Employment Rights Bill (Seventh sitting)
Thursday 5th December 2024
(1 month, 1 week ago)
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The Committee divided: - Ayes: 12 / Noes: 3 - Question accordingly agreed to.
The Chair
Will everyone please ensure that all electronic devices are turned off or switched to silent? We will now continue line-by-line consideration of the Bill. The grouping and selection list for today’s sitting is available in the room and on the parliamentary website. We now move on to clause 3. I remind all Members of the rules about declaration of interests, as set out in the code of conduct.
Clause 3
Right to payment for cancelled, moved and curtailed shifts
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
I beg to move amendment 30, in clause 3, page 18, leave out lines 7 to 19 and insert—
“(b) in relation to the movement of a shift, or the movement and curtailment (at the same time) of a shift, notice given less than a specified amount of time before the earlier of—
(i) when the shift would have started (if the shift had not been moved, or moved and curtailed), and
(ii) when the shift is due to start (having been moved, or moved and curtailed);
(c) in relation to the curtailment of a shift where there is a change to when the shift is to start (but there is no movement of the shift), notice given less than a specified amount of time before the earlier of—
(i) when the shift would have started (if there had not been the change), and
(ii) when the shift is due to start (the change having been made);
(d) in relation to the curtailment of a shift where there is no change to when the shift is to start, notice given—”.
This amendment has the effect of clarifying what “short notice” means for the purposes of proposed Chapter 4 of Part 2A of the Employment Rights Act 1996 in cases where a shift is both moved and curtailed and makes associated drafting changes to the definition of “short notice”.
It is a pleasure, Mr Mundell, to see you in the Chair this morning. I start by referring to my entry in the register of interests and my membership of the GMB and Unite trade unions.
Government amendment 30, alongside Government amendments 31 and 32, will ensure that employers are clear about their responsibilities where a shift is both moved and curtailed at the same time. Under the Bill as introduced, it may not have been clear to employers or workers when the short notice period in these cases would run until. Under current drafting, the calculation of the short notice period for a moved and curtailed shift could be done based on the rules for either a moved shift or a curtailed shift. This could produce two different outcomes.
For example, if a shift were due to be worked from 2 o’clock until 6 o’clock, and it is moved and curtailed so that it must be worked from 4 o’clock to 7 o’clock, it is not clear whether the notice ends at 2 o’clock or 4 o’clock. The amendment clarifies that in cases where a shift is both moved and curtailed at the same time, the short notice will be the same as if the shift had been moved only. It will therefore run until the earlier of when the shift would have started before the change or when the shift is now due to start.
In terms of what payment a worker will be entitled to when their shift is both moved and curtailed at the same time, we are committed to consulting on what that amount should be and will, of course, specify that in the regulations. The maximum amount, however, cannot be higher than what the worker would have received from working hours that were changed, as is the case for shifts that are cancelled, just moved, or just curtailed.
We believe that compensation in these circumstances is only fair, given that the movement of a shift at short notice disadvantages a worker. It impacts their ability to plan their lives and can cause financial disadvantage such as excessive childcare costs. Our measures will ensure that workers do not bear all the financial risk of shift allocation and cancellation, and will compel employers to give reasonable notice. Through good leadership and planning, an employer is in a position to reduce the instances of short-notice shift changes, which the worker is unable to influence.
Greg Smith (Mid Buckinghamshire) (Con)
It is a pleasure to serve under your chairmanship, Mr Mundell. I am grateful to the Minister for his explanation of Government amendment 30, but I gently suggest to him that starting by saying that he wished to be clear, and then going on to say that the Government will be consulting on it, possibly does not give businesses the clarity that they are seeking from this clause of the Bill. I would be grateful, when the Minister sums up the debate on Government amendment 30, if he could actually clarify what he believes, in plain English, to be reasonable notice, and, while not necessarily when future regulations will be laid, the window in which they will be consulted on.
I posed a similar question about an amendment in our sitting on Tuesday. I cannot imagine that the Government will want to simply put out a blank piece of paper consultation—there will be a floor and a ceiling that is consulted on. It would be helpful for all Members, but more importantly real businesses out there in the country, to understand that as soon as possible, so that they can most fully share their thoughts formally when the consultation launches. Can the Minister give the Committee any clue about what employers will need to comply with, or was Allen Simpson, CEO of UKHospitality, right when he said that he understood that
“the Government are intending to leave it to case law and employment tribunal systems to figure out what ‘reasonable notice’ means”?––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 43, Q39.]
We will shortly come on to debate Government amendment 31, which is relevant to this discussion.
Laurence Turner (Birmingham Northfield) (Lab)
Will the hon. Member give way?
Greg Smith
I will just finish this point. As the hon. Gentleman knows, I am not shy of taking interventions.
Government amendment 31 will cap the compensation an employee can receive if the employer does not give reasonable notice of cancellation or curtailment of a shift to the remuneration they would have gained if they had worked those hours.
Laurence Turner
I draw attention to my declaration in the register of members’ interests and my membership of the Unite and GMB trade unions.
We will of course see the consultation on the definition of reasonable notice in due course. Does the hon. Member accept that the meaning of reasonableness will be dependent on the circumstances of each case? What is reasonable in the case of, say, an early years setting might be quite different to that for an offshore oil rig.
Greg Smith
The hon. Gentleman makes a perfectly sensible point. We will come on to that issue shortly. The central point that I ask the Government to reflect on, before any consultation—post-legislation or during the passage of legislation—goes live, is that it is reasonable that those who are expected to put in meaningful and thoughtful contributions to that consultation on how the measures will affect them, will be applied in the real world and will need to be complied with, have as much notice as possible, so that they can put their thinking caps on and, if necessary, bring in professional advice where that is practicable or affordable.
In that way, when the Minister ultimately has the opportunity to read through every single consultation response with, I am sure, great attention to detail, before coming to a recommendation and drafting the necessary statutory instrument to bring about the exact regulations, the detail will be there. This should not be a rush job, but something to which the people out there in our country who actually run businesses, risk their capital and fundamentally create jobs and employ people are able to give as much thought as possible, so that the Government can come to a proper conclusion.
While I am glad that remuneration will be capped, I am still worried that the provisions in the Bill are not necessarily as proportionate as they could be for businesses. Sometimes an employer will have to cancel or curtail shifts through no fault of their own. We went through that issue at length on Tuesday, on a different point. I will not repeat the arguments now, other than to remind the Committee of force majeure. Events outside any employer’s control can happen; that is a reality of life.
It seems unfair in those instances that employers should have to bear the costs of not being able to complete the work on time, as well as having to remunerate employees for hours not worked. I stress, as I said on Tuesday, that that will be a minority of cases. It will be the exception, not the norm, but it is vital, when looking at this amendment and clause that there is an acceptance that those rare cases can and unfortunately will happen in the real world.
Alex McIntyre (Gloucester) (Lab)
I refer the Committee to my membership of the GMB and Community unions. We had a lot of back and forth on this point on Tuesday. I want to clarify what the shadow Minister said on Tuesday. In the extreme circumstances where employers are not able to continue with their work, the shadow Minister made the point that it was not fair on the employer to bear the cost. He also said that it was not necessarily fair for the employee to bear the cost, and that the cost should be shared. If the cost is not being borne by the employer, who does the shadow Minister expect to share that cost, other than it being placed solely on the employee?
Greg Smith
I do not want to repeat the whole debate that we had the other day as we might not hit the clause that the hon. Gentleman’s colleagues are trying to get to today. I fully accept his point that the situation is not fair on the employee, but equally it is not fair on the employer, given that those circumstances, events or eventualities are quite literally outside anybody’s control.
I urge the hon. Gentleman and his Front-Bench colleagues to reflect on how to put in place a better and more proportionate system to share the burden. I accept that nobody wants or plans for those eventualities. I refuse to believe that any employer ever wants to have to turn somebody away at the door as they turn up for work. They actually want to make those products, provide those services, ensure people have a good night out or whatever it might be. That is the core of their business. That is how they make money. That is how they grow and create more jobs in the first place. I refuse to believe that any business wants to turn someone away and say, “Sorry, that shift isn’t available,” or, “Only half that shift is available today.”
Uma Kumaran (Stratford and Bow) (Lab)
I refer Members to my entry in the Register of Members’ Financial Interests and my membership of the GMB trade union.
The hon. Gentleman makes a good point. The Association of Convenience Stores tells us:
“90% of colleagues in the convenience sector report that they have never had a shift cancelled with less than 48 hours’ notice, reflecting a strong track record of responsible scheduling. Furthermore, 86% of retailers state that they always offer alternative hours to employees if a shift is cancelled or reduced, demonstrating the sector’s commitment to fair treatment and employee support.”
It says that it
“can be confident that this will support existing provision by employers across the sector”,
and it welcomes amendment 30, which it says
“provides clarity in relation to short notice for when the shift is both moved and curtailed.”
It tell us that there is a counter-argument that the proposals may present challenges to convenience retailers and other small businesses, but that it has spoken to businesses and that
“these businesses tell us that they are already doing what the Bill makes provisions for.”
We are mindful of the impact on businesses, but there are a lot of businesses out there that are already doing what is proposed, and we have received representations from them welcoming the measures.
Greg Smith
I am grateful to the hon. Lady for that intervention, because she underlines the fundamental point that I am making: most businesses do not want to turn people away. Convenience stores are a great example of that, and are actually some of the most flexible employers out there. My constituency, which is spread across 336 square miles of rural Buckinghamshire, has a lot of small convenience stores, and they are exemplary employers. I cannot think of a problem I have ever encountered with any of them.
I come back to my central argument, which is that sometimes things happen. Nobody has planned for it, nobody wants it, and nobody is in any way happy in that situation, but sometimes these things happen. I fully accept the hon. Lady’s point that the vast majority of employers in this country are good employers. We should celebrate them, and not try to see them through the lens of some sort of Victorian novel. That is not what employers are in this country. They are responsible and want to look out for their workforce.
We had a debate the other day about the symbiotic relationship between the worker and the business owner, which are two sides of the same coin: no successful business could have one without the other. I am not saying that there are not rogue traders out there who seek to exploit their workforce—there are, and there must be proportionate, proper and robust measures in place to combat poor behaviour—but that does not undermine the central point that there must be flexibility that accounts for the realities of the real world.
Chris Law (Dundee Central) (SNP)
I am hearing this argument repeated again and again, but I am struggling. I need an example. Employers insure themselves against floods, fire and everything else. We talked on Tuesday about an empty restaurant giving notice if it was empty. So I am trying to find out what is the exceptional circumstance that the hon. Member is concerned about that he can see in real-life circumstances where the employee would have to lose out rather than the business.
Greg Smith
I can think of businesses in recent times in my own constituency that are particularly affected by shipping delays, some as a result of the covid pandemic, which I accept was an exceptional period in our history, where we saw shipping delays of parts that businesses were waiting for to put their products together. Buckinghamshire has a proud manufacturing base as well as other business sectors. Businesses simply did not have the bits, the parts, to be able to put their products together. I accept that some of those businesses are quite well established brands that will carry insurance and reserves or contingency funds for such eventualities, but some of them do not.
On Tuesday we talked about furniture manufacturers. Again, we are all creatures of our own experience. In my own constituency there are some very big furniture manufacturers such as Ercol and Hypnos and they face some great challenges. But I am also in regular contact with one, two or three-employee cabinet makers and kitchen fitters and other skilled trades businesses who would not be able to cope if they did not have the delivery to fulfil a particular order that has been placed. They are hard-working but very small businesses that might be working on one project at a time. They have to take one order on; if they cannot fulfil that, there is not the resilience to automatically just move on to the next.
Chris Law
I will just probe a little further. All those points are valid, but they are the responsibility of the business, not the employee—most notably because they have no shares in the business and will not benefit from any profit. Why should they have only the rough end where they end up without income? A company might have five shareholders in a small company. A cabinet-making firm is a good example—I have one in my constituency in Dundee where they all have a stake in it and can equally share the risks and the rewards. The problem with what the hon. Member is suggesting is that the employees are burdened with the risks without any of the rewards. I cannot see where there is a benefit at all. That in many respects insulates the employer and puts all the burden on the employee.
Greg Smith
I do accept the point that the hon. Gentleman is making. It is helpful to have this debate to tease out the core issues. The point I would put back to him is that those small microbusinesses faced with that eventuality almost certainly will not have the reserves or contingencies in place to be able to weather such a storm. A catastrophic event that delays perhaps their biggest order of the year by six months, a year or longer—some of the shipping delays in recent years have been undoubtedly severe—means they might go bust. If they go bust, there are no jobs at all. Although I am in no way, shape or form advocating a position where an unfairness is felt by employees, there can in the real world sometimes be an eventuality where it is undesirable—I will concede unfair—but a reality.
Greg Smith
I will finish this point and then give way —the hon. Lady knows that I am up for the debate.
There could be a pretty stark choice: go bust and no jobs, or some short-term undesirable pain that requires flexibility in order to get the business back on track to secure jobs. The last thing I want to see in this economy is businesses being forced to the wall and ending up shedding jobs, and overall employment numbers in this country going down. I want to see the economy growing. I want to see the number of jobs being created growing every single day. That is how we get ourselves to greater prosperity for everybody. I really worry that if flexibilities are taken away, it could go the other way.
Alison Hume
It is a pleasure to serve under your chairmanship, Mr Mundell. I refer to my entry in the Register of Members’ Financial Interests and my membership of Unison and of the Writers’ Guild of Great Britain.
The hon. Member talks about shipping companies and furniture companies, and I would like to talk about my constituency of Scarborough and Whitby. As of last year, 4,500 people there—11% of the workforce—were employed in retail, and 8,000—20% of the workforce—in hospitality. Those sectors employ a lot of women, and those women—I was one myself—rely on childcare, which is extremely expensive. Does he accept that when shifts are cut short or curtailed at short notice, those women still have to pay for their childcare and are therefore taking on board an expense? It is not force majeure for them; it is a day-to-day struggle to pay the childcare bills.
Greg Smith
I can assure the hon. Lady that I am intimately aware of the cost of childcare. It is something that challenges families—men and women, mums and dads, carers, grandparents and all sorts of people—on a daily basis. It is a very expensive reality of life. I do not want to get off topic, but the previous Government did a lot to increase the free childcare offer, and I fully acknowledge that the current Government are carrying through with that. We need more measures like that to ensure that people have the childcare arrangements in place to enable them to go to work.
I fully accept the hon. Lady’s argument: there is a cost to going to work. There is a cost of travel, as we all know as Members of Parliament travelling in from and getting around our constituencies. There are the costs of getting to work, of childcare or, perhaps, if someone is caring for a relative or someone else, of ensuring that alternative provision is there while they are at work. I fully accept that point and in no way wish to advocate for people to be left in that place. I do not want that for anybody in this country. But as I said to the hon. Member for Dundee Central, there are sometimes circumstances—very few, exceptional circumstances—where it could be a stark choice for the business and jobs could end up being lost altogether if there is not a little bit of flexibility. We are dancing on the head of a pin here, and it is about exceptional cases, but I do not want to see exceptional cases suddenly reducing the overall employment numbers in this country.
Chris Murray (Edinburgh East and Musselburgh) (Lab)
In response to the hon. Member for Dundee Central, the shadow Minister struggled to come up with a concrete example of a business that might be in the situation he is describing, with very small margins and staff costs not meeting the demand. I can think of two examples from my experience before coming here and from my constituency. One is car washes, where we frequently see very low-paid employees being recruited on demand and very small margins. Another is nail bars, which we see on high streets across the country, where fluctuating demand requires small amounts of work to be done, so people are employed on very short contracts with hours cancelled at very short notice.
The shadow Minister will also have noticed last week that the net migration figures for the last year of the Conservative Government reached almost 1 million. The point I am making is that we need to think about not just the impact on individual workers and businesses, but the bigger, broader impact on society as a whole. The problem we have seen with small businesses such as car washes and nail bars is that there is a high supply of labour, generally from exploited migrant workers. It is not a coincidence that the two industries I have just described are also where we see the highest incidence of modern slavery. That is because workers in those industries have very few rights, so they can be treated as almost expendable by their employers, and have their hours cancelled at very short notice, and they have absolutely no recourse. So, it is not a coincidence that it is the most exploited workers, or the most vulnerable workers, who have ended up taking such jobs.
On high streets across the country we have seen the growth of multiple small car washes and small nail bars. The industries are not struggling, but the employers are deliberately working on incredibly small margins. The point is that the dynamic between employer and employee is unbalanced, which is what the Bill seeks to correct.
The Chair
We just have get the balance correct between a speech and an intervention, if we can.
