Employment Rights Bill

Lord Leong Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I am very grateful to the noble Baroness, Lady Kramer, for setting out the position so clearly, but I am particularly grateful to my noble friend Lady Noakes because, as a result of her moving the key Amendment 5, we have had a remarkably positive debate about what I believe is the lifeblood of the UK economy, namely the small and medium-sized business sector. The noble Lord, Lord Londesborough, of course, is a great authority on all this, and it was good to hear from the noble Lord, Lord de Clifford, as well.

When we reflect for a moment on the speeches that have been made in this debate—apart from that of the noble Baroness, Lady Kramer—we have not had any contributions from the Government Benches. But, as my noble friend Lord Leigh of Hurley pointed out, the most important contribution will be made by someone who really does understand. The noble Lord, Lord Leong, knows all about small businesses, and I am thrilled and delighted that he is summing up the debate because he understands what so many of my colleagues have tried to point out. The noble Baroness, Lady Neville-Rolfe, said that bureaucracy can get in the way of success. Look at the amount of rules and regulations and bureaucracy.

I agreed with all my noble friends, including my noble friend Lord Ashcombe when he pleaded for a sensible and measured response. We all want to see bereavement leave—all good employers allow for bereavement leave. We want to see rights established very clearly, but my noble friend Lady Verma pointed out that if we impose them on the small and medium-sized sector in the way that my noble friend Lady Noakes outlined, three, four or five employees will suddenly have to deal with all this legislation.

Let us remind ourselves of the importance of small businesses. As several of my colleagues pointed out, at the start of last year there were 5.45 million small businesses with up to 49 employees, making up a staggering 99.2% of the total business population in the UK. We are talking about a massive sector, and therefore we have to worry and concern ourselves about the effect of the Bill. As the Federation of Small Businesses put it, in its current form the Bill risks becoming nothing short of a disaster for small and micro-businesses.

The noble Baroness from the Liberal Democrat Benches spoke about a two-tier workforce system, which those Benches object to. But as my noble friend Lady Noakes pointed out, we do in fact have tiering alive and well throughout the UK economy. It is not trying to impose one size fits all; it is recognising that over 99% of businesses in this country are small and cannot possibly cope with the burden of this Bill.

It just so happens that I already have a quotation from the noble Lord, Lord Leong, which I readily move to. We have heard from the Government on multiple occasions that they are committed to supporting SMEs and ensuring that they are not burdened with excessive costs or red tape. The noble Lord, Lord Leong, made a very important point during the passage of the Product Regulation and Metrology Bill:

“we do not want to burden SMEs with additional regulatory or financial cost”.—[Official Report, 25/11/24; col. GC 138.]

What wise words: we would love to hear those words from him again tonight. He will realise that the reality of this Bill is starkly different. The only thing this Bill seems to do for SMEs is to burden them with additional regulatory and financial costs. It is incredibly difficult to reconcile the Government’s stated intentions with the actual impact this legislation will have on small and micro-businesses across the country.

I know that my noble friend Lord Sharpe of Epsom and I have Amendment 282 in this group, but I do not want to go into it. I was taking the old Companies Act definition, and I do not need to go into all the findings of the Bolton committee and all those who have sought to define this, because I think my noble friends have done a great deal to define small and medium-sized enterprises.

We just need to know what the Government intend to do to alleviate the burden on small and micro-businesses. The impact assessment has highlighted the significant challenges that these businesses will face in implementing these reforms, and at the moment there is no adequate plan to support them.

I would like to ask the Minister these questions. First, will he please outline what the three main expected benefits of this Bill will be for small and micro-businesses? Secondly, how will the Government support small businesses in complying with the provisions of this legislation? What kind of guidance, training and resources will be made available to ensure that these businesses can navigate the new regulations without inadvertently falling foul of the law? Finally, can the Minister provide an assessment of the risk of unintentional non-compliance by small businesses? What steps are the Government taking to mitigate this risk and ensure that these businesses are not unduly penalised as a result of a lack of guidance in the legislation?

