Wednesday 16th July 2025
(1 year, 2 months ago)
Lords ChamberEmployment Rights Act 2025 View all Employment Rights Act 2025 Debates Read Hansard Text Watch Debate Amendment Paper: HL Bill 113-II(a) Amendments for Report (Supplementary to the Second Marshalled List) - (15 Jul 2025)
17:28 - Division on Amendment 49 - Ayes: 304 / Noes: 160 - Amendment 49 agreed.
19:01 - Division on Amendment 96 - Ayes: 248 / Noes: 150 - Amendment 96 agreed.
19:45 - Division on Amendment 97 - Ayes: 100 / Noes: 136 - Amendment 97 disagreed.
20:30 - Division on Amendment 98 - Ayes: 202 / Noes: 138 - Amendment 98 agreed.
21:19 - Division on Amendment 100 - Ayes: 124 / Noes: 131 - Amendment 100 disagreed.
21:43 - Division on Amendment 104 - Ayes: 47 / Noes: 121 - Amendment 104 disagreed.
21:54 - Division on Amendment 105 - Ayes: 184 / Noes: 123 - Amendment 105 agreed.
22:05 - Division on Amendment 106 - Ayes: 180 / Noes: 123 - Amendment 106 agreed.
22:16 - Division on Amendment 107 - Ayes: 148 / Noes: 155 - Amendment 107 disagreed.
Lord Goddard of Stockport (LD)
My Lords, I will be brief—not quite as brief as the noble and learned Lord, Lord Phillips of Worth Matravers, but I shall do my best, and I promise to keep away from the police and definitely the clergy. I had lunch with the right reverend Prelate the Bishop of Manchester, so I think I am safe for today.
While we agree that the current two-year qualifying period is too long, we are concerned about removing it entirely without a clear statutory probation period in place. This could leave businesses in a state of uncertainty, with a gap between the removal of the qualifying period and the introduction of the new probation framework. It risks inconsistency in employment tribunals, as claims will be judged under a system that lacks clarity until the probation period is formally established.
Amendment 49, in the name of the noble Lord, Lord Sharpe, would reduce the qualifying period to six months. Most other amendments in this group are consequential to ensure legislative consistency. We are gently supportive of this amendment, as it would reduce the timeframe for an employee with a plausible case to claim unfair dismissal, while allowing businesses time to correct genuine and non-pernicious hiring mistakes. If the noble Lord were to test the opinion of the House, we would support him on this occasion.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, this Government were elected on a manifesto to provide unfair dismissal protection from day one of employment—not two years, not six months, but day one. To deliver this commitment, we will remove the qualifying period for these rights.
The Government recognise that, from time to time, employers will need to fairly dismiss an employee for a fair reason. We expect that most employers already fairly dismiss employees, and the process need not be too arduous. Our changes will not prevent fair dismissal. An employee who has been working in the job for some time but whose performance has dipped will continue to have the standard protections against unfair dismissal. However, the Government believe that it is not right to expect employers to have to meet the same standards in the first few months of employment when they are assessing their newly hired recruit and deciding whether that person can deliver what the employer expects. This is why our policy creates a statutory probationary period, during which light-touch standards for dismissal relating to an employee’s performance and suitability will apply.
The noble Baroness, Lady Lawlor, asked what length the probationary period would be. As we have said previously, the Government’s preference is for nine months. We intend to consult on the duration and how the light-touch standards will operate. The current two-year qualifying period is designed not as a training period but a qualifying period before the individual can claim unfair dismissal. If the amendments tabled by the noble Lords, Lord Sharpe and Lord Vaux, were to be accepted, employees would still have the threat looming over them of being fired arbitrarily.
Amendment 51 preserves the policy in the Bill of exempting a dismissal due to a spent conviction for many qualifying periods—a point raised by the noble and learned Lord, Lord Phillips. I am pleased that the noble Lords agree with the Government’s policy, at least to that extent.
However, I can tell the noble Lord, Lord Vaux, that the Government do not believe in protection for some workers in some limited circumstances; instead, they believe in protection for all employees, benefiting 9 million people. The noble Lord spoke about the needs of young people looking for work. Of course we identify with that, and the Government are committed to supporting people as they take their first steps into the world of work or return to work. As the Prime Minister set out on the Get Britain Working White Paper in November 2024:
“Our country’s greatest asset is its people”.
As I explained in Committee, we are
“transforming the apprenticeship levy into a new growth and skills levy that will deliver greater flexibility”
for learners and employers
“aligned with the industrial strategy”.
This will include
“shorter duration and foundation apprenticeships in key sectors, helping more people to learn new high-quality skills at work, fuelling innovation in businesses across the country, and providing high-quality pathways for young people”.—[Official Report, 21/5/25; col. 305.]
We also intend to limit unpaid internships for those who are part of an education or training course. The law is clear that, if an individual is classed as a worker, they are entitled to at least the national minimum wage and anyone eligible must be paid accordingly.
Beyond enhancing learning on the job and ensuring that a fair wage is paid for young people’s work, we also believe that all employees should be provided with security of work through protections from being fired arbitrarily. It is no less distressing to lose a job at the start of your career than at any other point in the years that follow. However, the Government recognise that employers use probationary periods to assess new hires’ performance and suitability for their role. We will ensure that UK businesses can hire with confidence.
The noble Lord, Lord Sharpe, talked about social mobility. We recognise that good employers take a chance on what we might call “rough diamonds” up and down the country. The valuable time that employers take to support new hires by developing their skills and their talents on the job is not recognised often enough. The statutory probationary period will enable this, with light-touch standards for fair dismissals. We have said explicitly that our intention is to provide for a less onerous approach for businesses to follow to dismiss someone during their statutory probationary period for reasons to do with their performance and suitability for the role. Of course, that will apply equally to healthcare employees.
The noble Lord, Lord Sharpe, talked about potentially increasing the number of tribunals. Provided that the employer can show that the reason for dismissal was fair, they should have no concerns about the outcome, as nothing is really new from the current situation.
The noble Lord, Lord Hogan-Howe, asked about police officers. I understand that they are excluded from the existing legislation, as they would be from the Bill. In that sense, there is no change.
Noble Lords have raised the issue of a cultural fit, which, of course, can mean many different things. “Not a good fit” is often used euphemistically to refer to attributes such as an employee’s work ethic, their level of commitment to the job, or how they interact with their colleagues. In many situations, these reasons will fall into the category of dismissal for conduct or capability, to which the new light-touch standards will apply. If the cultural fit is linked to a protected characteristic then of course dismissing someone for that reason could lead to discrimination claims, and the Bill does not affect that.
Beyond these reasons for dismissal, which clearly fall within the conduct and capability category, the Government will carefully consult on what other kinds of “some other substantial reason” dismissals should also be subject to those light-touch standards. The Bill contains a power for the Government to define what a “some other substantial reason” dismissals “relating to the employee” should mean. As I have noted, the intent is to define what relates to an employee’s performance and suitability for their role. We will welcome employers’ and trade unions’ input on that important issue. However, these amendments would remove the Government’s statutory probationary period to enable light-touch standards for fair dismissals for the first nine months of employment.
Noble Lords asked about consultation. We have already consulted on the proposals, and we are continuing to engage with trade bodies and trade unions prior to publicly consulting later this year. The Secretary of State for Business and Trade issued a letter to stakeholders on Thursday 26 June, which outlined the fundamental principles that are guiding the Government’s development and implementation of day-one rights to unfair dismissal protections and invited stakeholders to engage on the detail of the policy. Should your Lordships be interested, I have now placed a copy of that letter in the House Library. I should also say to the noble Baroness, Lady Neville-Rolfe, that the road map shows that these day-one rights, including protection from unfair dismissal, will not be introduced before 2027.
In the meantime, these amendments would not deliver on the Government’s manifesto commitment to introduce a day-one right against unfair dismissal, leaving many newly hired employees without robust employment protections. I therefore ask noble Lords not to press their amendments.
Finally, my Amendment 52 is simply a minor technical amendment that corrects a cross-reference in Schedule 3. With that, I ask the noble Lord to withdraw Amendment 49.
Baroness Lawlor (Con)
Before the Minister sits down, is nine months now the Government’s official position on the initial period? If it is, can they confirm what they are minded to put into their light-touch unfair dismissal arrangements?
Baroness Jones of Whitchurch (Lab)
My Lords, as we have said before, we will continue to consult on this but that is our preferred option at this stage. We think that is a reasonable balance between the current arrangements and some of the proposals we have before us today.
Lord Sharpe of Epsom (Con)
My Lords, I am enormously grateful to the Minister for her response. It was remiss of me earlier not to thank the noble Lord, Lord Vaux of Harrowden, and my noble friend Lady Neville-Rolfe for signing various amendments. I am grateful to the noble Lord for his comprehensive and powerful speech, and for reminding us of the comments made by the noble Baroness, Lady Finlay of Llandaff, about GP surgeries.
