Employment Rights Bill
Wednesday 18th June 2025
(3 weeks, 5 days ago)
Lords ChamberEmployment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 81-X(a) Amendments for Committee (Supplementary to the Tenth Marshalled List) - (17 Jun 2025)
Baroness Chakrabarti
“Secretary of State: equal pay enforcement function(1) Payroll and other company information required by HMRC for the purposes of taxation may be used by the Secretary of State for the purpose of monitoring compliance with the equal pay duty under the Equality Act 2010. (2) The Secretary of State may conduct more detailed investigations into equal pay compliance on the basis of such monitoring of payroll and other information and an employer must take all reasonable steps to cooperate.(3) In the event that the Secretary of State is of the view that a particular employer is in breach of its duties to provide equal pay for like, equivalent or work of equal value, they may—(a) issue a private notice to the employer, advising of that view and recommending rectifying measures in relation to past discriminatory pay or future pay practices and policy,(b) issue a public notice with the type of advice set out in paragraph (a) above, or(c) seek such relief as would be open to individual employees in the appropriate court or tribunal, on their behalf.(4) A court or tribunal finding in favour of such an application may, in addition to awarding appropriate compensation to victims of discriminatory pay practice, impose a civil penalty, not exceeding 10% of the employer’s annual turnover, as it finds appropriate in all the circumstances.(5) The Secretary of State may employ algorithmic technology including artificial intelligence software in the monitoring of equal pay compliance but must provide any court or tribunal in which relief is sought, with details of any relevant software and evidence of the effective functioning of the computer system employed in the monitoring and investigation of the employer in question.”Member’s explanatory statement
This amendment seeks to probe why equal pay laws have been left to individual employees to enforce by personal litigation, and how an element of state enforcement might assist such employees in achieving their rights to equal pay as provided for under the Employment Act 2010.
Baroness Chakrabarti (Lab)
My Lords, I hope that the principle that sits behind my probing amendment, like the principle of equal pay for equal or equivalent work, is uncontroversial and therefore that I need not detain the Committee for too long—I am a sort of guest of this Committee, when some noble Lords have been really putting the hard yards in for so long. Over the years, I have been incredibly grateful to discuss my concern about equal pay legislation with a number of Members in this Committee and noble Lords in general. I have been particularly grateful to my noble friend Lady Jones of Whitchurch and her officials, who have been very generous with their time and responded to me by agreeing to consider my proposal as part of their preparations for a more specific Bill—not too long in the future—that will cover these issues.
There has been a broad consensus in British politics for some years that there should not be discrimination in pay. We have had the Equal Pay Act since 1970 and successor legislation; I do not believe it has been controversial in party-political terms. That will be 75 years of equal pay legislation in December, and still nowhere near equal pay. My own view is that, right from the beginning, there was a fundamental design fault in the legislation—which was so brilliantly “Made in Dagenham”—because the enforcement mechanism was wanting.
I have said before there is no other area of regulation in this country that we take seriously that we would leave to an individual citizen or consumer to enforce for themselves. Imagine school standards, food standards, nuclear safety standards, health and safety standards, environmental standards and so on if the only enforcement mechanism in the legislation was for the individual citizen to investigate the regulatory breach and then, with or without the support of a trade union or an NGO, to sue for themselves. That has been the position for individual workers under equal pay legislation from the very start, and that is problematic.
My amendment creates the possibility of the state acting as a backstop to stand behind an individual worker, so that she does not have to go through those ridiculous hoops—which will take years of expensive investigation and legislation—to find out what her colleagues are getting paid, not just for the same job but for equivalent work, with all the complications around that, and then, with or without trade union support, sue her employer. Who wants to do that? It is just not a realistic regulatory enforcement mechanism.
In my probing amendment, I suggest that some agency of the state ought to sit behind as a backstop in that investigation and enforcement process. If that were the case, we could help to avoid unnecessary and expensive litigation and the bankruptcy of some local authorities. A state regulator could, for example, investigate a particular employer that had become a concern with a range of regulatory options, including private notices and private conversations, before public conversations and potential enforcement action. Entrenched inequality in pay practice could be nipped in the bud before years transpire and the debts accumulate. I think, having listened to some previous debates on this Bill, that this principle ought to be welcomed on all sides of the Chamber, because it could be good for the business as well as for workers.