The Government have not consulted the small and medium-sized sector. If they have, can we please have a great deal more detail on what their conclusions were? If they have not consulted, will they please do so now?

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

My Lords, I thank all noble Lords who contributed to this group of amendments with such passion. The noble Baroness, Lady Noakes, together with the noble Lords, Lord Sharpe and Lord Hunt, tabled several amendments—Amendments 5, 124 and 282—that seek to remove micro-businesses and small and medium-sized businesses from the scope of large sections of the Bill.

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[Lord Leigh of Hurley (Con)]

With respect, the statement that was issued on April Fools’ Day seems to be in support of the minimum wage, not of the specific clauses in the Bill.

[Lord Leong (Lab)]

I thank the noble Lord for that, but IKEA is pretty supportive of the overall intention of the Bill and of the national minimum wage, which is obviously outside the scope of the Bill, such as what we are doing on zero-hours contracts, other short-term contracts and all that. I will write to the noble Lord with further details on the various clauses that it supports.

Various noble Lords asked about the impact assessment. The benefits of the Bill that were published by the TUC show that even modest gains from reforms to workers’ rights will benefit the UK economy by some £13 billion. Opposing this, the impact assessment says that the costs to business would be some £5 billion or 0.4% of employment costs. The benefit is huge, and economists have done research on this.

I cannot agree more with the noble Lord, Lord Londesborough, who says that start-ups and scale-ups definitely generate employment. It is absolutely right that we have to support them and I strongly believe that the Bill does support them.

Various noble Lords mentioned day-one rights and difficulty in recruiting employees. Remember that, when you run a small business, yes, it is very competitive to employ your first employee: sometimes you have to compete with the big companies in matching salaries or even benefits. I believe passionately that the Bill puts SMEs on a level playing field with large companies, where they can offer the basic benefits in the Bill.

Sometimes we asked: why are we excluding SMEs because it is so difficult for employers to recruit, and why should employees in SMEs not get day-one rights? My answer is: why not? Why should they not get day-one rights? As I said, they are the people who work for the owners, for the owners to make the profit. Without them, the owners will not have a business, so it is very important that they are supported and I believe strongly that good businesses provide fantastic support to their employees.

[Lord Ashcombe (Con)]

My Lords, I am not sure that it is the difficulty in recruiting that is the real problem for small and micro businesses; I think it is the fear of recruiting. That is a really different point.

[Lord Leong (Lab)]

I thank the noble Lord for that. I might turn that around and say that, if I am looking for a job, I have a choice of big or small companies. I am taking a chance and a risk working for a very small company. I am not sure whether that company will last. That risk works two ways. I strongly believe that most people work for companies not because of what the company does but because they look at the owner or the founders and whether they want to work with such people. At the end of the day, the employees will also be taking a chance on the employer.

[Baroness Verma (Con)]

My Lords, there is a huge difference between a large business—and its culture and the ability to respond to all the new burdens that will be placed on it—and a small business. The Minister himself said that a happy business and happy employees add to a good bottom line. The problem is that, if an employer is so burdened by so many things to comply with because it is a small employer, that happiness is soon going to disappear. All I think that all noble Lords around the House are asking is that we ease the burdens for small and micro-businesses by removing not the rights but just the burdens.

[Lord Leong (Lab)]

I thank the noble Baroness for that. There are other additional responsibilities, not only in terms of HR. A company that sets up needs to have IT support and payroll support. How many SMEs have their own IT department or payroll department, let alone an HR department? There will be big businesses that will be providing services to support SMEs. The whole argument is about responsibility: basically, when you set up a business, you have all these responsibilities, and this is part of those responsibilities.

[Baroness Verma (Con)]

My Lords, I do not want to labour the point but, if the Minister were to speak to the small businesses that people like us are speaking to, I think they would really argue that these are huge implications for them.