As the noble Lord, Lord Goddard, pointed out, we have heard from the police, doctors, businesspeople, lawyers, vets and the clergy, and there was no argument in favour of the status quo but there were powerful arguments for common sense. I wonder whether the silence from the Government Benches indicates a degree of unease in what we are debating—a change that will fundamentally alter the balance of risk in hiring, at a time when unemployment has risen in every month that this Government have been in power.
This clause will do nothing to promote fairness in the workplace. It will erode flexibility, choke opportunity and harden the barriers that those on the margins already face. The Minister argued that employers have nothing to fear from tribunals, but the Government’s own impact assessment says that they expect the number of cases to rise by 15%, so I am afraid I do not follow the logic of her argument.
Also, the Government’s own impact assessment admits—I will repeat this, even though the noble Lord, Lord Vaux, did not—that introducing day-one rights to claim unfair dismissal would
“damage the employment prospects of people who are trying to re-enter the labour market, especially if they are observed to be riskier to hire”.
As the noble Lord said, the Government already know that, so why are they doing this?
The noble and learned Lord, Lord Phillips of Worth Matravers, asked a very to the point question, and the noble and right reverend Lord, Lord Sentamu, made an argument based on his experience. Both noble Lords were, in effect, making the point that this is also the compassionate thing to do.
This clause is not ready, safe or wise. We need to avert what my noble friend Lady Neville-Rolfe described as a “looming tragedy”. Therefore, I seek to test the opinion of the House.
Member’s explanatory statement
This amendment is consequential on my other amendments of clause 26.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, these government amendments are tabled in the name of my noble friend Lady Jones of Whitchurch. They target the application of the clause to a set of restricted variations, to better focus the measures on unscrupulous “fire and rehire” tactics. We have heard many representations from both businesses and trade unions on the effect of this measure, and we have listened to the well-argued points in this House and the other place. We have greatly valued the input and co-operation of groups across industry on this issue, including the CBI, the British Retail Consortium and their members, as well as the TUC, Unite, USDAW, the RMT and many other businesses and trade unions. It is our intention to ban the unscrupulous use of “fire and rehire”, and we were elected on a manifesto commitment to do so. However, we want to avoid unnecessary restrictions on the ability of employers to make essential operational decisions.
Amendments 69 to 72, 77, 79, 82, 86, 91 and 92 mean that fire and rehire will be an automatic unfair dismissal in relation to restricted variations unless the employer is in severe financial difficulties and has no reasonable alternative. These restricted variations are pay, number of hours, leave entitlement and those changes to shift patterns that will be specified in regulations.
Lord Hunt of Wirral (Con)
My Lords, I agree with the noble Lord, Lord Goddard of Stockport, that, as we warned when we discussed it in Committee, Clause 26 was, as originally drafted, quite simply unworkable.
As we reminded noble Lords throughout Committee, the clause was far too broad. It would have captured entirely routine contractual changes, such as simple variation in work location, and treated them as fire and rehire cases. That approach was not only impractical but potentially damaging to employers and employees alike. We therefore welcome the Government’s decision to bring forward amendment that define the concept of a restricted variation. This brings much-needed clarity to the legislation. Although I would not go so far as to say that the clause now flies, it is at least comprehensible.
The Minister quoted Unite. May I quote Unite back at him? It has just issued a statement saying that it condemns the Government’s amendments, which in its own way suggests that progress is being made. The Minister would be well placed to consider the rather detailed brief that Unite has delivered, condemning the way in which the Government are now reworking Clause 26. It suggests that progress is being made and all our warnings are coming to fruition. One now has to wonder, I suppose, whether the realisation dawned when someone in Whitehall spotted that the original drafting could have torpedoed the Government’s own plans to relocate 50% of senior civil servants out of London.
Of course, these amendments, while helpful, have added layers of complexity. Look at what Clause 26 now represents: it is a recipe for going to Peers such as the noble Lord, Lord Hendy, and asking, “What does this mean?” There is so much here that is very difficult to understand; these amendments have added layers of complexity. The fire and rehire provisions are probably slightly more workable now—I say this slightly optimistically—but, my goodness, they are intricate. No wonder the Government are preparing to consult on the matter in the autumn; that consultation will be crucial.
I quote another major figure: Mike Clancy, the general secretary of Prospect. He has warned that
“the government must be careful it doesn’t inadvertently create a veto against all contractual change”.
Surely that is the risk. Among the restricted variations now listed are reductions in entitlement to pay, changes to performance-based pay measures, alterations to pensions, variations in working hours or shift times, and reductions in leave entitlements. These are precisely the sort of changes that businesses, particularly smaller ones, often need to make—not recklessly, but to adapt, restructure or just survive during periods of financial strain. So we urge the Government to conduct this consultation with care. The views of employers must be front and centre. The impact on small and medium-sized businesses must be fully understood. Yes, constraints matter, but so do incentives. If we are serious about improving employment practice, we must not just punish the worst but support the best.
As amended, this clause is better, but we look forward to hearing from the Minister how he will respond to the many criticisms that have been made.
Lord Katz (Lab)
My Lords, I thought for a minute that concord might break out across the House—it did at least partially, but not quite. However, as the short debate we have had today and the debates we had in Committee have shown—the noble Lord, Lord Goddard of Stockport, identified this—there is wide agreement across your Lordships’ House that the unconscionable tactics we saw P&O Ferries use should never be allowed again. We have also heard clear arguments that employers will need to make reasonable operational changes and that this should be permitted.
I begin with Amendments 74 and 88 in the name of the noble Lord, Lord Sharpe of Epsom, which seek to make it clear that, where an employer makes redundancies because they have had to change location, this should not be an automatic unfair dismissal. We agree. If there is no longer a job for the employee at a work location because that location has had to close down, this is unfortunate but is still a redundancy situation. That is why new Section 104I will apply only when the principal reason for the dismissal falls within that section. Where an employee’s place of work is closed, the principal reason for their dismissal is likely to be redundancy. We will set out further detail on this matter in our planned code of practice.
Further, the changes that the Government are making through their amendments will mean that a change to the location at which an employee works is a non-restricted variation. This means that, even in cases where there is no redundancy situation, a dismissal for failing to agree to a new work location will not be automatically unfair. An employer must still follow a fair process when making such dismissals.
Amendment 73 in the name of the noble Lord, Lord Sharpe, seeks to limit the protections in the Bill to cases in which fire and rehire was used to reduce pay and benefits. Government Amendments 69 to 72, 77, 79, 82, 86, 91 and 92 will focus the clause’s protections on variations to certain terms—specifically pay, leave, total hours worked and specified shift patterns. Those terms were identified because variations to them would have a significant impact on employees and should not be imposed under the threat of fire and rehire. This is, we believe, in line with the intention of the noble Lord’s amendment.
In his speech, the noble Lord, Lord Sharpe, raised the comments from Unite and Prospect. I think I am right in saying that they were askance. They show that there is a variety of views within the trade union movement as well as across industry. We understand that Unite would like stricter conditions on fire and rehire. We feel that, having consulted a wide range of trade unions—including, of course, the TUC—and a number of business organisations, as well as businesses themselves and representative business organisations, including the CBI and the BRC, we have struck the right balance in the way we have constructed the clause.
Amendment 75 in the name of the noble Lord, Lord Goddard of Stockport, proposes to limit the clause to contract variations that are not one of a list of protected terms and are otherwise minor and non-detrimental. The Government’s amendments, which limit the clause’s automatic unfair dismissal protections to a list of restricted variations, achieve the noble Lord’s intended outcome; he very graciously acknowledged this. They also have the benefit of being specific. For example, the Government’s amendments will not require an employment tribunal to come to a decision about whether a variation should be considered minor on the facts of each case. They also give employers flexibility to make reasonable location changes, which employers have told us is an important operational consideration and which would not be possible under the noble Lord’s amendment.
I therefore beg to move the amendments in the name of my noble friend Lady Jones of Whitchurch and ask the noble Lord, Lord Sharpe of Epsom, not to move Amendment 73.
Member’s explanatory statement
This amendment and other amendments of clause 26 would limit new section 104I(1) of the Employment Rights Act 1996 to cases where the variation of the contract of employment was of a particular kind. This includes reductions in an employee’s pay or time off and changes to the number of hours an employee is required to work.
Member’s explanatory statement
This amendment is consequential on my amendments of clause 26 at page 46, line 36 and page 47, line 2.
Member's explanatory statement
This amendment is consequential on the amendment of clause 26 at page 47, line 2 that inserts a new subsection (4A) into section 104I of the Employment Rights Act 1996.
Lord Katz (Lab)
I apologise for interrupting the noble Lord’s flow, but I feel that his comments on political funds go a fair way outside the scope of the amendments we are speaking to today. There will be plenty of time to discuss political funds next week on Report.
Lord Leigh of Hurley (Con)
With the greatest respect, I do not know if the noble Lord has read my amendment, but that is exactly the point. The point is that before the Bill is passed there should be consultation on these proposals, but there is no opportunity for consultation because they are implemented at Royal Assent. The Government keep telling us that there will be a consultation, but how can there possibly be consultation if the measures come in at Royal Assent?