Greg Smith
The hon. Gentleman makes a fundamentally good point about issues such as modern slavery. Actually, it was a former Conservative Prime Minister—I accept that we had a few in the last Government—my noble Friend Baroness May of Maidenhead, who did an enormous amount to tackle modern slavery in this country. Is it a case of job done? No, clearly not. However, we have made enormous strides and I encourage this Government to do all they can to continue the fight against modern slavery, which is a particularly evil crime that needs to be stamped out for good.
The hon. Gentleman asked for concrete examples. I felt that I gave one, with the example of the two-employee furniture maker. However, I will give another example of where force majeure may come in. Let us take the example of a small business. In fact, let us take a bathroom fitter, where there is perhaps one business owner who has, say, two employees who support him or her in fitting those bathrooms. They take on a big job in a hotel to refit all the bathrooms. Let us say that it is a 25-room hotel; I can think of a couple of those in Buckinghamshire. However, that hotel goes bust. It is not the fault of the company whose owner thought they had just taken on a really lucrative contract to refit 25 bathrooms. Clearly, it is the fault of the hotel that, sadly and for whatever reason, has ceased to trade, or perhaps it has been taken over as an asylum hotel. Obviously, that order to refit the bathrooms would have fallen.
What does that business do? It cannot suddenly magic up 25 bathrooms to fit in the space of a month, or a quarterly period, or whatever period it might be. However, it has probably already had to fork out for the parts, bathtubs, showers, toilet cisterns and everything else that goes into a bathroom. I gently suggest to the hon. Gentleman that that is a concrete example of where it is a lose-lose situation for the business owner and their employees, until they can get themselves back on track.
Nobody wants to see that type of thing happen, but it does happen. It is a reality of trading, not only in this country but worldwide, that sometimes bad things happen. So, there has to be flexibility around such events. That is notwithstanding the good points that the hon. Gentleman made about modern slavery and businesses exploiting those who perhaps are less able than other workers to stand up for themselves in workplaces in this country. However, I accept the broad sweep of the points the hon. Gentleman made in that regard.
I am conscious of how long I have been speaking about this amendment, but I am always up for a good debate. I will conclude by returning to the evidence that—
Greg Smith
I am tempted not to give way to the hon. Gentleman, since he seemed less than keen to take my interventions in the farming debate yesterday, but I will grant him an intervention today.
Jon Pearce
It is an honour to serve under your chairship, Mr Mundell. I refer to my entry in the Register of Members’ Financial Interests and to my membership of the GMB. I apologise to the shadow Minister for not taking his interventions yesterday. I did take two, if that assists.
I wanted to build on the point that the shadow Minister was making. I actually agreed with some of the examples he gave, in that there are emergency situations where things do not work out for a business. I am interested in whether the shadow Minister would apply the same principle when the employee has an emergency, which builds on the point made by my hon. Friend the Member for Scarborough and Whitby. For example, an emergency for the employee might be childcare, the illness of a family member, or the death of a family member—actually that may not be relevant because that would be a different type of leave. In those emergency situations, there is a right to dependant leave, but that dependant leave is unpaid. Would the shadow Minister accept the principle in those circumstances that the employer should equally bear the cost and pay the employee?
Greg Smith
I understand the point that the hon. Gentleman makes, and I fundamentally agree with his point about bereavement leave and dependant leave. As we heard in the evidence sessions, I have an enormous amount of sympathy for extending certain elements of bereavement leave, including to pregnancy loss before 24 weeks, which we will come on to later in the Bill. Those circumstances are arguably more about humanity than some of the practical realities of market failure, supply chain failure or whatever it might be. I think they should be kept in very distinct columns. One is a human response to tragedy and the facts of life with dependants, or people to whom individuals might have a caring responsibility, as opposed to the need for flexibilities to exist, such as with the example of the lost contract or supply chain problems. I accept that this is a slightly different point to being told, “No bookings today” in a hospitality setting, or whatever it might be. I accept the point made by the hon. Member for High Peak, but I see it as a distinct column as opposed to something that is all in the same category.
Jon Pearce
The principle is, though, that with dependant leave in those emergencies, whether that is childcare or anything else, there is no right to pay; that is the point I am trying to make. The shadow Minister is saying that if there is an emergency for the business they should bear no cost of it. If there is an emergency for the employee, that employee will, under the statutory provisions on dependant leave, bear the cost of it. In both scenarios, the shadow Minister appears to be asking the employee to bear the cost. Is that correct?
Greg Smith
I understand the point that the hon. Gentleman makes. Actually, at no point have I said there should be no cost to the employer; I have said there needs to be flexibility, as opposed to a hard and fast rule. On Tuesday I had an exchange with the hon. Member for Birmingham Northfield on the point around, “Okay, what else?” While I put that problem list back in the column for the Government to address, there are other safeguards; there are other things that the Government could look at so that the burden is more shared, as opposed to zero cost to the business. The key word here, which I have probably said 100 times this morning, is “flexibility”, as opposed to hard and fast rules.
I will get back to my conclusion. Allen Simpson from UKHospitality made some sensible points when giving evidence to the Committee last week, so I pose his questions to the Minister. I should be grateful for a response on each, as I imagine employers throughout the country would be. Could a different approach be taken to what constitutes “reasonable notice” for different employers in different sectors? That goes back to the point made by the Opposition earlier. Will shift swapping still be allowed, and if so, how will the regulations account for it? If shift swapping will not be allowed, why not? What will be considered “reasonable notice” within shift-swapping provisions? If an employee wants to change their shift at the last minute, are they allowed to do so, and in what circumstances? What would happen if an employer were to put out a message saying, “There is a shift available right now. Does anyone want it?” Does that constitute an offer of employment? Will there be a time after which employers will not be able to do that, because it does not constitute reasonable notice? Those were very sensible, thoughtful questions from UKHospitality, and as this legislation progresses through Committee it is only right that the Government and the Minister give a clear and full answer to them.
Justin Madders
Well done to the shadow Minister—he must have had his Weetabix this morning. He has clearly put in a great deal of time and we appreciate the way that he has engaged with the debate and some of the issues. He is taking a much broader look at the principles behind the legislation, rather than a quite narrow technical amendment about when shifts are moved or curtailed, but I am happy to address his points as far as I can.
I understand that the shadow Minister accepts the principle that we are trying to create some additional fairness in the workplace. That is welcome to hear, and I can assure him that this will not be a rush job. We do not anticipate these measures being implemented until 2026, and he will not be surprised to hear that the reason is that we intend to engage deeply with business and workers’ representatives on the details. There will be a consultation, following which we will set out in regulations what periods of notice should be presumed unreasonable; we will also set out factors for tribunals to take into account when considering whether notices are reasonable. That will go a long way towards addressing some of the concerns he mentions from Allen Simpson of UKHospitality. I think it is fair to say he generally welcomed the approach, but clearly some of the detail is to be worked on.
I do not think there will be any prohibition on workers swapping shifts, but if the employer, having been notified that worker B has taken the shift instead of worker A, then cancels the shift at short notice, we would intend that the regulations would then be engaged.
Greg Smith
So that we are absolutely clear on the shift-swapping provision—[Interruption.] I correct the Minister on the Weetabix; it was the Tea Room black pudding.
If worker A and worker B consensually decide that they wish to switch, worker B being the one who will take the shift and worker A the one whose shift is now displaced either to another time or not at all, and worker A being quite happy with that, will the employer be penalised?
Justin Madders
I am grateful for the details of the shadow Minister’s dietary exploits today.
We are looking in quite close detail at that situation, because there are a number of knock-on consequences, but we do not envisage that, in a situation where two workers agree of their own volition to swap shifts, the employer should in any way be penalised. We do not think that is in the spirit of what we are trying to achieve here.
I return to the points that my hon. Friend the Member for Edinburgh East and Musselburgh made about particular workplaces. The Director of Labour Market Enforcement has undertaken quite a lot of work in respect of those issues; considerable evidence is emerging about concerns in those sectors, and I encourage him to undertake some further reading on that.
There will be further consultation on what reasonable means. We all understand that there could be different factors applying, but what we want at the end of this process is for businesses to be clear about their obligations. That could mean a particular time period, but it could be different depending on the industry or the circumstances. It is right for us to take our time to consult and engage on that.
The shadow Minister referred to the force majeure issue; there is a power in the Bill for us to provide for exemptions for short-notice shift cancellation—that is always a tricky phrase to get out—but in some of the examples he gave where a huge contract was lost, a notice cancellation payment was probably the least of the employee’s and the employer’s problems in that situation; there may be bigger questions about whether there is enough work at all. Those are the kinds of things we will be looking at, as the power in the Bill gives us that opportunity.
Amendment 30 agreed to.
Justin Madders
I beg to move amendment 31, in clause 3, page 19, leave out lines 5 to 18 and insert—
“(a) where the shift is cancelled, the amount of remuneration to which the worker would have been entitled had they worked the hours that will not be worked because of the cancellation;
(b) where the shift is moved, or moved and curtailed (at the same time), and no part of the shift as moved, or as moved and curtailed, corresponds to the time of the shift (“the original shift”) before it was moved, or moved and curtailed, the amount of remuneration to which the worker would have been entitled had they worked the original shift;
(c) where the shift is moved, or moved and curtailed (at the same time), and part of the shift as moved, or as moved and curtailed, corresponds to the time of the original shift (but part does not), the amount of remuneration to which the worker would have been entitled had they worked the part of the original shift that does not correspond to the shift as moved, or as moved and curtailed;
(d) where the shift is—
(i) curtailed but not moved, or
(ii) moved and curtailed (at the same time) and the shift as moved and curtailed is to start and end within the time of the original shift,
the amount of remuneration to which the worker would have been entitled had they worked the hours that will not be worked because of the curtailment, or the movement and curtailment.”
This amendment has the effect of clarifying the maximum amount of a payment that can be specified in regulations under proposed section 27BO(1) of the Employment Rights Act 1996 in cases where there is a combined short notice movement and curtailment of a shift and makes associated drafting changes to the amended provision.
Justin Madders
These amendments should be considered alongside amendment 30, because they clarify what happens when a shift is both moved and curtailed at the same time. The Bill provides a power to specify the amount that must be paid by employers when they cancel, curtail or move shifts at short notice. It cannot be used to specify a payment amount in excess of what the worker would have earned from working the original hours.
However, the Bill was not clear whether the maximum payment due when a shift is both moved and curtailed at the same time should be calculated based on the provisions on movements or on curtailments, which would create different effects. For example, if a worker’s shift was due to be worked from 2 o’clock to 6 o’clock, but is moved and curtailed to 4 o’clock to 7 o’clock, the maximum payment could be based either on one or two hours of work, as the shift was moved by two hours but was curtailed by one hour.
Amendment 31 clarifies what happens in such cases. The maximum payment in this scenario would be what they would have earned from two hours’ work, reflecting the maximum they would have earned had they worked their original four-hour shift. That will ensure that workers are compensated appropriately, and it will also provide clarity for employers.
Amendment 32 clarifies for workers and employers how to calculate what amount of contractual payment can be offset against payments under clause 3 in cases where there is a combined short notice movement and curtailment of a shift. Again, the Bill is unclear whether the calculation should be based on the provisions on movements or on curtailments, which would create different effects. For example, if a worker’s shift was due to be worked from 2 o’clock to 6 o’clock, but is moved and curtailed to 4 o’clock to 7 o’clock, then after deducting the two hours in the shift that have stayed the same—4 o’clock to 6 o’clock—the remaining hours to be offset could be based on either one or two hours’ work.
The amendment clarifies that the hours to be offset should be for two hours’ work, as the worker should be entitled to the payment under proposed new section 27BO of the Employment Rights Act 1996 for two hours. That will ensure that it is clear that an employer is not doubly liable for some hours in such scenarios.
Although I appreciate that the amendments may appear complex, they will have the overall effect of simplifying the policy for employers and workers, so that it is very clear what happens when a shift is both curtailed and moved at the same time. They therefore prevent us from ending up with a whole load of litigation to decide what the correct outcome will be.
I reassure the shadow Minister that the changes will not be rushed: they will not be implemented before 2026, which will give us time to consult further and provide some more information on how the measures will work in practice so that employers understand what is expected of them. We will provide clear guidance throughout.
Many employers already guarantee hours, give reasonable notice of shifts, and make payments when they cancel shifts at short notice, so they will not need to alter their behaviour at all. In fact, data from the Chartered Institute of Personnel and Development suggests that around 33% of employers already pay some form of compensation for shifts cancelled with less than 24 hours’ notice.
Greg Smith
I am grateful to the Minister for his explanation of amendments 31 and 32. As he said, these amendments clarify the maximum amount of payment and the hours to which a payment relates in cases where there is a cancellation, movement or curtailment at short notice of a qualifying shift that the worker has agreed to work for the employer. Amendment 31 establishes that the payment should be for the hours that would have been worked.
The amendments make sense given the policy direction of the Bill but, once again, I gently suggest—as I will probably do multiple times during our discussions—that it is unclear why these provisions could not have been included in the Bill on its introduction. They seem like a fundamental part of the Bill. I would be grateful if the Minister could explain why it took so long to come to the conclusion that this was the way forward.
Justin Madders
I will address that point, which I am sure we will hear on numerous occasions from the shadow Minister. He will be aware that it was a manifesto commitment to introduce the Bill within 100 days, which we are very pleased to have been able to adhere to, but that meant that not every element of policy was ready. As we have continued to consult, engage and develop our thoughts in this area, it has become apparent that it is possible to add to the Bill at this stage, to close some loopholes and provide some clarity. That is why the amendment was tabled.
Amendment 31 agreed to.
Amendments made: 32, in clause 3, page 21, leave out lines 3 to 13 and insert—
“(a) where a shift has been cancelled, the hours that would have been worked if the shift had not been cancelled;
(b) where a shift has been moved, or moved and curtailed (at the same time), and no part of the shift as moved, or as moved and curtailed, corresponds to the time of the shift (“the original shift”) before it was moved, or moved and curtailed, the hours that would have been worked during the original shift;
(c) where a shift has been moved, or moved and curtailed (at the same time), and part of the shift as moved, or as moved and curtailed, corresponds to the time of the original shift (but part does not), the hours that would have been worked during the part of the original shift that does not correspond to the shift as moved, or as moved and curtailed;
(d) where a shift has been—
(i) curtailed but not moved, or
(ii) moved and curtailed (at the same time) and the shift as moved and curtailed is to start and end within the time of the original shift,
the hours that would have been worked if the shift had not been curtailed, or moved and curtailed.”
This amendment has the effect of clarifying the hours to which a payment under proposed section 27BO(1) of the Employment Rights Act 1996 relates in cases where there is a combined short notice movement and curtailment of a shift and makes associated drafting changes to the amended provision.
Amendment 33, in clause 3, page 21, line 26, leave out “three” and insert “six”.
This amendment would increase the time limit for bringing proceedings under the new section 27BS(1)(a) of the Employment Rights Act 1996 from three months to six months.
Amendment 34, in clause 3, page 21, line 31, leave out “three” and insert “six”.
This amendment would increase the time limit for bringing proceedings under the new section 27BS(1)(b) of the Employment Rights Act 1996 from three months to six months.
Amendment 35, in clause 3, page 21, line 36, leave out “three” and insert “six”.
This amendment would increase the time limit for bringing proceedings under the new section 27BS(1)(c) of the Employment Rights Act 1996 from three months to six months.
Amendment 36, in clause 3, page 21, line 40, leave out “three” and insert “six”.—(Justin Madders.)
This amendment is consequential on amendments 33, 34 and 35.
Justin Madders
I beg to move amendment 37, in clause 3, page 22, line 11, after “must” insert “—
(a) make a declaration to that effect, and.
(b) ”.
This amendment and amendment 38 require an employment tribunal that finds a complaint under proposed section 27BS of the Employment Rights Act 1996 well-founded to make a declaration to that effect.
Justin Madders
Proposed new section 27BT of the 1996 Act makes provision for a payment to be made to the worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that either was not given or was inadequate or untrue.
Amendment 37 will require the employment tribunal to additionally make a declaration in cases where the employer failed to make a payment for a qualifying shift, confirming that the worker’s rights have been violated. The declaration will be accessible not only to the directly affected worker but to others, including those working for the same employer. That will ensure that it is clear to other workers where and how such payments should apply if they have a shift cancelled, moved or curtailed in a similar way.
Amendment 38 will require the employment tribunal to additionally make a declaration where an exception applied and a notice was not given or where the notice was inadequate or untrue, confirming that the worker’s rights have been violated. Again, that will ensure that workers always receive a remedy in such cases, even where the tribunal decides that an award of compensation is not justified in the circumstances. That should ensure that it is clear to other workers where exceptions do and do not apply if they have a shift cancelled, curtailed or moved in similar circumstances.
Mandatory declarations of that nature are a common remedy across employment law. The amendments are in line with other similar provisions that concern complaints to the employment tribunal. Proposed new section 27BT also makes provision for the tribunal to order an employer to pay a worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that was either not given or was inadequate or untrue.