[Lord Leong (Lab)]

I thank the noble Baroness. I will not hold the House for too long, because I think the dinner break is coming up, but I will obviously meet up with her to talk further on this.

To conclude, the Government believe that having an entitlement to fair, flexible and secure working should not be reserved for those people who work for large companies. It is fundamental that our “make work pay” reforms, including those in this Bill, apply across all employers. Any exceptions to this provision based on the size of the business would create a two-tier labour market, with some workers facing fewer rights, entitlements and protections. This would reduce the talent pool from which SMEs could attract employees, as I mentioned earlier. This in turn would lead to an uneven playing field between employers of different sizes and reduced incentives for small businesses to grow. I therefore ask the noble Lord, Lord Sharpe, to withdraw Amendment 282 and the noble Baroness, Lady Noakes, to withdraw Amendments 5 and 124.

Employment Rights Bill

Lord Leong Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

Moved by

[Lord Leong]

14: Clause 1, page 4, line 2, at end insert—
“(8A) Subsection (8B) applies where—(a) a worker’s contract or arrangement requires an employer to make work available to a worker for a number of hours, and(b) some or all of those hours may be made available either on days falling within a reference period or on days falling within another period (all of the days on which the hours may be so made available together forming “the longer period”).In subsection (8B), “the unassigned hours” are the hours that may be made available at any time during the longer period as described in paragraph (b).(8B) Where this subsection applies—(a) subsection (3)(a)(ii) is to apply as if the contract or arrangement required the employer to make work available to the worker during the reference period for the apportioned number of the unassigned hours (in addition to any other hours that the employer is required to make available to the worker during the reference period);(b) “the apportioned number” of the unassigned hours is—Image-1where—H is the number of the unassigned hoursD1 is the number of days in the reference period that fall within the longer periodD2 is the number of days in the longer period.(8C) Where there is more than one longer period in relation to the same reference period, subsection (8B) is to be applied separately in relation to each longer period.”Member's explanatory statement
This amendment makes provision, for the purposes of proposed section 27BA(3)(a)(ii) of the Employment Rights Act 1996, about the calculation of the number of hours for which an employer is required to make work available to a worker during a reference period in cases where hours might be made available in that period or another period.

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

My Lords, I beg to move government Amendment 14 and shall speak also to government Amendments 23, 25, 26, 30, 34, 35, 39, 40, 41 and 45 to 61. I reassure the Committee that these are technical amendments brought about as a result of very welcome scrutiny of the Bill.

The amendments incorporate technical and clarificatory adjustments, close loopholes to safeguard policy functionality, and resolve uncertainties to ensure the measures are comprehensive and will accurately deliver the policy intent set out in the plan to make work pay, delivery of which was a clear manifesto commitment of this Government. They do not introduce new policy; they simply ensure the Bill works to achieve its intended aims effectively. Making technical amendments to the Bill in this way is an entirely appropriate and ordinary part of making good legislation.

On Amendment 14, as the Bill is drafted, workers on annualised contracts—or other contracts where the hours are guaranteed over a period longer than the reference period—that have a total number of guaranteed hours of work but little detail as to their allocation may fall out of the scope of the right to guaranteed hours. This is because the worker would be on neither a zero-hours contract nor a contract guaranteeing a certain number of hours over the reference period. It is the case even if they would otherwise be eligible. Workers may therefore fall out of the scope even if they are guaranteed only a very small number of hours over a year.

On the other hand, workers on annualised hours contracts who have a sense of when their hours will be worked may fall into scope of the right to guaranteed hours if they have a certain number of hours guaranteed during the reference period. This is not our policy intention—workers on annualised contracts may experience one-sided flexibility in the same way as those on weekly or monthly contracts. As the Bill is drafted, there may also be a perverse incentive for employers to place workers on to annualised hours contracts guaranteeing a very small number of hours with no indication as to when they should be worked to avoid being in scope of the right to guaranteed hours.