Still, I am grateful to the noble Lord for that interruption because it proves the point. It also allows me to explain to him another payment from the Unite political fund, which he may not be aware of, to the Marx Memorial Library. I kid you not—you could not make it up. I am sure the members of Unite are thrilled to know that their hard-earned wages are going to support the Marx Memorial Library, but when the Bill becomes an Act, in a matter of months, they will no longer have the right to see that disbursement.
If that is what Unite wants to do then that is up to Unite, but surely it should not be covered up. All I am asking at this time is that proper consultation on the effects of Parts 4 and 6 should take place before this is ramrodded through on the statute book without any proper consultation and discussion with, as the Government like to call them, “relevant stakeholders”. It is on Amendment 106 that I will probably be seeking to test the opinion of the House today.
Lord Sharpe of Epsom (Con)
My Lords, I shall speak to Amendments 105, 107 and 159 in my name. On Amendment 105, the Government are well aware that this Bill, in particular Part 1, will have a detrimental effect on seasonal work and seasonal industries, but they have failed to provide any clear definition of what seasonal work is. We therefore think it is essential that the Bill includes a precise definition to protect those vital sectors to ensure that the law reflects their unique and fluctuating nature. We are discussing the lives and livelihoods of thousands who work not in rigid year-round roles but in the beating heart of seasonal industries, such as agriculture, hospitality, tourism and the performing arts. Their work ebbs and flows with seasons, festivals, harvests and holidays, not according to neat quarterly reporting periods. Yet, under the present draft, a 12-week reference period is being proposed as a basis for determining what constitutes an established pattern of work.
Let us pause on that. Twelve weeks—barely three months or, one might observe, the precise duration of just one of the four seasons—is being treated as a sufficient measure for sectors whose very nature is defined by unpredictability and periodic intensity. That is not only an inadequate metric but, in many cases, an actively misleading one. A fruit farm may employ hundreds in May and none by August. A theatre technician might work flat out during festival season and then have no engagements for months, or be working elsewhere. A seaside hotel may be bustling in July but deserted in November. To take a short-term temporary rise in demand and then draw long-term legal assumptions from it about continuity of work is not merely a flawed approach but deeply unfair to both employers and workers.
Businesses cannot predict with such precision. They cannot bind themselves to a rhythm that the market does not keep. If they are forced to do so, they will, understandably, become more cautious. They will hire fewer people, reduce opportunity and retreat from flexibility altogether. Flexibility is not a sin, nor is it bad for an economy. In many cases it is the only practical means by which people—students, carers, parents and artists—can participate in the labour market. We must not make mistake irregularity for instability, nor seasonal work for insecure work.
This amendment does something elegant and essential: it defines seasonal work in clear, practical terms; it captures its recurring yet temporary character, grounded in the real operational rhythms of key sectors; and, crucially, it instructs the Secretary of State to have regard to this definition when drafting regulations. That is not an escape clause; it is a safeguard against blunt policy-making. We are not asking for a loophole; we are asking for recognition that not all labour is uniform and not all employment patterns can or should be squeezed into the same regulatory mould. If we pass this Bill without such a safeguard, we risk chilling seasonal hiring altogether—not protecting workers, just denying them opportunities.
I am grateful to my noble friend Lord Roborough for signing Amendment 107 and I look forward to hearing the answers to the questions that he asked, particularly on the suicide statistics. I hope the Minister is able to address those. Before turning to the matter at hand, I must begin with an unequivocal condemnation of the Government’s recent family farms tax policy. This disastrous measure has placed an unbearable strain on family farms, which are the very foundation of our rural communities and the heart of our national food security. Instead of supporting these hard-working families, the Government have chosen to punish them with policies that threaten their very existence. I urge the Government to commit today to reversing this tax immediately for the sake of our farmers, our countryside and our country.
Having said that, I turn with equal concern to the Employment Rights Bill. Although this Bill’s goal is to enhance worker protections, which is commendable, it tragically fails to take into account the unique realities of farm businesses and seasonal work. As we have heard, farming is unlike any other industry. It is defined by seasonal peaks and troughs, by work that is dictated by the weather and the cycles of nature, and by labour demands that can change from one week to the next. To impose inflexible employment rights designed for stable year-round jobs on these seasonal industries is to misunderstand them fundamentally.
Take, for example, the proposal to extend unfair dismissal rights from day one of employment, which we have just discussed, or the Bill’s restrictions on zero-hours contracts, which would further exacerbate some of these issues. Zero-hours contracts in agriculture are not a tool of exploitation but a necessary mechanism for managing the ebb and flow of seasonal labour. Moreover, the proposal to require compensation for cancelled shifts fails to consider farming’s intrinsic unpredictability. Decisions about work can hinge on weather conditions that change with little notice. To expect farmers to pay for cancelled hours when fields are unworkable is simply unrealistic and unfair.
Even the Bill’s provisions on the right to request flexible working place an undue burden on farmers. Agricultural work is highly seasonal and task driven, as my noble friend Lord Roborough explained. That makes flexible working requests difficult to accommodate in practice. Raising the threshold for employers to refuse these requests will hamper farms’ ability to plan and respond to fluctuating labour needs.
That is why Amendment 107 is not merely desirable but essential. By introducing a clear baseline definition of seasonal work, the Bill can be tailored to reflect the cyclical, temporary and weather-dependent nature of agricultural labour. This amendment recognises the reality of these industries, allowing for the necessary flexibility that the Bill currently denies.
Without this amendment, the Government risk imposing a one-size-fits-all regime that will force many farms to cease hiring, increase costs or even close altogether, yet again devastating rural communities and endangering our food security. I urge people around the House to support this amendment and send a clear message that the law must work with and not against the realities of seasonal work. Yes, we must protect workers, but let us also protect the farms and farmers who feed this nation.
I am grateful to the noble Lord, Lord Londesborough, for supporting Amendment 159. A few years ago, in a remarkable TV interview, a one-time Labour shadow Chancellor could only suggest “Bill somebody” when asked to name a business leader who supported Labour’s policies. Sadly, this Government’s Employment Rights Bill risks the same fate. Ministers cannot name a single small business that supports all the measures contained within it—if any exist at all. This Bill is being rushed through with little regard for the very businesses that form the backbone of our economy. The Government’s own impact assessment hints at a looming disaster but fails to fully capture its devastating effects.
The Federation of Small Businesses warned that this Bill is weighing heavily on the minds of small business owners, already forcing them to put investment and job creation on hold at precisely the moment when they are most needed. The noble Lord, Lord Londesborough, cited the ICAEW, and the Institute of Directors recently revealed that 72% of businesses believe this Bill will harm growth with 49%, so nearly half, saying they intend to hire fewer staff as a direct result.
Yet the Government insist that businesses will simply absorb these costs—a statement that is not only unrealistic but dismissive of the precarious financial position many small enterprises face. Larger firms may weather the storm but small businesses often survive on razor-thin margins, and their survival will come at the cost of lower wages, reduced opportunities, or a reluctance to hire new staff at all. The Office for Budget Responsibility has warned that these sweeping new regulations will likely have
“material, and probably net negative, economic impacts on employment, prices, and productivity”.
That, I fear, is masterly understatement.
Crucially, the Government have missed one vital fact—competition between employers, not simply regulation, best protects workers’ rights. Employers who want the most productive, loyal and committed workers must offer better pay and conditions to attract and then keep them. This natural market dynamic encourages fairness and opportunity far more effectively than heavy-handed mandates. This Bill would distort competition by imposing complex rules and costs that distract businesses from focusing on growth and innovation. Instead, they will divert precious resources into managing compliance and legal risk, and into erecting barriers rather than enabling opportunity. Ironically, this will lead to fewer businesses competing for talent and therefore fewer jobs being created.
The Government claim that these rules will improve job security and working conditions, but the reality is that the increased costs and risks will force many small businesses to rethink their hiring plans altogether. The FSB says so. They will either hold back on creating new jobs or cut existing ones, and some will reduce wages or cut hours to survive. The intended protections risk backfiring, making work less secure and less rewarding. Ultimately, the costs imposed by the Bill amount to a stealth tax that will fall directly on the workers themselves—an opportunity tax. Employers faced with higher compliance costs, the risk of costly tribunals and the restrictions on flexibility will have little choice but to pass these expenses down the chain. This means lower wages, fewer hours and fewer job opportunities, ensuring, paradoxically, that work simply does not pay.
I will say a quick word on my noble friend Lord Leigh’s Amendment 106. This Government like a consultation, but they have been unable to name any business they have consulted in relation to Part 1. My noble friend’s amendment is therefore elegant in its simplicity. It channels the Government’s enthusiasm and corrects their omission. I will support it if he chooses to divide. Finally, I remind the noble Lord, who I think is answering, that the noble Lord, Lord Howard, asked a very good question. Lest he has forgotten it, I would like to re-ask it.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, I am grateful to all noble Lords who have spoken in this debate. Amendment 94 from the noble Baroness, Lady Noakes, would exempt specific groups from all or some of the provisions within Part 1. Since the 1980s, UK reforms have stripped back workers’ employment rights and turned the country into an outlier among advanced economies. The UK’s productivity has stalled more sharply than in other economies, with millions trapped in low-paid, insecure and poor-quality jobs. What is the result? Less money in working people’s pockets.