Amendments 39 and 41 will allow an employment tribunal discretion to award an appropriate level of compensation in cases where an exception applied but the employer either failed to give notice or gave an inadequate or untrue notice. That will remove the need for a tribunal to take an all-or-nothing approach by awarding the full, maximum amount or nothing. The amendments will instruct an employment tribunal to consider the seriousness of the matter when determining what payment to award the worker, which might include, for example, considering whether the employer had acted in bad faith.
That is a more appropriate approach than under the previous drafting, and there may be cases where the maximum award is not reasonable. For example, if a worker has a shift curtailed by an hour and their employer relied on an exception but did not give notice of that, it would not be logical for their award to be greater than the amount that would have been owed for the curtailment of a single hour. The award itself is discretionary and it is appropriate that the payment amount should equally be discretionary up to a specified amount, which will allow employment tribunals to make awards that are just and equitable to all parties.
On amendment 40, proposed new section 27BT makes provision for a payment to be made to the worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that was either not given or was inadequate or untrue.
The amendment is minor and technical, correcting drafting so that the provisions do not make reference to a scenario that could never arise. An employer cannot be found both to have unreasonably failed to give a worker notice of an applicable exception in relation to a payment, yet also to have been liable to make that payment and have failed to do so: either no exception applies and payment is due, or an exception applies and a notice should be given as no payment is due. The amendment removes the potential confusion caused by the drafting as introduced. I apologise for that, but as the Committee will appreciate that we have been working to a very swift timetable. We hope that brings some clarity to the situation.
Greg Smith
The word “clarity” is doing quite a lot of heavy lifting there, so I will probe it a bit. Amendments 37 and 38 concern provisions in the Bill about how employees may make a claim to an employment tribunal where they have not been paid or received reasonable notice of shifts, or the employer had purported to give notice in compliance with the rules on right to reasonable notice, but in a way that was inadequate.
The amendments specify that if an employment tribunal finds claims to be well founded, it must make a statement to that effect. Why were these amendments, along with those increasing the time limit from three to six months, not included in the Bill when introduced? Those provisions do not seem like a loophole being closed or a minor technical drafting error; they seem fundamental to what the Government are trying to do here, so that was one of the bigger surprises. Why were they not locked into the Bill from day one?
I understand the point about political priorities and commitments to publish something in 100 days, because sometimes these things take a lot longer than 100 days to get right. Whether one agrees with the principle and practicality of the provisions or not, it is tough on those in the civil service and those who are drafting the Bill to be able to deliver something of this complexity in 100 days, but these seem to be fundamental provisions. I would also be grateful for clarity from the Minister about how much the Government estimate that the provisions in these amendments, as well as in the wider Bill, will increase employment tribunal claims.
On amendments 39 to 41, if an employee brings a claim to an employment tribunal for their employer breaching the duties imposed by the Bill, amendment 39 provides that the court can award compensation up to a cap to be set in regulations. We are back to our old friend: we do not know what those regulations are going to be. I have a set of what I hope will be straightforward questions for the Minister. What is the cap planned to be? I am sure that it will be open to consultation, but again, the Government must have a window in mind. That is a reasonable question that businesses up and down the land will be interested to know the answer to, so that they can start preparing their viewpoints and evidence base to present to the Minister for any future regulations.
In our oral evidence sessions, we heard witnesses ask several questions about how the provisions on the right to reasonable notice of cancelled, curtailed or moved shifts will work in practice, because there is precious little detail in the Bill. Can we now have that detail? Will the Minister provide a timeline by which the Government intend to provide some information not just to this House, but to businesses up and down the country, about how the measure will work?
When will we be able to see the draft regulations? It would be helpful if we could see them during the passage of the Bill, be it prior to Report, which would be the best case, or before it goes to the other place for consideration, so that the House of Lords can fully explore them, which would be better than nothing. Can the Minister explain why the clauses on award of cost are proportionate to the benefit that they may bring to employers?
The Chair
Government amendment 37—sorry, Minister, I should allow you the opportunity to respond.
Justin Madders
I am sure that the shadow Minister and the whole Committee are delighted that I have the opportunity to respond.
The shadow Minister asked some perfectly reasonable questions. On the first issue, it is a well-established principle that employment tribunals have the right to make declarations in a whole range of claims. Again, I can only refer him to my previous answers with regard to why that was not in the original Bill—we were up against a tight timetable. It is also worth bearing in mind that the Bill will not become law until it has passed through this House and received Royal Assent, so when it finally appears before the public, all those issues will be ironed out. I give him the same answer about regulations, because—as we are doing as we go along—the Bill can be amended here, on Report and in the other place.
It may be that the final Bill does not entirely reflect what we have before us, so it would be premature to draw up regulations at this stage. However, part of our ongoing dialogue with businesses, workers’ representatives and trade unions is about what regulations we will look at.
Greg Smith
I understand the Minister’s point, but this is a Government Bill; I accept that it is derived from their manifesto and from their political priority. Notwithstanding the Minister’s perfectly correct point that the Bill can be amended before it receives Royal Assent, does he at least accept the point that as this is a Government Bill, they should at least give a starting point on any consultation or proposal that people could then work around, as a test of reasonability for business owners and the wider public? People around the country, as well as Members of this House, could then let their views be known as they seek to challenge and amend the Bill.
Justin Madders
We are taking this approach because we want to be reasonable and engage with businesses and trade unions on what the shape looks like. That is why the full consultation, which will look at the broad range of issues, is not yet ready. It is not really in the spirit of that for us to nail down everything in the Bill. Most employment rights have their detail in secondary legislation.
There are some clear principles about the levels of compensation that we will set out. Clearly, a worker should not be compensated for more than the number of hours that he or she has lost. If other heads of loss occur, there are already principles about wages, for example, whereby ongoing losses have to be compensated for. That is the kind of thing where the detail ought to be put into secondary legislation and consulted on fully, which is what we intend to do.
Mr Peter Bedford (Mid Leicestershire) (Con)
The one thing that businesses do not like is uncertainty. Unfortunately, there are so many gaps that need filling in the Bill that it makes it very difficult for businesses to plan for the future—for example, about how many people they will employ, what risks they will take on, and how to budget. Does the Minister accept that the Bill is so full of gaps that it causes more uncertainty for businesses and makes it harder for them to plan?
Justin Madders
The hon. Member is trying to have it both ways. If we had set out too much detail in the Bill, he would no doubt have criticised us for not engaging and consulting, and for being too dogmatic in our approach. That is why we have taken the approach that we have. We want to engage, consult and get the detail absolutely right, because we are clear that the Bill will be effective only if it has buy-in from all concerned. That is why the detail will follow.
Amendment 37 agreed to.
Amendments made: 38, in clause 3, page 22, line 15, after “tribunal” insert “—
(a) must make a declaration to that effect, and
(b) ”.
See the explanatory statement for amendment 37.
Amendment 39, in clause 3, page 22, line 16, leave out
“of a specified amount to the worker”
and insert
“to the worker of such amount, not exceeding the specified amount, as the tribunal considers just and equitable in all the circumstances”.
This amendment has the effect of providing an employment tribunal with discretion, up to an amount to be specified in regulations, as to the size of a monetary award in respect of a complaint under proposed section 27BS(1)(b) or (c) of the Employment Rights Act 1996 (rather than there only being discretion as to whether a monetary award is made, but not the amount).
Amendment 40, in clause 3, page 22, leave out lines 18 to 20 and insert
“(2)(b) relating to a notice given in purported compliance with section 27BQ(2) if the tribunal makes an order under subsection (1)(b) relating to the same payment to which the notice related.”
This amendment has the effect of removing from proposed section 27BT(3) of the Employment Rights Act 1996 reference to a scenario that could not arise (because an employment tribunal could not make an order under both section 27BT(1) and (2) if no notice had been given).
Amendment 41, in clause 3, page 22, line 20, at end insert—
“(4) In determining—
(a) whether to make an order under subsection (2)(b), and
(b) if so, how much to order the employer to pay,
an employment tribunal must have regard, in particular, to the seriousness of the matter complained of.”—(Justin Madders.)
This amendment supplements amendment 39.
The Chair
I consider that the principles of the clause have been fully debated during discussion of the amendments, so if there is to be a clause stand part debate, it should be short.
Question proposed, That the clause, as amended, stand part of the Bill.
Justin Madders
Thank you, Mr Mundell. I am not sure whether that was directed at me, other members of the Committee, or maybe all of us.
Justin Madders
I am sure you always intend to be helpful, Mr Mundell.
I will briefly go through the provisions of clause 3. I appreciate that we have covered a lot of the issues already, but I think it is important to set out what the clause does in the round, because after discussions on quite a few amendments, we may not have followed exactly where we are.
It is obvious that predictability of income is a crucial part of a secure future. We need to address the scourge of insecurity at work. Equally, we understand that businesses want clarity about their obligations. The right to reasonable notice of shifts and of changes to them is important and will be enforceable at employment tribunals. While we regard the right to reasonable notice as appropriate, we also see a need for a rather speedier mechanism to provide some reimbursement to a worker when a shift is cancelled, moved or shortened at short notice. Of the 2.4 million people potentially eligible for these new rights, we estimate that around 600,000 have shifts cancelled at short notice. Clause 3 clearly sets out the obligations on both workers and employers, and I will go through the amendments that it will make to the Employment Rights Act 1996.
New section 27BO of the 1996 Act outlines the new duty that will be placed on employers to make a payment to workers if they cancel, move or curtail shifts at short notice. The duty will apply to workers on zero-hours contracts and arrangements, and workers on contracts to be specified in regulations. When workers have the timing of their usual shifts set out in their contract but are sometimes asked to work extra or longer shifts, the duty will also apply to the additional hours. The new section also provides the power to set what period constitutes short notice; what the payment amount should be; how quickly the payment should be made; when notice is treated as having been given; and the maximum delay of a shift, or bringing forward of a shift, for which payment is not due.
New section 27BP adds several supplementary details on the powers to make regulations provided in new section 27BO and therefore on the functioning of the right to payment. It restricts the period that can be set in regulations as “short notice” to no more than seven days, and it ensures that the payment due to a worker cannot be more than they would have been paid had they worked their original shift. It allows for regulations to vary the amount of the payment according to how short the notice of cancellation is. It also provides that the contracts in scope of the right to payment may be specified in regulations by setting an hours or pay cap.
New section 27BQ provides a delegated power to make exceptions to the right to payment, and states that where an exception applies, the employer must notify the worker of it and explain why it is considered to apply. The section enables regulations to specify how the notice of the applicable exception should be given and when it is deemed to be received.
New section 27BR ensures that a worker is not entitled to receive payment both under their contract and under new section 27BO in respect of the same hours. New section 27BS enables workers to complain to employment tribunals that their employer has failed to comply with the duties. New section 27BT establishes the remedies where a complaint to a tribunal is found to be well-founded.
I commend the clause to the Committee.
Greg Smith
Mindful of your comments, Mr Mundell, I will not speak at length to the clause, other than to underline the points that I and my hon. Friend the Member for Mid Leicestershire have made about certainty. I understand the political priorities of the Government, and I understand the principle of what they are trying to do. However, as my hon. Friend said, businesses need to be able to plan.
I accept that not all legislation can give detail on everything to the nth degree, but I think it is reasonable and proportionate for businesses small, medium and large in this country to expect to be given at least a hint of what is coming down the line. That way, they can begin the process of planning and putting their thoughts together, so that when the consultations come they can give as full and frank an account of their circumstances as they can, and describe what the proposals will mean for them and their employees, so that the Minister can come to a reasonable judgment before laying any regulations.
The Opposition are not opposed to the principle of the clause, but because of the holes in it, we cannot support it.
Question put, That the clause, as amended, stand part of the Bill.
Justin Madders
I beg to move amendment 42, in clause 4, page 23, leave out lines 34 to 39.
This amendment is consequential on NC11.
The Chair
With this it will be convenient to discuss Government new clause 11—Orders and regulations under Employment Rights Act 1996: procedure.
Justin Madders
Amendment 42 is another technical amendment that concerns not the function of the Bill but parliamentary procedure, so if we want another dry, technical debate, we certainly have the opportunity.
Clause 4 makes provision for new section 27BW to be inserted into the Employment Rights Act 1996. New section 27BW(3) would allow regulations made under part 2A of the 1996 Act, relating to the provisions concerning zero hours, that are subject to different or no parliamentary procedure to be included in regulations subject to the affirmative procedure. New clause 11 amends section 236 of the 1996 Act and makes the same provision to allow the combining of instruments, but applies to any orders and regulations made under that Act, rather than to only those made using powers in part 2A. This is a technical amendment intended to ensure that implementation can be undertaken as efficiently as possible.
On what instruments might need to be combined, we will be setting out further details required to implement zero-hours provisions through secondary legislation, but existing powers in the 1996 Act, such as the power in section 10 regarding pay statements, may play a part in supporting implementation. It may be that it would be appropriate to exercise that power to prescribe that pay statements must specify where payment has been made under proposed new section 27BO for the short-notice cancellation, movement or curtailment of a shift. Should that be the case, this provision would allow that amendment to be made in the same regulations as others to be made under new powers being inserted by this Bill that are—I am sure that the shadow Minister will be pleased to hear this—subject to the affirmative procedure. That will mean that provisions to be detailed in regulations that would have been subject to the negative procedure, or no procedure, receive greater scrutiny from Parliament before becoming law.
In the light of the amendment made to section 236, amendment 42 removes the provisions that apply only to part 2A of the 1996 Act, as they will be redundant.
Greg Smith
As the Minister says, this is a very technical amendment—and who doesn’t love a dry, technical debate? However, I am not sure that anyone seeking a dry, technical debate over some hours is going to be happy. I gently suggest that the Government should reflect on the procedural nature of these provisions and their intersection with the Employment Rights Act 1996, which is very complex to unpick and fully understand, not necessarily for those who sit in this House, or indeed in the other place, but certainly for businesses out there, which will require a lot of professional services and advice to navigate it.
On the particular, technical nature of the procedure, I heard what the Minister said about the affirmative procedure, but can he explain something to the Committee? This question could result in a very short answer or a very long one—I apologise for asking it if it prompts a longer one, although in some ways that would be better—but can he explain which powers in the new clause will not be subject to the affirmative procedure? Is there a list? And—it would be remiss of me not to throw this in—why could this not have been on the face of the Bill from day one?
Justin Madders
I am afraid that I will not be able to tell the shadow Minister what will not be subject to the affirmative procedure. I think that the intention is actually for the amendment to bring everything that is in scope of the clause under the affirmative procedure, but I will endeavour to confirm that and come back to him, if that is okay.
Amendment 42 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Justin Madders
I will not detain the Committee too long on clause 4. It contains amendments to the Employment Rights Act 1996 related to clauses 1 to 3, which we have just debated.
Proposed new section 27BU defines various terms used in clauses 1 to 3, and the rest of part 2A of the 1996 Act, relating to zero-hours workers and other similar workers. In particular, it copies across the definition of “zero hours contract” from section 27A of the 1996 Act. A zero-hours contract exists where the worker undertakes to work for the employer when the employer makes work available to them but there is no obligation on the employer to make work available. While that might be quite a lengthy explanation, I think that we all understand what we mean by that. New section 27BU also defines “zero hours arrangement” as an arrangement under which an individual works when the work is provided but
“the employer is not required to make any work available to the individual, nor the individual required to accept it”.
Greg Smith
I will not speak at length on this clause because, as the Minister said, it has a bit more clarity in it than many of the others. He has just outlined the new definitions, but perhaps I can put to him an example case showing how they would meet someone on what I believe he may describe as a zero-hours contract, but which also has some compensation for being a zero-hours contract. I will explain what I mean by that.
This is a live example of someone who explained their working relationship with their contracted employer to me the other day. He is required to be up, dressed and ready to go at 5 am every day—perish the thought—and he will receive a call by 5.30 am about whether there is a number of hours to be worked that day. He receives a payment for doing that. Each week, he receives a payment for being up at 5 am and being ready to go if required, but of course if he is not required he does not receive anything further for the shift or the full day of work.
There are probably not many such contracts in the economy, but that is a real-life one. I happened to be briefed on it by the individual involved the other day. The employee is happy. Not everybody is happy at 5 am, but he gets his payment for doing that. He accepts the quid pro quo that he may or may not get a full day’s work off the back of that. If he does not, he can go back to bed or do whatever he fancies with the rest of the day. How do the definitions in the Bill fit somebody who is quite happy with such an arrangement?