Amendment 14 will ensure that the policy works as intended and expected and will act as an anti-avoidance measure. It makes provision to determine what the minimum guaranteed hours are in the relevant reference period by providing a calculation method to find the apportioned number of any unassigned hours under the contract for that reference period.

Amendments 49 to 57 add grounds on which a dismissal would be automatically unfair. A dismissal would be automatically unfair where an employee was dismissed for bringing a complaint to an employment tribunal that they were wrongly issued a notice by their employer stating that their guaranteed hours offer had been withdrawn or for alleging the existence of any circumstance which would constitute a ground for bringing such proceedings. Adding these grounds aligns with the approach taken where a worker is unfairly dismissed for taking a claim to an employment tribunal on other grounds relating to the right to guaranteed hours. All employees deserve protection from unfair dismissal. These amendments will ensure that employees who make a claim in an employment tribunal on any of the grounds related to the right to guaranteed hours will be protected from being dismissed as a result of making such a claim. Consequential amendments have been tabled to amend the right not to suffer a detriment for workers and agency workers to ensure consistency when referring to the proceedings that can be brought or referred to and that could lead to that detriment.

Amendments 25, 26, 34 and 35 relate to the movement of shifts for the purposes of payment for workers for shift movement at short notice. These amendments make technical changes to the definition of the “movement” of a shift. This is to provide for situations where a shift is split in two or more parts, or where a part of a shift is moved with the result that the shift ends later than it otherwise would have but the start time remains the same. For example, a worker could have a 9 am to 5 pm shift changed at short notice to 9 am to 12 pm and 4 pm to 9 pm. In this case, it is right that a payment for a short-notice change is granted given that the worker may have already incurred costs for plans associated with the shift, such as childcare or other care arrangements.

Amendments 30 and 40 make technical changes relating to payments for shifts that have been cancelled, moved or curtailed at short notice where an exception applies. Where an exception applies—meaning that the employer is not required to make a payment for that changed or cancelled shift—the employer must provide the worker with a notice so they are aware that they will not receive a short-notice payment and why. The notice must be given to the worker within a certain amount of time, which will be specified in regulations. This period may be shorter than the deadline for making payment, which will also be specified in regulations. Under the current drafting, even if they make the payment despite an exception applying, the employer still has to provide an exception notice if they make the payment after the deadline for giving a notice. The amendments change this so that employers do not need to provide a notice if they pay the worker within the deadline for making the payment. The same applies in respect of work-finding agencies and agency workers.

Amendment 23 aligns the wording used in Clauses 2 and 3. To be eligible for the right to short-notice payment, workers must be on a contract of a specified description, if they are not on a zero-hours contract or arrangement. This is referred to in Clause 2 as a contract

“that requires the employer to make some work available to the worker”.

We are adding the same description into Clause 3 to ensure that this is included in the provision.

Amendment 39 is a minor and technical amendment that corrects a cross-reference to align paragraph 23(5) of new Schedule A1 to the Employment Rights Act 1996 with new Section 27BR(3) of the same Act, both inserted by this Bill. This concerns the duty to give notice where an exception applies that means that no payment is due for a shift that has been moved, cancelled or curtailed at short notice. The amendment ensures that, for both directly engaged workers and agency workers, only the requirement to give an explanation in the notice of exception does not require the disclosure of information where that would contravene data protection legislation or breach a duty of confidentiality, or where the information is commercially sensitive.

Amendment 45 signposts at Clause 6 the definition of “work-finding agency” in Clause 4. This minor and technical amendment adds the definition of “work-finding agency” to the interpretation section in new Section 27BZ2, with other definitions used for that part. It does this by referring to its meaning in new Section 27BV of Part 2A of the Employment Rights Act 1996.

