Tuesday 26th November 2024
(1 day, 14 hours ago)
Public Bill CommitteesEmployment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 26 November 2024 - (26 Nov 2024)
The Chair
If nobody objects, we will not sit in private before we start hearing from witnesses. Do any Members wish to make a declaration of interests in connection with the Bill?
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
I refer to my declaration in Register of Members’ Financial Interests as a trade union member.
Dr Marie Tidball (Penistone and Stocksbridge) (Lab)
I also refer to my declaration of interests. I am a member of the Community union, Unison and GMB.
The Minister for Equalities (Dame Nia Griffith)
I also refer to my declaration of interests. I am a member of the USDAW trade union.
Chris Murray (Edinburgh East and Musselburgh) (Lab)
I also refer to my declaration of interests. I am a member of the Unison and Community trade unions.
Justin Madders
Mr Stringer, I do not think that I actually mentioned my trade union memberships. For the record, the individual unions are Unite and GMB.
The Chair
Thank you, Minister. If any interests are particularly relevant to a Member’s questioning or speech, they should declare them again at the appropriate time.
Examination of Witnesses
Matthew Percival, Jane Gratton and Alex Hall-Chen gave evidence.
Greg Smith
Q
Matthew Percival: It is very difficult to put a number to it, because there are so many unanswered questions in areas where details are intended to be put into the Bill at a later stage. That leads to a wide range of potential estimates about the impact of a number of the measures. Work we are doing at the moment will give us updated figures on sentiment around a number of measures. We are looking to publish that soon, and I will make sure that we include those numbers in our written evidence.
Jane Gratton: The feedback we have had from members has been concern about increased cost, complexity and lack of flexibility to manage the workforce in the way that a business needs to. Members say that there would be a reduced hiring appetite were this legislation to come in, and that they would be less likely to recruit new employees due to the risk and difficulty, particularly under the day one rights, unless there were at least a nine-month probation period with a light-touch approach. There would be a preference for contractors and temporary staff, again to reduce the risk and avoid legal complications. To give some figures, 38% said that there would be a hiring freeze, 25% said that the Bill would result in less pay, and 30% spoke of less investment in their business. There would be significant risks and costs, particularly to small and medium-sized enterprises.
Alex Hall-Chen: In addition to considering recruitment levels at the higher level, we are also getting feedback about types of recruitment and the impact that the policies will have on that. We have had a lot of feedback, particularly with respect to day one protection against unfair dismissal, that essentially boils down to the fact that, under the current system, employers are very likely to take a risk on hiring a borderline candidate who may not have quite the right experience or qualifications, but they will now be much less likely to take that risk because the cost of getting it wrong will be considerably higher. I think there are really important questions about what that means for people on the fringes of the labour market, especially as those are precisely the people the Government need to get back into work to meet their 80% employment rate target.
Justin Madders
Q
On a more general point, Jane in particular said that a lot of the businesses you represent do a lot of the things in the Bill already. Do you think it is important that we have a level playing field so that good businesses are encouraged to treat their staff properly?
Jane Gratton: Yes. There has been a cautious welcome for some of the measures in the Bill—lots of businesses agree with the sentiment that it is about fair pay, security and non-discriminatory workplaces—but the question is around the proportionality of the changes that are being introduced in relation to the problem that the Government think needs to be addressed. From a business point of view, it is about the additional complexity and, in respect of some of the detail of the measures, the restrictions that the Bill will impose.
For example, on changing the “one establishment” rule, the feedback from members has been, “For every change, will we have to consult all our employees across all of our businesses, even if they are doing completely different things at different ends of the country, with different levels of skill and job role? It is disruptive for the business and unsettling for every employee.” It is about the detail. In principle we all want these things, but the detail of some of the measures and the impact they are likely to have is causing a lot of concern.
Matthew Percival: You are right to say there is a live consultation on a number of measures, and the consultations on a number of things are promised to come but have not started yet. That is why I resisted putting a figure on what it would currently cost, because there is a wide variance in what that could end up being. We are committed to trying to find a landing zone for the Bill that means that the Government can deliver their ambitions, which include the Bill not having a negative impact on the ambitions around growth or the focus today, outside this room, on the “Get Britain Working” agenda and an 80% employment rate. We want to stitch all those things together and find that landing zone.