Lord Jackson of Peterborough (Con)
My Lords, I will speak very briefly on this amendment. It is quite an ingenious and intelligent amendment that is quite superficially attractive. I know the Minister will give it proper and due consideration.
My only problem is that it draws an analogy that does not really stand up to close scrutiny. I defer to the noble Baroness’ greater legal expertise, but when you are employed, there is a personal contract between the employee and the employer that you have freely entered into. It may be that, in the course of that contract, your pay falls behind and there are societal and economic reasons why you are paid different amounts of money. We could be here all week discussing that.
However, it is not the same as the relationship you have with a nuclear power station, where you have the expectation that you will be kept safe from accidents and drastic events; with your local water authority and the expectation that you will not be flooded; or when you go on an aeroplane that, God forbid, that aeroplane will not crash. You do not have that direct contractual relationship with those bodies. In other words, you essentially defer that responsibility legally to other bodies to intercede on your behalf. Therefore, this amendment, in a circuitous way, undermines the very concept of a one-on-one contractual relationship, so I do not think it is analogous.
Having said that, I would not particularly oppose this amendment. It is ingenious and interesting but, with all due respect, I do not think the noble Baroness draws an accurate analogy between the two.
Baroness Chakrabarti (Lab)
I am grateful to the noble Lord for taking the argument so seriously. Of course, I disagree with him. When you go to eat in a restaurant, go to school or buy a can of baked beans, you may well have a private, contractual relationship with the supplier of that good or service. None the less, the state has decided that it needs to intervene because these power relationships are not all equal and there is a public good in the baked beans being safe to eat, the school delivering a good service, et cetera.
So, from the moment the UK Government and the UK people took the democratic decision that there should be laws to protect school standards, food safety, health and safety and non-discrimination in pay—supported by people from all parties, including in your Lordships’ House—it is not just a matter of private contract between two parties anymore; it is actually a matter of public policy and a wider rule of law point. The non-discrimination point has been non-partisan in this country for some years.
Most equality legislation has, perhaps, been promoted by Labour Governments, but the disability rights Act is the obvious exception. There has been a bipartisan consensus that we should not discriminate against people because of their sex, including in pay. We just have not been delivering on pay as well as we have been delivering in other areas of women’s lives. Therefore, the analogy with school standards, health and safety standards and food standards works. If we want to achieve equal pay, we have to take it seriously in enforcement.
Lord Jackson of Peterborough (Con)
Just to come back to the noble Baroness, would she therefore extend the provisions of her amendment to all protected characteristics under the Equality Act 2010?
Lord Sharpe of Epsom (Con)
My Lords, that was a most interesting exchange, and I thank the noble Baroness, Lady Chakrabarti, and my noble friend Lord Jackson for it. As I have said many times, I am not a lawyer, but as a broader observation, there seems to be a slight philosophical discussion developing this evening between intervention and initiation when it comes to various state interventions in certain areas of law.
I have no doubt at all that the intention behind the noble Baroness’s amendment is to strengthen the enforcement of equal pay laws. As she rightly says, we all support that objective, but we feel that this particular proposal is somewhat flawed, not least because we just do not think it will work. At its core, the amendment risks conflating pay disparity with unlawful discrimination. It assumes that if a pay gap exists, there must therefore be wrongdoing. As the noble Baroness, Lady Chakrabarti, acknowledged, it is not that simple, because pay disparities can and often do arise for entirely legitimate reasons, such as differences in experience or qualifications, performance geography or even negotiated terms, to my noble friend Lord Jackson’s point. To suggest that a mere statistical difference is indicative of discrimination is to abandon the nuanced legal framework carefully set out in the Equality Act 2010. While paying a great deal of respect to the arguments—and there is considerable merit in this—we cannot support this amendment.
The Minister of State, Office for Equality and Opportunity (Baroness Smith of Malvern) (Lab)
My Lords, like my noble friend Lady Chakrabarti, I am also an occasional visitor to this Committee, but I am very pleased to be here this evening to address her Amendment 275. I thank her for recognising the engagement there has been with the Government and others on this up to this point.