We are now paying the price. Millions of working people cannot afford basic living costs. In one of the world’s wealthiest nations, workers are still turning to food banks. Many cannot afford rent, let alone a mortgage. Morale is at rock bottom; motivation is vanishing. Average salaries have barely increased from where they were 14 years ago. The average worker would be over 40% better off if wages had continued to grow as they did leading into the 2008 financial crash, yet executive pay keeps climbing. In 2023 the average FTSE 100 CEO earned 118 times the pay of the median UK worker, up from 50 times in the late 1990s. This is not sustainable, not fair and no way to build a healthy, productive economy. The UK must stop treating worker protections as a drag on growth. They are the foundations of it.
More than 2 million people could benefit from guaranteed hours and rights to payment on zero-hours contracts. More than 9 million people would benefit from protections against unfair dismissal from day one. Up to 1.3 million employees will get a new entitlement to statutory sick pay. These new rights, entitlements and protections provide a baseline minimum standard for security and dignity at work. They should not be something the Government of the day can freely take away. Furthermore, exempting any category of person that the Secretary of State deems fit will ultimately create a two-tier system of employment rights based on the politics of the day. While I understand the noble Baroness’s intentions, I reiterate that these provisions were manifesto commitments.
Business confidence is at a nine-year high, according to the Lloyds Business Barometer—
Lord Leong (Lab)
Noble Lords opposite may laugh but this is the Lloyds Business Barometer, which I am sure many noble Lords across the aisle will know—with a second consecutive rise in workforce projections for the coming year. Deloitte recently ranked the UK as the joint top destination for investment.
Lord Leong (Lab)
My Lords, if the noble Lord starts throwing statistics around, I can throw statistics at him as well. As I said earlier, the Deloitte survey shows that the UK is the top destination for businesses. In fact, the Chancellor’s speech at Mansion House yesterday was very much welcomed by the City of London. All the financial services say that London will be the destination for fintech investment. Furthermore, KPMG’s recent consumer index says that people are feeling that they have more money in their pocket and are starting to plan holidays for the summer—good for them.
Lord Leigh of Hurley (Con)
I am sure the Minister will want to be very clear on this. I think the Deloitte survey he refers to was in respect of inward investment only, probably because the UK is regarded as a cheap place, given what has happened to us in the last month, whereas the chartered accountant survey is specifically on business confidence, which has fallen every quarter for the last four quarters. One wonders what happened four quarters ago to prompt that.
Lord Leong (Lab)
We got into government one year ago, after 14 years. Business confidence was very low then, and at the same time unemployment was on the rise. At the end of the day, we are making progress. The figures will take time to change, but I am confident that confidence will grow. Inward investment is coming in, which means more investment in business and growth. Furthermore, the FTSE index reached the 9,000 mark yesterday. What does that say? People have confidence to invest in British companies, so let us not talk down the economy.
Lord Sharpe of Epsom (Con)
My Lords, I cannot let that pass. The noble Lord will know that the FTSE represents mostly foreign earnings. It is not a domestic index.
Lord Hunt of Wirral (Con)
My Lords, I thank all noble Lords for their thoughtful contributions to this important debate. We are very grateful to the noble Baroness, Lady Grey-Thompson, for having raised what is a profoundly important issue, one that deserves very careful consideration by your Lordships’ House.
As my noble friend Lord Wigley reminded us, serious childhood illness places unimaginable strain on families, and it is not just a case of emotional turmoil. There are so many practical challenges as well, including hospital visits, overnight stays, unexpected emergencies and a need for sustained and focused care that no working parent can possibly schedule around.
I am pleased to say that many good employers already recognise this: in the most extreme circumstances, they show compassion and flexibility, ensuring that parents are not forced to choose between caring for a seriously ill child and retaining their job. At the heart of this is not only compassion but continuity. A child battling serious illness often requires a parent at their side, not occasionally but consistently. Without job protection and some form of financial support, the very people whom we would expect to be there—parents—may find themselves unable to be so.
Of course, any new entitlement must be, as the noble Lord, Lord Hogan-Howe, reminded us, designed carefully, with due attention to cost, clarity and implementation. Whereas on these Benches we do not take a fixed position on the amendment itself, I welcome the fact that it prompts us to engage seriously with a difficult but crucial area of employment and social policy.
I thank all those who have contributed to this important debate, and I hope that the Government will take from it not only a recognition of the challenge but a willingness to explore how it might be best addressed in law.
Lord Katz (Lab)
My Lords, this has been a powerful debate on Amendment 97, which seeks to introduce financial support and leave for the parents of seriously ill children, and I thank all noble Lords who participated in it. I pay particular tribute to the noble Lord, Lord Wigley, for sharing his painful and very personal story. It is clear that, even after a fair number of not just years but decades, the indelible mark of the pain that he and his partner and the rest of his family went through is still with him. On behalf of the whole House, I thank him for sharing that story.
I begin by thanking the noble Baroness, Lady Grey-Thompson, for bringing this extremely important issue to the attention of your Lordships’ House. I pay tribute, as, I am sure, does every noble Lord who has spoken in this debate, to the excellent work done by Ceri and Frances Menai-Davis and their charity, It’s Never You, which provides vital support to the parents of seriously ill children. Ceri and Frances set up this charity in memory of their late son, Hugh, who died tragically in 2021 after battling a rare form of cancer. It’s Never You has worked with the noble Baroness, Lady Grey-Thompson, to draft this amendment, and I know that Ceri and Frances have campaigned hard on this proposal to honour the memory of their son Hugh and to provide support to parents who face the same tragic circumstances that they did.
It is of course vital that parents be able to spend time at the bedside of their sick child without the fear of loss of employment or financial difficulties adding to a situation that can already be mentally overwhelming, isolating or physically draining, as the noble Baroness, Lady Grey-Thompson, set out so well. One can only imagine the trauma of being in such a terrible situation. I say that one can imagine, but perhaps one can never really fully understand unless one is in that situation.
I know that this challenge has been raised previously in your Lordships’ House and in the other place, and I want to emphasise that the Government are keen to continue to look at the issue with the noble Baroness, Lady Grey-Thompson, and It’s Never You. As the noble Baroness said, I have personally met Ceri and Frances several times already, and I have been struck by their selfless determination and resolve to provide for other parents what they did not have. We intend to continue this engagement. I want to ensure that parents of sick children are not ignored or left behind.
However, we do not believe that incorporating this amendment into the Bill would achieve this end, despite the very best of intentions with which it has been prepared. I will highlight three reasons for this.
First, we are concerned about the approach of amending the Neonatal Care (Leave and Pay) Act, which was taken through your Lordships’ House by the noble Baroness, Lady Wyld, as she set out a moment ago. Although the amendment rightly seeks to provide much-needed care to older children, it risks unintentionally undermining some fundamental principles of neonatal leave and pay, which were designed with the specific situation of newborns requiring medical care in mind. Much of the eligibility criteria for the leave and pay entitlements in the existing Act, for example, are connected to birth-related forms of leave, such as maternity and paternity, that simply would not apply to parents of other children. Similarly, the specific definition of “neonatal care” in the current Act has been carefully constructed through extensive consultation. Again, this amendment would require that to be overhauled, risking creating a gap in existing support.
Secondly, more detailed analysis is required to fully understand the total cost implications of this proposal. We need to understand how many parents may be eligible for support across England, Wales and Scotland, as well as the estimated take-up, familiarisation and business costs. Initially, external estimates suggest that the cost of this amendment could be in the low millions—the noble Lords, Lord Palmer and Lord Hogan-Howe, referred to that specifically—based on data from England only. However, those figures are likely to represent only a small proportion of all parents who may be eligible for support. The actual cost could be significantly higher, depending on how serious illness and other eligibility criteria are defined. Therefore, the overall financial impact will depend on the final definitions and scope used to determine eligibility.
Thirdly, it is also right that the Government consider other suggestions of support that have been put forward by parents who are put in this incredibly challenging and difficult situation, such as the right to a career break to enable parents to take an extended period of time out of work to provide care for a seriously ill child, as has been highlighted by Conservative MP Mark Francois in the other place and his constituent Christina Harris. It is right that the Government explore all proposals before proceeding to legislate in order to ensure good law—indeed, a workable law—and the very best outcome for parents, which I think we all, across the House, agree is needed.
The Government appreciate that there is a significant challenge to be addressed here, but more work needs to be done to understand the best approach and costs of tackling it. For instance, the noble Baroness, Lady Bennett of Manor Castle, raised GoFundMe and the way successful fundraising campaigns interact with the benefits system. That is undoubtedly an area that needs to be understood.
As the noble Lords, Lord Hogan-Howe and Lord Hunt of Wirral, said, we need to understand the costs, and to have clarity and full consideration. More work needs to be done to understand the best approach and the costs of tackling this issue and addressing it properly. However, I want to be very clear that we are listening, and I have been moved—as we all have—to hear of the distress caused by the incredibly challenging situation of serious childhood illness and the financial strain that comes with caring for a sick child.
