Employment Rights Bill

(Limited Text - Ministerial Extracts only)

Report stage
Wednesday 16th July 2025 Lords Chamber

Moved by

[Lord Sharpe of Epsom]

49: Leave out Clause 23 and insert the following new Clause—
“Right not to be unfairly dismissed: reduction of qualifying period and introduction of initial period of employmentSchedule 3 contains provision—(a) reducing the qualifying period of employment for unfair dismissal and introducing provisions in respect of an initial period of employment, and(b) making further consequential amendments.” Member’s explanatory statement
This amendment provides that the qualifying period for unfair dismissal is reduced as set out in further amendments to Schedule 3. It also provides for an initial period of employment after the qualifying period during which a modified process and different compensation limit would apply, as set out in further regulations.

[Lord Sharpe of Epsom (Con)]

My Lords, the Government’s intention to protect workers is commendable. We all agree that fairness, dignity and security at work are essential pillars of a just society. However, the approach taken in this Bill, particularly the changes to unfair dismissal rights and the introduction of a statutory probationary period, is confused and counterproductive. What the Government have failed to grasp is that, when businesses are given the flexibility to manage their workforce pragmatically, that is precisely when they are more likely to take on new staff. Hiring is always a risk. By heightening that risk and making it more difficult to manage, this Bill creates disincentives to hire, particularly at the margins of the labour market, where the stakes are highest.

This is fundamentally a question of incentives. Reduce the employer’s ability to assess suitability, cultural fit or even basic reliability, without the spectre of legal sanction, and you will see fewer jobs created. The cost is very real, but nowhere is it properly considered in the Government’s own impact assessment. That acknowledges a likely 15% rise in employment tribunal claims, but makes no attempt to model the knock-on effect on hiring behaviour. The tribunal system, as we know, is already overstretched, with cases often taking more than two years to resolve. A 15% increase without corresponding investment will only deepen the backlog, and employers will know that they are walking into a system that is clogged and uncertain.

Then there is the statutory probationary period, which the Government propose with no real clarity. The Bill fails to explain how this period interacts with the obligation to act reasonably or whether there will be a different standard for dismissals during this window. Will there be a list of fair reasons? Will an employer be able to extend the period if performance takes longer to assess? None of this is addressed. As any employer will tell you, uncertainty in employment law leads not to innovation but to caution and legal advice.

Perhaps the most troubling aspect of the Government’s approach is its likely effect on social mobility. When you raise the legal risks of hiring, it is not the well-connected, polished graduate who loses out but the individual on the edge of the labour market, the person returning to work after illness or parenting, the school leaver with no contacts, the ex-offender with a spent conviction, the refugee trying to prove themselves. The Government’s impact assessment recognises this risk, because it says that making unfair dismissal a day one right

“could 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”.

Those are not my words but the Government’s.

The same is true for a “cultural fit”, which the Minister dismissed in Committee as an illegitimate reason for dismissal. She said:

“The Government do not believe that an employee not being a cultural fit within an organisation should be a fair dismissal”.—[Official Report, 21/5/25; col. 334.]


However, “cultural fit” is not a euphemism for prejudice; it is about whether someone complements the way in which a team works, the style of communication or the pace and rhythm of a workplace. This is particularly acute for a small business. Hiring mistakes are costly. Even a highly skilled worker takes time to reach full productivity and the cost of advertising, onboarding, training and then managing a dismissal is not trivial. If employers cannot be confident that they will have a window in which to assess a new hire, including on soft factors such as team dynamics, initiative or client manner, they will become more conservative. They will play it safe. Who loses then? Again, it is the person who just needed someone to give them a chance.

My amendment offers a better path. It reduces the qualifying period for unfair dismissal from two years to six months, a meaningful extension of protection for workers. It also creates an initial period of employment following that six months in which a simplified process and lower compensation cap would apply. That strikes a fair balance, giving employers space to assess suitability while ensuring that bad-faith dismissals still carry consequences. Crucially, it also removes the sweeping power given to the Secretary of State in the Government’s clause to modify Section 98(4) of the Employment Rights Act, a power that could drastically shift the fairness test without proper parliamentary oversight.

Employees already have day-one protections against discrimination and automatically unfair dismissal, as they should. However, general unfair dismissal should be subject to a short and defined qualifying period that employers understand and workers can plan around. My amendment delivers that clarity. It also avoids a situation where employers are left wondering whether a dismissal based on fit or reliability will land them in court, even when handled with care.