Certainly, the Government want to make very clear that we share the broad aims behind this amendment. Over 50 years after the Equal Pay Act 1970 and 15 years after the Equality Act 2010, it is clear that equal pay has not yet been achieved. That is why the Government have committed to strengthen the equal pay regime and end pay discrimination. I share the concerns of my noble friend in identifying the challenge of enforcement in this case. There is more we can do to ensure that the onus does not fall only on women to find out whether they are receiving the same pay as their male colleagues for equal work and to take enforcement action against employers in the case of a breach.
It is possible to envisage, in relation to the points made by the noble Lord, Lord Jackson, a system in which you have both the contractual arrangement and the ability to take individual action as is the case now and an enforcement body that supports people doing that in general terms and identifies thematic or consistent ways in which equal pay is being breached. That is why the Government are committed to establishing an equal pay regulatory and enforcement unit with the involvement of trade unions. As part of this, we will carefully consider how we can improve the enforcement of the equal pay scheme.
On 7 April we launched a call for evidence on this issue and wider equality law to ensure that any steps we take will lead to a meaningful strengthening of protections against pay discrimination—an objective that I am sure my noble friend will share. It is important that the Government are able to develop these changes in partnership with business, trade unions and civil society to ensure that the law works for everybody. For that reason, I hope my noble friend will recognise that this will be a more appropriate process through which to address these issues. As she suggests, we will give these areas very close consideration in advance of the equality, race and disability Bill.
In relation to some of the specific points my noble friend raises about the way this might operate, we certainly recognise the benefits that can arise from government departments, including HMRC, working together. HMRC already has a number of joint working and data-sharing arrangements with departments and agencies. The Government are therefore not closed in principle to establishing new data-sharing arrangements with regulatory authorities where this can support their regulatory functions.
My noble friend made a very interesting point about the use of AI. It would not be sufficient simply to compare the pay of different people working within a workplace unless you could also have some analysis of how that applied to the nature of the work and whether that was work of equal value. It may well be that advances in technology, including AI, would be a way in which we could support that monitoring.
Policy is at a very formative stage. My officials will explore a wide range of options to improve the enforcement of equal pay rights. While taking great care to ensure that safeguards are put in place in relation to personal data, particularly where that relates to discrimination and protected characteristics, I suspect the sort of description that she gave of the contribution of AI is very much part of what, across government, we are wanting to see in terms of its use in future.
We are sympathetic to the ultimate objectives of my noble friend’s amendment. I hope she recognises that and the progress that we intend to make on that pledge to deliver stronger enforcement mechanisms and, in particular, an equal pay regulatory and enforcement unit. With that assurance, I hope she feels able to withdraw her amendment.
Baroness Chakrabarti (Lab)
My apologies to the Committee. It has of course been 75 years since the European Convention on Human Rights and 50 years since equal pay legislation—forgive that rather glaring howler. I am grateful to the noble Lord, Lord Jackson, in particular, and to my noble friend the Minister, whose officials have been very generous and thoughtful with their time. I look forward to watching their thinking develop on this forthcoming legislation. With that, I beg leave to withdraw.
Baroness Coffey (Con)
Member’s explanatory statement
This is a probing amendment to understand Parliament’s role as an employer itself and the role of over 600 other employers on the site.
Baroness Coffey (Con)
My Lords, I beg to move Amendment 279ZZZA—it somewhat reminds me of ZZ Top. This is, again, a bit of a niche amendment. The reason I say that is because many people—not your Lordships, I am certain—may think that “the Crown” in Clause 144 applies just to the King and the Royal Family. In fact, UK Ministers are of the Crown, and “Crown premises” means any government building and any land that it has, and so on. So the reality of what this clause refers to is much broader. I am sure that Ministers are thrilled that subsection (3) applies to them, so they will never be found criminally liable in that regard.
The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
Does the noble Baroness wish to move her amendment?
Baroness Coffey (Con)
I thought I started by saying I would move it, but yes, I certainly do want to move it.