The noble Lord, Lord Gascoigne, asked for a way forward, and I hope noble Lords will take what I am about to say in the spirit intended. I make a commitment to the noble Baroness, Lady Grey-Thompson, and to Ceri, Frances and It’s Never You, that we will consult on support for parents of seriously ill children, including the proposal for Hugh’s law, to gain views from all interested parties on the specifics of the support. We are doing this at pace—the consultation will run next year in 2026. We wish to continue working with It’s Never You, the noble Baroness and all noble Lords who are interested—having heard the debate this evening and the strength of opinion across the House—on this extremely important matter, as we further explore this proposal.
It is appropriate that we consult publicly and provide space to hear a range of views to ensure that we arrive at the most appropriate policy outcome. We want to do something that is right. We want to make sure we have a solution that sticks, is workable, and provides the support that so many parents need—indeed, that Ceri and Frances needed but did not have. It is important that we do not rush into it but have a considered approach. I therefore ask, while we undertake this consultation, that the noble Baroness withdraws Amendment 97.
Baroness Grey-Thompson (CB)
My Lords, I thank all those who have contributed to the debate this evening and, very specifically, the noble Lord, Lord Wigley, for sharing his deeply personal and moving experience. What we sought to achieve with the amendment has been discussed at length. I appreciate that, but it was over many meetings. We asked several weeks ago for guidance if there were technical concerns. We got a response yesterday, which was very helpful, but I note that there is no indication within it that the amendment is inoperable, nor that these concerns could not be dealt with through the offer of a tidying-up amendment or, potentially, an alternative text at Third Reading. I welcome the opportunity to continue to discuss this and I do not wish to delay the House any further, but I wish to test the opinion of the House.
Lord Katz (Lab)
My Lords, this has been a useful debate on Amendments 98 and 99, tabled by the noble Lord, Lord Palmer of Childs Hill, and the noble Baroness, Lady Fox of Buckley.
On Amendment 98, the law already provides that when workers are invited to attend a disciplinary and grievance hearing, they are entitled to bring a companion who is either a fellow worker, an official employed by a trade union or a workplace trade union representative who the union has reasonably certified as having received training in acting as a worker’s companion at a disciplinary or grievance hearing.
As we have heard, and perhaps in response to the critique by the noble Lord, Lord Ashcombe, employers can allow workers to be accompanied by a companion who does not fall within the above categories. Some workers may have a contractual right to be accompanied by persons other than those listed—for instance, a professional sports body, partner, spouse or legal representative.
As my noble friend Lady O’Grady of Upper Holloway helpfully reminded us, the existing legislative provisions seek to keep disciplinary and grievance procedures internal to workplaces to better ensure that the heat is taken out of the situation and that they are used as conciliatory opportunities to resolve tensions and maintain a good employer-worker relationship. As my noble friend said, this could involve a workmate who knows the context of the situation, understands the employment —and probably both parties to the grievance—and can provide real insight to the situation and focused support.
The inclusion of professional bodies, which may include legal representation in the legislation, may jeopardise the involved parties’ ability to engage in amicable conversation, with the concern that discussion may be significantly restrained as a result, with neither party willing to accept fault. The Government are rightly concerned that this will result in an increased likelihood of a failure to reach a suitable outcome for both the worker and employer. As my noble friend Lady O’Grady said, we want systems in place that are quicker, cheaper and more effective at reaching resolutions.
However, this in turn, as part of the proposal, would increase the cost of hearings for both parties, as the processes and the meetings themselves become more protracted and reduce the chances of a mutually beneficial outcome. The involvement of legal representatives may be particularly costly for smaller businesses, which may not have legal resources readily available—we have heard much already today, if not in previous debates in Committee and on Report, about that issue. Additionally, the introduction of legal expertise at these hearings may limit the ability of ACAS to mediate an ongoing dispute, as legal arguments may already have been heard during an internal hearing. It is worth noting that an amicable solution between the parties is the fastest way to deliver justice and the amendment may have the inadvertent effect of increasing the likelihood of tribunal claims being made, although of course that is not its intention.
Of course I understand that certain organisations, including those that provide legal services, would benefit. However, as previously noted when discussing similar amendments, an employer already has the existing ability to nominate an organisation to accompany their workers if they set this out in the workers’ terms and conditions. This is a solution in search of a problem. ACAS estimates that there are 1.7 million formal disciplinary cases in UK organisations each year.
It is rare that I ever say this, let alone from the Dispatch Box, but I agree with the noble Baroness, Lady Fox of Buckley, in that the approach taken by the noble Lord, Lord Palmer, in his amendment would be unduly cumbersome. It would complicate a law that has been in place for over 20 years and, if accepted, will require that the employer checks secondary legislation for every case to see who is a responsible body and whether the individual has been certified as having been trained. These are additional administrative burdens that the Government are keen to avoid. Indeed, the Opposition Front Bench has been keen to point out when they see fault in our proposals in other places—erroneously, I should add.
On Amendment 99, tabled by the noble Baroness, Lady Fox of Buckley, the Government believe that strong trade unions are essential for tackling insecurity, inequality, discrimination, enforcement and low pay. If Amendment 98 was a solution in search of a problem, Amendment 99 is an opportunity for the noble Baroness, Lady Fox, to bash a problem, in her view—namely, trade unions.
I am a former trade union official. I have also worked in a number of private sector roles as a manager. Unions are a good part of our industrial landscape, as we have heard across the House. I join with others across the House in saying that it would better if more people were members of trade unions. They are far from perfect, but although the cases that the noble Baroness raises undeniably raise issues about the trade unions she talked about, they do not undermine the day-to-day work of many trade unions and, in particular, of trade union reps. In the workplace, day in, day out and across the country, they work with employees and businesses to make workplaces safer, to ensure that employees are properly educated and skilled, and to help those employees access their rights at work, which we deem fair and necessary.
Trade unions have an important role to play in supporting workers during the process of a disciplinary or grievance hearing. Union officials allowed to accompany a worker, as prescribed in the existing framework, must be certified as having received training in acting as a worker’s companion at disciplinary and grievance hearings. By opening this role up to anyone the worker chooses, the amendment risks introducing individuals into the disciplinary and grievance hearings process who are not familiar with the workplace in question or, indeed, with the employment rights framework.
As I noted when speaking to the previous amendment, this is again likely to lead to a reduced likelihood of successful mediation of these disputes. The role of the recognised union representative allows the relationship between the employer and representative to be developed over time, thus increasing the likelihood of an amicable solution that does not go to a full legal process. This amendment could lead to the involvement of a family member or friend in disciplinary grievance proceedings, which may, in practice, cause more problems than solutions, given the sensitive nature of such a personal relationship.
In closing, it is unclear to the Government where the demand for expanding this right is coming from and which workplaces specifically would benefit. In the consultations we have undertaken in government and prior to being elected, with both businesses and trade unions, the need to expand this right has not featured from either side in the workplace.
Baroness Fox of Buckley (Non-Afl)
I think the Minister may have answered his own question there, because if the consultation was with trade unionists about whether there was any need for non-trade unionists to go in, then they would give you one answer. I want to clarify one thing: it is true that I have never been a trade union official, but I have been a rank and file trade union member for decades. I am not anti-trade union, but I do not think the world stops and starts at trade unions.
I want to ask the Minister whether he understands that, at the moment, the statutory right to be accompanied by a trade union official is not in-house. The way the law is phrased is that any trade union official, even one from a union that you have never joined and from a completely unrelated sector, can accompany you—that is the way the law is. I wanted to know whether that is fair or whether that wording could change. What is wrong with, say, a Citizens Advice caseworker or what have you? The numbers of people who are in the trade unions just do not tally for people to be accompanied fairly at the moment. Unless there is an 80% increase in trade union membership, it is obviously two-tier and discriminatory at present.
Lord Katz (Lab)
To respond to the first point the noble Baroness made, perhaps I did not enunciate clearly enough, but I said that in the consultation the demand for change did not come from either trade unions or employers.
Baroness Fox of Buckley (Non-Afl)
This is the final word. This is not a trade union rights Bill; this is the Employment Rights Bill. It is casually known as the workers’ rights Bill. There are millions of workers who are not in trade unions for a variety of reasons, including your own Minister Angela Rayner, as I just noted. I simply suggest that when you ask employers or trade unionists whether there is a demand for this then rank and file workers are being ignored. I suggest that you acknowledge and empower them.
Baroness Nichols of Selby (Lab)
My Lords, I just want to put the record straight, because we have heard much about the Deputy Prime Minister not being in a union. She is in a union. She is in the union called UNISON and has been for a number of years. I did not want noble Lords to go home tonight thinking that no one would represent the Deputy Prime Minister.
Lord Katz (Lab)
I thank my noble friend Lady of Nichols of Selby for that helpful clarification. I thought that was the case, but I am glad that she made it. She is in a far better position than I am to talk about UNISON and its membership.
