies with fewer than 250 employees. This is an interesting proposal, as we have heard from the noble Baroness, although we have yet to hear from the noble Lord, Lord Fox. I look forward to hearing the Minister’s response on the practicalities of such a proposal.
I feel very strongly that mental health is health, and that this is not just to do with those facing mental health conditions; it goes wider than that. It is important to note that this is about all workers who have been signed off from work; there are lots of different reasons why they might be ill, including those relating to mental health.
The aims of these amendments differ from those of Amendment 72, which seeks to address gaps in the Bill concerning adequate sick pay for workers—gaps that cause some concern, especially the consequential effects on low-paid workers. I hope that, in responding, the Minister addresses my concerns: the adequacy of the SSP rate as set out in the Bill; the effect on low-income workers, without relying on the welfare system to offset that effect; and whether His Majesty’s Government will commit to a review of SSP rates, so that workers are not punished by measures in a Bill which is expected to strengthen their workplace rights.
Baroness Fox of Buckley (Non-Afl)
My Lords, there have been some excellent debates in this group. I ask for some clarification, particularly from the Government, on something I am confused about. I am sympathetic to Amendment 74A. The noble Baroness, Lady Cash, made a very useful and insightful contribution that brought another layer to the discussion. There is a danger of us talking about these things technically, yet in a rather old-fashioned way, when there is a lot more evidence and new phenomena to consider.
Amendment 74A looks at the impact on—
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
I am sorry to interrupt the noble Baroness, but we are not debating Amendment 74A. It is grouped elsewhere.
Baroness Fox of Buckley (Non-Afl)
I have the right group; I have just said the wrong thing.
Lord Fox (LD)
My Lords, I thank all noble Lords who have spoken in what has been a very interesting debate. I will try to reflect on what I have heard as I speak; that will make my job quite difficult and probably make my speech completely incoherent, but I will do my best.
We closed last week with a couple of de-grouped Conservative amendments. I promised to reserve what I would say on statutory sick pay for this group, which means that I am unlikely to speak on the next group. Last week the noble Lords, Lord Sharpe and Lord Hunt, spoke firmly against the Government’s proposed changes. I have seen evidence of businesses arguing strongly either for the status quo or for a two-day threshold.
I am not a behavioural scientist, but I can read a room politically. The party that is sitting on a huge majority in the Commons has made it very clear where it stands on this issue, and that has been reasserted by some of the even stronger comments we have heard from the Benches opposite. Businesses have drawn the same conclusion. Many of those I talk to are seeking ways to ameliorate this, rather than eliminate it, which is probably unlikely.
I was interested to hear the noble Lords from the Conservative Front Bench speak to Amendments 71A and 71B. Their version of amelioration appears to be to reduce the amount of SSP, or at least severely limit it. We heard a different story from the noble Baronesses, Lady Lister and Lady O’Grady, who set out why SSP is important and why the rate is meaningful. To contextualise poverty, we are talking about the poorest people who are working people but still extremely poor. It is difficult to overestimate the generosity of this scheme, but that is what I have heard from several on the Conservative Benches. This is a very modest offer. With her statistics, the noble Baroness, Lady Lister, set it out very clearly, as did the noble Baroness, Lady Smith.
Before I talk to my own Amendment 74 and Amendment 73, I will deal with the others. In Amendment 75, the noble Lords, Lord Sharpe and Lord Hunt, call for a reviewer to report within two years. I mentioned there is a subsequent group which also has impact assessment amendments in it. I am not really sure why we are debating them separately. Rather like the noble Baroness, Lady Fox, I am going to mention 74A to 74C, which have been shunted into a separate group. Taken together, there is a slightly curious mismatch of timings: Amendment 75 is after two years, 74B and 74C after six months and 75A after a year. I agree that there do need to be impact assessments following whatever your Lordships decide, perhaps on a more systematic calendar than the ones suggested.
I am interested in the pre-emptive impact assessment. For the benefit of your Lordships’ Committee, it would be good to hear the Minister spell out the detail of the impact assessment of business on the current proposed measures. If, as the Minister says, the costs will be relatively modest, the costs of Amendment 73 or 74 would also be relatively modest, which takes me to the point in question.
As we have heard very eloquently from the noble Baroness, Lady Coffey, she and I have come up with very similar suggestions in terms of amelioration, which is what I was talking about earlier. Rather like the noble Baroness, Lady Noakes, I slightly prefer the version from noble Baroness, Lady Coffey, but that is not the point—this is not a competition. We would like to sit down with the Government and thrash through a way whereby a rebate scheme can be reintroduced. This seems to be the sensible approach. We care deeply about SMEs—they drive a huge part of our economy. This is a way of making sure that they do not get disadvantaged as employees get what they deserve as SSP. That is what I am asking for from these Benches. Very sensibly, the noble Baronesses, Lady Coffey and Lady Noakes, and others supported it. I hope that the Minister will be able to make a positive noise about that and we can sit down and have that conversation.
Today, we have heard that SSP is absolutely vital for a section of society who are already massively disadvantaged. We should not be drawing lines and pushing them further down. We should be finding ways of making sure that they are not disadvantaged even more and, at the same, we should find ways of making sure that our SME sector is not also disadvantaged.
Baroness Jones of Whitchurch (Lab)
My Lords, we have had a really good debate on these issues, and I hope that I can do justice to all the questions and points that have been raised.
I begin with Amendment 75, tabled by the noble Lords, Lord Sharpe and Lord Hunt, on independent reviews into the effects of SSP reforms on small and medium enterprises. As noble Lords will be aware, the Government have already undertaken a regulatory impact assessment, which was published on 21 November 2024 and can be found on GOV.UK. This considered the likely direct business impact of the SSP changes, including on small and medium enterprises. In the regulatory impact assessment, the Government estimated that delivering these measures will cost businesses a modest £15 extra per employee. I assure noble Lords that the Government remain committed to monitoring the impact of these SSP measures. We intend to conduct a post-implementation review of the measures in the Employment Rights Bill within five years of implementation. Additionally, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of the SSP changes on a range of employers and employees.
I draw attention to the Keep Britain Working review. We asked Sir Charlie Mayfield to lead this independent review, which will consider recommendations to support and enable employers to promote healthy and inclusive workplaces, support more people to stay in or return to work from periods of sickness absence and retain more disabled people and people with health conditions.
While I am speaking about the variety of illnesses that people on sick leave incur, let me address the issue of mental health absences, which was raised by the noble Baronesses, Lady Cash and Lady Smith, the noble Lord, Lord Sharpe, and my noble friend Lord Davies. Our proposals have to be seen in the wider context of the Bill. The Bill is intended to improve the experience of employees at work, so measures such as flexible working, guaranteed hours and protection from harassment could—we believe will—reduce stress at work, potentially leading to fewer incidents of burn-out and better employee mental health, and therefore fewer related absences. For us, that is an important challenge that we intend to monitor.