It is a credit to you and to colleagues that the engagement we have had up until now has led to things like some movement on the recognition of the importance of a probation period. There is so much in the Bill and we have only really scratched the surface in terms of what we have been able to get into the detail of so far. We are hoping that through this process, and as the Bill progresses through Parliament, we are able to give the same amount of attention to the rest of the Bill.
Justin Madders
I can assure you of that, do not worry.
Alex Hall-Chen: I echo Jane’s point about there being quite significant support in the business community for parts of the Bill. A good example is fire and rehire: two thirds of IOD members agreed with the principle of outlawing fire and rehire. Where we have concerns is, as others have said, around not only proportionality but the detail. On fire and rehire, for instance, there is concern that it will make any changes to contracts, whether or not they are actually net positive for both the employee and the employer, much more difficult to achieve.
Justin Madders
Q
Jane Gratton: Employers know that a happy and engaged workforce is more productive. It is in their interest to make sure that they look after their workforces, and most businesses are good, caring employers. The worry with the legislation is that in trying to address bad behaviour by a tiny minority of businesses—of bad actors—the cumulative impact and cost of all this will have a negative impact on the majority of very good businesses. Again, it comes down to the proportionality. These are huge changes, and one concern is that they have been brought in at such pace—although we are very grateful to the Minister and the Department for the time they have been able to give us in terms of consultation—that there are things written into the Bill that our members do not feel they have had sufficient time to be consulted on, because of the pace of change.
I think we need further engagement on some of these key aspects, including the reference period for offering guaranteed hours and extending those things to agency workers. There is a lot of disquiet around how that would work, particularly for companies that offer seasonal work, such as Christmas and holiday periods. How does a 12-week reference period equate to that? It does not seem to work. It would be better to have a 26-week period, for example. There are a lot of things.
The other thing that has come up often is a real nervousness around removing all the waiting days for statutory sick pay. Again, employers are really on board with supporting people who have a long period of illness, but some of the feedback from members has been that it is the single day of sickness absenteeism that causes the most disruption and impact. Rather than its being day one, a lot of employers have said, “Could it be from day two? Can we pay from day two, so the Government meets us halfway?” The overwhelming response from businesses has been, “Can Government please minimise the additional cost of these regulations on all businesses, but particularly on small and medium-sized companies?”
Matthew Percival: Yes, there is a lot of confidence in the idea that employee engagement helps to boost productivity; that is why businesses make it a priority. I am not sure they believe that much in this Bill is going to increase productivity, though, because they are not convinced that much in this Bill is going to improve employee engagement.
To take a couple of practical examples, I already mentioned in the industrial relations space the importance of the recognition process, where there is a great deal of concern that, if you recognise a trade union that does not speak for much more than a tiny proportion of your workforce, and you elevate that voice ahead of the voice of the actual workforce, that is not going to boost employee engagement. Employers are happy to work with trade unions who are the representatives of their workforces, and it is right that they should do that, and it is right that, if there are any employers who will not do that voluntarily, there is a statutory process that can force them and bring them to the table. But in the same way that we have employment law not because every employer has negative intentions, but because there are a small minority who have the potential to abuse their power, it is also appropriate to regulate the actions of trade unions in the industrial relations space.
Another quick practical example within the zero-hours contract aspect of this regulation is that crafting the requirement for accessing guaranteed hours as something that employers need to be constantly calculating for all employees whenever they work beyond their fixed hours, and then making offers to people, some of whom would want to receive those offers and some of whom would not, seems to us the most administratively complex and costly way of delivering on the proposal. We think there could be two other constructions worthy of consideration.
One of those constructions could be a right to request framework, where there are good tests on when an employer needs to accept a request versus not, just as we have around flexible working currently. Or you could call it a right to have, if you like, but at the moment I have not seen a difference between a right to request that an employer has to accept other than in limited circumstances, and a right to have that you do not have the right to have if an employer meets the same test for limited circumstances. What really matters is not whether you call it a right to request or a right to have, but what the test is for when an employer accepts the request. That would minimise significantly the administrative burden, rather than calculating lots of offers for people who will not want to accept them.