We have to be clear that jobs are not abstract concepts; they are costs. In the early stages, even the most promising employee is an investment that takes time to repay. Employers need space to make those judgments. This Bill, as it stands, puts a thumb on the scale in favour of caution and against second chances. That is not fair, that is not just and that is not how we grow a dynamic, inclusive labour market. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I have two amendments in this group, Amendments 50 and 67, which, like the amendments the noble Lord, Lord Sharpe, has just spoken to, which I have also added my name to, relate to day-one unfair dismissal rights. I thank the noble Lords, Lord Leong and Lord Katz, for making time to discuss this issue with me, for which I am very grateful.

The introduction of day-one dismissal rights will have a range of consequences: in particular, additional costs to business, which the impact assessment says will run to hundreds of millions a year and the Government themselves says will fall disproportionately on smaller businesses; and greater numbers of tribunal cases on an already overloaded tribunal system. But the most important impact is on people who are looking for work, especially those with riskier profiles: young people trying to get their first step on the employment ladder; people trying to get off benefits; people with health issues; people changing careers; ex-offenders and so on. The Government rightly want to get all of these into work, but the Bill will make that more difficult, not easier.

The current law, with the two-year qualifying period, allows an employer to take a risk on someone—to give them the benefit of the doubt—without facing the risk of an employment tribunal claim if it does not work out. This Bill ends that. An employee will be able to claim for unfair dismissal from day one, and the only valid grounds for fair dismissal will be capability or qualification to do the job, conduct by the employee or some other undefined substantial reason relating to the employee. These reasons are essentially the same as the current reasons for fair dismissal after the qualifying period in today’s law, and they cannot be changed by the regulations that the Government intend to use to create a new—again undefined—type of probation period. Employers will no longer be able to let someone go during a probation period because it is not working, without risking an unfair dismissal claim.

So what will be the result? Simply, employers will now have to think twice before hiring anybody with a less than perfect employment record. The Bill will make it harder for an employer to take a chance on such people, to give them the benefit of the doubt. To quote the Federation of Small Businesses:

“all it’s going to do is make small employers more reluctant to recruit and fearful of being open to vexatious claims … It’s those furthest from the jobs market who will then suffer, because the less risk small employers can afford to take, the fewer second chances, fresh starts and first jobs they’ll be able to offer”.

If anyone is in any doubt, the Government themselves state the same effect in the impact assessment. I will not repeat what the noble Lord, Lord Sharpe, quoted, but this is what the Government also know and think.

We already have a million young people not in employment, education or training—the so-called NEETs. If we want to solve that, we need employers who want to take them on, who will take a chance and give them that first all-important opportunity. So, why on earth would we want to make it riskier for employers to take that chance?

You would think, therefore, that there must be a good, well-evidenced reason why this Government would decide knowingly to make it more difficult for young people to get their first opportunity to work. I have asked several times during this process for evidence that the existing law is in fact causing any problem. There is no evidence given in the impact assessment, and I have had no real answer to that question. In Committee, the Minister’s answer was:

“We have worked with academics who are looking at this subject. I reassure the noble Lord that we have looked at this and are confident that the benefits in this particular case will outweigh the risks”.—[Official Report, 21/5/25; col. 333.]


That really is not good enough to take action that the Government themselves acknowledge will damage the life chances of the most vulnerable or those just starting out.

Employers do not dismiss people lightly, even during a probationary period; hiring and training are expensive and time-consuming, so employers are strongly incentivised to try to get it right. But it is a fact of life that sometimes, with no fault on any side, things do not work out.

As the Minister knows, the noble Baroness, Lady Finlay of Llandaff, wanted to speak in this debate, but, unfortunately, she cannot be here today. She has asked me to point out the impact this change could have on GPs. Not being able to let someone go if the fit or culture is wrong is extremely serious for a small business—as the noble Lord, Lord Sharpe, described—but in a GP practice it could put lives at risk. GP practices tend to be small teams who must work together well and with great understanding and support. An employee who does not fit with the rest of the team could lead to miscommunication, appointment issues and so on. In healthcare, such errors could compromise patient welfare and could even have fatal consequences. It is essential that people can be easily let go if it is not working out in the early stages of their employment.

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However, the Government know what the impact will be; they say so in the impact assessment. They have provided no evidence at all that there is a problem to solve. So there is no other way to put it: with this Bill, the Government are knowingly and deliberately damaging the life chances of the most vulnerable, particularly young people trying to get their first step on the employment ladder, and for no apparent tangible benefit. I urge them to think again. In the absence of constructive commitments from the Minister, I will support the noble Lord, Lord Sharpe, if he decides to press his amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendments 49 and 50 and Amendment 51, to which I have added my name. I agree with the case that my noble friend Lord Sharpe of Epsom has made, and with the arguments put forward by the noble Lord, Lord Vaux of Harrowden.