Justin Madders
At the all-party parliamentary beer group’s reception last night, the shadow Minister and I talked about pubs. His question sounds perfect for a pub quiz for retired employment lawyers: it is the sort of thing that might end up getting taken to a group of KCs to understand the precise relationship. My best guess is that it would be classed as a zero-hours arrangement and would therefore be covered by the legislation. However, I do not wish to set a precedent inadvertently, so I will take further advice and come back to the shadow Minister. I hope he has some more interesting teasers like that: I am sure the entire employment law community are furiously scrabbling through their books to find the answer to his conundrum.
Question put and agreed to.
Clause 4, as amended, accordingly ordered to stand part of the Bill.
Schedule 1
Consequential amendments relating to sections 1 to 3
Justin Madders
I beg to move amendment 43, in schedule 1, page 106, line 8, at end insert—
“In section 27 (meaning of ‘wages’ for purposes of Part 2 of the Act), in subsection (1)—
(a) after the paragraph (ce) inserted by the Neonatal Care (Leave and Pay) Act 2023 insert—
‘(cf) a payment under section 27BO(1) of this Act (payment for a cancelled, moved or curtailed shift),’;
(b) renumber the paragraph (ce) inserted by the Employment (Allocation of Tips) Act 2023 as paragraph (cg).”
This amendment provides for a payment under proposed section 27BO(1) of the Employment Rights Act 1996 in respect of a short-notice cancellation, movement or curtailment of a shift to be treated as “wages” for the purposes of the provision about protection of wages in Part 2 of that Act.
The right of a worker to bring a claim for unlawful deduction of wages is an important principle in employment law. It is right that payments for cancelled, moved and curtailed shifts are included in this provision. Although a worker can already claim through the employment tribunal that their employer has not made a payment for a cancelled, moved or curtailed shift, in some cases it may be more appropriate for workers to bring a claim under the unlawful deduction of wages provisions, for example if there are instances of non-payment covering a period of months or years; if they want to claim for financial loss as a result of non-payment, for instance because of bank charges; or if a claim covers non-payment of cancellation payments and other wages.
The amendment will provide workers with an alternative remedy for non-payment, in addition to the new provisions in proposed new sections 27BS and 27BT of the Employment Rights Act 1996. That is in line with other statutory rights to payment, such as remuneration during suspension of work on medical grounds. I hope that that is a clear explanation.
Greg Smith
I do not say so often in this Committee, but that was actually a helpful clarification. I can only come back to a point that I will make countless times in this Committee: why on earth could that not have been clearer at the start, when businesses up and down the land were submitting their written evidence, or indeed when they were providing us with oral evidence last week? I stress that it is helpful to have that clarity now. I take no issue at all with the Minister’s explanation, other than to gently repeat the point about certainty and planning going forward.
Justin Madders
I am grateful for the shadow Minister’s support for the amendment.
Amendment 43 agreed to.
Amendments made: 44, in schedule 1, page 107, line 10, after “27BA(1)” insert “or 27BD(5A) or (5B)”.
This amendment is consequential on amendments 11 and 14.
Amendment 45, in schedule 1, page 107, line 10, after “27BA(1)” insert “or 27BEA(1) or (2)”.—(Justin Madders.)
This amendment is consequential on amendment 13.
Justin Madders
I beg to move amendment 46, in schedule 1, page 107, line 16, at end insert—
“(4A) A worker has the right not to be subjected to any detriment by any act, or any deliberate failure to act, by the worker’s employer done on the ground that—
(a) the duty imposed by section 27BA(1) applies to the employer in relation to the worker and a particular reference period, or
(b) the employer believes that that duty so applies.”
This amendment ensures that a worker’s right not to be subjected to detriment includes a case of detriment on the ground that the worker is, or the employer believes the worker is, entitled to a guaranteed hours offer under proposed new section 27BA of the Employment Rights Act 1996.
Justin Madders
Amendment 46 will broaden the detriment provisions in respect of the right to guaranteed hours. It will ensure that a worker has a right not to be subjected to detriment on the grounds that the worker is, or the employer believes that the worker is, entitled to an offer of guaranteed hours. The existing provisions protect workers from detriment only where a worker accepts or rejects an offer of guaranteed hours or proposes to do so; where the worker declines to work a shift, as they believe their employer has failed to comply with their obligation in relation to notice of shifts; or because the worker alleges the existence of such grounds to take a case to an employment tribunal.
Amendment 47 is a consequential amendment that clarifies the definition of “reference period” in amendment 46.
The amendments will extend the protections to ensure that detriment to the worker arising from the right to guaranteed hours can be addressed. The detriment experienced by the worker may include cases in which a worker’s contract is terminated. Whether a worker experiences a detriment on those new grounds will be a matter for the employment tribunal to determine in the usual manner.
Greg Smith
I am grateful for the Minister’s explanation. The Opposition can clearly see that amendment 46 will ensure that a worker’s right not to be subjected to detriment includes a case of detriment on the grounds that the worker is, or the employer believes that the worker is, entitled to a guaranteed-hours offer under proposed new section 27BA of the Employment Rights Act 1996. The question—our old friend—is why that was not in the Bill in the first place.
I would be grateful if the Minister explained what sort of detriment the Government are concerned about and are trying to prevent with the amendments. It is another point of clarity: it is about giving businesses an early understanding of where the Government are trying to go. This is one of the areas in legislation that could be widely open to legal opinion, if I may put it that way: a sort of lawyers’ charter, whereby if a bunch of lawyers are put in a room they could easily come up with many different interpretations of detriment and of the scope of amendment 46.
We see uncertainty in legal opinion all the time on the legislation that passes through this House. Once the Bill, in some form, has become an Act—as undoubtedly it will, given the parliamentary arithmetic—and a case comes to court, it will be helpful for the judiciary to look back at the parliamentary debate and see the full meaning of this provision.
Justin Madders
I am grateful for the shadow Minister’s question. I recall on one or two desperate occasions quoting Hansard in an employment tribunal. I always felt, “If you’re explaining, you’re losing,” as the old phrase goes.
We are not actually creating a new category of detriment. Detriment is something that already applies across a whole range of employment rights, so we are not inventing something that is not already there. At the moment, there is quite a live academic debate about how far the extent of detriment reaches, which we may come to at a later point.
To answer the shadow Minister’s points, the amendment will not create a whole new area of litigation about understanding what detriment means in this circumstance. It will still be the same detriment that would apply in other employment-related claims.
Amendment 46 agreed to.
Amendment made: 47, in schedule 1, page 107, line 29, at end insert—
“(7) In this section ‘reference period’ has the same meaning as in Chapter 2 of Part 2A (see section 27BA(4)).”—(Justin Madders.)
This amendment is consequential on amendment 46.
Justin Madders
I beg to move amendment 48, in schedule 1, page 107, line 37, at end insert—
“(2A) In subsection (2), for ‘and (6)’ substitute ‘, (6), (7) and (7A)’.”
This amendment makes technical changes to section 49 of the Employment Rights Act 1996. The reference to subsection (7A) is consequential on amendment 49.
Justin Madders
The amendments will ensure that the provisions on the maximum compensation awarded by a tribunal for detriment cases will be workable for cases involving the termination of an arrangement that is not a worker’s contract. Where there is no worker’s contract in place, it may be very difficult to determine the individual’s termination date. Let me clarify what I mean by that, if I can do so in such a technical area.
A zero-hours contract is a contract in which the worker undertakes to work for the employer when the employer makes work available to them, but there is no obligation on the employer to make work available. It is a worker’s contract because it involves obligations on the worker to undertake work. A zero-hours arrangement is an arrangement under which the employer is not obliged to make work available, and the worker is under no obligation to accept work when offered. Zero-hours contracts are workers’ contracts because there is an undertaking to work, whereas zero-hours arrangements are not workers’ contracts because there is insufficient mutuality of obligation.
There are particular complexities in applying legislation that involves a particular effective date of termination to those on zero-hours arrangements. The worker’s exact termination date may be difficult to determine and the calculation of compensation will therefore be circumstance-specific, meaning that it is more appropriate for the employment tribunal to use its discretion in arriving at such sums.
The amendment will ensure that in such cases, the amount that a tribunal awards will be left to its discretion. While there will not be a set maximum compensation for an individual on a zero-hours arrangement, as opposed to an employee on a zero-hours or low-hours contract, that maximum will be left to the discretion of the employment tribunal, which has the expertise to draw from the existing thresholds in compensation and apply them specifically to these types of cases.
Greg Smith
I have two questions for the Minister—hopefully simple ones—about Government amendments 48 and 49, which relate to the maximum award for a detriment claim.
First, there does not seem to be a set limit for the maximum award. Can the Minister explain that? Can he give an indication whether a maximum award will be set further down the line, either via a consultation process or in regulations?
My second question is possibly less straightforward, but it will be important as we look at the practical application of the Bill once it receives Royal Assent and comes into force. How much does the Minister envisage that tribunals may award under amendment 49?
Justin Madders
I am grateful for the shadow Minister’s questions. They cannot be answered in the round, as all cases will be very fact-specific. The maximum that a tribunal awards will be down to the circumstances in which workers find themselves. With a zero-hours contract, there will be a whole range of issues relating to the kind of work that they would have expected if the detriment had not taken place. It is a well-established principle that a tribunal will award what is just and equitable in the circumstances. Tribunals are well versed in understanding the factors that they would need to take into account in making such awards. The shadow Minister tempts me to get into details, but as this is a Bill Committee and not an employment tribunal, I cannot give him the kind of detail that he is looking for.
Greg Smith
I am grateful to the Minister for that answer. I understand the broad principle that he outlines, but there could be a mechanism, without putting a pounds-and-pence limit on any award, to bake in some formula that would cap an award according to proportion of original pay, contracted hours, length of service or some other factor. For the clarity of the record, is the Minister saying that no such framework is envisaged and that it will be a totally open-ended question for any employment tribunal?
Justin Madders
The amendments relate to detriment claims only, whereas the shadow Minister’s question is a slightly broader one. The point about compensation in other situations would be far more detailed. As this is about people on irregular contracts who may have suffered a detriment that we cannot possibly predict in advance, it is normal to say at this stage that the usual principles of the just and equitable compensation that an employment tribunal would award will apply in those circumstances.
Laurence Turner
Does the Minister agree that if a cap of some sort were introduced, there would be a risk that, as we have seen in other cases, people who have been subject to a detriment may seek other routes, particularly under equalities legislation where damages are uncapped? That is an existing problem that has added to the strain in that part of the employment tribunal system.
Justin Madders
There is a danger that we will get too prescriptive about this. There will be a relatively small number of cases in which there is detriment, but they are all going to be very fact-sensitive. That is why we have framed the amendment in this way.
Mr Bedford
The hon. Member for Dundee Central referred to how a lot of businesses will have insurance for various eventualities. As a maximum is not specified, have the Government considered the unintended consequences of such provisions on businesses’ ability to insure against such instances?
Justin Madders
We are not talking about the general running of a business, with reference to shift notice and cancellations; we are talking about a very specific set of circumstances in which an employer’s act is considered to be detrimental to the employee and gives rise to an employment tribunal claim. I am sure that there are insurance products that cover all employment tribunal claims, but this is about individual acts of penalisation against employees or workers. This is not a departure from existing legal principles; it is well set out and understood by lawyers and HR practitioners. I do not envisage that this is a provision that will be greatly used, but it is an important principle to have in the Bill.
Amendment 48 agreed to.
Amendment made: 49, in schedule 1, page 107, line 39, leave out from beginning to end of line 11 on page 108 and insert—
“(7A) Where—
(a) the complaint is made under section 48(1BA),
(b) the detriment to which the worker is subjected is the termination of the worker’s contract, and
(c) that contract is not a contract of employment,
any compensation must not exceed the compensation that would be payable under Chapter 2 of Part 10 if the worker had been an employee and had been dismissed for a reason specified in section 104BA.”—(Justin Madders.)
This amendment relates to the maximum award of compensation by an employment tribunal in a detriment claim under section 48(1BA) of the Employment Rights Act 1996. The change achieved by the amendment is that the maximum award in cases involving the termination of an arrangement that is not a worker’s contract is at the tribunal’s discretion.
Ordered, That further consideration be now adjourned. —(Anna McMorrin.)
Employment Rights Bill (Eighth sitting)
Thursday 5th December 2024
(1 month, 1 week ago)
Public Bill CommitteesRead Full debate Employment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 5 December 2024 - (5 Dec 2024)
The Committee divided: - Ayes: 12 / Noes: 3 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
I beg to move amendment 50, in schedule 1, page 108, line 34, at end insert—
“or the employer believes that that duty so applies, and”.
This amendment extends proposed section 104BA(3) of the Employment Rights Act 1996 (dismissal is unfair if done to avoid giving a worker a guaranteed hours offer to which the worker is entitled under proposed section 27BA of that Act) to a case where an employer believes a worker is entitled to such an offer.
Justin Madders
It is a pleasure to see you in the Chair, Sir Christopher. As is now our custom, I will start by referring to my entry in the Register of Members’ Financial Interests and my membership of the GMB and Unite trade unions.
Government amendment 50 will expand the existing protections for employees who are dismissed as a result of employers seeking to avoid the new duty to offer guaranteed hours. It will ensure that an employee who is dismissed because their employer believes that the right to guaranteed hours applies will benefit from unfair dismissal protections. As drafted, the provisions apply only if the duty to offer guaranteed hours actually applies. That could leave a loophole whereby an employee who is dismissed because their employer mistakenly believes that the obligation applies would have no protection from unfair dismissal. All employees deserve protection from unfair dismissal, whether or not they are eligible for guaranteed hours. The amendment will ensure that equal protection is in place.
Government amendment 51 is a small amendment that will remove wording in the Bill about when the termination of a worker must take effect in order for them to be regarded as unfairly dismissed for the purpose of proposed new section 104BA(3) of the Employment Rights Act 1996. The Government have concluded that there is no need to set out when the termination occurred. The amendment will make the Bill’s meaning clearer, as it is logical from its provisions that that would be during a reference period or the corresponding offer period. Remaining silent on the effective date of termination also follows the precedent set for other rights under the 1996 Act.
Government amendment 52 is consequential on Government amendment 51.
Greg Smith (Mid Buckinghamshire) (Con)
It is a pleasure to see you in the Chair, Sir Christopher. I understand the Minister’s explanation of the amendment, which appears to be a logical consequence of the other provisions on guaranteed hours, although we have the old chestnut about why it was not in the Bill when it was first introduced. It seems a pretty straightforward measure that reflects where the Government have always said they are coming from, so it is peculiar that it is coming at this stage. I might go so far as to ask the Minister whether Government amendments 50 and 51 are in fact correcting mistakes, as opposed to adding to the original drafting of the Bill.
I have some specific questions about the amendments. How does the Minister envisage that it will be proven that an employer believes that a worker is entitled to an offer of guaranteed hours? Some clarification would be helpful, not just so that the Committee and the House can understand the scope of the amendment, but so that businesses can plan for what might be coming down the line.
May I also ask the Minister for clarity about what amendment 51 will mean for dismissal during the reference period? I am not sure that we have enough clarity on that point to satisfy the Committee. Given how the schedule and the amendments are drafted, there is a possibility of a legal opinion indicating that it is possible for employers to dismiss employees during the reference period. From everything else that the Minister has said, I would be surprised if that were the Government’s intent. When he sums up, it will be useful if he clarifies whether that is indeed his intent. Is that one of the many loopholes that he is seeking to shut down with the Government’s amendments, and does it need shutting down further? Or is it the Government’s intent that that should be possible for employers within the scope of the Bill?
Justin Madders
I am grateful for the shadow Minister’s questions. I feel that we are embarking on an employment law masterclass, although I am not sure that I consider myself a master.
The first point was about how an individual would demonstrate that an employer had believed that they were entitled to particular rights and therefore had reason for dismissal. It is akin to existing case law and legal precedents from other jurisdictions: a set of facts can be presented to the employment tribunal to determine its judgment. I accept that it is not the easiest thing to prove, but that is how the law is currently structured and there will be no departure from that.
On the second point, clearly we would not want this to have the unintended consequence of not relating to a dismissal during the reference period. Proposed new section 104BA(3) logically demonstrates that if there is a termination during the reference period, the same protections would still apply. I am happy to seek further advice, but my understanding is that the Bill, as drafted, covers that situation. Clearly we would not want a loophole of that nature. I hope that that deals with the shadow’s Minister’s questions.
Amendment 50 agreed to.
Amendments made: 51, in schedule 1, page 108, leave out lines 39 to 41.
This amendment removes a requirement about the timing of a dismissal from proposed section 104BA(3) of the Employment Rights Act 1996.
Amendment 52, in schedule 1, page 109, leave out line 1. —(Justin Madders.)
This amendment is consequential on amendment 51.
Justin Madders
I beg to move amendment 53, in schedule 1, page 109, line 30, leave out “last” and insert “latest”.
This amendment and amendment 54 concern the calculation of a week’s pay for the purposes of an award of compensation by an employment tribunal following a complaint under proposed section 27BF of the Employment Rights Act 1996. The amendments ensure that the rules work for all such complaints.