Amendments 46, 58 and 61 amend Schedule 6 to the Insolvency Act 1986, Schedule 3 to the Bankruptcy (Scotland) Act 2016 and Section 184 of the Employment Rights Act 1996 so that employees can receive short notice payments in the same circumstances as they receive other wages on the insolvency of their employer. When an employer goes insolvent, outstanding wages due to employees are treated as preferential debts—or preferred debts in Scotland. Amendments 58 and 61 ensure that outstanding short notice payments are also treated as preferential or preferred debts.

Amendment 46 enables employees to obtain payment of unpaid short notice payments from the Secretary of State in the same circumstances as they receive other wages under the scheme created by Part 12 of the Employment Rights Act 1996.

Amendment 59 amends Section 202 of the Employment Rights Act 1996 to ensure that information does not have to be provided and will not be disclosed to a tribunal or court under the zero-hours provisions where a Minister is of the opinion that such disclosure would be contrary to the interests of national security.

Amendment 60 amends Section 206 of the Employment Rights Act 1996 to ensure that, in the event of a worker’s death or the employer’s death—or the death of another respondent in the case of agency workers—tribunal proceedings under the zero-hours provisions can still be instituted, continued or defended as appropriate by a personal representative of the deceased.

Amendments 41 and 47 amend Section 12A of the Employment Tribunals Act 1996 and the provisions on short notice payments for agency workers in order to enable employment tribunals to impose financial penalties on all types of respondents in claims brought under the zero-hours provisions where there are aggravating circumstances.

Amendment 48 amends Section 16 of the Employment Tribunals Act 1996 to include payments for cancelled, moved or curtailed shifts in scope. This ensures that regulations can be made to enable benefits to be recouped where a worker has not received such a payment and so has had to claim benefits, and the tribunal has then ordered the employer or work-finding agency to make the payment. The amendment also ensures that regulations can be made so that benefits can be recovered from all types of respondents in claims brought under the zero-hours provisions—for example, in respect of the payments that are compensation for loss of wages.

These amendments seek to prevent workers receiving double award where their rights have been breached and ensure that employers and other respondents do not benefit from breaching these rights. I therefore beg to move these amendments.

[Baroness Coffey (Con)]

My Lords, I rise to speak to this group of government amendments. I am surprised that the Minister made the assertion that they are all technical. Amendment 53, for example, extends the types of dismissal that will be regarded as “automatically unfair”. That is not a technical amendment; it is an extension of what is already considered potentially controversial in being added to the Bill in this way.

There are other amendments in this group that really concern me in their drafting. Multiple amendments leave out several lines of the previous Bill presented to this House and the other House and then leave the employment tribunal and the employer to get into the detail. For example, Amendment 52 states:

“It is immaterial … whether or not the proceedings were, or would have been, well-founded provided that the agency worker acted in good faith in bringing the proceedings or alleging the existence of the circumstance”.


I ask the Minister, what has changed? Why do we now have an employment tribunal group which has to decide whether the actor worked in good faith? They will not necessarily need to know what the Government proposed before, but it would be very helpful to understand why significant parts of the Bill on the operation of the employment tribunal are being changed at this stage.

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[Lord Sharpe of Epsom (Con)]

My Lords, I thank the Minister for his detailed introduction to the amendments in this group. As he was speaking, I thought that he had inadvertently highlighted the mind-boggling complexity of what employers are up against when dealing with this Bill. I did hear all the words but, to paraphrase a famous comedian, I was not entirely sure that they were necessarily in the right order.

As my noble friends Lady Coffey and Lord Murray, and the noble Baroness, Lady Kramer, have pointed out, the Government tabled these 27 amendments only a few days ago. Perhaps they are simply technical amendments, but I am afraid I am inclined to agree with the other speakers that they do not appear to be so. I will just pick a few items at random from the Minister’s speech. If amendments involve national security, insolvency and the death of a claimant at an employment tribunal, these are matters of substance; they are not technical at all.