I point out that the detail of the arrangements for improving protection against unfair dismissal was one of the areas that provoked the widest debate in Committee. Some 21 noble Lords spoke, and nearly all were concerned about the perverse effects of completely removing the two-year qualifying period. When we discussed my concerns in Committee, the Minister said that when I saw the Government’s implementation plan I would be reassured. However, while it is generally helpful, all it says on this matter is that in summer/autumn 2025 they will consult on:

“Giving employees protection from unfair dismissal from ‘day 1’, including on the dismissal process in the statutory probation period”.


So we still do not know what the rules will be.

I believe that the approach the Government are taking of making up the vital detail of legislation after Bills have passed, so well exemplified here, as the noble Lord, Lord Vaux, has said, is profoundly undemocratic. This is giving too much power to the Executive. The Minister should be able to tell us categorically today that employers will be able to dismiss unsatisfactory staff without risking a tribunal during a probation period of six or nine months.

I will not repeat all I said in Committee from the historic perspective of a good employer like Tesco. We even had a unique partnership with the trade union USDAW, seemingly very different from some of the public sector unions dominating this Bill. My main current concern, as the Minister knows, is that day-one rights will make employers extremely nervous about taking on new employees, especially the young or those with a risky track record like the unemployed or the disabled. This will kill growth. My noble friend Lord Sharpe talked about the disincentive to hire. That sums it up perfectly.

There is government evidence to support this. DBT’s economic analysis of 21 October 2024 admits, in section 16, on unintended consequences, that:

“There is some evidence that employment reforms make employers less willing to hire workers including evidence specific to the strengthening of dismissal protections. For example, the OECD noted that more stringent dismissal and hiring policies involve an inherent trade-off between job security for workers who have a job, and firm adaptability to changes in demand conditions or technology”.


In other words, lower growth.

The provisions will require significant extra internal resource to ensure compliance. It will be necessary to implement cumbersome administrative procedures across all businesses for all employees from day one, and indeed in the public sector. It will make the introduction of Making Tax Digital look extremely easy in contrast. It is a looming tragedy for smaller businesses already drowned in regulation. Above all, it will increase costs, adding to the jobs tax in the last Budget, and at a time when the Chancellor is promising to reduce red tape. Another certainty, as we have heard, is that the changes will increase the traffic through employment tribunals. There is already a tremendous backlog of 50,000 cases in the system. I know someone whose case has been listed for 2027.

Because it is important, I am extremely keen to help the Government find a way out of this unfortunate set of circumstances. The fact is that sometimes, appointments do not work out, and it is no one’s fault. I accept that that should normally be clear within six or nine months, which I believe the Government are contemplating for their probation period, but we need certainty on this and probably a government amendment before the Bill becomes an Act. For me, this uncertainty, which is why I have chosen to speak from the Back Benches on an area outside my own responsibility, could prove to be the very worst aspect of this Bill. I hope that, even at this late hour, the Government will think again.

[Lord Phillips of Worth Matravers (CB)]

If there is not to be a sensible probation period, is any employer going to have the courage to take on an ex-offender?

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[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.

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17:28

Division 1

Ayes: 304

Noes: 160

The Division result was initially reported as Contents 299; Not-Contents 165.

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Moved by

[Lord Sharpe of Epsom]

51: Schedule 3, page 194, line 24, leave out paragraphs 1 and 2 and insert—
“1 Section 108 of the Employment Rights Act 1996 (qualifying period of employment) is amended as follows—(a) in subsection (1) omit “two years” and insert “six months”;(b) after subsection (5), insert—“(6) Subsection (1) does not apply if section 4(3)(b) of the Rehabilitation of Offenders Act 1974 (read with any order made under section 4(4) of that Act) applies.”.”Member’s explanatory statement
This amendment reduces the qualifying period for unfair dismissal from two years to six months, leaving in place the existing exceptions to that qualifying period in section 108(3) of the Employment Rights Act and adding a new exception in relation to spent convictions.

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Moved by

[Lord Sharpe of Epsom]

53: Schedule 3, page 196, line 29, after “employment” insert “beginning with the day after the employee has been continuously employed for the period set out in section 108(1) of the Employment Rights Act 1996”
Member’s explanatory statement
This amendment provides that the initial period of employment begins after the qualifying period for unfair dismissal.