Justin Madders
Amendment 53 will ensure that the provisions in section 225 of the Employment Rights Act 1996 on the calculation date for the purposes of calculating a week’s pay will work in relation to the new right to guaranteed hours. It is a small amendment: it will replace the word “last” with “latest” to reflect the fact that the date of termination will not necessarily correspond with the final day of the reference period. It sits alongside Government amendment 54; combined, the amendments will ensure that there is clarity for employment tribunals on calculating a week’s pay for the purpose of determining compensation for a well-founded complaint brought under proposed new section 27BF. The maximum number of weeks’ pay that may be awarded by a tribunal for a claim brought under proposed new section 27BF is to be defined in regulations.
Greg Smith
This is a minor and technical amendment that brings, on this specific point, the clarity that we have been asking for on so many other clauses and Government amendments. It appears to be correcting defective drafting in the version of the Bill originally presented to the House.
The need for such amendments suggests that the arbitrary target to publish the Bill in 100 days has once again been found wanting. As I have said before, I understand the political imperative for the Government to have done so, but it brings little comfort to employers or employees, who need certainty and clarity on the Bill. At least with Government amendments 53 and 54, that certainty and clarity has now come. I urge the Government to apply the same rigour to their other amendments so that businesses planning for the future can do so—perhaps not with jubilant support for the Bill, but with an understanding of what the Government are legislating for.
Amendment 53 agreed to.
Amendment made: 54, in schedule 1, page 109, line 31, at end insert
“on which the worker was employed by the employer under a worker’s contract”.—(Justin Madders.)
See the explanatory statement for amendment 53.
Question proposed, That the schedule, as amended, be the First schedule to the Bill.
Justin Madders
Schedule 1 will make various amendments to the Employment Rights Act 1996 and the Employment Tribunals Act 1996. Among those amendments, which are consequential on clauses 1 to 3, I highlight the insertion of proposed new section 47H of the Employment Rights Act 1996, to make provision for a worker not to be subject to detriment on various grounds relating to the right to guaranteed hours. The employer cannot penalise the worker for accepting an offer of a guaranteed hours contract, for example, or for challenging an offer that is not in compliance with the obligations on the employer regarding guaranteed hours.
Amendments have been made to extend these detriment provisions to situations in which a worker brings a claim or alleges the existence of a claim in relation to a breach of the duties relating to information rights and notice requirements. The detriment provisions are also extended to situations in which a worker suffers a detriment because they qualify for the right to guaranteed hours or the employer believes that they do. Whether a detriment has occurred in such instances will of course be for an employment tribunal to determine. Likewise, the employer cannot penalise the worker for declining to work a shift that the worker reasonably believed was offered with unreasonable notice. This is an important right that helps to address the potential power imbalance between an employer and a worker who is seeking to enforce their statutory rights.
Schedule 1 will also insert proposed new section 104BA of the Employment Rights Act, which makes provision for an employee to be treated as unfairly dismissed if the reason—or principal reason—for the dismissal is that the employee accepted or rejected, or proposed to accept or reject, an offer of guaranteed hours. Likewise, an employee will be treated as unfairly dismissed if the employer was under a duty to offer guaranteed hours but the employer dismissed the employee during the reference period to avoid having to comply with that duty. Amendments have been made to ensure that unfair dismissal protections extend to cases where a worker is dismissed because the employer believes they have a duty to offer guaranteed hours, even if that belief is mistaken.
Greg Smith
My argument is similar to the arguments that we have had in substantive debates on previous groups of amendments to the schedule. With this Bill, we have consistently seen an approach of legislating first and consulting second. I understand why that might be appropriate in some circumstances, but certainly for many of the schedule 1 provisions that the Minister has outlined, businesses will find it inadequate. They will find it too difficult to start making their business plans, their plans for growth, their plans for new contracts or their plans to expand in the next financial year, the year after, or even the year after that. It is not unusual for businesses to engage in medium and long-term planning, but too many aspects of the schedule mean that they cannot. Real businesses in the real world are trying to scope out where their next capital investment, their next expansion or their next acquisition of another business is coming from.
Because of those holes, the Opposition are deeply concerned that the Bill, which was incredibly rushed to meet an arbitrary 100-day political rather than legislative objective, will bring too much uncertainty to the economy and to business. At the end of the day, judging from the evidence that we heard in last week’s four sittings, it is having the net effect that businesses will simply take a deep breath and draw back from employing more people. They will not take the risk of taking on new hires. Given our debates on Tuesday, I am thinking particularly of that all-important risk of giving a second chance in life to a marginal candidate.
Sometimes an employer is not entirely convinced that a candidate is the best fit for their workplace, for any of a number of reasons—they may be a rehabilitated former offender or they may have had a number of struggles in life—but is willing to give them a chance. We heard from witnesses that those employers who were going to give people in those circumstances that chance in life—that chance to better themselves—might not now do so. That would be an absolute tragedy for the individuals involved and a travesty of justice when it comes to employment numbers in this country.
Laurence Turner (Birmingham Northfield) (Lab)
Does the hon. Gentleman accept that if the Bill were to go back to the Department as he suggests, the period in which changes to employment legislation are considered by Parliament would be extended and the uncertainty of which he speaks would be prolonged? Does he further accept that one of the business community’s key requests was for ongoing consultation as the Bill makes its way through its parliamentary stages, and that if we were to take the action he suggests, the Government would be breaking that commitment to business that business has asked for?
Greg Smith
I understand the hon. Gentleman’s point, but I believe that it was the Deputy Prime Minister who, in the media over the weekend, could not name a single business that supports the Bill. I will gladly take another intervention from the hon. Gentleman if he can name a single business that supports the Bill. [Interruption.] Not an umbrella body, but an actual business.
Laurence Turner
We heard from the Co-op, in the evidence sessions that we all attended last week, that that support is there. Off the top of my head, I would add Octopus and Centrica, two examples of very significant businesses that have welcomed provisions in the Bill.
Greg Smith
I am grateful to the hon. Gentleman. There are clearly thousands of businesses in this country; I notice that he did not name a single business from his constituency. I actually know Northfield very well: my late grandmother worked in Walter Smith butchers in Northfield for many years, well into her 80s.
I fully understand the need for any Government to have ongoing dialogue with business, but I gently say to the hon. Gentleman and all Government Members that there is a big political cost when any Government legislate too swiftly without fully thinking things through and without clarity of thought and of objectives. Yes, there are principles—they are clearly Labour principles—running through the Bill, but there is not that clarity of thought as to many measures in schedule 1.
I say gently, perhaps from bitter experience in the four and a half years prior to the general election, that I know what happens when legislation is rushed. From the Nationality and Borders Act 2022 to the Illegal Migration Act 2023, there were multiple pieces of legislation, none of which hit the nail on the head. Perhaps they were a little bit too rushed. They failed to meet the objective that we, the previous Government, clearly set out to achieve of ending small boat crossings in the channel.
I raise that clearly very out-of-scope point only as a warning to the Government that if they insist on going too quickly and rushing the Bill through just to meet the headline of having published it in 100 days, it could turn out to be a very painful experience not just for them as a Government, but for the business community in this country. These are the businesses that will be the backbone of our economy and will actually create the jobs that I think the Government also want to see, but the Bill might have the unintended consequence of damping them down.
Justin Madders
My irony meter has reached overload. I think it is fair to say that in the last four years of chaos under the previous Government, uncertainty was brought to a new level. That was not about legislation; it was just about the way that the Government operated, or failed to operate, as the case may be.
Let me try to put the shadow Minister’s mind at ease about the process. We consulted extensively in opposition, we consulted in government before the Bill was published, and we are continuing to consult. The Bill will set out the broad powers that the Government wish to take in respect of employment rights. There will then be more detailed consultation as we get into the secondary legislation, where the detail—the real meat and veg of this law—will be dealt with. There is not going to be a rush for this provision to be enacted, because we understand that it is important to get the details right. Many of these measures will not come into force until 2026, because we want to get this right.
We want to make sure that we take businesses with us and listen to their concerns, to workers’ concerns and to trade unions’ representations. The impact assessment is clear that there is no expected impact on the number of jobs available.
Greg Smith
The Minister talks about further consultation. Can he give a commitment right here, on the record, to consultation on all the measures in schedule 1 and the rest of the Bill that go through to his 2026 deadline? First, can he commit that 2026 really is the deadline? Secondly, can he commit that consultation with trade unions and with business will have equal billing, and that one of the two will not outweigh the other?
Justin Madders
I think there was a suggestion there that we may favour one stakeholder group over another. I assure the shadow Minister that when we tot up the engagements that we have had so far, the number of businesses and business organisations is far in excess of the number of trade unions. Actually, we want to consult with everyone, broadly: we do not think that there should be an arbitrary limit on who we discuss this with.
On the time limits, the “Next Steps” document is very clear about the timetable. If it takes more time, it takes more time. We do not want to rush the Bill through and create unintended consequences of the type that the shadow Minister is rightly concerned about. We want to get it right. That is why we are committed to consulting as we go forward.
Nick Timothy (West Suffolk) (Con)
On the point about process: at the point at which the Bill came before the House for a Second Reading, how many of its clauses were already subject to revision within the Department?
Justin Madders
I was not privy to the drafting of individual clauses—the Office of the Parliamentary Counsel does that, and it is a separate organisation from the Department—but I can certainly write to the hon. Gentleman with details on which clauses we expected to be amended. It is fair to say that we expected a number of clauses to be amended when the Bill was published.
It is important that we get this right. The Bill is a Bill, not an Act, so it will continue to evolve; there will then be further detailed consultation on implementation and the regulations. That is why I believe that the shadow Minister’s concerns are ill-founded.
Question put, That the schedule, as amended, be the First schedule to the Bill.
Justin Madders
Clause 5 is the first of several clauses that will repeal previous legislation, although it may not be the most controversial of our repeals. The clause will repeal the previous Government’s Workers (Predictable Terms and Conditions) Act 2023, which if commenced would have brought in a right for workers to request a more predictable working pattern. Requests could still be turned down by the employer. That approach is clearly different from the right to guaranteed hours that we have set out in the Bill. We do not want to confuse employers and workers with two different models, so the Bill will repeal the 2023 Act entirely. Nevertheless, the work that was done to develop the 2023 Act has been useful in the drafting of our new measures and will continue to be taken into account as we evolve and develop our policies.
We want predictability and security to be the baseline in all jobs, creating an economy that works for all. We think responsibility for offering guaranteed hours should therefore rest with the employer. Without guaranteed hours, workers do not have any form of certainty as to their earnings, making it difficult for them to apply for credit or a mortgage, rent a flat, plan for major events such as weddings or holidays, or even manage day-to-day expenses.
In addition, when people have a better idea of how many hours they will be working, it is easier for them to organise their family and social life, plan time together and organise travel and childcare—all things that are just so important for the wider welfare of our society. These provisions of the Bill will apply to all employers, levelling the playing field so that best-practice employers are rewarded rather than placed at a competitive disadvantage against employers who want to place risk wholly on the worker.
Greg Smith
On the one hand, the Minister says that he wants certainty. On the other hand, he is repealing legislation that is but a year old. I fully appreciate that a new Government will want go through the legislation that the previous Government put on the statute book: it is vital in our democracy that we maintain the principle that no Parliament can bind a future Parliament, and I fully acknowledge and accept that the Government have a mandate to deliver their manifesto. However, I gently put it on the record—I direct this point towards the Minister—that certainty does not come from abolishing year-old legislation that businesses have only just started thinking about, let alone implemented.
Justin Madders
I think it is fair to say that we signalled our intention to repeal the 2023 Act shortly after taking office. It had not actually been implemented, so it is not a case of creating additional burdens. I am sure the shadow Minister will concede that if we had allowed it to take its course, it would have created a set of regulations, involving time and expense, that would only have been replaced in short order with another set of rules. The problem with the 2023 Act is that it would still create a huge power imbalance for the employer, as the Low Pay Commission recognised when it expressed its concerns.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Exclusivity terms in zero hours arrangements
Question proposed, That the clause stand part of the Bill.
Justin Madders
Clause 6 will amend section 27B of the Employment Rights Act 1996 to reflect the new definition of “zero hours arrangement” in clause 4, which will apply to the whole of part 2A. As has been discussed in relation to clause 4, the definition has been amended to ensure that it does not inadvertently exclude any zero-hours workers in cases where they have a contract with the employer but the contract does not, in itself, make them a worker. The definition of “zero hours arrangement” captures those who have an arrangement to work for their employer when work is provided but have no obligation to accept work, and the employer has no obligation to provide it. Such an arrangement between the employer and the individual could, however, include other obligations that amount to a contract, albeit that they are not a workers’ contract. The clause will ensure that individuals caught in that situation are also covered by the Bill.
On a technical point—I put this on the record for clarity—the definition of “non-contractual zero hours arrangements” in section 27B of the 1996 Act is amended by clause 6, but a new definition for the whole of part 2A will be inserted by clause 4. The definition of “non-contractual zero hours arrangements” in part 2A is being changed by clause 6, as well as being inserted by clause 4, which may well be commenced after clause 6 for the rest of the provisions. The changes in clause 6 will ensure that the definition in section 27B operates as intended before the commencement of other provisions on zero-hours arrangements. The definition in section 27B will then be repealed on commencement of the other provisions, as is provided for in schedule 1.
I hope that that was clear to everyone. I commend the clause to the Committee.
Greg Smith
I feel that we have gone over those details multiple times, particularly on Tuesday, so I will not take up a great deal of time. However, it is important to put on the record the Opposition’s concern about cases such as the one that I outlined in this morning’s sitting. The Minister conceded that it probably was a zero-hours contract, but it did have an element of certainty of pay as that individual was contracted to be up at a certain time of day to find out whether he had work that day, so there was payment for it but not necessarily guaranteed hours. Such cases still need an answer, whether from the Government’s legal counsel or within the Department. I take the Minister at his word: he said this morning that he would look into such cases and test how the Bill will apply. That is as relevant to clause 6 as it is to other clauses that we have discussed.
The worst-case scenario is that the Bill becomes too prescriptive and takes away arrangements that individuals enter into freely and want to enter into; perhaps it suits them to do so. I accept that that is probably not the majority of cases, but there will be people out there in the economy who perhaps do not need to work. Perhaps they do not need the money. There are such people, believe it or not—I am certainly not one of them. There are people who want to take on a zero-hours contract for something to do. I fully accept and place it on the record that that will be a very small number of people, but if they are completely wiped out by some of these prescriptions without flexibility, that will be a problem for the economy, much as it is if employers just take everybody on a zero-hours contract and offer them nothing further. That, equally, would be a tragedy.
I understand where the Government are coming from in clause 6. I understand the principles behind it. Again, however, I urge the Minister to double-kick the tyres and check that there will not be unintended consequences that have a negative impact on employment in this country.
Justin Madders
I am grateful for the shadow Minister’s comments. I have been reflecting on his scenario from this morning. Actually, the first thing I thought about over lunch was how the employer would be checking that the individual was up and dressed at 5 o’clock in the morning to make sure he had complied with the terms of his contract. However, the intention behind the Bill is to make sure that we do not get into lots of debates about whether someone is covered by this legislation or whether everyone who is in some sort of arrangement or contract is covered by it. Of course, if they do not wish to have an offer of guaranteed hours, they are entitled under the legislation not to accept it. I think that this clause will bring clarity and consistency across the board in that respect.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7
Right to request flexible working
Greg Smith
I beg to move amendment 136, in clause 7, page 25, line 5, at end insert—
“(1AZA) But where the employer is—
(a) the Security Service;
(b) the Secret Intelligence Service, or
(c) the Government Communication Headquarters,
the test of reasonableness in subsection (2)(b)(ii) does not apply, and the notification under subsection 1(aa) need not explain why the employer considers that it is reasonable to refuse the application on that ground or those grounds.”
This amendment would exclude the security services from the Bill’s provisions on flexible working.
Amendment 136 is essentially a probing amendment—I make that clear from the outset—but one that should go to the nub of exactly where the Government want to go with this measure, not least bearing in mind the Minister’s comments at the end of the last debate about ensuring that everybody falls under the same set of rules. There may be organisations where it is impractical for their employees to be under the same set of rules. The amendment seeks to probe the matter of exempting those working in the security services from clause 7. We define the security services as MI5, GCHQ and the Secret Intelligence Service.
The Regulatory Policy Committee has explained that the Government have not proved that the measures on flexible working are necessary or undertaken any proper assessment of the costs to business. We therefore want to probe the Government’s thinking on how the provisions might apply in practice. There may be certain occupations, such as the security services, where it is harder for the employer to agree requests for flexible working. I am sure that everyone can see the practical realities and the potential consequences for national security and the safety of everyone in our great United Kingdom if the security services were to suddenly have flexible working arrangements.