A number of individual businesses have told us that, if the Bill is to go with the grain of the good practice that already exists within industry, they will monitor people’s hours where they already have mechanisms to do so, and there will be a trigger for a conversation between the individual and their line manager in the event that their hours regularly exceed the hours guaranteed in their contract. Those who have that policy in place tell us that, most often, that leads to no change in contract. The hours are picked up as extra hours, and the individual does not want to guarantee them in their contract. There will be occasions when the individual does change contract, but those businesses say that the majority of people in that situation do not want to change their contractual arrangements, so we are hoping to minimise the admin burden.
Alex Hall-Chen: I just want to emphasise that employers absolutely recognise the link between the two. That is why, in many cases, they are ahead of the legislation. A good example of that is flexible working: 90% of IOD members’ organisations already offer at least one form of flexible working to their employees.
The concern is about the scale of the changes and the costs associated with them. We know from the Government’s impact assessment that that may be as high as £5 billion a year, with the cost disproportionately falling on small and medium-sized enterprises. A frequent piece of feedback that we get from members is that they feel that the Government do not understand how difficult it is to run an SME at the moment and just how tight profit margins are. That is primarily where we are coming from. These changes are huge—to an extent, they are unprecedented—and will impact on those already very fine profit margins.
Steve Darling (Torbay) (LD)
Q
Jane Gratton: It is really important that there is a probationary period, and it should be at least nine months. Businesses ideally want a 12-month probationary period, not least because some individuals are required to undertake mandatory training, which takes 12 months or more. We could live with a nine-month probationary period.
The key thing is that there should be a light-touch approach during that period so that businesses are not discouraged from taking a risk on employees. Employers should not have to introduce very stringent performance monitoring from day one, which helps neither the employee nor the business. Having structure during the probation period is good, but businesses need to be able to end the relationship on the basis of ability or performance, as we do now. There should be no greater risk to an employer of an employment tribunal than there is currently during the probation period.
Matthew Percival: Typically, a business’s standard probation period is no longer than six months. However, that does not mean that it is appropriate to set in regulation a limit on probation periods of six months. That is important for us, because a common response of an employer who sees that an individual is not performing quite to the level that they would want to be able to confirm them in post is to say, “Okay, we have gone through our standard probationary period, but we are willing to continue to invest in you, offer you more support and training, and extend that probation period, rather than rush to a firm yes or no decision for confirming employment.”
It is important that the regulations do not prevent the employer good practice of being willing to extend someone’s probation and give them more time to adapt to work, particularly if we are thinking about the challenge of getting people back into work who have had a period out of work. That is a big public policy and economic priority at the moment. We are in the same camp: certainly no less than nine months, so that there is that extra time before an employer is forced to make a firm yes or no decision on confirming employment, but preferably 12 months.
Alex Hall-Chen: Similarly, the feedback we have had from members is that their probation periods tend to be between three and six months, but as the other panellists have said, given exemptions around training and the potential to extend probation periods, nine months would be the minimum and 12 months would be preferable. As to the specific process, the lighter-touch dismissal process is better. We have done research that suggests that even a light-touch dismissal process, as defined by Government at the moment, would not solve the issue. A third of our members said that it would not mitigate their concerns around this policy at all, and half said that it would only partially mitigate their concerns, so we remain worried about the impact that this policy will have.
Justin Madders
Q
David Hale: To go back to the previous question, what I hope you will support is the introduction of a statutory sick pay rebate in the Bill. We have always been very clear that a rebate is important with any changes that increase SSP costs, because if you do not have a rebate, you systematically disadvantage the firms that take on people who are sick or likely to get sick, and those firms are already not supported enough by Government policy.
If you want to make changes to statutory sick pay, as the Bill proposes, you should put in a statutory sick pay rebate to cater for the risk to small firms. Say a firm has six staff members and two are off at the same time, that is 33% of the workforce. It would be very useful if the Government stepped up and actually supported firms that are taking on the people they are talking about. So it is a question more for you than for me: will the Bill include a rebate or not?