Amendment 73, in the name of the noble Baroness, Lady Coffey, would introduce a rebate scheme to reimburse SMEs for the cost of SSP for the first four days, although I think she clarified that she meant three. I thank her for her interest in SSP, and of course I appreciate her extensive knowledge and experience in this area, as a former Secretary of State for Work and Pensions. As previously mentioned, regarding waiting days, the changes we are making to SSP will cost businesses around an additional £15 per employee, a relatively modest amount in comparison with the benefits of reduced presenteeism and the positive impact that this will have on our lowest paid members of society. As the noble Baroness may recall, we previously delivered SSP rebate schemes such as the percentage threshold scheme. This was abolished due to SMEs underusing it, and feedback that the administrative burden was complex and time consuming. So I suggest that a rebate scheme that covered only the first three days of sickness and absence would also be quite administratively burdensome, both for businesses to claim and for the Government to process.
Previous SSP rebate schemes also did not encourage employers to support their employees. We know that employers having responsibility for paying sick leave helps maintain a strong link between the workplace and the employee, with employers encouraged to support employees to return to work when they are able.
Sticking with the theme of rebate schemes, Amendment 74, from the noble Lord, Lord Fox, would introduce an SME rebate scheme for the whole duration of sickness absence. I reiterate the points I made earlier about the limited cost to business as a result of SSP changes and the experience of previous rebate schemes. I agree with the noble Baroness, Lady Lawlor, that we have moved a long way from the Beveridge system of social insurance. The costs and the mechanisms are very different now.
A rebate for the full cost of SSP could cost the Government up to £900 million a year. I do not believe that a rebate scheme is the best way to support our SMEs at this time. We will be considering the findings of the aforementioned Keep Britain Working review, which is expected to produce a final report with recommendations in the autumn. The noble Lord, Lord Fox, challenged me to keep talking about this, and of course I am very happy to do so.
Amendments 71A and 71B were tabled by the noble Lords, Lord Sharpe and Lord Hunt. As they may be aware, the Government consulted on what the rate of SSP should be for those who currently earn below the lower earnings limit. There was no clear consensus from stakeholders on the percentage. The Government believe that the 80% rate strikes the right balance between providing financial security to the lowest paid employees when they need to take time off work to recover from illness and limiting the cost to business. As the noble Lord, Lord Fox, said, if we are not careful, we will be penalising the very poorest in our society.
Crucially, the total amount saved by business, if the rate were set at 60% compared to 80%, would be around £10 million to £30 million per year. That is about a £1 difference per employee per year, or less than 0.01% of total spending on wages annually by businesses. On the noble Lord’s Amendment 71A, which would set the rate at 60% for the first three days of a period of incapacity for work, the amounts potentially saved by business become even smaller, with the difference in cost being a matter of pennies. Given the minimal savings for businesses, the complexity for employers in administrating different rates is difficult to justify.
Lord Sharpe of Epsom (Con)
My Lords, I thank the Minister very much indeed for her response, and, indeed, all noble Lords for their contributions to what has been a thoughtful and valuable debate. My particular thanks go to my noble friends Lady Noakes, Lady Coffey and Lady Lawlor, as well as to my noble friend Lady Cash, for bringing to the debate her unique expertise in the area of behavioural science.
It is it is crucial that the Government fully recognise that many provisions in this Bill are interlinked, as we have heard from all sides of the Committee. Changes in one area can have unintended ripple effects in others. As I have said, we support statutory sick pay, but we must also acknowledge that these proposed changes will result in higher costs for employers. My amendments were an attempt—in the words of the noble Lord, Lord Fox—to ameliorate some of those costs and find some sensible compromises. I am disappointed that the Government have chosen to reject them. Without clarity, businesses cannot plan, cannot invest and cannot hire with confidence. As I pointed out in my opening remarks, the facts are plain: jobs are being lost now.
Regarding an SME rebate scheme—as highlighted by my noble friend Lady Coffey in her Amendment 73 and spoken to by my noble friends Lady Noakes and Lady Lawlor, as well as by the noble Lord, Lord Fox, in his Amendment 74—the Government have stated that final decisions will follow consultation with business through secondary legislation. The impact assessment notes plans for “extensive engagement” with small and medium-sized businesses to
“test where mitigations can be made”.
However, SMEs have spoken: they have asked for a rebate scheme as used during the pandemic. It is therefore disappointing the Government have not accepted the amendments to provide that support.
I would suggest that the Minister takes up the offer of the noble Lord, Lord Fox, to talk more on this subject —a conversation that we would like to be party to. I am pretty sure that we will be returning to it on Report. If I may paraphrase the noble Baroness, Lady O’Grady, it should not be beyond the wit of man to design a simple scheme that works. For now, however, I beg leave to withdraw my amendment.
Lord Hunt of Wirral
“Impact assessment: Statutory Sick Pay provision on absenteeismWithin 12 months of the day on which this Act is passed, the Secretary of State must publish an assessment of the impact of the provisions in this Act relating to Statutory Sick Pay on levels of absenteeism.”Member's explanatory statement
This new clause requires the Secretary of State to publish an assessment of how the Statutory Sick Pay provisions in the Act impact absenteeism, within 12 months of the Act being passed.
Lord Hunt of Wirral (Con)
My Lords, after what has been a fascinating, wide-ranging and important debate on statutory sick pay, I would like to focus on the impact that these changes are going to have in particular on absenteeism, on short-notice shifts and on enhanced sick pay schemes. So I shall speak to Amendments 74A, 74B and 74C. We will continue to make the point that this Bill brings with it a raft of unintended consequences.
The importance of Amendment 74A cannot be overstated. Absenteeism is a critical issue for many businesses, especially those in hospitality, retail and other service-based industries, where staff shortages can lead to disruption, cancellations and even closures. With the removal of waiting days for SSP and the expansion of eligibility, it is essential that all of us should understand fully how these changes will affect absenteeism patterns across various sectors.
One of the sectors most concerned with the potential rise in absenteeism that these changes will cause is, of course, hospitality. Many businesses in this sector rely on part-time, hourly or zero-hour contracts, often employing younger workers, students or those with fewer financial responsibilities.
As we know, a significant portion of the workforce in hospitality earns below the lower earnings threshold for statutory sick pay, and may be employed for only limited hours. These workers are typically less dependent on their income, often still living at home or with fewer financial obligations. This brings us to a major concern. If these workers know that they will still receive statutory sick pay regardless of their financial needs, there may be little incentive for them to attend work when they feel under the weather, or even when they would simply prefer a day off. The concern is that the reforms could result in workers taking sick leave when it may not be strictly necessary, as the financial implications of their doing so would be mitigated by the statutory sick pay payment.
For example, if a student worker or part-time employee knows that they will still receive statutory sick pay, even if they do not meet the earnings threshold, they may not feel the same level of obligation to attend work. This is particularly true in a sector such as hospitality, where work provides either temporary or supplementary income. As such, the absence of financial pressure could lead to increased absenteeism in the short term, which could, in turn, lead to operational challenges for hospitality businesses, especially those that already operate with small teams, a high turnover of staff, or both.