Has the Minister given any consideration to which sectors may find these provisions either more difficult or completely impractical to comply with? The amendment takes the example of the security services, where irregular hours are worked. I am sure that hon. Members can think of other occupations, such as policing—and perhaps ours, if I may be so bold, Sir Christopher—where irregular hours are more than commonplace.
We would like to understand how the provisions of the Bill will apply to the security services and to understand the Minister’s thinking as to why. That is the critical question in politics—my early mentor in politics, the late, great Eric Forth, was clear that it is the only question that matters in politics—so I put it to the Minister. We want to understand the balance between the right to request flexible working and public protection. Again, I do not believe that any Member of this House wants to undermine public protection and the safety of our nation. The first duty of Government is the defence of the realm and the security of its citizens.
The security services will not be the only profession that might find the requirements difficult to administer. Will the Minister let us know, when he responds to what I repeat is a probing amendment, where the Government stand? What is his assessment of those areas that simply will not be able to comply with the provisions of the Bill? What safeguards will the Government put in place for them? We seek to understand the practicalities of the requirements that the Government are seeking to impose.
Laurence Turner
It is a pleasure to serve under your exemplary chairmanship, Sir Christopher.
Before I get into the clause, may I say that I enjoyed my discussion with the shadow Minister about the Northfield constituency? I am half tempted to cite my great grandparents, who were confectioners and newsagents, to burnish my small business credentials, but some on the Labour Benches can do it better. I appreciate that he said that the amendment is probing and that he is taking a particularly unique case in order to test the limits of the Bill.
Focusing on the words of the amendment rather than on the wider issues, because it is the words that matter, it is important to look at the history of employment rights as they relate to the intelligence services, because this is an area that was tested in the 1980s and 1990s in particular. The consequences of not extending these rights to the intelligence services speak to the argument against making the amendment.
For those of us who come from a trade union background, there is an uncomfortable reminder of the ban on trade union activity at GCHQ in the 1980s, which led to a number of skilled professionals leaving the employment of that service. It is important to remember the 14 trade unionists who were sacked because they did not give up their trade union membership. Many of them were re-employed 13 years later, because they still had their skills, which were in high demand.
The shadow Minister talked about the unique nature of flexible working in the intelligence services. I suspect that employees of those services have flexible working arrangements that are hard for any of us on the Committee to imagine, but when employees of the intelligence services did not have recourse to most of the normal procedures of employment law, it was an acknowledged problem that dissatisfaction among employees of the services in itself became a security risk. Some hon. Members may recall that there were a number of very high-profile cases of dissatisfied members of those services who went on the public record in breach of the Official Secrets Act. In some cases, that was attributed to dissatisfaction with employment situations. I can do no better than quote from the Intelligence and Security Committee’s annual report of 1997-98. At that time, the Committee was chaired by Baron King of Bridgwater, the predecessor of one of the Conservative Members who tabled the amendment. It stated:
“The Committee also believes that everything possible should be done to ensure that employees of the Agencies have the same rights as employees elsewhere.”
Nick Timothy
The hon. Gentleman is making a powerful case for the universalism, or near-universalism, of employment rights and presumably, within that, trade union rights. The power to withdraw one’s labour is a very important part of modern employment practice. We are talking about the three security and intelligence agencies listed by my hon. Friend the Member for Mid Buckinghamshire, but I want to give the hon. Gentleman an opportunity to give his view about the universalism of these rights, including the right of the police, for example, to join a union and to strike.
Laurence Turner
I am grateful to the hon. Member for raising that point. It is a shame that our Liberal Democrat colleagues are not able to join us, because we could have an interesting discussion about the consequences of the 1919 police strike, and the promises that Lloyd George made and subsequently broke, which led to the creation of the Police Federation rather than an independent trade union, but I will not detain the Committee on that matter. I will just say that we are operating under the international framework for employment law, which sets out very clearly that there are exemptions to the normal right of freedom of association—let us call it what it is—and that includes industrial action. I do not think that the Bill is the right place to diverge from that international framework.
I had reached the end of my points. As I say, there are good national security reasons for rejecting the amendment.
Michael Wheeler (Worsley and Eccles) (Lab)
It is, as ever, a pleasure to serve under your chairmanship, Sir Christopher. As this is my first time speaking today, I draw everyone’s attention to my declaration in the Register of Members’ Financial Interests and my trade union memberships. I want to pick up very slightly on some of the points made by my hon. Friend the Member for Birmingham Northfield.
I fully appreciate that we are talking about a probing amendment. I will not revisit my use of the word “ridiculous” on Tuesday—we stayed in that territory for long enough—but the shadow Minister perhaps underestimates the ability of different sectors to accommodate flexible working and to overcome the challenges that he believes the flexible working measures in the Bill might present. In fact, GCHQ already operates a flexible working policy. On its website it is proud to point out that
“Work-life balance is important to us”
and that its
“flexible working patterns…are designed to help work fit… alongside…personal lives.”
If anything, exclusions for entire services sectors would be a retrograde step in places where flexible working provisions are already working perfectly well.
Moving on to the broader point, as demonstrated, I believe that sectors, businesses and employers can cope with this change. There are adequate measures for reasonableness in the Bill. Access to flexible working is an incredibly important right for workers in a modern, evolving workplace. Measures such as these gear the world of work for the future by enabling people to enter the workforce and to stay in it—something that the shadow Minister has expressed a concern about. Anything like this amendment that would exclude sectors, groups or organisations wholesale feels unnecessary, especially in the light of how the measures would work in practice.
Alex McIntyre (Gloucester) (Lab)
It is a pleasure to serve under your chairmanship, Sir Christopher. I want to refer to a couple of the comments made by my hon. Friend the Member for Birmingham Northfield. I appreciate that this is a probing amendment and that, as the MP for Gloucester, I perhaps have a vested interest, given that a number of my constituents work over the constituency border in Cheltenham.
Flexible working will not be available in every role, for some of the reasons listed in the Bill, but for many roles there would be the ability to start half an hour later and finish half an hour earlier, perhaps, or to work different hours over the course of a week. Those are results of flexible working requests. I think that, sometimes, there is a haste from the Conservative party to equate flexible working with working from home—and to put little notes on people’s desks saying that they are not working hard enough. It is really important that we look at flexible working as a whole.
In my experience as an employment solicitor, the Bill is welcome, because the “reasonable” test is important in making sure that we are encouraging employers to think properly about flexible working requests. This measure is also very business friendly, because there is a long list of exemptions that will allow an employer to say, “Because of x, y and z, flexible working is not appropriate.” There is no requirement to accept a request; there is only a requirement to think about it, and to think about those exemptions reasonably. In the context of what we are trying to do, and that balancing act between rights for employees and rights for businesses, I think this lands in about the right place.
The shadow Minister is right that this change will not apply evenly in every sector; it cannot in every business, because of the reasons listed in the exemptions. Each business will have different requirements regarding customer demands, performance and quality. It would be quite difficult for a dentist to work from home, I suggest, but it might be quite easy for them to come in at half-past 9 two days a week. Again, that is a flexible working request. The reasonableness test deals with the purpose of the shadow Minister’s amendment, which is to look at how different sectors might approach the change rather than having a one-size-fits-all approach.
Jon Pearce (High Peak) (Lab)
It is a pleasure to serve under your chairship, Sir Christopher. I refer Members to my declaration in the Register of Members’ Financial Interests, and my membership of GMB.
I will apologise now if I have an out-of-date amendment paper; the one that I have is dated Tuesday 3 December. Very early on in our discussions, we had the strange definition of a small or medium-sized businesses as one employing 500 people or more. I just want to check whether the proposed amendment is indeed accurate, because it refers to
“the test of reasonableness in subsection (2)(b)(ii)”.
I do not think that any such subsection exists—I think it should be (3)(b)(ii)—but I appreciate that that might be my misunderstanding.
The Minister for Equalities (Dame Nia Griffith)
I draw the Committee’s attention to my interests, and to my membership of the Union of Shop, Distributive and Allied Workers and the National Education Union.
The hon. Member for Mid Buckinghamshire seeks to amend clause 7 in order to commit the Government to exempting the security services from the requirement to refuse a flexible working request only when it is reasonable to do so against one of the eight reasons set out in legislation. His amendment would also exempt the security services from having to explain to an employee why their request for flexible working could not be met. My hon. Friends the Members for Birmingham Northfield, for Worsley and Eccles and for Gloucester have pointed out many good reasons why that is unnecessary, and I will explain why I think the same.
The grounds for refusing a flexible working request are intentionally broad, so that they capture all the business reasons that may make such a request unfeasible. That applies to the security services as it does to any other employer. I will not read out all eight reasons, but I will give some examples. The work may not be able to be reorganised among other staff, or quality or performance may be negatively affected. There may be a lack of work at a particular proposed time, or the business’s ability to meet the demand of customers—we have mentioned the Home Office—may be negatively affected. There is a huge range of reasons that could be used, and they would surely cover—
Nick Timothy
I would be grateful if the Minister could explain what conversations she has had with MI5, MI6 and GCHQ to understand whether, given their unusual, specific, specialist operations, there are any circumstances that might go beyond those already set out.
Dame Nia Griffith
If I may continue, the point is that there is significant leeway. Basically, the way the provision is worded takes into account the context of the particular type of business. There are many different types of roles in the security services, as has been pointed out, and different things will apply in different circumstances. There is plenty of opportunity there.
Nick Timothy
I think the answer to the question must be no. That may be fair enough, but can the Minister tell us whether she has had any conversations with her opposite numbers in the Home Office, which sponsors MI5, or the Foreign Office, which sponsors GCHQ and MI6?
Dame Nia Griffith
What really matters is that flexibility is in-built, and I am sure that colleagues in the Home Office will be able to use it.
The other point that the hon. Member for West Suffolk might like me to address is whether giving a reason could expose something that it would be undesirable to expose—in other words, whether any explanation given would incur a breach of security. In many cases—probably the majority—the reason for refusing a flexible working request will not involve matters of national security. It might be a matter of not being able to reorganise the work among existing staff to facilitate a requested working pattern, or there being insufficient work during the period someone has asked to work. Those reasons will be no different from what other employers are considering. In most cases, it will be possible for an employer to give reasons for their refusal without disclosing any sensitive information.
There will certainly be cases where matters of national security come into play, but there are already protections in place. The grounds for refusal given by the employer have to be made public only at the point at which legal proceedings are started. In the unlikely event that an employee makes a claim in the employment tribunal, the tribunal is able to conduct all or part of the proceedings in private, or to order a person not to disclose any document. I therefore invite the hon. Member for Mid Buckinghamshire to withdraw his amendment.
Greg Smith
I am grateful to the Minister for her responses. I highlight that this is a probing amendment designed to test the Government’s thinking. I appreciate the flexibilities that she has outlined, but as my hon. Friend the Member for West Suffolk set out, the security services are a particularly unique element within public service.
I can see a multitude of reasons why some of those flexibilities will not be good enough to ensure that those predominantly charged with our national security can comply with every measure in the Bill. I urge the Minister to have those conversations with relevant Ministers in the Foreign, Commonwealth and Development Office and the Home Office, who are responsible for our security services, to double-check that they are entirely comfortable with the provisions in the Bill, which I dare say has been through the write-around process. Sometimes minutiae and detail can be lost in that process, and it is vital for our national security that the Bill should be properly road-tested to the nth degree.
Greg Smith
I will finish the line, and then I will. I make that point just to highlight that there are sometimes circumstances in which the flexibilities that the Minister spoke of may not fully apply. I am sure a witticism is coming.
Alex McIntyre
Sadly, I am not very funny. Would M’s HR adviser not say, “That might have a detrimental impact on your performance, Mr Bond”? That flexible working request could therefore be reasonably denied.
Greg Smith
I think that has probably been a plot line already. The hon. Member for Gloucester understands the point that I am making here within certain elements of employment in this country. This was a probing amendment, and we will come back to the principle of this discussion—although maybe not the detail of the Bond example—later in the Bill’s passage. For the time being, I urge the Minister to have those conversations with colleagues in other parts of Government to double-check that they are fully appreciative of the measures in this Bill. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 26—Consultation and assessment on the right to request flexible working—
“(1) The Secretary of State must carry out an assessment of the likely impact of the right to request flexible working provided for in section 7 of this Act.
(2) As part of the assessment, the Secretary of State must carry out a consultation on the proposed right to request flexible working.
(3) The assessment must—
(a) include labour market and broader macroeconomic analysis,
(b) examine the impact of the measures in section 7 on employment, wages and economic output,
(c) consider the likelihood of the costs of flexible working measures being passed on to employees through lower wages, and
(d) examine the likely effect of the right to request flexible working on—
(i) productivity,
(ii) wage growth,
(iii) equality of opportunity,
(iv) job security,
(v) economic activity, and
(vi) employment.
(4) A report setting out the findings of the assessment must be laid before each House of Parliament no sooner than 18 weeks after the consultation has been initiated.”
This new clause requires the Secretary of State to assess the impact of the provisions of Clause 7.
Amendment 132, in clause 118, page 105, line 20, at end insert—
“(3A) But no regulations under subsection (3) may be made to bring into force section 7 of this Act until the findings of the report under section [Consultation and reporting on the right to request flexible working] have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown.”
This amendment is linked to NC26.
Dame Nia Griffith
Flexible working is essential to helping people achieve a better work-life balance. It can lead to employees being happier, healthier and more productive. Having the ability to vary the time, hours and place of work is also key to the functioning of the UK’s flexible labour market. Improving access to flexible working is therefore good for employees and good for business. That is why we have committed to making flexible working the default, unless it is not reasonably feasible.
I reassure members of the Committee that my team has fully engaged with members of the Security Service, particularly on amendment 132 and not just the write-around, which is quite important. I am, of course, looking forward to this year’s Mid Buckinghamshire pantomime—I assume the hon. Member for Mid Buckinghamshire will play the role of a secret service special agent.
To return to the clause, the Government accept that employers must be allowed to make decisions about what is and is not reasonably feasible so that they can ensure that business operations are able to run effectively. We are therefore retaining the existing legal framework, which allows employers to reject flexible working requests on one of eight specified business grounds. The Bill makes it more likely that requests will be accepted and that flexible working will become the default. It contains the three following measures. First, it creates a new requirement that employers may refuse a flexible working request only if it is reasonable to do so on the basis of at least one of the eight specified business grounds.
Secondly, the Bill requires employers to state the ground or grounds for refusing requests and explain why they consider it reasonable to do so. Under the current framework, an employer must only notify the employee of the decision; there is no requirement for an employer to explain the basis of a decision, which can mean a lack of clarity and transparency for the employee if their application is refused. While these measures do not remove the employer’s ability to make a decision on whether a flexible working request is reasonable, they do require the employer to explain and justify that decision and, in turn, the measures open up that decision for scrutiny by an employment tribunal.
Finally, the current legislation is silent on how to meet the requirement to consult when rejecting a request. We think it is important to provide employers and employees with greater clarity around the process if the employer intends to reject a request, so we are inserting a new power for the Secretary of State to make regulations setting out the steps that employers must take when consulting with the employee before deciding to refuse a flexible working application. We do not want to create bureaucracy for the sake of it. To ensure we get the balance right, we will work with stakeholders and undertake a full public consultation in partnership with business, trade unions and third sector bodies. The consultation will consider what the process should be, and that will ensure we get the balance right before we lay regulations.
Taken together, these measures are designed to encourage the acceptance of more requests, to improve clarity on decisions, to encourage more careful consideration of requests and to encourage constructive dialogue between employers and employees. We believe that this will help to make flexible working the default in a sensible and pragmatic way.
There is strong evidence to support our approach. Research by the equal parenting project, for example, found that 75% of UK managers believe that flexible working increases productivity and that 62.5% believe that it boosts motivation. Yet, according to the flexible jobs index 2023, although nine in 10 people want to work flexibly, only six in 10 employees are currently working flexibly and only three in 10 jobs are advertised with flexible working.
Uma Kumaran (Stratford and Bow) (Lab)
I will stop with the Bond jokes for now, but “Never Say Never Again”—Members know that laughter is one of the best medicines, certainly for our mental health and for the mental health of workers. Research from the Centre for Mental Health cites strong evidence that Government policies to boost workplace rights, such as on flexible working and job security, can positively impact workers’ mental health.
Flexibility is crucial to the workplace participation of those with long-term chronic health conditions and those with mental health problems, and it is good for workers. In the oral evidence sessions, we heard that good employment conditions support productivity, employers and the economy, and that good flexible working policies generally go down very well with employees: it can help staff to feel engaged in their work and to feel valued by their managers. I am sure Opposition Members want to feel valued, but—
The Chair
Order. The hon. Lady is perfectly entitled to make a speech, but I thought this was going to be an intervention. She can make a speech later. I call the Minister.