Lord Hunt of Wirral (Con)
My Lords, I thank my noble friend Lady Coffey for her amendment. She raises thoughtful and important questions about Parliament’s role as an employer and the complexity of managing the site, which contains over 600 other employers. These are legitimate concerns that deserve proper consideration, not least because Parliament should seek to model best practice in matters of employment and compliance. I think we all agree with that, but does it comply, and should there be a power of entry into these premises to check that we are complying?
My noble friend has made compelling points, and I hope that the Minister will respond with clarity and detail. The concerns that my noble friend outlined are not theoretical; they touch on the credibility of this institution as both lawmaker and employer. I therefore look forward to hearing the Minister’s response and the Government's justification for retaining—or reconsidering—the exemption as drafted.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)
My Lords, I thank the noble Baroness, Lady Coffey, for her amendment, which raises an important topic: how the enforcement provisions in Part 5 would apply to Parliament and MPs as employers.
Parliament must of course comply with employment legislation. However, the Bill provides that the powers of entry in Part 5 cannot be exercised in relation to
“premises occupied for the purposes of either House of Parliament”;
otherwise, Part 5 would apply to both Houses of Parliament and to MPs as employers. We are in danger of having something similar to—but slightly less than—a deep constitutional crisis, because the approach was agreed on the advice of the House authorities. It is therefore not a government decision; it is a decision made by the House authorities. They are more powerful, as far as I can see, and they can therefore overrule what the Government may think about all this.
This approach is not unusual. It aligns with recent precedents, such as Section 165(1)(a) of the Building Safety Act 2022, to respect parliamentary privilege. In this case, Parliament has to comply with employment legislation. The only issue raised here is about the power of entry not applying to the Parliamentary Estate. The noble Baroness might understand why we want to make sure that the Parliamentary Estate is secure from that challenge, and there is probably another place where she could raise her concerns about employment in the Parliamentary Estate. I have some sympathy with some of the cases that she argued about, but I suggest that she sees the House authorities about them. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Coffey (Con)
I certainly will withdraw it. I did not mean to put the Minister in a difficult place, and her answer was very gracious. My amendment was based on the expectation that this is a royal palace, where things such as licensing laws and health and safety rules do not technically apply. However, that aside, we still need to consider how we act. If nothing else, I hope that this short debate has contributed to reminding ourselves of the obligations that we all share. With that, I beg leave to withdraw.
Lord Sharpe of Epsom
“Impact assessment on enforcement of holiday pay compliance(1) The Secretary of State must, within 12 months of the day on which this Act is passed, lay before Parliament an impact assessment of the ability of businesses to comply with the enforcement provisions of this Act relating to holiday pay entitlements.(2) The assessment under subsection (1) must include—(a) an evaluation of the practical, administrative and financial implications for employers in meeting the requirements relating to holiday pay,(b) consideration of the capacity of small and medium-sized enterprises to comply with those requirements, and(c) an analysis of any barriers to compliance identified during implementation.”Member’s explanatory statement
This amendment places a duty on the Secretary of State to assess how effectively businesses—particularly small and medium-sized enterprises—are able to comply with the enforcement mechanisms relating to holiday pay under this Act, and to identify any practical barriers or burdens.
Lord Sharpe of Epsom (Con)
My Lords, I will speak to Amendments 279ZZB and 305 to 309, which are in my name.
Turning first to Amendment 279ZZB, we firmly support the principle that workers must receive their full entitlement to holiday pay and that those rights must be enforceable. However, we believe that achieving that goal in practice, particularly under the new framework set out in the Bill, requires us to be clear-eyed about the real-world challenges that many businesses face. Holiday pay is one of the most complex areas of employment law and has only become more so following the changes introduced in January of this year.
While some employers regrettably seek to avoid their obligations and should rightly being sanctioned, the reality is that many more are simply trying to navigate a legal framework that is very confusing, technical and still evolving. For small and medium-sized enterprises in particular, compliance is not always a question of willingness but of capacity and clarity. That is why this amendment is both timely and proportionate: it asks only that the Secretary of State undertakes an impact assessment to consider how businesses—particularly SMEs—are coping with the new enforcement provisions. It would require an evaluation of the practical, administrative and financial implications of compliance and establish whether any barriers have emerged during implementation.
