Employment Rights Bill

Earl of Erroll Excerpts

Committee stage
Wednesday 21st May 2025 Lords Chamber

[Lord Lucas (Con)]

My Lords, I have Amendment 107A in this group, which is intended to be an entirely helpful amendment for the Government, allowing them to put nine months on the face of the Bill but preserve all the flexibility they have there at the moment. I think that would be a small step forward in giving comfort to employers to know what is coming their way.

I understand that probationary periods are uncomfortable for people who want to take them—it would be interesting to try them in this House. None the less, when you run a small business, as I do, they are important. I have in the past employed prisoners; actually, every single one of those has worked out really well. I have employed promising young people who have turned out to be a total disaster. It is really hard to know. You cannot rely on references these days; nobody gives a truthful bad reference, because they would just get sued for it, so it is really hard to pick up warning signals. Everyone’s documents are compiled by AI, so they are beautifully written and answer all the questions perfectly. You cannot interview everybody, you have to take a chance, and sometimes it just does not work out.

To have to prove capacity or competence is hard. I do not know whether any noble Lords here have been involved in a school where the head has not quite worked out. It is really difficult to get rid of them on the basis of competence; it takes so long to negotiate their departure. If you are faced with that sort of disincentive for the ordinary, run-of-the-mill employees—“If get this wrong, I’ll be saddled with a £50,000 bill for unfair dismissal”, which is about the scale of these things if you are paying people decently—that is a big disincentive to employing people in the first place. It is certainly a huge disincentive to taking on people who have a question mark in their CV—a period of unemployment or something that looks odd about it—or who are just young.

We want people to take risks. I have enjoyed taking risks. It is wonderful when it goes right. You really feel you have helped someone in their career and have been part of building a life for them. They leave you, which usually they do, but you take pleasure in what they have gone on to do and the success they have made of their life, and perhaps you have done a bit there. But it is a risk, and to load that risk on to what is by its nature an inexact, uncomfortable and uncertain decision is a real incentive not to take that decision—not to hire.

I think it would be a mistake to go down that road, although I am comfortable, as the noble Lord, Lord de Clifford, pointed out, with a shorter timescale. You ought to know, if you are paying attention, whether things are right within three months; you might want to give someone a bit of extra leeway if you think they can set themselves right—but not holding it at two years. I am totally in favour of that; nine months seems a decent figure. It has to be possible, as my noble friends have said, to dismiss people just because it has not worked out. In some circumstances that is the best you can say: “No, sorry—we both did our best and it didn’t happen”.

[The Earl of Erroll (CB)]

Very briefly, because we are talking about the time periods here, you have to be very careful because accrued holiday goes into that, and if you do not give people notice before the holiday is up, you cannot get rid of them. So be careful: it should be three months or less, and actually you have to knock off another week or so. This is from experience.

The other thing is the headmaster issue. I know one small school which had terrible trouble because the headmaster was incompetent. He knew it, so he got depressed and went on permanent sick leave, and of course the school was then saddled with the costs. There are a lot of problems such as that. It would be nice to clean them up at the same time if we could, but I do not think it will happen in this Bill.

[Baroness Stowell of Beeston (Con)]

My Lords, I support the amendments in this group and endorse most of the arguments that have already been advanced. I will focus just briefly on tech scale-ups.

Noble Lords will, I hope, remember that the Communications and Digital Select Committee published a report just a few months ago on AI and Creative Technology Scaleups. These businesses are incredibly important to our economic growth. They represent the innovation that comes out of our universities and the talent that exists in this country, but they need a huge amount of support to get from being start-ups to scale-ups. However, if they are successful, the return that they then deliver to our economy is huge.

Our inquiry found that the UK is, in effect, an incubator economy. What we are seeing now is that increasingly the kinds of businesses that have the potential to turn into unicorns, or indeed become unicorns, are galloping away. They are doing so because of many things. Sometimes it is about access to capital growth and to highly competitive workforces. But one of the biggest challenges that we face is that our regime, whether it is regulatory or investment, is not supporting risk-taking. As my noble friend Lady Noakes said a moment ago, the measures in the Bill about day-one rights on unfair dismissal, along with many other things, are undermining risk takers.

As part of our inquiry—before the Bill was published—witnesses told us, in the context of hiring, that the costs of hiring and firing are already much higher in the UK than anywhere else, which is putting UK businesses at a disadvantage. In the context of the Bill and the day-one rights around unfair dismissal, the Startup Coalition, which represents the start-ups, talked in its briefing note about the chilling effect that these day-one rights around hiring and firing would have on start-ups, seriously undermining their potential for growth. TechUK, which represents tech businesses of all sizes, has raised a lot of concerns about some of these day-one rights, but in the context of unfair dismissal, one of its concerns, which I do not think we have heard much about so far, is the risk of fraudulent claims.

In the Government’s response to our report—while I am on my feet, I add a bit of advertising: the debate on the report is on Friday 13 June, so I urge any noble Lords who are interested in this to sign up and contribute—they referred a lot to their AI action plan and the forthcoming industrial strategy, saying that jobs will be “at the heart” of that strategy. If that is the case, I urge the Minister to think again in the context of what I have just argued. If jobs are to be at the heart of that strategy, and the Government are as keen to support tech scale-ups as they have declared themselves to be and have put this part of the economy centre stage in all their growth plans, but these kinds of measures are making it impossible or so difficult for these businesses to be willing to take the risks to hire in the way that they need to in order to scale, then the Government are introducing measures which are self-defeating and which will undermine their own objectives.

--- Later in debate ---

[The Earl of Erroll (CB)]

I would like to take the noble Lord up on this, because I have had experience with this. When an employee has been behaving very difficultly and sometimes they want to go anyway, but you want to dismiss them, they say, “Right, we’re going to take you to a tribunal”, and the answer is they will settle for £3,000 to £4,000 just because it is cheaper for everybody. The trouble with that is, for the loyal employees who stay, it is a huge disincentive and causes a lot of aggro within the thing, and it is very unfair on everybody else.