Dame Nia Griffith
I thank my hon. Friend for her valuable contribution; she reminds us that flexible working can often be a real help in getting people into work.
The changes in the Bill will support employers and employees to agree solutions that work for both parties and increase the take-up of flexible working. The Opposition amendments, new clause 26 and amendment 132, proposed by the hon. Member for Mid Buckinghamshire, include a requirement for an assessment of the impact of the Bill’s provisions on flexible working to be produced before the provisions can be commenced. The Government resist those amendments. They have already produced a comprehensive set of impact assessments, which was published alongside Second Reading and based on the best available evidence on the potential impact of the Bill’s measures on business, workers and the wider economy.
Our proportionate assessment included labour market and broader macroeconomic analysis considering the impact of these changes on individuals and businesses. It also provided a breakdown of the impacts on employment tribunals, small business and individuals with protected characteristics. We intend to refine that analysis over time, working closely with businesses, trade unions, academics and think-tanks. The analysis published alongside the Bill describes the overall business impact as neutral. Businesses may see benefits in improved productivity, employee loyalty, worker satisfaction, staff retention and the ability to attract a wider range of employees. It is important to remember that businesses can still reject flexible working requests on eight valid business grounds, including the burden of costs.
As is standard practice, the Government will publish an enactment impact assessment once the Bill reaches Royal Assent, in line with the requirements of the better regulation framework. That will account for where the primary legislation in the Bill has been amended in its passage through Parliament in such a way as to change the impacts of the policy on business significantly. That impact assessment will be published alongside the enacted legislation. We will then publish further analysis alongside future consultations, ahead of secondary legislation to meet our better regulation requirements. I therefore ask Opposition Members to withdraw their amendments.
Greg Smith
New clause 26 and amendment 132 are about impact assessments of flexible working. Amid her speculation about the Mid Buckinghamshire pantomime, to which I trust she will be buying a ticket, the Minister talked about impact assessments that have already been made. But we know what the Regulatory Policy Committee has said about those impact assessments:
“there is little evidence presented that employers are rejecting requests”
for flexible working “unreasonably”.
We should remember that the previous Conservative Government, although they want to repeal it, introduced the right to request flexible working from the first day of employment through the Employment Relations (Flexible Working Act) 2023, which came into force in April. The RPC has said that the Government have not considered the effectiveness of the previous Bill—it might be difficult to do so given how recently it has come into force—and that it is therefore
“difficult to assess the justification for the additional measures”
in the Bill. The RPC also says that the Government have not considered the effectiveness of non-regulatory options such as raising awareness of the right to request flexible working. So the Government have not made the case for why this is necessary. I do not believe the Minister gave a clear explanation either. I am sure she will have a second chance to do so in summing up.
The RPC rebukes the Government for failing to take into account the costs this measure will impose on business, namely
“the costs to employers of engaging with more ET cases and hearings taking longer because they will now be considering wider and more subjective factors”
and that the Government’s own impact assessment
“assumes that there are no net costs to employers of accepting requests, on the basis that they would do so only if the benefits at least matched the costs. However, this does not necessarily hold as rational, risk averse employers will also factor in the increased cost/risk of rejecting requests under the proposal, seeking to avoid costly employment tribunals and, especially for SMBs”—
Alison Hume (Scarborough and Whitby) (Lab)
The hon. Member is talking about costs, but does he not agree that the lack of flexible work locks out far too many women? Some 40% of women who are not currently working say that access to flexible work would mean that they could take paid work. If we are talking about the cost to the economy, does he not agree that guaranteeing flexible working would boost the economy?
Greg Smith
The Opposition are not against flexible working; as I said, we actually legislated for it in the previous Parliament. We can see the benefits of it, as we discussed this morning, for anyone with childcare responsibilities—I count myself and my wife in that; I do not think it is quite a declarable interest—a caring responsibility or a need to have those flexible hours.
We fully recognise and accept the challenges around the nuts and bolts of the details proposed in this legislation, but I gently put it to the hon. Lady that it is our job, as His Majesty’s loyal Opposition, to road-test any legislation that the Government bring forward, which is what we are seeking to do. We are not against flexible working, but we are focused on the potential unintended consequences, the potential cost to business and the potential cost to jobs in the overall workforce, as I argued in a debate on an amendment this morning.
If employers do not have confidence—if they think that something will go wrong or that it will lead to countless days and months in employment tribunals—they may not make those hires in the first place, and then everyone and the whole economy will suffer. Opposition Members cannot stand by and not challenge or test that to ensure that the Government have got it right. To return to what I was saying before the intervention, for SMEs, the opportunity cost of their chief executive officer or another senior director spending time on employment tribunals is also considerable.
New clause 26 in my name and the name of my hon. Friends merely gives the Government an opportunity to do their homework and test whether the provision will work. We do not believe that they should casually pile more regulation on to business without knowing whether these specific measures—the detailed measures in the Bill—are actually needed to achieve their objectives.
We are asking the Government to consult on the impact of the measure and to report on it, and for the House of Commons to approve that report before the measure comes into force. Given the RPC’s verdict on the Bill’s impact assessments, business would find it reassuring if the impact assessment could be done and placed before the House so that we could study it and debate it, and so that Members on both sides of the House—Government Back Benchers and Opposition Back Benchers, as well as those in the smaller parties—can fully understand it. We believe that it is important for the Government to have to come back again for the approval of the House before the measure comes into effect.
Laurence Turner
The hon. Gentleman seems to be looking for statistical evidence about employers unreasonably refusing flexible working requests. I must say that it is a shame that the workplace employment relations study was last carried out in 2011. The Government at the time declined to repeat the exercise; had they not, we might have the information in front of us that he is looking for.
Does the hon. Gentleman accept that there are precedents—blacklisting, for example—in which there were widespread but anecdotal reports that the practice was occurring? It was difficult to prove, and on that basis, the regulations on blacklisting were not enacted. Then, lo and behold, it became apparent years later that the practice was not just widespread but had been carried out on an industrial scale. Had the measures been put in place at the time, many lives would have been left unbroken.
Greg Smith
I will take on the chin the hon. Gentleman’s point about the 2011 dataset, which was published under the coalition Government, led by my noble friend Lord Cameron. The current Government is seeking to make this legislation, however, so the onus is on them—right here, right now—to provide the datasets, evidence, proper analysis and impact assessments for the legislation that they are putting before the House of Commons and, later, the House of Lords in this Session of this Parliament. I hope the hon. Gentleman accepts the good will with which that comment is made—it is not a political attack. It is the duty of any Government at any time, as they seek to legislate on any matter, to provide the impact assessments, the real data and the real-world evidence of why it is necessary to put that legislation in place.
As I said earlier, it is simply a case of asking the Government to do their homework properly, and to provide, not just to Parliament but to businesses and employees up and down the land, the basis for which they are seeking to change our statute book.
Alex McIntyre
I will return briefly to a couple of the shadow Minister’s comments. I take some quantum of solace in the fact that he now seems to be accepting the principle of consultation. Over the past couple of weeks, we have often heard that he would prefer there to be certainty for business in some of the provisions, and now there is some certainty.
Greg Smith
I understand the hon. Gentleman’s point, but my argument throughout our debates on the amendments has been that it is normal practice to consult first, legislate second, but in many parts of the Bill the practice is to legislate first, consult second. That, I gently suggest to him, is probably the wrong way round.
Alex McIntyre
The “cake and eat it” argument is the point I was trying to make. I advised on flexible working requests regularly when in private practice, where individuals and, in particular, employers were asking what their rights were in respect of a request.
The hon. Gentleman raised two points, the first of which was about costs. Again, I point to the exemptions. The burden of additional costs is one of the exemptions by which an employer can say that it is not reasonable to accept a flexible working request. The balance between having rights for employees and making sure that they are not too much of a burden on business is important. The burden of additional costs is already explicitly covered in the legislation.
Secondly, in relation to tribunals, one of the issues with the current system is the lack of explanation provided. Employees often believe the worst, even if that is not always the case. They might make their request, with valid reasons, and if their employer tells them a flat no, with no further explanation, they often believe the worst and bring a tribunal claim.
Providing that explanation at the beginning requires the employer to think about the request. Not every employer is an excellent, flexible employer; some employers think that by offering flexible working, they will somehow lose productivity, whereas lots of studies have shown the opposite. Through that provision, employers will think about the request, engage with the process and the exemptions, think about what that means for their business, and provide a reasoned explanation.
That will not take as long as we might think, because there are only eight exemptions and people know their business very well. When they give that written explanation, it can be relatively short. It does not have to be “War and Peace”—I should have mentioned another James Bond novel—because it is just to give some background. We will then have an explanation that can be used in a tribunal. That will really assist tribunals in dealing with these cases, because there will be a written explanation of why the decision has been taken.
There are loads of cases in which people bring claims of discrimination because their flexible working requests have been rejected. Those can take up lots of time, when there has been just a misunderstanding between the employer and the employee. By introducing the requirement to provide an explanation, and for the employer to think through the reasonableness of it, there might hopefully be fewer claims in the employment tribunal.
Dame Nia Griffith
Let me make a couple of quick points to sum up. The Opposition are trying to say that most businesses already do this, but this is not about the principle of introducing flexible working; it is about making the process straightforward, clear and consistent across businesses. As my hon. Friend the Member for Gloucester said, by ensuring that clarity, it may well reduce the number of cases that get taken to tribunal.
If most businesses are already doing this, why do we want to legislate? Well, we do not want those businesses to be penalised for doing the right thing. We want everybody to be offered the opportunity of flexible working within the reasonableness of their working situation, and with the opportunity for employers to refuse on the eight specified grounds. That will spread best practice not only in it being offered in all places of employment, but in the way that any request for flexible working is dealt with. That is an explanation of the context.
As we have clearly said, our impact assessment has provided an initial analysis of the impacts that can follow, but we will update and define them as we further develop the policy. In fact, part of the clause is specifically about the Secretary of State having the power to provide further detail. We are confident that as most businesses already participate in this process, make the appropriate responses to their employees and understand the system, it will be not a huge new burden to them in any way. I remind Committee members yet again that dealing appropriately with requests for flexible working can considerably help recruitment and retention for businesses. On that note, we reject the amendments tabled by the Opposition.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Statutory sick pay: removal of waiting period
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss Government new clause 5—Statutory sick pay in Northern Ireland: removal of waiting period.
Justin Madders
Clause 8 provides for the removal of the waiting period from the statutory sick pay system, meaning that all eligible employees are able to access statutory sick pay from the first day of sickness absence. The current system of waiting until the fourth day of sickness before SSP is paid means that many people are forced to make the difficult choice between going into work when they are unwell or receiving no income. That is bad for individuals but also bad for business.
Removing the waiting period will support employees in taking the time off they need to recover from illness and reduce the spread of infection. Under the current rules, the system encourages workers to drag themselves into work when they are unwell. The TUC gave an example of workers in a mental health hospital in Blackpool who had to go on strike because they did not have access to day one sick pay and could not afford to take the day off. Those NHS workers felt that they were being forced to go into work. Obviously, they work in a clinical environment, so they were also putting patients at risk.
Greg Smith
I will not take long. I understand the principle that the Minister has outlined and accept his arguments about workplace sickness and the evidence that the Committee has heard, but I want to reflect for a moment on the challenge that he raised about the potential—I emphasise the word “potential”—for abuse of day one sick pay.
The Government need to put in place safeguards, rather than just saying, “It’s up to businesses to manage their own practices.” Of course it is up to businesses to manage their own practices for the vast majority of things, but if a clear and unambiguous case of abusing day one provisions is found, we need protections for businesses as they seek to deal with those staff members. I have no doubt that the vast majority will not seek to abuse them, but there is always that scope, as in any walk of life.
I will ask the Minister for some clarity about new clause 5. On one level, it is perfectly sensible to make sure that there is a united policy approach to this issue across the whole of our United Kingdom, but why has it taken a new clause in the Bill for the Government to remember that Northern Ireland is part of our country? I sense the hon. Member for Dundee Central potentially tingling at the mention of our United Kingdom, but I thought that one thing that could unite the Conservative and Labour parties was that we are both Unionist parties—we both believe in keeping the United Kingdom of Great Britain and Northern Ireland together.
I hope that the answer is that, like many other things in relation to this rushed, 100-day Bill, the reference to Northern Ireland was simply left out. I think the Committee needs an explanation, however, as to why, rather than a reference to Northern Ireland being put straightforwardly in the first version of the Bill, a new clause was needed to show that the Government remember that Northern Ireland is part of our great United Kingdom.
Alison Hume
It is a pleasure to serve under your chairship, Sir Christopher.
We in this place enjoy the employment rights that come with our job, which is to serve our constituents to the best of our ability. When we are unwell, we can take time off but we are still paid. Before I arrived here, I spent a considerable number of years working as a freelancer while bringing up my family; I believe that is now called being a worker in the gig economy. I understand all too well the pressure for people to work when they are unwell, as they juggle work around caring responsibilities, as I had to for my disabled son, and worry about money, as our family worried about how we would pay the rent and the other bills if I did not work.
At present, large numbers of workers either rely on statutory sick pay or receive nothing at all if they are absent from work due to illness. Those workers are more likely to be low paid than others. We also heard in the evidence sessions last week that women are currently more likely to miss out on statutory sick pay than men, because they do not earn enough to meet the threshold or have not been in their jobs for long enough. It is estimated that 1.1 million workers earn less than £123 a week and most of them are women who are not eligible for statutory sick pay at all.
In practice, as we heard in the evidence sessions last week and as Minister just referred to, that means that people drag themselves into work despite the fact that they are ill. As it stands, our sick pay system pushes far too many people to go to work when they are ill. Working while in poor health is more common among those from marginalised ethnic groups, people in lower-quality jobs and workers lacking formal qualifications.
Under the Bill, hundreds of thousands of people will qualify for sick pay from the first day that they are ill. That change and other changes will help to increase productivity, reduce prolonged illness due to exacerbating existing conditions, and lead to better public health outcomes. Lower-paid workers will no longer have to face the unpalatable choice between coming to work and risking spreading infection, or struggling to put food on the table and to pay bills. Those are very real concerns that, as I mentioned, I have faced.
In conclusion, I believe that the Bill will transform the world of work for millions of people across the country. If I may say so, it is a privilege to have played a small part in scrutinising it.
Chris Law (Dundee Central) (SNP)
It is good to see you in your place, Sir Christopher. I will speak to an amendment on this issue shortly, but I will briefly say that everyone in this room, at some point in their working life, will be ill. It is not something that we would choose or desire, and most of us want to get back to work as soon as possible. The problem is that it happens, and when we are off ill we still have bills to pay, families to keep and mortgages or rents to pay. The level of statutory sick pay is frankly woeful in this country—in fact, for those hon. Members who do not know, it is the worst in the developed world. We should all be ashamed of that and we need to really think about it.
I welcome the changes to ensure that everybody gets statutory sick pay, but I find it disgraceful that we have not even touched on its level: it is £116 a week, or £6,000 a year. At some point in our lives, all of us have worked in very low-paid jobs. We have all done that, particularly in the early years. We would never imagine that somebody could live on £6,000 a year. Not everybody is expected to be off for a year, but some are, due to prolonged illnesses.
I will talk about this issue more on my amendment, but before I go into it in detail, I really want to hear from the Minister what changes the Government look to make so that we are no longer the sickest country in the world for being unreasonable, unfair and unjust to employees, and to ensure that statutory sick pay, which is about 17% of the average income—it was 35% when it was introduced—will start to restore the proper justice required for employees.
Laurence Turner
The shadow Minister’s comments to the effect that he accepted in practice the arguments on the workplace and presenteeism were welcome. If, through this Committee, we can reach some degree of cross-party consensus on the issue, it would be a real advance and proof of the value of this process. I mean that sincerely.
I turn to the measures. The question of waiting days is as old as the national insurance system. Although many of the incremental changes made in the Bill are welcome, it is time to take a step forward. The case for that step was proven during the pandemic. The Minister quoted USDAW research, and I am obliged to quote GMB research, which found that 90% of care workers could not afford to take time off if they became ill. That meant that during the pandemic, many people were presenting at work either for the duration of their illness or for the waiting period, and we have very good evidence of that. I will quote one example. A study by Dr Laura Shallcross and other authors in The Lancet found that the odds of covid infection in care home residents and staff and of large outbreaks
“were significantly lower in LTCFs”—
long-term care facilities—
“that paid staff statutory sick pay compared with those that did not.”
That was one of the key determinants or predictors of where outbreaks might occur.
To perhaps quote a more human voice, a social worker and member of the GMB said:
“For me, being on a zero-hours contract, I don’t always get work. If I become ill, I don’t get paid. If I get a cold or flu-related illness, I am expected to stay at home without pay, because I may pass the illness on to our service users. It is a very, very stressful life.”