As I mentioned, we believe it is essential that the Government thoroughly evaluate how these statutory sick pay provisions would affect absenteeism, particularly in sectors such as hospitality, where the risks of absenteeism are most pronounced. The impact assessment called for in Amendment 74A would enable us better to understand the extent to which these reforms would result in higher absenteeism rates and whether there are any other unintended and undesirable consequences, such as workforce disengagement, or a lack of motivation to work, in sectors where employees may not be so financially reliant on their income.
It is vital to understand, first, how absenteeism levels might change, especially in sectors with a younger, less financially reliant workforce; secondly, the operational challenges businesses would face due to potential increases in absenteeism; and, thirdly, the wider economic effects of these changes, including potential impacts on service quality, customer satisfaction and employee morale.
I turn to Amendment 74B. The proposal to remove the waiting period for statutory sick pay and the lower earnings limit represents a substantial shift in how sick pay obligations are structured. It carries serious financial implications, particularly for low-margin sectors, such as retail and hospitality, and for small and medium-sized enterprises more broadly. This amendment seeks a modest but necessary safeguard. It asks the Government to publish, within six months, a report on the impact of these statutory sick pay reforms on employers’ ability to offer enhanced sick pay and occupational health and well-being services.
As of 2024, 28% of UK employers offer occupational health services, while 27% provide sick pay that goes beyond statutory minimums. While we certainly want to see those numbers improve, we must surely understand why provision remains relatively low. A survey conducted last year found that 43% of business leaders cite financial constraints as the primary barrier to offering enhanced sick pay. Another 31% highlighted legal complexity; 28% cited administrative burden; and 31% cited staffing challenges as further obstacles. Rather than addressing those challenges, surely the Government have to recognise that the Bill threatens to amplify them.
Baroness Fox of Buckley (Non-Afl)
My Lords, I should have spoken in the other debate—
Baroness Fox of Buckley (Non-Afl)
But I will carry on. I also want to refer to the issue of absenteeism, but I feel as though I have wandered into the skivers debate, and I do not necessarily want to be involved in that.
I am not worried that sick pay will create a nation of skivers or everybody phoning up and saying, “I am off sick”. But I am confused—maybe the Minister can help me here—about what seems to be a conflict in government priorities concerning our attitude to work and, in a way, our attitude to sickness. There seems to be some tension between the discussion around reforming the welfare system and PIPs, for example, and the concerns raised in that debate about ever greater numbers claiming disability benefits, especially for mental illness. I thought that the questions asked by Wes Streeting, the Health Secretary—quoting experts and evidence on the problem of overdiagnosis and of encouraging a culture in working-age adults, especially young people, of feeling incapacitated and dependent on the state in a demoralising way, such that they are written off—are in fact a very mature way of looking at that discussion that we should consider.
We also have to acknowledge a phenomenon that we discussed quite a lot during the passage of the Mental Health Bill. Being unwell, particularly mentally unwell, has now become integral to many people’s identities. The figures given in the earlier debate—when I meant to speak, and when the noble Baroness, Lady Cash, and others made the point about huge numbers of people now being off work as a result of disability due to mental ill-health—indicate that there is an increase not in mental ill-health but in a new cultural phenomenon of people feeling unable to cope in some capacity.
I raise this issue in relation to the Bill because, although the Government are having a mature and interesting discussion on welfare in the other place, I cannot see that it does not conflict with the statutory sick pay provisions and debate we have had on this Bill. On Amendment 74A, which calls for an impact assessment regarding absenteeism, I am concerned in a different way about absenteeism. If Liz Kendall and Wes Streeting are incentivising or encouraging people who have been on long-term sick leave to return to the workforce—maybe to all those care home jobs that have just been created—will they willingly do that, or will they take advantage of this new flexible sick pay from day one? Is that likely to happen? I think that the noble Baroness, Lady Noakes, made this point. In what way would they be encouraged to employ somebody who has been on long-term sick leave if they must say, “Come and work for me—by the way, you can have sick pay from day one”, when they have taken all that time trying to persuade them to get back into work? At the very least, it becomes a bigger risk for the employer to take on such people: the very people the Government want to get back into work and who, for their own sake, should be in work, because the alternative is not doing them any good.
We need to be honest in this discussion. Sick pay was hard-fought for for all those years, but we live in a different time, when sickness is viewed differently. It is almost like a badge of honour in some instances, but it has also become a way of coping. To give your Lordships an example, when I was a further education teacher, some 25 years ago, it was the first time I had come across people taking time off for stress-related sickness. It was often when there had been a political dispute or some big row at work, or a disciplinary action had been taken. Instead of it being dealt with politically, people went on stress-related sick leave. Fair enough—that was fine when it was one or two people. But at one point, a third of the staff in a further education department of humanities were off on stress-related sick pay. As you can imagine, it was a dysfunctional department.
So I agree with the Minister when she said earlier that we are hoping that a happier workplace is going to have less stress. I get that point, but I genuinely think that something else is going on. That form of sickness has become a means for people to express their problems in a range of ways, and they lose the habit of work. My concern is that the Bill, particularly in respect of some of the less flexible ways this issue is being dealt with—in this instance, sick pay—will incentivise those regressive ways in which people are retreating from the workplace.
There is a report out today that says that Gen Zers, or whatever the term is, believe that the workplace itself makes them ill and that workaphobia has to be taken into account. I know that these concepts seem a bit flaky, but it is an academic study, so I am citing it. It says that what needs to be considered is that is why young people should be treated with leniency about not going into the workplace, because they find going into the workplace and interacting far too stressful. It is that kind of nonsense, to be frank, that I hope that we will not encourage inadvertently by this Bill.
Lord Vaux of Harrowden (CB)
My Lords, like the noble Lord, Lord Fox, I am a little puzzled by the groupings between this and the previous amendments. I have gone the opposite route and decided to speak to this group rather than the last one, but everything that I say in this group applies equally to Amendment 75, which would have created a review of the impact of the changes on small and medium-sized businesses. This group would require impact assessments to carried out for the various other effects that the Bill would have—so really it is the same subject.
Frankly, a lot of this would not be necessary if the Bill had been properly thought through from the beginning, if there was not so much detail to be filled in later by regulation and, in particular, if a proper impact assessment had been carried out on the various changes proposed. The Bill will, by the Government’s own admission, impose costs on business, disproportionately on smaller businesses, of around £5 billion, and will, again by the Government’s own admission, have potentially negative impacts on employment opportunities for those with poorer employment records. It is deeply unsatisfactory that it should not have been properly impact-assessed.
The Regulatory Policy Committee rated the impact assessment as “not fit for purpose”. It is worth reminding noble Lords what it said:
“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis, to understand the overall impact on employment, wages and output, and particularly, the pass-through of employer costs to employees. The eight individual IAs and the summary IA need to provide further analysis and evidence in relation to the rationale for intervention, identification of options (including impacts on small and microbusinesses) and/or justification for the preferred way forward”.