Crucially, this is not about weakening enforcement. In fact, it is quite the opposite: it is about ensuring that the fair work agency, which we hope will become a cornerstone of enforcement under this Bill, is properly resourced, modernised and equipped to support both workers and employers in meeting their obligations.
Turning to Amendment 305, this Government have managed to get unemployment to hit its highest since the pandemic—4.6%, according to the most recent ONS figures. This is not a figure that we can shrug off because, of course, behind it are real lives, real households and real businesses that are facing uncertainty. At the same time, the business environment is under considerable strain. Recent changes to national insurance contributions have forced employers to make extremely difficult decisions. The employer rate has risen from 13.8% to 15% and the threshold has been lowered, placing even greater pressure on payrolls.
Research from S&W has shown that around a third of UK business owners are still planning further job cuts as a direct result of these changes. Many have already begun reducing headcount. Others are cutting hours, freezing pay or raising prices—moves that will impact both employees and consumers. So, the question that has to be asked is: how will this legislation affect employment in that context? I should also have mentioned, of course, that May showed a very significant drop in payroll numbers.
It is easy to sit in Westminster and write these rules. It is much harder to understand how the rules will play out in towns and factories, in small businesses, in hospitality, in logistics, and across the many sectors that make up our labour market. That is why this amendment is vital.
I turn to Amendment 307. The British Retail Consortium has warned of a potential “high-street bloodbath”, with one in 10 retail jobs at risk over the next three years, if the Bill’s measures are implemented without careful consideration. Retailers are already grappling with rising costs and squeezed margins, and these additional employment burdens could accelerate job losses in an industry that is vital to our economy. I believe that 180,000 jobs—I forget the precise number—are at risk through to 2028, according to the BRC.
Similarly, the Institute of Directors has published stark findings showing that nearly three-quarters of its members—72%—believe that this legislation will dampen economic growth. Some 49% of business leaders say they plan to reduce hiring; 36% of them intend to outsource more roles; and 52%, more than half, anticipate investing further in automation as a response. These figures paint a clear picture: employers are preparing to scale back on job creation and are likely to replace human roles with technology, in response to rising costs and compliance demands.
The Federation of Small Businesses echoes these concerns. SMEs are the backbone of the UK economy, yet many are telling us that the cumulative impact of new regulations, increased national insurance contributions and rising wage floors are forcing them to reconsider recruitment plans or even reduce existing staff. The FSB has called for a more balanced approach that safeguards workers’ rights without stifling the very businesses that create these jobs, and the growth. Can the Minister name a single business that expects to increase hiring because of the measures in the Bill?
On Amendment 306, what of our youth? At a time when the Government should be prioritising opportunities for young people entering the workforce, the figures are concerning. Between January and March 2025, an estimated 354,000 young people aged 16 to 24 were not in education, employment or training; that is up by 21,000 compared with the same period last year. The Government will no doubt argue that the provisions in this Bill, such as the right to guaranteed hours and changes to statutory sick pay, are designed to protect vulnerable workers, many of whom are young and may be on the margins of employment. However, the reality is more complex. Although well intentioned, these changes will make it more costly and complicated for employers to hire young people, who often lack the experience and are seeking flexible or part-time work to get started in their careers. The burden of additional costs and rigidities can discourage employers from offering entry-level roles or apprenticeships—exactly the opportunities that young people desperately need to develop skills and build work histories.
On Amendments 308 and 309, let me turn to a specific sector in the UK: manufacturing. In the north-west, manufacturing is not only a significant contributor to the regional economy but a vital source of skilled employment and innovation. Many manufacturers there are actively seeking to invest in advanced technologies, including artificial intelligence and automation, to improve productivity and to remain competitive on the global stage. However, these ambitions risk being undermined by the additional costs and compliance burdens imposed by this Bill. Manufacturers are already grappling with the challenges of global tariffs, supply chain disruptions and inflationary pressures; adding further regulatory and financial strain threatens to hollow out this critical sector.
If the increased labour market enforcement and associated costs become too great, there is a real risk that manufacturers will reduce investment, scale back hiring or even relocate operations. The knock-on effects on local economies, particularly in regions depending on manufacturing, would be severe, affecting jobs, skills development and regional growth. While the objectives of the Bill—to protect workers’ rights and promote fair employment practices—are indeed laudable, we must ensure that they do not come at the expense of vital industries and communities. I beg to move.