When the Chartered Institute of Payroll Professionals surveyed its members, 47% agreed with the abolition of the waiting days period, so there is support in this area among private sector practitioners. When the Fabian Society, of which I declare I am a member, looked at this question, it found that the cost to business of adopting that measure would be very low—somewhere in the region of £15 per year for each employee.
As matters of cost have been raised in Committee on several occasions, I shall finish by quoting from the 2010 Black review, commissioned by the then incoming Government, which I think is still the best evidence we have of the cost of the statutory sick pay regime. It said:
“Great Britain has a mixed approach to sickness absence. Although employers in theory bear the cost of Statutory Sick Pay (SSP), the cost itself is not very high. Barriers to dismissal are relatively low (although it should be noted that dismissing someone specifically to avoid paying SSP is illegal). Employers are therefore obliged to bear little cost or accountability for sickness absence, albeit many employers choose to pay more in occupational sick pay (OSP) than the statutory obligation.”
There are many cases where occupational sick pay is paid at a rate higher than the SSP rate. That is of course welcome, and accounts for the majority of employers. For those employers who are being brought into paying SSP earlier, as we have heard, the cost is low, but the changes could make a really significant difference to the lives of some of the lowest paid workers in the economy. This measure is extremely welcome.
Uma Kumaran
I would like to highlight a few examples in addition to those mentioned by my hon. Friend the Member for Birmingham Northfield.
According to the Nuffield Trust, these changes will greatly benefit social care workers and workers on zero-hours contracts who, as has been highlighted, have inconsistent access to statutory sick pay, let alone occupational sick pay schemes, to cover costs such as rent and bills. As we have heard, and we have seen in our constituencies, many of those workers worked through the pandemic, risking their own lives and risking infection, putting themselves in harm’s way, because they did not have a fallback—they did not have statutory sick pay.
A more generous system of statutory sick pay should be seen not only as a right for workers, but as part of our national defences, including against pandemics. In particular, the changes will benefit low and outsourced workers such as porters, cleaners and housekeepers. I recently visited Newham General hospital in my constituency, where I saw at first hand the impact that porters and cleaning staff are having. I heard from the hospital’s chief executive officer how the hospital is unable to function without those essential staff.
Health Equals found that 28% of employees are reliant on statutory sick pay, one in 10 workers get nothing at all if they are sick and 82% of workers reported that flexible working arrangements allowed them to maintain a good level of personal health and wellbeing. I spoke earlier about mental health provisions. Evidence from Mind has shown us that employees with mental health issues are reliant on SSP. Without access to it, they are forced into debt, increasing the strain on their mental health.
The Centre for Progressive Change highlighted a recent study that shows that the cost of presenteeism for the private sector for mental health alone is around £23 billion a year to our economy, which is more than the cost of absenteeism, which is around £5 billion a year. The Institute of Public Policy Research has shown that workers in the UK are among the least likely to take sick days and that the presenteeism culture costs our economy £25 billion annually, due to the impact on productivity. We are speaking about workers today, but highlighting the impact on business and our economy helps to demonstrate why these measures are so important.
I will finish with one final statistic. The Centre for Progressive Change highlighted modelling by WPI Economics that shows that the implementation of an increased SSP rate, alongside other changes put forward in the Bill, such as the removal of waiting days and lower earnings limits, would deliver substantial economic benefits to the UK, including net gains of up to £800 million for businesses. That is £1.7 billion for the Treasury and £2.1 billion for the wider economy. Those are not small sums of money. Those would have a huge impact on our economy, through measures that put workers at the heart.
Justin Madders
We have had a good debate. Most Members have spoken positively about the need for this change. Obviously, this was a measure brought in temporarily by the previous Government, during covid. They recognised the particular issue at the time.
Before I turn to the shadow Minister’s comments, I wish him the best of luck in the Mid-Buckinghamshire pantomime. I hope he does not become the George Lazenby of the Conservative party as a result. He raised two perfectly reasonable questions. The first was on Northern Ireland. I can assure him that it was not an oversight. It has been introduced as an amendment because, as this is a transferred power to Northern Ireland, we need their consent before it can be included. I think he will understand that putting it in without getting that agreement might have been counterproductive.
On the second point that the shadow Minister made, about abuse of the provision, of course employers already have the power to deal with employees whom they feel are falsely taking time off sick. Whether that is day four or day one, those powers are already there.
My hon. Friend the Member for Scarborough and Whitby made a very powerful speech to highlight the impact on particular groups. The evidence we heard from the Women’s Budget Group last week was particularly important in that respect. Other Members who spoke, my hon. Friends the Members for Birmingham Northfield and for Stratford and Bow, raised a whole plethora of examples with pieces of evidence in support of the policy. I think it is one that is generally supported.
To deal with the point made by the hon. Member for Dundee Central about the level of statutory sick pay, he may not have seen my opining on SSP at the evidence session last week, or the famous comments from the former Health Secretary about it not being enough to live on. I recognise that. Unfortunately, however, I have to give him the stock answer, which is that the actual level is set by the Department for Work and Pensions. He made a fair point about people on long-term sick, because there is a huge interplay between people on long-term sick and the benefits system, but it is in the Department’s gift to set the rate and to look at how it interplays with accessibility to other benefits, which of course depends on people’s individual circumstances.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clause 9
Statutory sick pay: lower earnings limit etc
The Chair
With this it will be convenient to discuss amendment 159, in clause 9, page 26, line 19, leave out paragraph (b).
Chris Law
I have already touched on the impact that illness has in our lives. Some of us have family members who have been long-term sick. If they have been in employment, £6,000 a year as an annual amount is clearly not going to be enough. I am glad that the Minister has raised the issue and addressed it, and I hope that the DWP can consider those levels. We are still the sickest country in the developed world, and I hope that that will change under this Government.
I will leave my comments on that for the moment, apart from one, which is about the TUC. I am sure that those on the Government Benches will be well aware of this. Previously, the TUC campaigned for an increase in the weekly level of sick pay to at least £320 per week. That is something to consider. I advocate statutory sick pay being based on the national living wage in respect of each hour during which the worker would have worked, but for sickness.
My amendment, however, is small and one that I hope will get cross-party support, largely because it is so modest and seeks to protect the lowest paid workers. I therefore hope to get to a conclusion today. This is not about a hammer to crack a nut, but about a small change that would help the most vulnerable and low-paid workers in our societies.
According to the Centre for Progressive Change, the wording of the Bill will make up to 1.3 million employees worse off. The Bill’s wording specifies that employees should be paid either SSP or a prescribed percentage of their usual pay, whichever is lower. However, that creates a group of workers who will receive even less in sick pay under the new arrangements than they do now. After 14 years of austerity, I am sure that the new Government do not want that to get even worse.
That is because although that group of workers might be earning above their lower earnings limit, reducing their earnings in line with the prescribed percentage would result in a weekly sick pay amount that is lower than statutory sick pay. For example, an employee earning £125 a week will currently get sick pay of £116.75. However, they would only receive £100 for the prescribed percentage of 80% or, worse, £75 for a prescribed percentage of 60%. The lower the replacement rate, the more employees will be affected, with a quarter of a million employees losing out on the 80% rate and 1.3 million employees losing out at the 60% rate.
The amendment would allow for those earning less than statutory sick pay to have their full earnings replaced. Frankly, that is the bare minimum that this Government and this Bill should be doing. That should be a starting point for statutory sick pay, increasing to the point where it is in line with the national living wage.
Employees earning less than statutory sick pay are by definition low earners. The evidence is clear that households with low incomes spend the vast majority of their earnings on essentials, such as rent and food. Cutting the incomes of those employees, even by a small percentage, risks them being unable to afford essential costs, pushing working families into hardship and deepening poverty. The changes in income may be especially difficult to bear during times of ill health, when the ability of households to adapt to budget losses is inevitably reduced.
An example of modelling that has been mentioned already is by WPI Economics. It shows that the direct cost to businesses of providing full earnings replacement would be small, calculated at £125 million per year across the entire UK economy. That is equivalent to £15 per employee per year. Reducing the earnings replacement rate below 100% as proposed would save businesses a small fraction of that already small amount, providing trivial cost savings for businesses. Furthermore, modelling shows that full earnings replacement would generate economic gains to businesses, the Treasury and the wider economy. With direct business benefits expected to be £1.1 billion, businesses would see aggregate net gains of around £1 billion every year from providing 100% earnings replacement.
I reiterate that the amendment makes a small change that should be regarded as the bare minimum. Further reform and increases to the sick pay system need to be implemented. As was mentioned earlier, we learned during the covid pandemic that employees coming into work when unwell can have a detrimental impact on public health and the economy. Those who come into physical contact with many people at work are often the least able to afford to self-isolate without pay or to have access to employer-provided sick pay, and are more likely to engage in presenteeism.
The UK’s current sick pay system contributes to economic stagnation, exacerbates the spread of infectious disease, makes long-term sickness absence more likely and drives people out of the taxpaying workforce. Everything that the Committee has discussed so far, across all parties, is about getting people into the workplace. The increased ill health adds a significant extra cost to the NHS, adds many more patients to waiting lists and increases the UK benefits bill. Workers themselves face financial hardship. There is no upside to the current system.
A meaningful increase to statutory sick pay would immediately turn the situation around. SSP reform would enable people to more proactively manage their health conditions, remain linked to their employers and stay off benefits when they fall ill. Modelling by WPI Economics shows that implementation of an increased SSP rate alongside the other changes put forward in the Bill would deliver substantial economic benefits for the UK, including net gains of up to £800 million for businesses, £1.7 billion for the Treasury and £2.1 billion for the wider economy—all upsides.
The onus is therefore on the Government to either: substantially increase the basic rate of statutory sick pay—although I have heard already that it is the DWP that needs to consider that—benchmarking it to the national living wage rate for normal working hours; use the Bill to amend existing primary legislation to give the Secretary of State additional powers, via secondary legislation, to change how the statutory sick pay rate is calculated; or, at the least, hold a statutory consultation with a timeline to establish what the new benchmark rate for SSP should be.
In the meantime, 100% replacement of earnings for employees earning below statutory sick pay is an easily affordable policy. It brings substantial net benefits to UK businesses, the Treasury and the wider economy. At the same time, it would avoid making over 1 million employees even worse off than they are today when forced to take time off sick. It would reduce hardship among employees with the lowest pay.
Justin Madders
I am grateful to the hon. Member for that helpful run-through of some of the issues that we are actively considering. He will be aware that a consultation on the issue closed only yesterday, so I would not want to pre-empt the outcome by accepting the amendment today. We understand the various arguments he has advanced that the level should be higher. He will not be surprised to hear that contrary arguments are put forward by some groups around having an incentive to take sick days when they are not needed.
Some of the modelling figures that the hon. Gentleman has come up with do not quite fit with the ones we have on where people would lose out at certain rates, but that will be considered in the round when we formally respond to the consultation. We hope to do so early in the new year, because we wish to put this into the Bill before it finishes its progress. It is something we are actively considering at the moment. I should be grateful if he would withdraw the amendment, so that we can take full account of the consultation that we have just completed.
Chris Law
I have listened with great interest to the Minister. I thank him for his comments and for the consultation that concluded yesterday. It would be helpful to hear today what the conclusion of the consultation is. I have made it crystal clear that none of us present want to see those at the lowest end of earnings worse off than they currently are. The Bill has been brought forward in good faith and good will, I am sure, by the new incoming Government to improve the lives of everyone, most of all those at the most vulnerable end. I have spoken to employers and employees quite widely about this, and the feeling I hear constantly is that this is a no-brainer. Delaying would be very difficult.
Justin Madders
I understand the point the hon. Member is making, but he will understand that when a Government Department—in this case the Department for Work and Pensions—undertakes a formal consultation, it is obliged to consider all responses before coming to a conclusion. That is why it is premature to agree to his amendment.
Chris Law
I thank the Minister for his intervention, but this is not a DWP issue. We are not talking about the level of SSP. We are talking about a sentence in the Bill that puts in a threshold that will make people on the lowest incomes worse off. That is an issue for the Minister for Employment to address rather than DWP. The level of SSP more widely has been discussed, and that may be an issue for DWP to consider. I think there will be disagreement over what that level should be. I have already quoted the TUC’s £320 a week, and I have suggested the national living wage. I look forward to that consultation, but this amendment seeks to strike a sentence out, nothing more.
Justin Madders
The very issue that the hon. Member is putting forward in his amendment is the issue that the Department for Work and Pensions is consulting on at the moment, which is why it would be premature to make a decision at this stage.
Chris Law
I need to ask for your advice, Sir Christopher, because at this point I would press the amendment to a vote but I want to be charitable and open to understanding what we are expecting from this consultation and when we would be able to bring this issue back—perhaps even during this Committee.
The Chair
One of the options open to the hon. Gentleman is to withdraw the amendment today but with a view to coming back to it on Report. Whether he wishes to do that or put the matter to a vote today is a matter for him.
Chris Law
Thank you for that advice, Sir Christopher. Based on that, I would consider coming back to this on Report, given the fact that I have not seen the consultation and I would like to work in the spirit that we have done so far in this room to try to bring about the best for all. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government new clause 6—Statutory sick pay in Northern Ireland: lower earnings limit etc.
Government amendment 107.
Justin Madders
Clause 9 provides for the removal of the requirement for an employee to earn at or above the lower earnings limit to be eligible for SSP. This requirement means that currently up to 1.3 million people, primarily women, are not entitled to receive SSP from their employer. This group are some of the lowest-paid in society, meaning that they and their families are most at risk of financial hardship if they cannot work. The clause ensures that all eligible employees can access statutory sick pay and the peace of mind it brings when they need to take time off due to illness.
However, we do not want to create a situation where anyone is entitled to receive more through SSP than they would otherwise earn. The clause therefore provides that an employee will be entitled to a certain percentage of their average weekly earnings or the current flat rate of SSP, whichever is lower. The clause therefore includes a power for the Secretary of State to determine that percentage rate by secondary legislation. However, it is our intention that the percentage rate is enshrined in primary legislation. I hope that gives the hon. Member for Dundee Central some comfort. We therefore published a consultation, which closed on 4 December, asking respondents what that percentage rate should be. We will now take time to carefully consider the responses we have received, before tabling an amendment to the Bill.
The changes that we are bringing in through the Bill will mean that up to 1.3 million low-paid employees will now be entitled to statutory sick pay and all eligible employees will be paid from the first day of sickness absence irrespective of their income, which will of course benefit millions of employees.
It is important to highlight that many employers choose to go further and provide more financial support to their employees during a sickness absence, with around 60% of all eligible employees being entitled to contractual sick pay. Those who need additional financial support while off sick are able to claim additional benefits through the welfare system, depending on their individual circumstances.
New clause 6 extends to Northern Ireland the benefits of strengthening statutory sick pay by removing the requirement to earn at least the lower earnings limit and creating a new percentage rate. These measures will ensure that all eligible employees have access to statutory sick pay irrespective of their income level, with the peace of mind that this brings when they need to take time off work due to sickness. The clause includes a power for the Minister for Communities to determine that percentage rate by secondary legislation.
Statutory sick pay is, as we have discussed, a transferred matter in relation to Northern Ireland. However, Northern Ireland has historically maintained parity with Great Britain on social security matters, including statutory sick pay. The Minister for Communities, Gordon Lyons MLA, has agreed to ask Westminster to legislate on the Northern Ireland Assembly’s behalf and to seek a legislative consent motion for the proposed changes in order to maintain parity in relation to statutory sick pay.
Finally, amendment 107 is consequential on new clauses 5 and 6; it limits the extent of the new clauses to Northern Ireland only.
Greg Smith
I shall be brief. On the Northern Ireland issues, I accept the Minister’s earlier explanation.
I have one straightforward question. The Minister says he has consulted and will consider the responses around the percentage rate going forward, and has said he will seek to amend the Bill to lock the percentage rate into the face of the Bill. The question remains when that amendment is likely to come. I appreciate it takes time to go through responses; it is unlikely to be done overnight, and potentially with Christmas coming up that will get in the way of any chance of the matter’s being considered by this Bill Committee. Therefore, is the Minister envisaging such an amendment on Report? Does he anticipate that it may come forward when the legislation is in the House of Lords? At what point will we see the detail? I do welcome the Minister’s commitment to get it into primary legislation, because that is important and is consistent with some of the things that I have been arguing for in relation to other amendments, but in order for Parliament to take a considered decision, it is important that we know when the amendment is likely to come—later in Committee, on Report in the House of Commons, or in the other place.
Justin Madders
That is a reasonable question. It is another Department’s consultation so there are only so many levers I can pull, but I envisage that the amendment will be tabled at Report stage at the latest. I hope that is sufficiently clear.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Anna McMorrin.)