It is damning that that was not done before the Bill was presented to us.
Now, before the Minister points this out, I concede that the statutory sick pay individual impact assessment is the only one of 23 that is rated as good—in itself a pretty damning statistic. However, the impact assessment for the monitoring and evaluation plan for the statutory sick pay part is rated as weak. The noble Lord, Lord Hunt, has already referred to the potential behavioural aspects that arise, which are not in any way covered in the impact assessment. In fact, there is a complete cop-out; it says, “We can’t do this because of the behavioural impacts”.
Sadly, these proposed amendments and Amendment 75 in the previous group are clearly necessary, as are the others that we will debate later today and throughout the Committee process. The five-year review that the Minister referred to earlier frankly does not cut it, given the significance of the measures in this Bill and how quickly how they will have impact. Five years is way too long to wait to understand whether it is damaging.
I do not wish to test noble Lords’ patience by repeating this speech multiple times during the process of the Committee, so I ask the Minister to take as read my support for proper and timely reviews and assessments of the impacts of this Bill as we go forward.
Baroness Jones of Whitchurch (Lab)
My Lords, as noble Lords have identified, we are now continuing the important debate on statutory sick pay and specifically to address the impact of these measures on businesses.
It is important to highlight that the statutory sick pay system, and the changes that we have brought about as part of this Bill, is designed to balance providing support for the individual with minimising the costs to the employer. This group of amendments, Amendments 74A, 74B and 74C, tabled by the noble Lords, Lord Sharpe and Lord Hunt, would require impact assessments on absenteeism, enhanced sick pay schemes, occupational health, and short-notice shift working.
As I mentioned earlier, and as the noble Lord, Lord Fox, has already identified, the Government have already undertaken a regulatory impact assessment which considered the likely direct business impact of SSP changes. This included considering the impact on small and medium enterprises and sectoral impacts.
Overall, in the regulatory impact assessment, the Government estimated that the cost of delivering these measures would be approximately £15 extra per employee, a relatively modest amount when compared to the positive impacts that these changes will have for employees and overall productivity. I thank the noble Lord for the three amendments tabled in this group, all of which would require impact assessments. I look forward to debating those with the other 23 or so requests for impact assessments that the Opposition have already tabled. We have a plethora of requests for impact assessments. I reassure the noble Lord that we are at the same time updating our regulatory impact assessment and operating a post-implementation review of the measures—so the Opposition’s requests are probably not necessary.
On the noble Lord’s Amendment 74A, requiring an assessment of the impact of the changes to SSP in the Bill on absenteeism, we acknowledge that overall sickness absence may increase as a result of this Bill. This is not a loophole, nor are the Government not considering businesses; rather, it is the very objective of these changes to enable the lowest-paid employees to take time off when they are sick. Under the new system, employees will be able to take the time that they need to recover from short-term illness without struggling through work and often risking the spread of infectious diseases such as influenza. Similarly, employees with long-term or fluctuating conditions should feel able to take a day of sickness absence to manage their condition to prevent it worsening. The noble Lord, Lord Hunt, suggested that employees might be encouraged to misuse the system. However, if employers have the right policies and practices in place, the risk of inappropriate absenteeism can and should be mitigated.
Additionally, the noble Lord’s amendment would be quite difficult to deliver in practice. There is not a standard measure of absenteeism versus legitimate sickness absence, and in many instances, it would depend on whether you asked the employer or the employee. The Government intend to build on the regulatory impact assessment and, as I have said, we intend to conduct a post-implementation review of the measures in the Employment Rights Bill.
I turn to Amendment 74B, to assess the impact of the reforms in the Bill on employers’ ability to continue offering enhanced sick pay and occupational health services, particularly in low-margin sectors such as retail. I appreciate the noble Lord’s concern about the potential impact on this matter, and the Government certainly agree that it would not be in anyone’s interest for there to be a rollback of occupational sick pay or occupational health provision. However, the Government’s view is that these changes will serve only to strengthen the link between the workplace and the employee. I question why any business would want to use these changes as a reason to reduce the support that they provide their employees to help them stay in, and return to, work.
The noble Baroness, Lady Fox, asked about the Government’s policy on getting people back to work, and she was right to raise the issue. We are talking about a balance here; when people are sick, they should have the right to be off sick. I also accept the point that she made that being at work can in itself be a healing experience, and we should not lose sight of that—that there can be a positive health impact from being at work.
I once again draw noble Lords’ attention to the Keep Britain Working review. As I set out earlier in the debate, Sir Charlie Mayfield will consider recommendations on how the Government can support and enable employers to promote healthy and inclusive workplaces and support more people to stay in or return to work from periods of sickness absence. That review is expected to produce a final report in autumn this year. I believe that much of what the Keep Britain Working review is doing will address the noble Lords’ concerns, and I hope this reassures them that the Government are taking this matter seriously. We look forward to the results of the review.
Finally, I turn to Amendment 74C, which seeks to review the effects of the SSP changes on shift management and short-notice scheduling in the workplace. As discussed in relation to Amendment 74A, the number of sickness absences may go up as a result of these changes. This is because it would enable employees to take time off when they are sick.
I again reassure noble Lords that the Government are committed to understand the impact of these changes on businesses. We intend to conduct a post-implementation review of these measures in the Employment Rights Bill within five years of implementation. Additionally, as I set out in the earlier debate, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of SSP changes on a range of employers and employees.
However, this amendment would require the Government to collect a significant amount of data from businesses on what noble Lords will understand is quite a wide range of issues. We believe that this would be administratively challenging for them to provide, particularly in less than six months. This is the very thing that the noble Lord is seeking to avoid—the extra bureaucracy that he has talked about. For example, asking employers, including SMEs, to accurately record and report to government the frequency of shift cancellations and redeployments because of sickness absence is not practical or reasonable.
We have had a worthwhile, short debate on these issues, but I hope I have persuaded noble Lords that we are on the case and therefore that the amendment can be withdrawn.
Baroness Noakes (Con)
My Lords, the Minister said during her remarks that there would be a cost per employee of £15; I think she said that in the earlier group as well. Can she provide any more information on this? It seems counterintuitive. If the average number of sick days per employee is around eight, which is what the most recent survey data showed, that implies that employers are already bearing the cost of something like seven and a half days and are going to pay only for an extra half day. That does not seem to be consistent with the evidence of the nature of absences that also exist, which implies that most are at the shorter end and probably are going to be below the level at which they are currently being reimbursed by statutory sick pay.
It has been troubling me for some time, but I hope that the Minister will be able to provide some further information. I do not expect it from the Dispatch Box, although I would be delighted if it were to come from the Dispatch Box right now, but if she could write to me, I would be most grateful.
