Employment Rights Bill

Lord Wolfson of Aspley Guise Excerpts

Report stage
Monday 14th July 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, in this group I have Amendments 9 and 22, both of which seek to amend government amendments in identical ways. I shall speak to Amendment 9, which seeks to amend government Amendment 8, but my remarks apply equally to Amendment 22, which seeks to amend government Amendment 21. Before doing so, I offer my support to the other non-government amendments in this group; other noble Lords have already spoken well in favour of them.

My Amendment 9 is based on the premise that the Government should be trying to balance employee rights with the need of businesses to be successful and to grow. The Government want to end what they call “one-sided flexibility” but that would not be a good thing if the outcome was to destroy the labour market flexibility which is the hallmark of the UK’s international competitiveness and has been a major contributor to the country’s overall economic resilience.

Government Amendment 8 amends the provisions of Clause 1 which would have allowed the Secretary of State to create exemptions from the duty to offer guaranteed hours on a very broad basis. That power was a glimmer of light in a part of the Bill that was otherwise quite dark, especially for those employers whose businesses could be harmed by the new duty. It is clear that the Government wanted to use that new power very sparingly but it was drafted in a broad way and would therefore have offered the Government an elegant solution if they discovered that certain types of businesses simply could not stay in business if the duty applied to them.

Unfortunately, the Delegated Powers and Regulatory Reform Committee of your Lordships’ House, for which I generally have a high degree of respect, declared that this power was “inappropriately broad”. I suspect that if the DPRRC had attended some of the debates on the Bill earlier in its passage, it would not have been quite so quick to damn this power. Even more unfortunately, the Government have chosen to respond to the DPRRC’s recommendation by making the power virtually useless.

My little glimmer of light has been virtually extinguished by the Government’s Amendment 8. This now requires that when the Government try to use the regulations to create exemptions, they have to take account of two things. The first is the benefits of workers receiving a guaranteed-hours offer. I would have absolutely no problem with that if it were balanced by an equivalent need to avoid having adverse effects on employers, but Amendment 8 goes further and says that the needs of the employers concerned can be taken account of only if they are dealing with “exceptional circumstances”. I do not know what “exceptional circumstances” means but it is probably something like a pandemic; it would not deal with those businesses which face fluctuating demand patterns as part of their natural business model. Unpredictable work demands are therefore difficult to see as exceptional circumstances.

When we debated this clause in Committee, my noble friend Lady Verma, who is not in her place, talked about the need for employers providing domiciliary or home care to be responsive to the actual fact pattern of demand for care. I suspect that would not count as exceptional, even though it is an intrinsic part of the business model of those who provide home care; nor would it, I suspect, apply to any of those businesses that are affected in any way by seasonal demand patterns, as has already been mentioned. Therefore, the ordinary everyday needs of businesses will be ignored if Amendment 8 is accepted without amendment. In practical terms, all the Secretary of State can take account of is the benefits to workers of receiving a guaranteed-hours offer.

Therefore, my Amendment 9 removes the constraint of needing to satisfy the exceptional circumstances limb; the Secretary of State would simply be having regard to, on the one hand, the benefits for employees and, on the other, the adverse effects on employers. I hope in that way a proper balance would be achieved in the Bill and that the Government will be prepared to rethink their Amendments 8 and 21.

[Lord Wolfson of Aspley Guise (Con)]

My Lords, Amendment 2 stands in my name. I declare my interest as a shareholder and the chief executive of Next plc, a job I have held for 24 years. I should add that Next employs nearly 50,000 people in the UK, of whom around 20,000 are part-time.

I hasten to add that the company I work for does not use, and never has used, zero-hours contracts. I am not in favour of them. As the noble Lord, Lord Barber, said at Second Reading, eliminating bad employment practices serves the interests of good employers. He was right. As I said in Committee, I support the Government’s aim of eliminating the unfair practices associated with zero-hours contracts. The problem with this section of the Bill is not the tight regulation of zero-hours contracts; nor is it the understandable intention to extend those protections to low-hours contracts, preventing employers from circumnavigating zero-hours provisions by offering token contracts. The problem is the failure to define what low-hours contracts are for the purposes of the Bill or give any hint as to what that limit might be.

Amendment 2 aims to address this problem by placing a reasonable cap on the discretion of the Secretary of State to define what low-hours contracts should be at eight hours a week. This is important because it materially changes the nature and scope of the Bill; if this number is set too high, the provision will profoundly change the working arrangements of 8.5 million part-time workers in the UK.

I can assume only, having read through the provisions of the Bill, that the Government have not really understood the near impossibility of managing the process they are proposing if it extends to millions of people. Employers will have to track their low-hours employees’ extra hours every day of the year, and at the end of every employee’s individual reference period, businesses must offer those employees a new permanent contract. These hours will have to be offered in a compliant way, with no hint as to how you comply with the Bill itself. They will have to be offered the hours regardless of whether those hours are actually needed.

This process creates two problems. The first is the problem of complexity of implementation, and the second is that businesses, if they comply with the Bill, risk being chronically overstaffed. To start with complexity, I estimate that in the company I work for, it will take us at least a year and several million pounds of systems development to develop a system to adequately cope with the implementation of the Bill. I work for a company that has more than 1,600 systems and software professionals. Small businesses will find this process almost impossible to manage. I would be very grateful if the Minister could share any details as to the cost and scope of work that will be required to be undertaken by councils, hospital trusts and other public sector employers for the purposes of developing these systems.