In response to the noble Baroness, Lady Fox, I want to be clear that this issue has not come up in all the consultations we have undertaken, with a wide variety of stakeholders. It is not that I am saying, “We talked to some trade unions and, guess what, they’re quite happy with the status quo”. Genuinely, this issue has not come up. Simply, this is not an issue for workplaces. That is why I described it—
Lord Ashcombe (Con)
Does the Minister understand that there is a two-tier system here? If you are a trade unionist you can have somewhat more professional attendance than somebody who is not a trade unionist. That is what is important.
Lord Katz (Lab)
To be clear, if there is a recognised trade union or you are a member of a trade union then you can take a trade union representative, but you also have the right to be accompanied by a workmate. If you are a member of a trade union, you do not need to take that trade union representative along; you could have a workmate come along. If responsible employers want to have more flexibility, they can write this into their terms and conditions. There is nothing to stop people doing that. That is why I suggested, to again use the phrase, that the solution to such a problem is not something we really need to respond to in the legislation because it might create unintended consequences and, in terms of the amendment from the noble Lord, Lord Palmer of Childs Hill, unfair administrative burdens on employers. Therefore, I ask the noble Lord to withdraw Amendment 98.
Lord Palmer of Childs Hill (LD)
My Lords, we have had some very interesting comments here from various people. I remind noble Lords that all we are saying is that people should have a choice. They could have a trade union representative, fine, but 77.7% of people are in firms that do not have a trade union. But if there was a trade union, that is fine.
The alternative is that, as the noble Baroness, Lady O’Grady, said, you could have a fellow worker. But the point of the amendment is that we are saying that the workers need to have a trained person to represent them. It can be a trade unionist—that is fine—but, if it is not, it will be like when a person goes to the solicitor at the end of the road and gets him to represent them on a complicated issue: he is the wrong person to represent them on that issue. You have to have someone who has some training. The trade unionists have the training, but they do not represent everybody. We are saying that the person who is seeking help should have someone who is trained.
I thank the noble Baroness, Lady Fox, for what she said; I gather, from having spoken to her, that she will support the amendment in my name. Bearing in mind the lateness of the hour, I would like to test the feelings of the House.
Lord Sharpe of Epsom (Con)
My Lords, I am grateful to my noble friend Lady Penn for bringing forward this amendment, which raises matters of genuine importance to families, working parents and, frankly, society as a whole.
The arguments that my noble friend has made for extending non-transferable paid leave for fathers and second parents is a serious and well-intentioned one. A more balanced system of leave can play a role in promoting gender equality, increasing participation in the labour market and supporting children in their earliest years. As my noble friend explained, it is therefore good for fathers, mothers and children.
I wholeheartedly agree that we should continue to review and refine our parental leave system so that it remains fit for the realities of modern working life. The commitment in proposed new subsection (1) to a comprehensive review is, in itself, a sensible and comprehensive step. I note that this was a manifesto commitment that should have been completed by now, yet the Government are only just starting it. Given the Government’s enthusiasm for consultation, that seems curious to say the least.
We must recognise and acknowledge the broader context in which we find ourselves. The Employment Rights Bill, as it stands, already promises to impose significant new obligations on businesses, at a time when many are still struggling with the increase to employer national insurance contributions, the Government’s constant U-turns, inflation and ongoing global economic uncertainty. Frankly, the Government have asked a great deal of British businesses in the last year—too much, in the view of many—and the effect of these measures has been entirely negative, undermining growth, reducing our competitiveness and rapidly stifling job creation, especially at the margins. If the Government were to think again and accept some of our perfectly reasonable amendments—on the right to request an unfair dismissal, for example—it would be easier to argue in favour of amendments such as this, which could be implemented after careful consultation with business.
While the intentions behind this amendment are commendable and there is certainly room for discussion about the long-term evolution of paternity and shared parental leave, without wider changes from the Government to their most damning plans, this is not the time, nor the Bill, in which to make these commitments. However, I hope the Government will continue to engage seriously with the questions and the comprehensive arguments advanced by my noble friend, and that we will revisit them in a context that allows for a comprehensive economic and perhaps demographic evaluation, along with genuine and meaningful consultation with businesses of all sizes and shapes, and indeed wider society as a whole.
Baroness Jones of Whitchurch (Lab)
My Lords, this has been an important debate on the issue of parental leave and pay. It has been wonderful to hear consensus on how important some of these fundamental issues are to individuals and to our society. I thank the right reverend Prelate the Bishop of Newcastle, the noble Baroness, Lady Penn, and my noble friend Lady Lister for their prior engagement on these important issues. The noble Baroness, Lady Penn, spoke eloquently and with conviction on these matters. I assure her that it is a conviction that I and the Government share.
We need to reform our confusing patchwork of parental leave and pay rights so that they are fit for a modern economy and deliver the wider societal benefits that noble Lords have raised in this debate. The Government are committed to making life better for families and we know that the current system needs improvement. This is why, through this Bill, we are making paternity leave and parental leave day-one rights, meaning that employees will be eligible to give notice of their intent to take leave from the first day of their employment. This brings these entitlements in line with maternity leave and adoption leave, simplifying the system. We are removing restriction preventing paternity leave and pay being taken after shared parental leave and pay to further support working parents in accessing these entitlements. Crucially, the changes in this Bill are not the limit of our ambitions.
Moving specifically to the amendments, Amendment 100 was tabled by the noble Baroness, Lady Penn. While I appreciate what the noble Baroness is attempting in her amendment, I regret that the Government cannot accept it. Let me reassure her that work is already under way to deliver on the spirit of her amendment. Since Committee, the Government have delivered on their manifesto commitment to launch their parental leave review. In doing so, they have listened carefully to concerns raised by noble Lords and stakeholders as to the details and scope of that review.
To answer the questions from a number of noble Lords, the published terms of reference make it clear that all current and upcoming parental leave and pay entitlements will be in scope of the review. The review gives us a chance to consider what we want the system to achieve, while giving due consideration to balancing costs and benefits to families, businesses and the Exchequer. As stated in the published terms of reference, we expect the review to run for 18 months. This will conclude with the Government producing a set of findings and a road map, including next steps for taking the reforms forward to implementation.
In response to my noble friend Lady Lister, we will want to engage and consult with stakeholders throughout that process to inform the conclusions of our work. In response to my noble friend Lord Jones, the call for evidence is already live; it began on 1 July.
I stress that the fact that the review is a manifesto commitment underlines the seriousness with which we are taking it and our obligation to act on its conclusions. However, we cannot predetermine the outcome of the review, nor can we justify the proposed cost increase without a thorough evidence-based assessment. This is why we cannot accept an amendment that would place a duty on the Secretary of State to lay regulations that would almost quadruple the rate and triple the length of paternity pay from current levels.
Amendment 102 seeks to make paternity pay a day-one right for all employees by removing the current continuity of working requirements. I reassure all noble Lords that we understand the importance of fathers and partners having time away from work to support their partner and to be with their developing family. As we have heard, the Secretary of State at the Department of Business and Trade recently met with Dad Shift and others at the launch of the review to hear first hand about their campaign. We are determined to do everything we can to encourage proper shared parenting for the improved well-being of both the parents and the children involved.
While we are removing the qualifying period for paternity leave to make it a day-one right, statutory pay remains conditional on an average earnings test and a requirement to work for the same employer for 26 continuous weeks. This is standard across all statutory parental pay work entitlements, including maternity pay. The only exception is maternity allowance, which is a benefit, not a work entitlement. Maternity allowance is designed to support health and recovery following childbirth for those who do not qualify for maternity pay.
Lord Hunt of Wirral (Con)
I thank my noble friend for introducing this important debate. As he has pointed out, the challenge is to strike the right balance. We must protect individuals from being exploited or drawn into extended unpaid roles that are in effect jobs by another name, but we also must avoid placing undue burdens on organisations whose motives are benign and whose placements offer genuine social and developmental value. I welcome the debate that the amendment has prompted, and I hope that as the Bill progresses, the Government will engage closely with stakeholders to ensure that any future regulations achieve the twin goals of fairness for individuals and viability for those offering valuable early opportunities.
Lord Katz (Lab)
I thank noble Lords for this short but interesting debate around Amendment 103 moved by the noble Lord, Lord Holmes of Richmond, which seeks to prohibit work experience for a period exceeding four weeks. With regret, as he said, the noble Lord was unable to join us in the Chamber in Committee when we debated this amendment, which was moved on his behalf very ably by the noble Viscount, Lord Colville of Culross, who I do not believe is in his place at the moment.
The Government have always been clear that a fair day’s work deserves a fair day’s pay. You need only look at the Government’s track record on the national minimum wage and the provisions in this Bill to see how the Government are delivering on this commitment. I will reiterate what I have said on this issue previously because it is worth emphasising: the existing legislation is clear that aside from a very small number of exemptions, workers who are entitled to the national minimum wage should be paid accordingly. No ifs, no buts. These are the rules that our enforcement body enforces, and these are the rules that we expect businesses to abide by. Of course, the vast majority do, but those that do not undercut the responsible businesses unfairly, and we should all be agreed that this is not behaviour that we should tolerate. This means that an employer cannot call a worker an intern to avoid paying them. I want to repeat this very important point, not only for your Lordships’ House but for those who are listening to this debate outside: an employer cannot call a worker an intern to avoid paying them.