Baroness Jones of Whitchurch (Lab)
I suppose the simple answer to that is that it is in the regulatory impact assessment, which the noble Lord, Lord Vaux, acknowledged was one of the things that we got a fair rating for. I refer the noble Baroness to that, which I think will give more details.
Baroness Noakes (Con)
I have read it. There is no more detail in that impact assessment on the £15. That is why I am asking whether the Minister can provide further detail on how that £15 was arrived at.
Baroness Jones of Whitchurch (Lab)
I am happy to write to the noble Baroness.
Lord Fox (LD)
It would be very useful if she could share it with the other Front Benches as well.
Lord Hunt of Wirral (Con)
I am very grateful to the Minister. We have had a very important debate. I am particularly grateful to the noble Baroness, Lady Fox of Buckley, because we have not really spent enough time worrying about the people who are just unable to cope. Working conditions have changed so much. Stress-related sick leave is a huge issue, as is what the noble Baroness referred to as “losing the habit of work”. These are issues that we have to think about very carefully.
There is an important and complex issue of so-called presenteeism, which deserves greater attention in our discussions about workplace health and productivity. I came across some research—perhaps the noble Baroness had this in mind—carried out by Robertson Cooper: its 2023 data, drawn from over 3,000 UK respondents, revealed that almost two-thirds, 60%, of employees reported working while they were unwell, so-called presenteeism, in the last three months. That is an important issue, which has to be taken into account in any impact assessment.
The distinction is essential because not all forms of working while unwell are inherently harmful. Some, such as pragmatic or therapeutic presence, can be beneficial for both the employer and the employee. The challenge lies in identifying when presenteeism becomes detrimental and ensuring that workplace policy, including statutory sick pay reform, supports businesses in managing that balance effectively.
I am also grateful to the noble Lord, Lord Vaux of Harrowden, for reminding us of the finding of the Regulatory Policy Committee. We just need to be aware of the severe criticism that was meted out about a Bill that is making such profound changes while in the gloom of uncertainty, because no one can be actually sure what effect these changes are going to have.
“Review of parental leave(1) The Secretary of State must, within six months of the day on which this Act is passed, commence a review of paid parental leave.(2) The review under subsection (1) must explore—(a) the introduction of a statutory period of reserved, non-transferable paid parental leave for—(i) fathers;(ii) mothers’ partners;(iii) “second parent” adopters.(b) the level of statutory pay available to the parents listed in paragraph (a), through paternity leave, other reserved leave for fathers considered by the review or shared parental leave, and whether it is sufficient to encourage high take-up;(c) options for making paid leave available to self-employed fathers, and others ineligible for statutory support because they are not in regular employment, for example through a paternity allowance similar to the maternity allowance, currently available for mothers;(d) the extension of full employment rights, including redundancy protections, to fathers who take paternity leave and any other reserved leave considered by the review;(e) international examples of best practice in parental leave policy design.(3) The Secretary of State must lay the review before Parliament within 18 months of the day on which this Act is passed.”Member’s explanatory statement
This probing amendment specifies a number of issues that the proposed review of parental leave should consider, in particular a reserved, non-transferable period for fathers paid at a rate sufficient to encourage high take up. It also requires such a review to take place.
Baroness Lister of Burtersett (Lab)
My Lords, I am grateful to those colleagues who have added their names to Amendment 76 and to the Fatherhood Institute for its help.
I welcome the Bill’s improvements to paternity and parental leave, but they only scratch the surface of a policy that is letting fathers down badly. Moreover, it is disappointing to discover that paternity pay will not be a day one right—an issue addressed by Amendment 139 in the name of the noble Baroness, Lady Penn, which I support. Could my noble friend the Minister explain in her summing up why it will not be?
The amendment calls for a review of parental leave, which was required for drafting purposes, although I know that, in the Commons, the Minister reaffirmed an earlier welcome commitment to a review. The purpose now is to ensure that the review covers a number of key issues relating to fathers’ entitlement to paid leave in their baby’s first year, namely measures designed to improve fathers’ take-up of parental leave, including a “use it or lose it” period and adequate payment, taking account of international examples of best practice; the inclusion of self-employed fathers, who are currently excluded, and others currently ineligible for statutory support; the protection through full employment rights of fathers who take the leave; and the commitment to publish adequate take-up data in future years.
The aim is a simple one, on which I hope we will all agree: to strengthen the rights of fathers/“second parents” to be active parents, which, as I will argue, would thereby also strengthen mothers and prospective mothers’ labour market position. In doing so, it would further the Government’s own aspiration to achieve greater gender equality.
The current situation is pretty woeful as far as fathers are concerned. This has practical and cultural, symbolic effects: it is, in effect, saying that fatherhood is of lesser importance to family life and that, in so far as the labour market accommodates responsibilities for childcare, it need do so only for mothers. If we want to surround boys with positive symbolic messages about masculinity, what better place to start than to give their fathers the time they need to build strong relationships in infancy that last a lifetime, thereby showing that fatherhood is valued?
I do not have the time to give details of what fathers are entitled to compared with mothers, but suffice it to quote the Fatherhood Institute’s evidence to the Women and Equalities Committee’s current inquiry into the issue:
“As well as offering one of the least generous statutory paternity offers in the OECD … the UK is an outlier, especially among higher income countries, in the huge gap (50 weeks) between mothers’ and fathers’ entitlements to leave in the baby’s first year. By 2022 most countries in western Europe had a gap of 12 weeks or less”.
The partial extension of day-one rights does not touch the sides when it comes to the current shoddy treatment of fathers, which has resulted in low paternal take-up of paternity and shared parental leave. Paternity leave is dealt with by the other amendments in this group, so I will focus just on shared parental leave.
Take-up among fathers of the shared parental leave scheme, introduced 10 years ago, is a pitiful 5% of eligible fathers, according to a 2023 government report. The scheme is also skewed against lower-income families, with just 5% of the tiny population of SPL users coming from the bottom 50% of earners. Shared parental leave does not constitute an independent right for fathers: it depends on an entitled mother transferring part of her leave. The Government were warned at the time that this was going to fail in the aim of encouraging fathers to take the leave, and it did. This is in part because of the way the scheme is constructed, in part because the low rate of payment means that many fathers cannot afford to take it, and in part because some, such as self-employed fathers, are excluded altogether.
This matters for fathers, mothers, children and family life, as well as for the Government’s number one priority of economic growth. It matters for fathers because it makes it very difficult for them to play an equal, hands-on role in the upbringing of their infant children, which, increasingly, fathers wish to do. It matters for mothers because, to quote the Women’s Budget Group, of which I am a member:
“Unpaid care is the root cause of women’s economic inequality”.
So long as women carry so much of the responsibility for childcare in the private sphere, they enter the public sphere of the labour market with one hand tied behind their back. Too many women’s careers fall off a cliff when they become mothers. As the Women and Equalities Committee’s call for evidence states:
“Unequal division of childcaring responsibilities is a key driver of … gender inequality and the gender pay gap”.
