Employment Rights Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Wednesday 21st May 2025 Lords Chamber

Debate on whether Clause 23 should stand part of the Bill.

[Lord Vaux of Harrowden (CB)]

My Lords, we now come to the general subject of unfair dismissal rights from day one, which we have just touched on in relation to apprentices. Many of the same arguments are going to apply more widely. For me, this is most damaging part of the Bill because the unintended, but well understood, consequence is that it will damage the life chances of the young and the most vulnerable. I thank the Ministers for their time last week; I am not sure if I persuaded them, but I will try again now.

At Second Reading, I asked why these changes are required. What is the evidence that there is a genuine problem, or that the qualifying period of two years is being abused in any material way? The Minister did not answer the question, so I have therefore given notice that I intend to oppose the question that Clause 23 and Schedule 3 stand part of the Bill, so that I can probe further into what problem these changes are intended to solve.

Rather than hearing my views on the subject, I am going to tell noble Lords what the Government’s views are, and what they think the impacts of these changes to the qualifying period will be. According to the impact assessment,

“it is likely employers will make changes to hiring, dismissal and management practises to minimise the risk of litigation for dismissal and minimise unproductive employee-job matches. The burden of these changes could be in the hundreds of millions per year”.

It goes on to say:

“The impact on businesses is expected to be negative and driven by familiarisation costs, and administrative costs from providing a written reason for dismissal, as well as the costs associated with additional early conciliation and tribunal cases, which is also likely to create additional burdens for the Employment Tribunal system”.


So, the Government agree that there will be a substantial cost to business, an increase in litigation risks and additional burdens on the tribunal system. They also state that these impacts will fall disproportionately on smaller businesses. I assume that nobody in this Chamber thinks that any of those are a good thing.

More importantly, what are the impacts on employees, especially those who are trying to find work? The impact assessment is pretty clear on that too. It says that

“there is some evidence of a negative relationship between stronger dismissal protections and hiring rates … this suggests that if not implemented with care ‘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 (e.g., younger workers with less experience, ex-offenders, etc.)”.

It later says that

“there is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections, particularly for those that are seen as riskier hires”.

Again, I cannot believe anyone thinks those are good things.

The Government accept that this policy will create costs in the hundreds of millions for businesses, add burdens to the already stretched tribunal system and, most importantly, damage the hiring prospects—the life chances—of the very people we should be helping to get into employment. I hate the term NEETs, but we have heard a number of comments about the nearly 1 million young people who want to get into work. It goes directly against the Government’s admirable policy to get people off welfare and into work. So, why do this? Surely there must be some hard evidence that the current two-year qualifying period is causing some genuine problems, or evidence of material abuse, to justify these changes that will have all the damaging consequences that the Government themselves accept.

However, the impact assessment makes no such claims. It provides no evidence whatever that there is a problem. It simply makes a number of very vague and unquantified statements about people benefiting from increased job security. For example, it suggests a direct benefit to households driven by the welfare benefit arising from increased job security, with absolutely no attempt to quantify it. It also goes on to say that there are benefits from

“additional settlements and awards from additional early conciliation and employment tribunals”.

That last one really is extraordinary. This Bill has been described as a bonanza for employment lawyers; the Government appear to be confirming that, and actually seem to be suggesting that it is a good thing.

To read or listen to what the Government say, noble Lords would be forgiven for understanding that there are currently no protections from unfair dismissal for employees during the qualifying two-year period. That is quite wrong. There is a whole list of reasons for dismissal that are automatically unfair from day one. I will give a few examples, rather than go through the whole list—I do not want to keep everyone here all night. They include dismissal for reasons of a protected characteristic, such as age, disability, race or religion, et cetera; for being pregnant or on maternity leave; for being a trade union member or representative; for taking part in industrial action; and for being involved in whistleblowing. There are many others. So, let us stop this idea that new employees are unprotected from day one. It is just not true.