The second problem is that, even if an employer successfully implements a system, they will have to offer contracts regardless of whether there is any work for those people going forward. Your Lordships will not be surprised to hear that restaurants, shops and pubs simply cannot afford to have the same number of people working in their establishments in February as they have in December. Nor can we take the risk that the extra hours required to cover many different seasonal peaks and sale events become permanent costs for the rest of the year.

The complexity of implementation, along with the risk that businesses leave themselves overstaffed, will mean only one thing, and it is very important that the Government understand this: businesses simply will not be able to offer additional hours to workers on low-hours contracts. Instead, they will be forced to employ temporary staff to cover those peaks, depriving loyal and skilled employees of income at times when they need it. Whose interest does this serve? Neither business nor employees, and certainly not a Government that I believe are genuinely interested in promoting growth.

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We believe it is necessary to retain the ability to set the hours threshold in regulations, giving the flexibility to respond to changing circumstances, invoking working practices and emerging evidence about how the new right is working in practice. I will say to noble Lords that we have not said what the hours threshold should be—we intend to consult on it. By setting it in the Bill, we would lose the ability to consider the valuable input of businesses, trade unions, workers and other relevant stakeholders.

[Lord Wolfson of Aspley Guise (Con)]

Would the Minister accept that setting a cap on the number of hours still gives the Secretary of State flexibility to determine exactly what the number of hours is, while giving industry the security, comfort and certainty it needs to carry on investing in its shops, pubs, restaurants and care homes?

[Baroness Jones of Whitchurch (Lab)]

My Lords, we intend to consult on this, and of course we will take the comments and concerns of business into account; it is our absolute intention to do that. What we do not want to do is pre-empt that by setting out the conclusions of the consultation in advance. I hear what the noble Lord says, but I do not think that fits with our model of wishing to take this and consult further on it. But of course we will take business views into account.

I turn to the amendments tabled in my name. We listened to concerns raised by parliamentarians and business stakeholders, and responded promptly by amending the Bill. The Bill allows regulations to specify circumstances in which the duty to offer guaranteed hours does not apply or for a guaranteed offer once made to be treated as withdrawn. We expect that this power will be used narrowly in response to changing circumstances to address situations where the measure would have significant adverse impacts. The Delegated Powers and Regulatory Reform Committee recommended restating this power with greater precision.

In response, we have tabled amendments to constrain the use of this power. Our amendments require that, in exercising this power, the Secretary of State must have regard to both the benefit to workers of receiving a guaranteed-hours offer and the desirability of preventing the provisions having a significant adverse effect on employers who are dealing with exceptional circumstances. Where this power is exercised and the duty to offer guaranteed hours does not apply, a further amendment clarifies that the exception will operate in relation to a single reference period, rather than being open-ended.

Circumstances specified in regulations would need to be specific, factual and narrow enough so that it is crystal clear that the duty then does not apply or no longer applies. There will be no room for discretion from the employer or the worker. The Government will consult on any use of this power. This way of constraining the exercise of the power still allows flexibility to determine the specific circumstances once all interested parties have had a chance to input.

Corresponding amendments are made to the provisions for agency workers. In addition, under the Bill’s current provision, an agency worker who accepts a guaranteed-hours offer from an end hirer becomes directly engaged by the hirer. The worker could then be entitled to another initial reference period as a directly engaged worker. Amendments 6 and 23 clarify that agency workers who accept a guaranteed-hours offer will not benefit from a new initial reference period. This aligns their rights with directly engaged workers and eases employer burdens.

Regarding Amendments 12 to 19, the Bill usually requires a guaranteed-hours offer to be made to a qualifying agency worker on no less favourable terms and conditions taken as a whole than those under which the agency worker was engaged during a relevant reference period. We have heard concerns about instances where agency workers are paid a significant premium in recognition of, for example, the temporary and insecure nature of their work. As the Bill stands, such pay premiums could be carried over into a guaranteed-hours offer, putting those agency workers at an unintentional advantage compared with directly engaged workers in similar roles. This could also cause employers to move away from hiring agency workers in the first place. These amendments will allow less favourable terms and conditions relating to pay to be proposed in guaranteed-hours offers to agency workers, to ensure alignment with comparable directly engaged workers, maintaining flexibility for businesses and supporting consistency in treatment of the workers.

I turn to Amendments 9 and 22, in the name of the noble Baroness, Lady Noakes, which seek to amend the amendments in my name that I have just justified. I listened carefully to the noble Baroness’s points, but accepting her amendments and removing the reference to employers dealing with exceptional circumstances would not address the DPRRC’s criticisms regarding the breadth of the power. It would also not be clear what the Secretary of State would need to consider when setting out the specified circumstances. I reassure the noble Baroness that, once the Secretary of State has considered these matters, he can still decide to make regulations to set out the circumstances in which the duty to make guaranteed-hours offers does not apply, which may not relate to exceptional circumstances.

I therefore ask the noble Lord, Lord Goddard of Stockport, to withdraw his amendment. We very much share his objective to address the imbalance of power, and I hope he has heard our case about why we believe that what is currently in the Bill is the best way to do that. I also commend to the House Amendments 6 to 8, 12 to 21 and 23 in my name.