It matters for children in two-parent families, not just for their relationship with their fathers but also, the evidence suggests, for their educational and cognitive development and overall family relationships. Research indicates that paternal engagement during the first year can foster ongoing engagement until a child is aged at least 11 and that this positive effect builds over time. It matters for families, as it can affect family well-being and stability.
It matters, too, for economic growth. The Joseph Rowntree Foundation and Centre for Progressive Policy calculate that more generous provision for fathers, earmarked for six weeks, could deliver nearly £2.7 billion net to the wider economy as a result of strengthening mothers’ labour market position.
The amendment requires a review to take account of international examples of best practice, because we have so much to learn from the many countries that are way ahead of us on this issue. In particular, the experience of the Nordic countries and some others, which have for some years included a reserved period of parental leave for fathers on a use-it-or-lose-it basis in their schemes, suggests that this model, together with adequate payment—I emphasise that—is the best way of ensuring fathers take up the leave, leading to a more equitable division of childcare responsibility between parents and enabling mothers to participate in the labour market on more equal terms.
Most see this as a better and more effective model than extending paternity leave, because it separates out the caregiving function of parental leave from the health and safety function of maternity/paternity leave and, after the first two weeks, it signals clearly that the father can take it at a later date, ideally on his own, helping more mothers resume their employment earlier. As the Fatherhood Institute notes:
“Reserved parental leave for fathers is seen as key to reducing both the gender wage gap and the gendered gap in men’s and women’s participation in paid employment – both of which act as an impediment to economic growth”.
In a book I wrote many years ago on feminist approaches to citizenship, I identified such schemes as a key social policy lever for promoting greater gender equality and recognising the importance of care to men as well as women and to wider society.
Much as I would like to see this as one result of the review, I should stress that the amendment in no way ties the Government’s hands as to this or any other outcome, apart from the provision of adequate take-up data. It could be seen as the soft-cop amendment to the hard-cop amendments by the noble Baroness, Lady Penn, which would require action now—I do have some sympathy for those, but we are where we are. That said, if the review fails adequately to consider the issues that Amendment 76 raises, then I fear it will be met with widespread derision.
I hope, therefore, that my noble friend will feel able to accept the amendment, in this or some other form, as a signal of intent. If not, at the very least, I would ask her to make clear on the record the Government’s acceptance that the current situation disadvantages farmers unfairly and that it must be a clear and explicit aim of the review to create a system that properly supports fathers and other second parents to play a full role in their children’s lives.
At Second Reading, my noble friend she expressed respect for the points that I and the noble Baroness, Lady Penn, made about parental leave and the desire to go further. However, she said that
“we must strike the right balance, while continuing to ensure that this remains a pro-worker, pro-business Bill”.—[Official Report, 27/3/25; cols. 1925-26.]
But the current situation is totally unbalanced as between the rights of fathers and mothers. Moreover, workers are gendered beings, and thorough reform of parental leave is in no way anti-business. Indeed, it would help ensure business can benefit fully from the contribution of female as well as male workers and would, as I have said, thereby contribute to economic growth.
Thus, on gender justice and pragmatic economic grounds, I hope the Government will accept the amendment and send a strong symbolic message to male workers that their role as fathers is fully recognised and valued. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I speak to Amendments 80 and 136 in my name. These purely clarify an entitlement to paternity leave and really follow on from the remarks by the noble Baroness, Lady Lister, on Amendment 76. Amendment 80 would extend statutory paternity leave to six weeks and allow new fathers to take this leave at any point within the first year after their child’s birth, rather than being restricted to the current 56-day window. At present, eligible fathers are entitled to just two weeks of leave, paid at a rate of less than half of full-time earnings at minimum wage. Take-up remains low and affordability is a major factor; 62% of fathers say they would take more leave if statutory paternity pay was higher.
Greater equality in parenting is essential to achieving greater equality in the workplace. At present, the unequal distribution of caring responsibilities is a major driver of the gender pay gap. On average, a woman’s earnings fall by approximately 40% following the birth of her first child and often do not recover. By contrast, men’s earnings remain largely unaffected.
Baroness Penn (Con)
My Lords, I will speak to Amendments 127, 128 and 139 in my name. Before doing so, I would like to add my support to all the amendments in this group, in particular Amendment 76 of the noble Baroness, Lady Lister, to which I have also added my name.
As we have heard already, our current system of parental leave is in desperate need of reform. For some of that reform, I accept a review is necessary. How can we improve shared parental leave? This is something that I was proud to have worked on during the coalition Government, but I and the noble Lord, Lord Palmer, have to accept that this has not delivered the change we want to see. Also, how do we extend parental leave to self-employed people—mums, dads and adoptive parents—at a proper rate of pay?
As the noble Baroness, Lady Lister, knows, I believe she is being too generous to the Government with her timelines. When this Government first took office, the Employment Rights Minister, Justin Madders, committed to the review of parental leave being completed within their first year; now, it is meant to be launched within their first year. On Report in the Commons, the Minister committed only to a launch ahead of Royal Assent of this Bill, which even on the most optimistic timetable will be after 4 July.
As well as giving important clarity to the points that the noble Baroness, Lady Lister, has made—calling for the review to cover key issues, including measures designed to improve fathers’ take-up of parental leave, such as a dedicated period of leave, adequate payment and the inclusion of self-employed fathers—could the Minister give us some reassurance on timelines? Will the review be launched within Labour’s first year in office? How long will the review take? To me, six months seems a reasonable period of time to report back on its outcomes, but I look forward to hearing from the Minister what the Government’s plan is.
While reviews are perhaps necessary in some areas, it is important not to confuse a review with action. The Minister kindly met with me last week to discuss my amendments, and it was clear at that meeting that the review would not be a consultation on specific proposals; those would have to come later. Added to any timelines for action would be a consultation on the outcomes of the review, and then, subject to its findings, further legislation. In reality, we are talking about a timeline extending over several years.
I am afraid that is not good enough on an area where there is clear evidence to support action now, and that is on improving paternity leave. It has been said that we are an outlier on how bad our paternity leave is in the UK and how unequal provision is between mums and dads or second parents. And yet, if you increased paternity leave to six weeks’ pay at 90% of salary, capped at average earnings, as my Amendment 127 does, the evidence for the benefits is overwhelming.
As the noble Baroness, Lady Lister, has said, it would improve things for dads. This week is Mental Health Awareness Week. According to research by the Dad Shift and Movember, nearly half of new dads report experiencing multiple symptoms of depression in the first year after their baby is born; 82% of them agree that better paternity leave is the number one thing that the Government could do to protect new dads’ mental health. We have heard how it will support new mums and kids too. And it will support economic growth—and that is meant to be this Government’s number one priority.