I ask the Minister, as I did at Second Reading, when she did not answer: why are the Government doing this? What evidence do they have that the qualifying period is really a problem? Presumably, there must be some tangible benefits from the policy to justify all these disadvantages that the Government have described. What are they?

The amendments in the name of the noble Lords, Lord Sharpe and Lord Hunt—and happy birthday to him—would require impact assessments of the changes, which I support, but surely it would be better to get this right in the first place. The impact assessment does say:

“The impact of hiring and labour mobility will ultimately depend on the final regulations on what is permissible in the ‘initial statutory period’ of employment”.


That is absolutely right, and that is what the rest of this group tries to deal with: to reduce the negative impacts of this change.

Paragraph 3 of Schedule 3 says that the Secretary of State may make regulations about dismissal during the initial period of employment, which is generally called a probationary period. My Amendment 104, along with Amendment 334, is intended to make it a requirement that the Secretary of State “must” make, rather than “may” make, such regulations. I thank the noble Lord, Lord Morse, for his support on this and other amendments. He sends his apologies that he is unable to be here tonight.

As the Bill stands, the two-year qualifying period can be abolished and not replaced with anything. I understand that is not the Government’s intention, and we heard earlier about the nine-month preference, but it is what the Bill says. Having no probationary period at all would be extremely damaging, so it is important that it should become a requirement that these regulations are issued, and not just a “may”.

My Amendment 108 would ensure that any probationary period is at least nine months long. What is important is that the employer should have adequate time to assess whether the new employee is right for the business, including by giving them a good chance to get up to speed through training and so on. I agree that the current two-year period is very long, and from discussions I have had with business groups and from my own experience in business, I am confident that the shorter period would be acceptable to most businesses. I think the Government’s suggestion of nine months is workable, and that is what I have proposed in the amendment, so I hope it is not particularly controversial from that point of view.

The other critical factor for a probationary period is that it must work in a way that enables an employer to give the person the benefit of the doubt, rather than acting as a disincentive to hire them, especially for the riskier hires that the Government described and that I mentioned earlier. For that to be the case, it is essential that the employer can dismiss them without having to give a reason during the probationary period.

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[Lord Hendy (Lab)]

Of course; that is always the way whenever there is litigation. Whatever the subject matter, people do not want the burden of defending the case and the people bringing the case do not want the burden of bringing it. That is just the reality of litigation.

I will say one last thing before I sit down. The argument that the noble Lords and noble Baronesses opposite have put forward is all about what they perceive to be the consequences of this matter, which my noble friend Lord Monks just addressed. But nobody can seriously advance the case that employers should have the right to dismiss anybody unfairly and without recourse to the law.

[Lord Vaux of Harrowden (CB)]

Does the noble Lord accept that these are not simply arguments that people around this Chamber are putting forward but matters that are in the Bill’s impact assessment? It is the Government’s own statement that the Bill will have these impacts. It is not being made up by any of us: the Government accept that this will be the impact.

[Lord Hendy (Lab)]

That may very well be, but it still does not remove the fundamental point: what is being proposed is a category of worker who can be dismissed unfairly for the most extreme reasons without resort to any justice.

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[Baroness Jones of Whitchurch (Lab)]

The noble Baroness is absolutely right. She will know that I share her ambitions for the tech sector. The UK remains the number one country for venture capital investment, raising $16.2 billion in 2024—more than either Germany or France—and since last July we have secured £44 billion in AI investment. Strengthening employment rights and giving day-one protections can help support talented people to take the leap into a start-up company.

I turn to Amendment 104, tabled by the noble Lord, Lord Vaux. Setting a statutory probationary period during which light-touch standards will apply is a crucial part of our plan to make work pay. I can reassure the noble Lord that setting out the detail in regulations is fundamental to fulfilling this commitment. It is not necessary to make this a requirement in legislation.

The noble Lord, Lord Vaux, asked a number of questions. He, the noble Baroness, Lady Coffey, and others asked why the Government are doing this. The UK is an outlier compared to other OECD countries when it comes to the balance of risks and entitlements between the employer and the employee. We believe that it is an important principle that employees should have greater security at work. Our reforms will mean that around 9 million employees—31% of all employees —who have been working for their employer for less than two years will have greater protection against being unfairly dismissed.