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Moved by

[Baroness Jones of Whitchurch]

89: Clause 26, page 47, line 34, leave out “subsection (4)” and insert “subsections (4) and (4A)”
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.

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Amendment 107 seeks to exempt individuals employed by farming businesses from Clauses 1 to 13, 23 and 26. Despite our strong advocacy on behalf of farming communities, we cannot support this amendment because, throughout the passage of the Bill, we have consistently opposed the creation of a two-tier employment system that excludes certain sectors from core protections. In addition, we believe that some of the provisions the Conservatives propose for exemption should still apply to farm workers, including those relating to the right to request, which the Conservatives voted in favour of on Monday, and statutory sick pay. We also believe there are other struggling sectors, such as adult social care and early years providers, which are not receiving such special arrangements, so we cannot support Amendment 107.

[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—

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The noble Lord, Lord Sharpe, asked about business costs. As I said earlier, we have consulted with businesses extensively throughout the passage of this Bill, and many have come out in support of the Bill. The noble Lord asked for one example, and I will give it to him. Abraham Moon is a world-renowned, high-quality textile manufacturer—an SME based in West Yorkshire —which has welcomed the Bill’s ambition to level the playing field, noting that it ensures responsible employers such as Abraham Moon are not undercut by lower standards. It is a step forward for fairness, for business and for people. In conclusion, I ask the noble Baroness, Lady Noakes, to withdraw the amendment

[Lord Sharpe of Epsom (Con)]

Before the noble Lord sits down, he has put up a heroic defence based on a variety of statistics, but is he aware of the latest survey from the ICAEW—the chartered accountants? It is regarded as very representative, surveying over 1,000 companies of various sizes. The survey shows the fourth quarterly decline in business confidence and that the expectations for employment are at their lowest level since the third quarter of 2020.

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[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.

[Baroness Noakes (Con)]

My Lords, I thank all noble Lords who have taken part in this debate, which has covered quite a lot of ground. I cannot pretend to be anything but disappointed in the Minister’s response. In fact, the first chunk of his response seemed to be some kind of lesson in the socialist view of life and had nothing to do with any of the amendments. While I respect the Minister’s own business expertise, he does seem to demonstrate that this Government do not understand business and do not understand the key to successful economic management.

I was pleased to hear that my noble friend Lord Leigh of Hurley intends to test the opinion of the House. I hope my noble friends on the Front Bench will seek to do the same when we reach their amendments in their places on the Marshalled List.

I was of course disappointed, but not surprised, that the Minister was not prepared to accept my generous offer of a reserved power to create exemptions to get the Government out of trouble in due course. I hope they do not come to regret their decision. You can take a horse to water, but you cannot make it drink. I have taken the government horse to water, and it has refused to drink. On that basis, I beg leave to withdraw my amendment.

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19:01

Division 2

Ayes: 248

Noes: 150

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19:45

Division 3

Ayes: 100

Noes: 136

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[Lord Leigh of Hurley (Con)]

I rise to say simply that, in my experience, I have found that employees want to bring with them family members, often parents—particularly women want to bring a parent—and I am not sure that this will allow that anymore.

[Lord Sharpe of Epsom (Con)]

I thank the noble Baroness, Lady Fox of Buckley, and the noble Lord, Lord Palmer of Childs Hill, for their amendments and their introductions. I speak strongly in favour of these amendments, which address a crucial gap in the rights currently afforded to workers.

At its core, this is about fairness, autonomy and dignity; it is about giving working people real choice and a real voice when it matters the most. As we have heard, under the current law, a worker facing a disciplinary or grievance hearing has the right to be accompanied, but only by a fellow worker or a trade union representative. What of the workers who are not in the union, which, as the noble Lord, Lord Palmer of Childs Hill, and my noble friend Lord Ashcombe pointed out, is most of them? What of those who work in small businesses, where asking a colleague to attend is uncomfortable or perhaps even counterproductive? What of those sectors in which peer support simply is not realistic? We must not confine workers to a narrow and outdated list of whom they are allowed to bring into the room at a time of maximum stress and uncertainty. As the noble Baroness, Lady Fox, so powerfully illustrated with her real-world examples, that causes problems.

This amendment would bring common sense, compassion and modern flexibility into law. This is about worker autonomy, trusting people to decide whom they need in the room with them. If we are truly to modernise employment rights, either amendment should be accepted.

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20:30

Division 4

Ayes: 202

Noes: 138

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[Lord Palmer of Childs Hill (LD)]

My Lords, I have signed this amendment in support of the noble Baroness, Lady Penn. I will not add to what many noble Lords have said, but I want to deal with one point.