This last point is really important. In our discussions on this Bill, I am acutely aware about the concerns employers have expressed about many aspects of the Government’s plans, but, in the context of our earlier debate on statutory sick pay, it is important to remember that statutory paternity pay is reimbursed for businesses at a rate of 92% for larger businesses and 108.5% for those which qualify for small business relief. Of course, it is not only the pay that affects business but also the prospect of more administration and disruption, which can be a concern. This is why for smaller businesses the government compensation rate is at over 100%.
As we are so far behind many other countries when it comes to paternity leave, we can look at whether those concerns have been borne out in practice when leave is more generous. The short answer is that they have not. A study by the National Bureau of Economic Research in the US on Danish parental leave showed no reduction in firms’ output or decline in the wellbeing of other employees at the firm when parents took time off at the birth of their child.
One of the reasons that better paternity leave has the potential to bring such significant economic gains is that, although you lose the dad's economic output for the time he is off, the loss is limited to that period only, whereas for mothers you see an increase in labour market participation and hours worked on a sustained basis, increasing the level of economic activity overall. Reimbursing paternity pay would come at a cost to the Government, but again increased economic activity as a result of the policy would offset four-fifths of that.
It might also be argued that it is not a priority for employers or employees when there are so many other issues that need our attention. However, only 18% of the public think that two weeks is enough paternity leave and 81% agree with the statement that “I believe that giving fathers a decent amount of paid paternity leave so they can be a bigger part of their children’s lives is good for families and good for the country too”. That includes a majority of support from voters from all political parties across the spectrum, including Reform.
As I mentioned, many employers already offer enhanced pay and leave, because they see the benefits for their employees but also, as companies, for recruitment and retention of staff. According to CIPD data from 2024, around 30% of organisations enhance paternity leave beyond the statutory two-week minimum, and around 37% enhance paternity pay beyond the statutory provision.
If this is the case, why is government action needed? For two reasons, I think. First, we are talking about a culture shift. Our system of paternity leave does not reflect many people’s attitudes and plans for starting a family in today’s society. None the less, moving away from the current system is a big shift for our society, and it is one that will not happen on its own. At the moment, the statutory system tells employers that two weeks is enough, and it tells employees that that is all they can expect.
The second reason, as I have said, is that the Government reimburse employers for the statutory system. If a firm wants to go further than the statutory entitlements, they bear the burden of all the costs. That is particularly difficult for smaller businesses. While there are long-term benefits for employers, we also get benefits as a society for supporting people to start and grow their families, and we should recognise that. The CIPD asked employers about their views on paternity leave in 2022 and 2024, and almost half supported extending the statutory paternity leave and pay system, with only 24% opposing it.
Finally, I turn briefly to my other amendments in this group, which would make smaller, but none the less important, improvements to our system of paternity leave. Amendment 139 takes the new day one right to paternity leave included in this Bill and makes it paid. I have to confess that, from everything the Government had said, I thought it would be paid, as they always talk about extending the right to paternity leave and unpaid parental leave. Well, parental leave is always unpaid, so specifying it for one but not the other feels a little misleading.
It also makes no policy sense. We know the biggest barrier to take up of paternity leave is financial. The current statutory rate may be low, but it is far better than nothing at all, particularly at such a point of financial stress in families’ lives. It makes no sense to me that Ministers and the Government acknowledge that paternity leave should be a day one right but are introducing it in a way that makes it hard, if not impossible, for those who most need it to actually take it up. On the subject of costs to businesses, this would be minimal. As I have said, they are reimbursed for this cost.
Amendment 128 would require businesses with 250 or more employees to publish their leave policies on their websites. That would help people thinking about a job move to have transparency on what their entitlements are, and it would help create a race to the top, where companies would need to keep pace with their competitors to attract the best talent.
Unlike almost every other measure in the Bill, this policy has actually been consulted on. It showed that 98% of respondents supported the proposal, including 96% of businesses and business representative organisations. One of the consultees could be considered to be Sir Keir Starmer. He was asked about this policy by Mumsnet in 2020 and said:
“I completely support this. In fact I’m really surprised it hasn’t already happened … I will wholeheartedly support this”.
Perhaps, in responding to this debate, the Minister can explain to the Prime Minister why this has not happened already and why his Government do not want to take the opportunity of this Bill to correct it.
Baroness Morrissey (Con)
My Lords, I am also pleased to support Amendment 76 in the name of the noble Baroness, Lady Lister, and add my voice to others in the Chamber asking the Government to review paid parental leave in this country. I confirm, as someone who is involved with a number of multinational businesses, that Britain certainly has fallen behind the modern practices of other countries.
I appreciate that, as my noble friend Lady Penn has already said, some Members of this Committee might consider this to be a matter best left to businesses rather than government policy or law. Unfortunately, in my experience, many British employers—not the ones cited by my noble friend Lady Penn, but the others—take a rather old-fashioned view of paternity leave, leaving the UK at risk of continuing with this unusually gendered approach to parenting and childcare, which is ultimately detrimental to society, to women, to men and to the economy.
As set out in my registered interests, I chair the Diversity Project, which seeks to future-proof the investment industry’s ability to attract and develop the very best talent. We have been working with almost 120 member firms on enhanced paternity leave and pay. There are a number of early adopters, including Aviva, Mercer, Janus Henderson and Julius Baer, which have all reported positive impacts on culture, retention and staff morale. In a “Dragons’ Den”-style competition —I do not see the noble Lord, Lord Sugar, in the Chamber—at our International Women’s Day event earlier this year, somewhat ironically, enhanced paternity leave was voted overwhelmingly by the audience as the single biggest game changer for women’s progress. I endorse the point made by the noble Baroness, Lady Lister, and others that this would help drive gender equality.
Baroness Jones of Moulsecoomb (GP)
My Lords, I will speak to Amendments 127, 128 and 139, which I have signed, but all the amendments in this group have real value.
In my relatively long life, in which I have argued endlessly for human rights, I think there can be only one or two times when I have stood up and argued for men’s rights, because I feel they have plenty of them and they do their own arguing. But, of course, this is a human rights issue. It is not just men’s rights; it is women’s rights as well, because the mothers will benefit if the fathers have parental leave.
Statutory paternity leave does not support families only in their first weeks; it helps rebalance society by moving away from a statutory parental leave system, which sends a strong message that parenting is a woman’s job and that men should keep working and stay out of the home. That idea is not just present in the legislation; it is embedded and deeply rooted in many people’s prejudices. Maternity leave is already a very hard-fought and essential right, but the imbalance between maternity and paternity leave is structurally embedding gender differences that do not benefit society.
This legislation can set young families up for a stronger start by ensuring that new fathers have plenty of paid time off work in those early weeks and months that are so crucial to a child’s development. I hope the Prime Minister was listening to the remarks of the noble Baroness, Lady Penn, and that he will perhaps urge this House to adopt at least some of these amendments.
Lord Russell of Liverpool (CB)
My Lords, I have put my name to Amendment 76 in the name of the noble Baroness, Lady Lister, and Amendments 127 and 128 in the name of the noble Baroness, Lady Penn. I rise as one of, I think, only two fathers in this debate so far and, as it happens, a recent grandfather. I thought it would be helpful to have a little bit of balance in a discussion on a group of amendments which is about what appears to be an imbalance in the respective roles of fathers and mothers.