This is not the way to do business in this House. The last-minute approach is symptomatic of a much deeper issue, which is the lack of care and due diligence when it comes to this Bill. It is rushed, it is poorly thought-through, it has been inadequately consulted on, and it is one that these Benches will scrutinise to the fullest possible extent.

We have to ask why the Government have still not tabled any amendments to address the concerns of businesses regarding the changes to zero-hours contracts in this Bill. These are not niche or minor concerns; they go to the heart of how businesses—especially, as we have been discussing all evening, small and seasonal employers—operate.

We have heard already some of the germs of the future scrutiny that these amendments can expect to receive in depth. We will not oppose them today, but we of course reserve the right to revisit them at a later stage, when we have had time to digest them and read the Minister’s comments in much more detail.

On a personal note, I read Amendment 14 with mounting horror. It induced a minor heart flutter because it reawakened memories of a particularly unsuccessful algebra exam I took when I was about 16. I would be very grateful if we could have a minor health warning on any future amendments of that type.

[Lord Leong (Lab)]

I thank all the noble Lords for their contributions. Some noble Lords raised concerns about the number of amendments tabled by the Government, and I would like to reassure the Committee that these really are technical amendments, brought about as a result of welcome scrutiny of the Bill. They are entirely appropriate and an ordinary part of making good legislation. I remind noble Lords that we had tons of government amendments when we debated the Procurement Bill recently, so this is not unusual.

I will answer some specific points raised by noble Lords. The noble Baroness, Lady Coffey, asked about Amendment 53. This is one of a number of technical amendments designed to ensure that the Bill operates as it was intended to operate. As an example of how technical they are, Amendment 53 seeks to amend new Section 104BA because we realised that it was not clear that Section 104 of the Employment Rights Act 1996 already ensured that dismissal in such cases was automatically unfair.

The noble Lord, Lord Murray, mentioned scrutiny. There will be technical regulations tabled at a later stage, or during the course of this legislation, and the House will have every opportunity to scrutinise these through the affirmative procedure. There will be time for noble Lords to scrutinise delegated powers and this Bill.

[Lord Murray of Blidworth (Con)]

The Minister appears to be saying that the House’s deficit in scrutiny can be made up by the fact that we can scrutinise secondary legislation. As the Minister will be well aware, the last time this House negatived a statutory instrument was, I think, in the 1970s. It is an all or nothing: either we agree to a statutory instrument or we do not; we cannot amend a statutory instrument. The Minister will surely agree that, realistically, this is not an avenue for scrutiny.

[Lord Leong (Lab)]

I take the noble Lord’s point, but I am sure he will appreciate that, when he was a Minister, a number of statutory instruments were placed before the House and we had every chance to scrutinise them. There is a question over whether noble Lords want to table whatever options are open to them, but the whole objective is that the House will be able to scrutinise regulations as well.

I refer to the point about algebra from the noble Lord, Lord Sharpe. I had to read three times the formula in Amendment 14 to understand what it actually means. I will try to explain in plain English what we are trying to achieve with H times D1 over D2.

To qualify for guaranteed hours, a worker’s existing guaranteed hours need to be lower than the threshold and the worker needs to work more than the guaranteed hours in the reference period. That condition does not work for someone whose guaranteed hours may or may not fall entirely in the reference period, such as someone on an annualised-hours contract with no clarity on when those hours fall.

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[Baroness Kramer (LD)]

Before the Minister sits down, could he answer my question on whether or not there will be a code of practice? I can see many businesses struggling their way through all this stuff. I think his attempt to clarify the complex algorithm illustrates the need for such a code very powerfully.

[Lord Leong (Lab)]

I thank the noble Baroness for her question, which I have written down. In response to an earlier grouping, my noble friend the Minister said that the Government would publish detailed guidance on the government website, which I hope will give some clarity on that.

Amendment 14 agreed.