The noble Lord, Lord Jones, talked about being too prescriptive. We need such prescription to help new fathers. The idea that this is mind-boggling is ridiculous. It would extend paternity leave from two weeks to six weeks, at 90% of pay. We are not talking about a revolution. We are talking about a modest increase to make some connection between fathers and their children in their very early years. It is needed, because the UK has the least generous paternity leave in Europe. It is good for fathers, bonding and mental health. It supports mothers, with a more equal division of care, and it is good for children’s development. It supports business, because employees will be happier, more contented and not stressed with trying to get back to the family home and their young children. This is not revolutionary. This is a modest step forward. I was delighted to be able to sign the amendment of the noble Baroness Penn, which we on these Benches support.

[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.

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21:19

Division 5

Ayes: 124

Noes: 131

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21:43

Division 6

Ayes: 47

Noes: 121

Amendment 105

Moved by

[Lord Sharpe of Epsom]

105: After Clause 26, insert the following new Clause—
“Definition of seasonal work(1) In making regulations under Part 1 of this Act, the Secretary of State must have regard to the specific characteristics and requirements of seasonal work as defined in subsection (2).(2) “Seasonal work” means work that—(a) is performed during a particular period or periods of the year,(b) recurs substantially in the same periods each year,(c) is directly linked to a predictable and temporary increase in demand for labour during those periods,(d) includes work in sectors where such patterns are common, including but not limited to—(i) agriculture and horticulture,(ii) the creative industries, including theatre and live performance,(iii) retail,(iv) hospitality, and(v) tourism and events, and(e) is entered into for a fixed duration not exceeding 26 weeks to meet the temporary demand.”Member’s explanatory statement
This amendment introduces a baseline definition of “seasonal work” to clarify its recurring and time-limited nature for the purposes of the Act.

[Lord Sharpe of Epsom (Con)]

My Lords, I would like to test the opinion of the House.

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21:54

Division 7

Ayes: 184

Noes: 123

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22:05

Division 8

Ayes: 180

Noes: 123

Amendment 107

Moved by

[Lord Sharpe of Epsom]

107: After Clause 26, insert the following new Clause—
“Exemptions for individuals employed by a farm business(1) Sections 1 to 13, 23, and 26 of this Act do not apply to employment by a farm business.(2) For the purposes of this section— “farm business” means any business, undertaking or activity carried on wholly or mainly for the purposes of agriculture, horticulture or forestry, and includes—(a) the growing of crops, including cereals, fruits, vegetables and flowers;(b) the rearing or fattening of livestock or poultry;(c) dairy farming;(d) the management of woodlands where ancillary to agricultural operations;(e) land used for grazing, mowing or market gardening;(f) any business conducted on land that is occupied under a farm business tenancy within the meaning of section 1 of the Agricultural Tenancies Act 1995 or section 109(3) of the Agriculture Act 1947.”Member’s explanatory statement
This amendment exempts all individuals employed by a farm business from the application of Sections 1 to 13, 23, and 26 of the Act.

[Lord Sharpe of Epsom (Con)]

My Lords, British farmers have been hammered by this Government. Requiring farmers to give guaranteed hours and day one rights on sick pay and unfair dismissal, as well as to make payments for cancelled shifts, is unworkable, so I would like to test the opinion of the House.

22:16

Division 9

Ayes: 148

Noes: 155

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[Lord Holmes of Richmond (Con)]

My Lords, I will be blessedly brief. I tabled a similar amendment on this issue in Committee to ask the Government, through the Bill, to introduce regulations to designate a body to bring clarity, consistency and fairness and, in effect, to level the playing field in this area of umbrella businesses, on which the Bill is curiously silent. These entities differ dramatically from other sectors of the employment market, the recruiter market and many other sectors of the economy in not having consistency and clarity of approach in how they are treated.

My amendment in Committee suggested the designation of a body to address this issue. At that stage, it was taken by the Government and others around the Committee that I was suggesting the creation of an additional body. Not a bit of it. It was about the designation of an existing body rather than the creation of a new one. With this amendment on Report, I have moved that on and seek to ask the Government to introduce regulations to ensure that existing codes of practice in good standing—ways of operating that all bona fide businesses in this sector of the market already adhere to—apply to all umbrella businesses.

This extraordinarily moderate amendment would bring fairness, clarity, consistency and a levelling of the playing field. I very much hope the Government will accept it. I beg to move.

[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.