Lord Goddard of Stockport (LD)
My Lords, these amendments collectively highlight the critical importance of supporting small and medium-sized enterprises as they adapt to the changes introduced by the Bill. We have raised this issue repeatedly throughout our deliberations. Night after night, this comes up in other parts of the legislation. It all comes back to small businesses. My biggest postbag at the moment is from small businesses concerned about their future—of no political persuasion at all. This is one of the few chances, in this small debate, where we get to talk about those challenges and the enforcement mechanisms, especially around things such as holidays. As alluded to by the noble Lord, Lord Sharpe, compliance can be complex and resource-intensive, although I do not fully agree with his complete doom-and-gloom scenario of this part of the Bill.
Recent data shows that SMEs employ around 60% of the UK workforce, yet many report that regulatory burdens can disproportionately strain their limited administrative capacity. The amendments proposed by the noble Lord, Lord Sharpe, such as Amendment 279ZZB, would place a duty on the Secretary of State to assess how effectively the SMEs can meet those obligations and to identify any practical barriers that they face. It is important to ensure that the Bill’s ambitions do not inadvertently disadvantage the very businesses that form the backbone of our economy. That the Government should have a means of tracking how the Bill’s implementation is impacting on the economy is vital.
I briefly turn to the reviews called for in Amendments 305 and 309, which seek to examine the Bill’s impact on employment, youth opportunities, job creation and regional labour markets, especially in the north-west of England, where my heart still lies and where the Industrial Revolution began. We are trying to embrace AI. We are trying to become ground-breakers again at Manchester University and other establishments. I know that these really affect the regional labour markets, but these are valid concerns, as we are still recovering from the recent economic shocks. The requirement for independent assessment would help us get a clearer picture of this legislation and how it affects businesses and workers. While amendments by the noble Lord, Lord Sharpe, and others are cautious in their approach, they reflect a genuine concern that implementation must be manageable for SMEs, without stifling growth for employment.
As we move forward, I look forward to hearing the Minister’s view on these amendments and would appreciate some remarks about how the Government intend to physically support SMEs throughout these changes and the unintended consequences. Because that is at the heart of this. You can have and develop the policies, but what businesses are asking me is, “What are you going to do? What can I see that helps me to embrace this legislation and to take people on, train them and employ more people?”—as opposed to the perception that the burden is against that, which is an unintended consequence of trying to do the right thing of giving everybody employment rights, and it is a fine line. We are politicians and we understand it a bit clearer than people in a small company employing 10 or 15 people. They are just concerned that something is going to overwhelm them: something is going to come that they cannot control.
I want the Minister to explain the following to me and members of my group. What practical things will the Government put in place to give those small businesses confidence to embrace this and to work with them to make employees more secure, safer and have better rights? Meanwhile, how can small and medium-sized companies, not the giant multi-million companies, carry on creating jobs, developing the economy and lifting us out of the doom and gloom? We have done it before, and we can do it again. That is the question that needs answering—whether or not the Minister can do so tonight, we need some clarity before Report, or we will be meeting other people. This is important. This is not just me grandstanding; small businesses are saying to me, “Just ask the Government what they are doing and how they can help us”. This is what I am trying, clumsily, to say as we draw to a close this evening: if the Minister can give me some hope that what we are doing and have put in place will help small and medium businesses, I will be satisfied.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, here we go again on impact assessment. I hope that the noble Lord, Lord Sharpe, will forgive me if some of my notes repeat what was said in previous debates, but I will answer some of the points here. First, I thank the noble Lords, Lord Sharpe, Lord Hunt and Lord Goddard, for their amendments relating to impact assessment.
I refer to the point by the noble Lord, Lord Goddard, about what the Government are doing concerning SMEs. I have just recently been appointed as the spokesperson for the Department for Business and Trade, and my priority is to have regular communications with micro-businesses and small businesses. That is what I will be focusing on. Today, we appointed the Small Business Commissioner, who will start work very shortly in tackling late payments and some of the abuses that small businesses experience from big companies not paying them on time. We will be publishing a small business strategy very soon, and our industrial and trade strategy very soon as well, hopefully sometime next week or thereabouts. We are doing a lot—not only myself but the Secretary of State, my noble friend Lady Jones and all the Ministers in the department. We have regular contact right across the business community.