Justin Madders
Q
David Hale: It is a good question. It partly goes back to the overwhelm. We can talk to only so many small businesses at a time, and we can talk to them about only so many things. We can say, “If the changes to unfair dismissal come in, how will that change your recruitment?” We can have that conversation, or we can say, “If there are changes to zero-hours contracts, will that mean you have to ban swapping shifts in your business, just to cater for your regulatory risks?” We can explore those things, but only one at a time. We have 40 minutes today. We will spend less than a minute talking about each of the measures in the Bill. That overwhelm has a time consequence for good engagement and good exploration.
I do not want the officials who have engaged with us about the Bill to feel that that is not appreciated, but I do think there are process problems. This Committee is taking evidence from different groups in turn to explore the Bill over a two-day period, I think, but that is not the approach that the Department has taken, and that is a problem. At the Department level, each measure would have to be explored in turn, with different groups coming together. At the moment, the way in which the process has worked has created more division than is necessary. It has set up two sides—worker representatives and business representatives—and set them in opposition, without providing a voice for those at the biggest potential risk, which is the people who are out of work.
That is on the broad scale, but there are a lot of practical things, too: can we have regular meetings, organised at the same time each week, rather than them coming in and out of diaries, and that sort of thing? That is a practical issue, but those issues are important.
The Chair
Dom, do you have anything to add?
Dom Hallas: Just on the process point. People sit here on our side of the table and say, “Things aren’t being communicated well,” when the problem—let us be honest—is with the policy.
One of the broad challenges here, especially for small businesses, which David and I work with, is that, with an impactful piece of legislation, even communicating to them what is going on is difficult. They are a disparate group; we certainly cannot sit here and claim to represent the entirety of the tech start-up community, even if we work with a big community of businesses.
I am mindful of two things: the length of the implementation period is absolutely important, but the way the Government go about it and choose to operate in that period is also important. What does it mean, frankly, to explain to employers what their obligations are? How are we going to go through that process? We need to think about that coherently now, so that we do not get to that period later and, suddenly, it is panic stations. That will be really important.
Greg Smith
Q
Cathryn Moses-Stone: I cannot talk to the specifics of the Bill’s initial cost implications, but I can talk to the cost implications of having really highly trained managers in the workplace. When thinking about general management training, we know that chartered managers, on average, boost a business’s revenue by £59,000. We know that the average pay rise of a chartered manager is £13,000. We see in a lot of our data that there is a direct productivity impact on an organisation from having highly skilled, highly trained managers who are able to implement policies that increase retention, retain talent, boost morale and create a more positive workplace culture, which prevents turnover, which saves a business from losing money.
It probably also comes back to the point that managers need time to get it right and to understand it, so that the burden on their business in the long run is not huge because they have the right amount of time to understand how they will work with their employees so that they do not have to escalate everything to tribunal. The early training period is crucial for the wider cost savings, because we know that there are lots of concerns from businesses on these issues, as well as the broader sentiment of being in support of the Bill.
Ben Willmott: One of the challenges for a business looking to upskill its managers is that that will incur a cost. If we look at the proposed increases in employment costs overall, we see those from the different measures in the Bill and those from the changes in the Budget, which also need to be taken into account. Businesses will have to find the money to upskill and train their managers. That is one reason why we are saying that ACAS needs to be resourced, particularly to help those smaller businesses that are more resource-challenged and have less knowledge and capability around the HR and people-management side of the business, which is so important to this.
Carly Cannings: Ben made a really important point about making sure that small businesses are adequately resourced to deal with the changes. I am, as many employers are—as the statistics bear out—very supportive of raising the standards of employment, and the Bill certainly takes a step in the right direction towards raising standards. The balance that needs to be struck is about making sure that employers, and particularly small employers, are able to cope with the changes.
There are lots of businesses out there already doing really good things, and some of the things in the Bill will be measures, practices and policies that lots of employers already have in place. That is not the case for everyone and, in particular, that might not be the case for small businesses. Echoing Ben’s point, small businesses are more likely to fall foul of the legislation accidentally, rather than intentionally, because they do not have the right access to support and advice in the same way. That is an important point that must not be missed.