If workers who are entitled to the national minimum wage are not being paid what they are due, there are protections in place so that they can receive what they are owed. The Government and His Majesty’s Revenue & Customs have raised and continue to raise awareness on workers’ rights, so that no one is left out of pocket. I have previously stated that the Government will be consulting on this issue soon. In fact, and in response to the noble Lord, Lord Holmes, I am pleased to be able to tell your Lordships’ House that this consultation will indeed begin tomorrow with a call for evidence. I do not believe that I am overstating the case when I say that all of us in this House care about this issue, in particular, ensuring that our young people have access to opportunities, regardless of their background, whether they can afford to work for free or where they are based in the country. The noble Lord, Lord Holmes, spoke powerfully on that basic right and I think that we are all in agreement with the principle.
This amendment, while well-intentioned, risks creating loopholes, where existing workers who are entitled to the national minimum wage from day one could find themselves working for free for up to four weeks. I am sure that we would all agree that this is not right and not what any of us wants to see. Adopting this amendment could well lead to an influx of four-week roles appearing, with only those who can afford to work for free accessing them. We do not want to lock away valuable opportunities and create unintended consequences by rushing through this amendment. These issues are complex, which is why I reiterate that it is important that the Government consult on this issue first. To make clear, we are standing by our words in Committee. When we said that we would be starting the consultation “soon”, in this case, that means tomorrow. As I stated in our debate in Committee, the issues that the noble Lord, Lord Holmes, wishes to address can be dealt with most effectively outside of this Bill. I therefore ask him to withdraw Amendment 103.
Lord Holmes of Richmond (Con)
My Lords, before the Minister sits down, does he have to hand the number of prosecutions that HMRC has taken under the NMW regulations in this instance? If he does not have that to hand, I would be very happy for him to write.
Lord Katz (Lab)
I do not have that information to hand. I am happy to write to the noble Lord with the detail. I take the opportunity to point out that the fair work agency that we are creating in this legislation will be responsible for enforcing this aspect of employment rights regulation as well as others. We would expect that work to be taken forward by the fair work agency. I undertake to write to the noble Lord with that detail.
Lord Holmes of Richmond (Con)
My Lords, I thank all noble Lords who have taken part in this debate. As the hour is late, I will not run through them all by name. I am thankful to the Minister for his response. I very much look forward to the consultation tomorrow and, for now, I beg leave to withdraw the amendment.
Lord Hunt of Wirral (Con)
My Lords, we are very grateful to my noble friend Lord Moynihan of Chelsea for his amendments. I thank the Minister and her team for the way in which they have entertained and thought through some of the key points made by my noble friend. As he rightly pointed out, collective redundancies are, sadly, not uncommon in cases of employer insolvency. In such circumstances, the role of the insolvency practitioner, which my noble friend has outlined so clearly, is both time-critical and highly constrained. The legal duties placed upon practitioners can come into direct tension with the obligation to consult collectively with employees, a tension that is not merely theoretical but is borne out time and again in practice.
I say to the noble Lord, Lord Goddard of Stockport, that the amendment does not seek gratuitously to diminish the rights of employees. My noble friend has drawn the Government’s attention to a genuine gap in the law, one that has become more acute in the light of the changes that the Bill introduces. As it stands, the duty to consult can place insolvency practitioners in an impossible position, bound by law to take urgent decisions to preserve value or manage a collapse while also facing legal jeopardy for failing to comply with collective consultation obligations that were not, and never were, designed with insolvency in mind.
We have to be realistic. Where a company is collapsing, consultation—however desirable—cannot always be carried out in the prescribed way. It is in nobody’s interests, least of all that of employees, to put insolvency practitioners in a position where they are forced to choose between compliance with employment law and their fiduciary responsibilities.
I believe that the Government should take my noble friend’s arguments seriously. This is not a theoretical concern; it is a matter of practical urgency. I therefore urge the Minister to reflect carefully on the implications of the clause and to engage with my noble friend’s proposal in the constructive spirit in which it is offered.
Lord Leong (Lab)
My Lords, I am grateful to all noble Lords who have spoken. Amendments 108 and 109, tabled by the noble Lord, Lord Moynihan of Chelsea, would amend Clause 27. I thank the noble Lord, as well as the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, for their engagement in this matter when we met.
On Amendment 108, the clause as drafted does not alter how collective redundancy obligations apply to insolvent employers. It is right that, when employers know that their business is in trouble and redundancies will be necessary, they should be required to do as much as possible to collectively consult on those redundancies. That was the case before and it will be the case after this legislation comes into force, so nothing has changed.
Employers should consult when they propose to make a qualifying number of redundancies, and they will face penalties if they do not. However, crucially, as my officials and I have discussed with noble Lords, those penalties are set by a tribunal, which will take into consideration the seriousness of the employer’s default, as well as any mitigating factors. The amount set out in legislation is a maximum award, but tribunals may award less where the employer or insolvency practitioner has taken all reasonable steps to consult for as long as possible in the circumstances.
Section 188(7) of the Trade Union and Labour Relations (Consolidation) Act 1992 already affords flexibility for employers who cannot fulfil their collective consultation obligations. It allows employment tribunals to assess on a case-by-case basis whether there are special circumstances which make it not reasonably practicable for an employer to comply with their collective consultation obligations.
Lord Moynihan of Chelsea (Con)
I apologise for intervening, but is the Minister saying that R3 stated that it was against this amendment?
Lord Leong (Lab)
The R3 website said that it was concerned about the amendment because it may devalue a company’s valuation on an ongoing basis because of the day-one rights accorded to employees. That is what it said on the website.
Lord Moynihan of Chelsea (Con)
I do not want to detain the House, but I am in ongoing discussions with R3, and it has never said this. Is the Minister quite sure that it is not saying that it is concerned about the clause, rather than the amendment?
Lord Leong (Lab)
I may be wrong. Sorry: it is not the noble Lord’s amendment; it is the clause. I apologise for that. But it is the same thing: if it is against the clause, it is because it is concerned about the valuation of the business. My point is, why should the employees suffer because of the taking into account of day-one rights?
On Amendment 109, I inform the noble Lord that the notification period in the current law aligns with the consultation period. This means in practice that whenever an employer begins a collective consultation, they must also notify the Secretary of State at that point. Setting these periods at different times could cause confusion for employers and increase the risk of non-compliance. The objective of the notification provision is that such notifications may be distributed to appropriate government departments and agencies that are best placed to support affected employees. This amendment would mean that those agencies would be less prepared to support large volumes of individuals who have been made redundant. We have had extensive engagement with employers throughout the passage of the Bill, and the notification timeline has not been raised as a concern. Therefore, this amendment is unnecessary.
I take this opportunity to say to the noble Lord that we will engage with the Insolvency Practitioners Association, raise and discuss the issues that noble Lords have raised, and listen to what it has to say. With that in mind, I ask the noble Lord to withdraw Amendment 108.
Lord Moynihan of Chelsea (Con)
I thank noble Lords for their patience in enduring at this late hour this somewhat arcane discussion. The noble Lord, Lord Goddard, emphasised the importance of consultation and, indeed, the essential nature of it, and said how vulnerable employees are. But they are not vulnerable in this particular circumstance; they have priority as creditors above all other creditors. If there is money, they will get it. If there is no money, they will get it from the Redundancy Payments Service. But why, having got their full amount of redundancy money, should they then scoop the pot and get three times as much because of a flaw in the law that will leave, for example, small trade creditors not receiving anything and possibly facing bankruptcy? That is not to mention the fact that a lot of this money will usually come from the taxpayer—ultimately, the source of funds for these penalty payments—via HMRC, where the Redundancy Payments Service is, thus increasing the deficit. It would create a mini black hole, if I could be so foolish as to mention that.
My noble friend Lord Hunt of Wirral ably reinforced the need for this amendment. The Minister emphasised the importance of consultation. I understand that, but I believe Hansard will show that I have already dealt with most of the items in his response. I will not delay noble Lords any longer by going over that ground again, except to say once again that when he asks why employees should suffer, the answer is that they will not suffer. I hoped I had explained that. I am chagrined to understand that I have not. They have total priority above all other creditors in receiving their full redundancy payments.
All I ask is, why should they, as a result of a glitch in the law, receive in total three times that much as a so-called penalty payment? They will not be paid by the employer because the employer will be long gone. They will not be paid by the insolvency practitioner, in facing the impossible task of obeying both laws at the same time. They will be paid mostly by us, first through HMRC and through it the taxpayer.
The hour is late and so, if only on compassionate grounds, I beg leave to withdraw my amendment.
Lord Sharpe of Epsom (Con)
My Lords, I thank my noble friend Lord Holmes of Richmond for his Amendment 110. What this amendment does is simple but important. It encourages the Secretary of State to ensure that in bringing forward regulations under the Employment Agencies Act 1973, they draw upon existing recognised certifications and industry standards. These standards, developed and refined by responsible actors within the market, offer a ready-made baseline for compliance which the Government can and should use.