It seems to me that there are three key reasons to act, rather than to think and debate and dance on the head of an ever-smaller pin. The first is the early years argument. I, together with other noble Lords and noble Baronesses, will be arguing the case for early years being included and very deeply thought about in the Children’s Wellbeing and Schools Bill. Indeed, the Secretary of State for Education yesterday said that early years was her number one priority. It is inarguable that changing our approach to paternity pay and giving fathers the opportunity to have a much greater presence in the lives of their children in the early years—and also, very importantly, in support of their partner or spouse, particularly if she is working or is attempting to work—is frankly a no-brainer. In that context, that is a very good first reason.
The second reason is that the economic arguments for this are also very strong. The report by the Joseph Roundtree Foundation, which came out only three weeks ago, and which was mentioned by, I think, the noble Baroness, Lady Lister, is fairly convincing. It says:
“Building on the evidence from other countries on the impact of paternity leave, the”
Centre for Progressive Policy—one would imagine that His Majesty’s Government would be in favour of an institute with a name like that—
“has modelled the economic costs and benefits of more generous paternity leave options. This novel model was built to help policy-makers understand the labour market effects – and associated economic and tax costs – of varying paternity leave terms in the UK”.
Its conclusions were very simple:
“The modelling shows a positive economy-wide effect of £2.68 billion, driven by the gains achieved when more women move into work and work more hours”.
The second bullet point is particularly apposite to the Government’s aims and what they are trying to achieve with the Bill:
“The modelling also shows that the increase in labour market outputs for this policy option is mainly driven by those at the bottom and middle of the labour market”.
That is a policy outcome you would think was very close to the Government’s heart.
Turning to the third and final reason, for 31 years I was a professional headhunter and, as a headhunter, you become relatively expert in what I might call the psychology of attraction and repulsion—what attracts people to particular types of employment or employer, and what detracts from that degree of attraction. There is increasing evidence to show that companies that are thoughtful, progressive and transparent about the offering they are making to both fathers and mothers stand a much better chance in this labour market of attracting people of real talent who have many choices they could follow up on. Also, relating back to comments made by the noble Baroness, Lady Fox, in a previous group, an important issue is that many individuals have a degree of trepidation about working for potential employers because they are uncertain of the working environment and how it might impact on their ability to play a full part in family life.
For those three key reasons, I support not only having a long hard look at paternity leave—as the noble Baroness, Lady Penn, said, frankly, we have been looking at it for longer than is either necessary or good for us—but, for the good of families and children, just getting on with it.
Baroness Whitaker (Lab)
My Lords, I add my support to this group, in particular to Amendment 76 in the name of my noble friend Lady Lister. I commend her illuminating and penetrating introduction. Indeed, all the speeches that we have heard set out a very strong case.
When I worked in an organisation, I had women colleagues whose partners could not afford to take even the leave they were entitled to, thus further burdening the tired mother and losing those irreplaceable bonding first days, to the detriment of both child and father, as many noble Lords have said. That bonding and support for the mother is just as important for adoptive fathers and stepfathers. Why should self-employed fathers be unequally treated? They are just as much fathers. I hope that my noble friend the Minister will carry out the review as set out in this amendment.
Lord Bailey of Paddington (Con)
My Lords, I support Amendments 127, 128 and 139 from my noble friend Lady Penn. I too am a father, so I have an interest in that regard. These amendments will be very useful to the poorest families in the country because currently, only the very well paid get access to serious paternal leave.
As someone who comes from a community that has suffered horribly from the absence of fathers, I know that an early intervention that ties a father emotionally, financially and in any other way to that family unit is very important. The impact it has on educational outcomes and the finances of the family into the future are hugely important. My community is more than three times more likely to be impacted by poverty and all the downsides that poverty inflicts because of that lack of an initial paternal connection to the family.
This country is also facing a very low birth rate. Many young men in this country will tell you that they cannot afford to have children. Paternity leave will be a big part of addressing that. So, supporting our birth rate in this country—addressing that demographic time bomb—is very important.
The mental health of men in this country has been poor for a very long time. Part of turning that around is improving how fatherhood is perceived, so that young men in particular lean into that role and take pride in being a father. That also has a strong knock-on effect for the women involved: they receive support in the home, and it helps them return to their own careers, as we have heard from so many Members of your Lordships’ House. In the poorest communities in this country, many of the real breadwinners in the household are the women. If they can be supported back to work, that will have a profound impact on the mental well-being of the entire family.
I have been on a personal journey to make this a day one right. Because of the profound effect that the lack of a father in the household has on many aspects of society, this should be a day one right. Basically, some things are just worth paying for, and if this has a cost to the Government, so be it, because the upsides, socially and financially, are massive and beyond measurement.
Lastly, as is well documented and as many noble Lords have already said, the benefits to companies are profound. The challenge will be the smaller companies, where one or two people form a significant proportion of the workforce. That is where this conversation has to be sold, where the rhetoric is important, because if smaller companies adopt this approach, I believe it will happen. Larger companies already know the benefits this has for their workforce.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, I beg to move that the debate on this amendment be adjourned.
Lord Katz (Lab)
My Lords, it has been agreed by the usual channels that we break at a time convenient for the Minister to make a Statement, thus allowing her to continue her other business outside the House.
Lord Katz (Lab)
My Lords, if I felt we were able to finish the group in the next five minutes, that would be fine. We have had a good debate, but this is an important topic, and it is important that the Committee is able to finish the group by hearing from any other Back-Benchers who might wish to contribute, as well as from the Front-Benchers and the Minister. All of the Committee might not be aware of it, but we have agreed through the usual channels that we will have the dinner break early to accommodate the repeat of the Statement. We are ultimately in the whole Committee’s hands. That is why we are breaking now. I know it is not usual to break midway through a group, but, as I say, it has been agreed through the usual channels that a dinner break at 6.30 pm would take priority. Perhaps we can resolve this.
Lord Sharpe of Epsom (Con)
I have had confirmation from my side that the usual channels have agreed.
Baroness Jones of Moulsecoomb (GP)
I am grateful to the noble Lord, Lord Katz, for his explanation.
Baroness Jones of Moulsecoomb (GP)
Stop groaning.
Normally, if today’s list says, “at a convenient time”, that means at the end of a group surely.
Lord Katz (Lab)
As I said, I understand that this is unusual, but it is in no way unprecedented. We have broken in the middle of a group before. It is not ideal, but we are where we are. I think it is in the best interests of the Committee, especially as it has been agreed through the usual channels, to hear from both Front Benches and any other Back-Benchers on this group in good time, and to hear, in the meantime, a repeat of the Statement from the Minister, so that everybody gets the best of all worlds. I know this is not usual practice, and we will endeavour not to do it on future Committee days.