Cathryn Moses-Stone: Would it be all right if I added a point? It is true, obviously, that there is a cost to training managers, but that is why we are also really concerned about the proposed defunding of the level 7 apprenticeships, because there will be a huge knock-on impact. Potentially, a huge skills gap could open up in highly trained management across the UK, at a time when businesses are going to be required to know their staff and to implement the legislation in the right way. We are concerned about how that aligns with the development and delivery of the Bill.
Justin Madders
Q
I have a more general question about what you see as the current weaknesses in the employment rights sphere. What do we need to do to give people more protection and security at work? Do you think the Bill addresses that?
Ben Willmott: The introduction of the fair work agency—a single enforcement body—is a positive step forward, but there needs to be further thought about how to improve the labour market enforcement system. We need a long-term strategy to improve labour market enforcement that includes not just a fair work agency but the Equality and Human Rights Commission and the Health and Safety Executive, not in a single enforcement body but as part of the strategy. We need measures to improve the efficiency of the employment tribunal system, which we know is swamped, and we need to increase the overall number of labour market inspectors—by international standards the UK is under-resourced on the number of inspectors.
As I have said before, we also need to significantly increase ACAS’s budget so that it can help small firms to comply. If labour market enforcement is about getting the carrot and stick balance right, that is why it is so crucial that ACAS can play that role in helping to raise employment standards. Businesses that are not bad employers—those that are poorly resourced, or might be knowledge-poor or time-poor, particularly micro and small firms—tend to fall foul of legislation because of those issues, not because of any malicious intent.
Cathryn Moses-Stone: I will start with the latter part of the question. We have a lot of data showing the impact of good management practice on both productivity and an improved workplace culture. Much of the Bill falls into that camp. For example, we know that one third of employees have cited negative work culture as a driver for leaving their organisation. That is obviously driven by ineffective management. We know that when managers in organisations have mutual trust and respect with their direct reports, they find that productivity rises. Poorly managed teams have lower motivation, satisfaction and retention. We believe a lot of the elements of the Bill are tied up in driving much of that in a positive way.
The things we are worried about, which echo what I have said before and what Ben has said, come down to implementation—that is, what the fair work agency looks like, how it behaves, how it supports, and how it gives space for managers to upskill. We know that 40% of our managers have expressed some concern about the detail of some of the policy, such as the right to disconnect. For example, what defines business-critical comms, versus just maintaining team comms?
We know that with high-quality management training—helping people to understand how to have difficult conversations, prioritise and have emotional intelligence—people can navigate those things much more effectively in the workplace. Our worry is about what the implementation will look like and about how managers and leaders will be supported in respect of the fair work agency.
Carly Cannings: I think the Bill is about raising minimum standards. As I said previously, a lot of employers are doing a lot of good things. Let us be realistic about the impact of the Bill: it is about raising minimum standards. Cathryn alluded to the bigger picture of creating happy, thriving workplace cultures, and it goes far further than that. This is not a call for further legislation; for me, legislation is about raising minimum standards. There is so much more outside and beyond legislation that makes a real difference to whether somebody has a happy, thriving workplace culture, and the benefits of that culture.
Thank you, Cathryn. You have done a very good job of outlining the things that I see in reality and when working with my clients—the factors that play a part in creating a workplace culture. Like I said, for me the Bill is about raising minimum standards.
Justin Madders
Q
Cathryn, you spoke about surveys with your managers and about the strong support for the Bill, and you said that there is nothing in the proposals that should alarm a responsible business. Given what you also said about the pace of implementation and the need to continue dialogue, if we get that right, would you still say there is nothing in the proposals that should alarm a responsible employer?
Cathryn Moses-Stone: First, the right to disconnect was just a useful example of the sort of concerns we hear.