There is consensus that regulation of umbrella companies is overdue, but as we take this opportunity, let us ensure that the regulation is done well and in a way that is pragmatic, proportionate and effective. This amendment helps point us in that direction, so I hope the Minister can offer some reassurance that the spirit of the amendment will be reflected in the Government’s approach to umbrella companies.
Lord Katz (Lab)
My Lords, I am grateful to the noble Lord, Lord Holmes of Richmond, for tabling Amendment 110, which covers the regulation of umbrella companies. The amendment seeks to place an obligation on the Secretary of State to utilise pre-existing industry codes and accreditations as a basis for the regulation of umbrella companies.
We recognise the important role accreditation and trade bodies play in sharing information and best practice with their customers and members. The work of these bodies in the umbrella company industry has had some success in driving up standards. However, this success has been fairly limited, and we would not want to assume that an organisation that is a member of an accreditation or trade body is necessarily compliant with everything. We therefore believe that now is the right time for the Government to step in to protect businesses that already do the right thing and also protect workers.
Many in the umbrella company industry, and those who use umbrella companies, welcome regulation, especially as it will help to level the playing field. This includes public positions taken by the Freelancer & Contractor Services Association, Contractor Calculator, the Recruitment and Employment Confederation and several other bodies’ responses to the consultation run under the previous Government.
We have been clear since Clause 34 was introduced to the Bill that the Conduct of Employment Agencies and Employment Business Regulations 2003 will be amended to apply to umbrella companies. The Government recognise that the regulations in their current form are not appropriate to regulate the activities of umbrella companies. That is because the regulations predominantly focus on entities providing work-finding services or supplying individuals to end clients, which, generally, umbrella companies do not do. Where umbrella companies do provide such services, they would indeed already be covered under the regulations.
The Government have a statutory requirement to consult before any changes are made to these regulations, and as referenced in the recent roadmap publication, the consultation on umbrella companies regulation will be published this autumn. As part of the consultation process, the Government are keen to get views from trade unions, workers and industry bodies in the umbrella company sector. This will enable the Government to better shape policy development. Following consultation, an appropriate and proportionate umbrella company regulatory regime will be introduced in 2027. Once those regulations come into force, they will be enforced by the Fair Work Agency, which will take a risk-led and intelligence-led approach to its compliance regime.
I hope this provides some of the reassurance that the noble Lords, Lord Holmes and Lord Sharpe of Epsom, were seeking, and for that reason I ask the noble Lord, Lord Holmes, to withdraw his Amendment 110.
Lord Holmes of Richmond (Con)
I thank the Minister for his response. It is good to hear that the consultation is coming in the autumn, and we can only hope that is the early autumn and that following that, perhaps there can be some more pace, and it will not be put out to 2027. We also hope the Minister will consider what happens in the interim for all those businesses currently doing the right thing that are disadvantaged by being in a market where some others are perhaps not operating to the same standards and codes of practice. But for now, I beg leave to withdraw the amendment.
Lord Hunt of Wirral (Con)
My Lords, I thank the noble Lord, Lord Goddard of Stockport, for his important words when he talks about the impact of the Bill on small and medium-sized enterprises. The fact is that while the Government recognise the impact, they have not really taken enough time and trouble to identify the extent of that impact. The Government may argue that they cannot predict the future. We are not asking them to, but we are asking for greater effort in understanding the likely incentives that their policies will create and for a thorough, transparent review of the impact on small businesses. Only then can this House exercise proper scrutiny and ensure accountability.
I will now deal primarily with Amendment 166 in the names of my noble friend Lord Sharpe of Epsom and the noble Lord, Lord Londesborough. The Regulatory Policy Committee has given the Government’s existing impact assessment a red rating. We have referred to this before, and the Government have never denied that rating. The rating means that they have failed to provide an adequate analysis of most of the Bill’s provisions. The Government talk about the Bill representing the biggest upgrade to workers’ rights in decades, and one that is long overdue. If that is indeed the case, we should expect a comprehensive, evidence-based analysis of its effect, in particular on small businesses, which make up 99% of all businesses in the UK.
Amendment 194 is not a wrecking amendment. The fact is that the Government have provided no evidence of any tangible benefit from their proposed trade union reforms—we will deal with those in much more detail on our next day on Report. The Government optimistically suggest that the changes might improve industrial relations, but no one seriously believes that—I doubt that even the trade unions do. We have seen the chaos that these types of measures have caused in the public sector. Our worry is that the Government now want to import that chaos into the private sector. Even if strike days are reduced, it will come at a high price: unaffordable pay rises and extreme regulatory burdens designed to placate union demands. That will ultimately harm hiring, weaken competitiveness and make the UK a far less attractive place in which to invest.
As for Part 5 of the Bill, the Government are proposing to hand sweeping powers to the new fair work agency without any meaningful safeguards. Will a minor accounting error mean that family-run businesses face raids from civil servants and property seizures? Will everyday employees with small workplace grievances, who simply want to resolve them informally, find themselves sidelined as the Secretary of State pushes their case to a tribunal, without their knowledge or consent?
Let us be clear: when the Conservative Party wins the next general election, we will repeal these sections and restore a labour market rooted in growth and prosperity.
Lord Leong (Lab)
My Lords, I am grateful to the noble Lord, Lord Hunt of Wirral, for his contribution and to the noble Lord, Lord Goddard, for speaking to his amendment.
Amendment 194, tabled by the noble Lord, Lord Sharpe of Epsom, seeks to repeal Parts 4 and 5 of this Bill, as well as Sections 149 and 150 at the end of this Parliament. In Committee, we debated at length the merits of Part 4 and 5 of the Bill, as I am sure we will again next week, as the noble Lord, Lord Hunt, mentioned. Parts 4 and 5 are key to delivering the biggest upgrade in workers’ rights in a generation, so I do not wish to repeat myself to your Lordships’ House tonight.
Amendment 166, also tabled by the noble Lord, Lord Sharpe of Epsom, proposes a review process that effectively duplicates what we are already doing. As I have outlined previously, the Government already have robust monitoring and evaluation plans in place. The Government’s impact assessment sets out how we will review the Bill and any secondary legislation that follows, including effects on small businesses, which we know are vital to the economy. The recently published road map shows that implementing this Bill will take several years and its full effects will not be realised until long after Royal Assent. Significantly advancing a post-implementation review would not allow for an effective assessment of its impact, including on small businesses.
On Amendment 111, moved by the noble Lord, Lord Goddard of Stockport, this Government know the importance of making sure that employers of all sizes are supported in preparing for employment rights reforms. As set out in our road map, the Government are committed to ensuring there is sufficient support and guidance for employers of all sizes. As set out in paragraph 24 on page 8 of the road map, we will be working closely with ACAS and others to develop codes of practice and guidance on measures where these are needed. We have committed to ensuring time is built into our implementation plans to allow stakeholders, including many small businesses, to familiarise themselves with changes in law, codes of practice and guidance. Many of the measures in the Bill build on existing legislative provisions which already have guidance and codes of practice. When we make changes to regulations, we will also work to update relevant guidance and codes of practice as a result.
We know one of the main places that people turn to for reliable, accurate information on legal requirements is GOV.UK. Work is currently under way to ensure that our digital content is usable, easy to navigate and accessible for all stakeholders. In addition, we have engaged, and will continue to do so, with stakeholders of all sizes to understand what support will be useful for them in implementing these changes.
The noble Lord’s amendment is unnecessary and duplicative. An additional code of practice on top of the guidance and support that the Government have already planned risks causing confusion among stakeholders as to where they should turn for clarity and certainty. I therefore respectfully ask the noble Lord, Lord Goddard, to withdraw Amendment 111.
Lord Goddard of Stockport (LD)
I thank the Minister and the other speakers in this small group. Although it is three minor amendments and it is 11 o’clock at night, for us, and, I think, for the Conservatives, small businesses are the heartbeat of the economy in this country. We will keep nagging about small businesses, and we want clarity and certainty.
Yes, codes of practice are great. I have read the road map; it is very interesting. I understand the direction of travel with the road map. It requires patience, trust and a little bit of honesty about what is deliverable in time periods. The road map is a good thing, and I recommend people to read that road map.
Small businesses need to know now the impact of this proposed legislation. Asking for reviews of that, after a period of time, does not seem unreasonable to this group. We are not being awkward for the sake of being awkward, we are just trying to protect small businesses and small companies that are, quite frankly, bewildered. They do not have a political view on the Employment Rights Bill. They are bewildered as to how someone can come in and affect how they try to make a small profit and a small living.
We will continue to probe, not forcing votes for the sake of votes. I speak to Ministers regularly, probably more with these Ministers than on any other Bill—apart from the football Bill, perhaps, with the Minister who is sat next to the noble Lord. The Ministers have been really helpful and supportive, and I appreciate that. I think they understand where we are coming from on this—we are not trying to be obstructive, but we are just trying to tease out a little bit more detail and promise of certainty for people. At the moment, life is difficult, and to put more uncertainty in front of people who are trying to do the things the Government want them to do—grow their business, employ more people and create GVA—those things have to be compatible with the things they are trying to do for the employees. On that basis, I will stop wittering on, and I withdraw my amendment.