[Lord Vaux of Harrowden (CB)]

I hate to interrupt the noble Baroness at this late hour, but that is just a repeat of what has been said before; it is not a tangible quantified reason for doing this. Yes, for a short period of time, they will have greater security in theory, but the downsides of this—they are in the Government’s own impact assessment—are really clear. The Government say that this will reduce the life chances of people who are riskier hires. It will cost business hundreds of millions of pounds. There is no quantification of that benefit against those downsides, and I am still not hearing that.

[Baroness Jones of Whitchurch (Lab)]

I will talk about the impact assessments in more detail shortly, but the noble Lord will know that it is a lot easier to identify the costs in impact assessment than the benefits. 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.

I will pick up the point made by other noble Lords about cultural fit and other reasons why an employer might want to dismiss somebody during their probationary period. Dismissal for “some other substantial reason” is a catch-all category designed to allow employers to terminate an employment contract where no other potentially fair reasons apply. There can be cases where dismissal is legitimate and reasonable; “some other substantial reason” dismissals depend on the facts and circumstances of the employment relationship. “Some other substantial reason” is broad, and case law supports personality clashes in workplace teams or a business client refusing to work with an employee being a potentially fair reason for dismissal. The Government do not believe that an employee not being a cultural fit within an organisation should be a fair dismissal per se. We would expect an employer to be able to dismiss someone fairly only if any cultural misfit was relevant in a reasonable manner to the employer’s business objectives and the needs of the workplace.

The noble Baroness, Lady Noakes, mentioned employees with spent convictions. I gently point out to her that dismissing an employee solely for having spent convictions is currently unfair and potentially grounds for an unfair dismissal claim—

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[Baroness Jones of Whitchurch (Lab)]

I can assure the noble Baroness that not only have we thought about this but we are working very closely with the business sector to get this right. We understand that some of these things will take time. It takes time to change systems, and a lot of it is about changing computer systems for processing and so on. We are aware of this and, when the noble Baroness sees the implementation plan, it will reassure her that we have allowed space and time for it, as well as proper consultation with those who will be affected.

[Lord Vaux of Harrowden (CB)]

My Lords, it has been a long debate so I will try not to detain the Committee much longer. I thank the many noble Lords across the Committee who have contributed. It has been long because this is really important. I confess that I come out of the end of this debate feeling somewhat depressed. I still have not heard really why we are doing this, and what the real, tangible benefits are, to offset against the very real negative impacts, particularly on those who are looking for employment and are perhaps disadvantaged in one way or another: they have not worked before, they are young, they have a gap—we heard all the various examples. The Minister did not really address that point terribly clearly in her speech, and it is so important.

This may be, as the Government have regularly called it, a Bill for workers. However, as I said at Second Reading, it is not a Bill for people who want to work—the potential workers who were mentioned by the noble Lord, Lord Elliott. He stole my Charlie Mayfield quote, but I will not worry about that. It is true that Denmark has much easier hire and fire, and he was using that as a paragon of virtue because it allows people who are harder to hire to get into employment, which is so important.

In the interests of being constructive, I hope the Minister understands the real concerns about those people and the impact the Bill is going to have on them, and the negative impacts this section of the Bill will have. I hope that she will be prepared to spend a bit of time with us between now and Report to try to find solutions to those negative impacts, to minimise the problems and downsides that they will cause. I say to the noble Lord, Lord Monks: I am not making this up, or crying wolf, as with the national minimum wage, as the noble Lord suggested. This is what the Government say will be the impact. I cannot emphasise that enough. It is not me saying that; the Government say this will be impact. If we can try to work together before Report, to try to find ways of knocking the edges off this and reducing the negative impacts, that would be very helpful. With that, I will not oppose Clause 23 standing part of the Bill.

Clause 23 agreed.