We are not saying there is nothing for businesses to be alarmed about. One of the challenges that managers and leaders face is implementing and managing change across their organisations, and that is a complex thing. That comes back to our point that we have a whole suite of data on the impact that highly skilled managers have on managing change in their organisations, and the knock-on impact that has on recruitment, retention, productivity and the success of a business. It does not mean it is easy and straightforward; I do not think many things that managers and leaders do are easy and straightforward. Again, it comes back to the core principle of having the right amount of time and being able to support managers to skill up. That at least gives them the tools to be able to tackle these complicated things head on, because they will be complicated.
Ben Willmott: I absolutely agree that there is a significant role for well-designed, effectively enforced employment regulation to support overall improvement in employment standards and to support efforts to improve employee engagement and productivity. The key is that it has to be well-designed regulation. If it is excessive or too complex to implement on the ground, it will lead to increased costs, and that will undermine the ability of businesses to improve job quality, invest in recruitment and skills, and support technology adoption and things that will drive productivity. That is why, as we move forward, the consultation is so important.
An example of a measure in the Bill is around the reference period for workers to have the right to guaranteed hours. It is not set out in the Bill, but in “Next Steps” it is set at 12 weeks. In our view it is crucial that there should be consultation on the 12-week reference period. The Government have set out their principles for a modern industrial relations framework: accountability, proportionality, collaboration and balancing the interests of business and workers. Those principles need to apply as we roll out and implement the proposals, so 12 weeks is a test that should be subject to consultation, because it is so important to the functioning of that right. That is the sort of thing where we want to see consultation—where it would help to decide that the ultimate regulation is effectively designed and can work.
Steve Darling
Q
Ben Willmott: The Bill is focusing businesses’ minds on how they recruit, manage and develop their people. I will refer to comments I made earlier. If the measures in the Bill are designed the right way, they can support improvements in overall employment standards. But if consultation is not effective and measures are introduced that are not workable, it will have the opposite effect. It is about finding the right balance.
Cathryn Moses-Stone: Similarly, we have a lot of data that shows that policies like flexible working, enhanced family-friendly rights and day one rights make employees feel valued and supported, which in turn drives better performance.
We did a study last year looking at the impact of trained managers in effectively delivering hybrid working. By way of example, 68% of our managers said that hybrid working made it easier to increase their work productivity, and that was a result of managers being trained to manage teams that work in a hybrid way. We know that where managers trust their direct reports—this is what our evidence shows—they find that productivity rises. As I have already said, poorly managed teams face lower motivation, satisfaction and retention, and ultimately impact on business delivery. So really good management in designing work that allows employees to thrive is important.
We must remember that managers are employees themselves. Managers want it to work for themselves as much as they want it to work for employees. That in turn will boost productivity at the higher levels of the organisation as well. We have lots of data that backs that up. Again, it is all about how the legislation is implemented and all about the time and space that is given to support managers to do that.
Ben Willmott: The other thing I would add is that our members are certainly supportive of the ambition behind the Bill. Our member survey shows that there is significant support for changes to improve statutory sick pay and to improve parental leave.
There are definitely areas of the Bill that have support, but I will give an example of an issue. When talking to members in sectors that might bear more cost from changes to statutory sick pay, we found they were much more sanguine in September than they were after the Budget, because they are now thinking about it in the context of broader changes. The cumulative effect of changes and increases in employment costs needs to be taken into account when we think about individual measures.
Carly Cannings: On the point about productivity, if you look at what makes a workforce productive, there are lots of things that go in the mix, such as feeling engaged in the work you are doing and valued by your managers, as well as having an environment around you that offers things such as flexibility. The factors that lead to productivity are broad. We need to be realistic about the measures in this Bill and how far they will go to support productivity, given that lots of employers are probably already meeting lots of these minimum thresholds.
It is a step in the right direction. It raises the profile of things such as flexible working, so hopefully more businesses will adopt it—it is now a day one right anyway. It definitely moves in the right direction in terms of creating that happy, engaged workforce who feel valued and able to work in a way that works for them and their employer. Again, it is back to that point about raising minimum standards. There is more to this element about workplace culture and productivity than just minimum standards of employment legislation.
Cathryn Moses-Stone: Echoing that, it is important to acknowledge that lots of forward-thinking employers are already doing a lot of this stuff anyway. They are doing it for a reason, because they are seeing the impact on their business. That must not be forgotten.