We have had extensive debate already on impact assessments related to this Bill. My commitment in an earlier debate to meet noble Lords to further discuss the impact assessments still stands. The Government have already published a comprehensive set of impact assessments based on the best available evidence on the workers likely to be affected by these measures. This includes an assessment on the economic impacts of the Bill, including on workers, businesses, sectors and regions. This package shows that there are clear, evidence-based benefits from tackling issues holding back the UK labour market. This analysis is based on the best available evidence and consultation with external experts and stakeholders, including academics and think tanks. Further analysis will be forthcoming, both in the form of an enactment impact assessment when the Bill secures Royal Assent and when we consult on proposed regulations to meet the Better Regulation requirements.
Before I conclude, I share with noble Lords some really startling statistics. We already know that healthier and happier workers are more productive workers. The Health and Safety Executive estimates that stress, depression or anxiety accounted for something like 17.1 million working days lost in 2022-23, which is equivalent to a loss of something close to £5.3 billion in output per year. In addition, close to 2 million employees report feeling anxious about hours worked or shifts changing unexpectedly. By increasing the job security of these workers, the Bill would have well-being benefits worth billions of pounds a year. The Bill will therefore create a healthier and happier workforce, which is not only the right thing to do but will help businesses by making the workers more productive as well as resulting in lower treatment costs for the NHS.
Earlier, the noble Lord, Lord Sharpe, asked me what we have done to support growth since getting elected. I am proud to share with the noble Lord that, since the election, 500,000 more people are in work. In recent weeks, we have had the strategic defence review with some 30,000 new jobs building submarines created, and the announcement of the Sizewell C project, which will create some 10,000 new jobs. So, we are creating new jobs.
In addition, we have people who are investing in this country and who have confidence in this Government. Jamie Dimon, who has run one of the largest US banks, JPMorgan Chase, for two decades, told the Financial Times:
“I’ve always been a believer in the UK’s inherent strengths as a place to do business and there’s much to like about the new government’s pro-growth agenda”.
Further, a couple of weeks ago, Jon Gray, president of Blackstone, one of the largest private equity companies in the world, which has invested close to £100 billion in the UK and employs some 50,000 people, told the Times:
“I would give the UK government a lot of credit for embracing business”.
This is not what the Government are saying, but what people with money who are investing in this country are saying to us. Further, every single day, £200 million is being invested in tech companies in this country. I do not call that a small sum, I call it confidence in the UK Government and what we are doing for business.
Baroness Noakes (Con)
My Lords, I listened very carefully to that wonderfully rosy picture of the UK economy. Can the Minister reconcile that with the most recent employment statistics, which show a decrease in payrolled employment and an increase in unemployment? That does not reconcile with what he is trying to convince us is the case.
Lord Leong (Lab)
I thank the noble Baroness for that. Figures go up and down every month but let us look at it in the longer term. We are creating new jobs and that is what is really important. In conclusion, I ask the noble Lord, Lord Sharpe, to withdraw his amendment.
Lord Sharpe of Epsom (Con)
I am enormously grateful to the Minister for his passionate defence of his Government and for his remarks. I am genuinely delighted that he has taken on a new role in small business because, unlike the vast majority of his Government, he actually knows what he is talking about when it comes to small business. We are very pleased to hear that and we welcome his general remarks. I also agree with Jamie Dimon about the growth agenda, but the fact is the Bill will not help the growth agenda. That is the argument we are trying to make.
I am also grateful to the noble Lord, Lord Goddard, for his remarks. He accused me of being doomy and gloomy, but I did not get those statistics out of thin air; they were all supplied by the employer organisations that we referenced. If he would like, I will happily put him in touch with them all. The fact is that, once again, the Minister could not rise to the challenge of naming a single business that expects to increase hiring because of the measures in the Bill, and references to the strategic defence review do not help that argument.
The other reason why I am doomy is because, the other day, I came across a notice in a window in London that said, “After much reflection, and as a result of the substantial business rate and national insurance cost increases imposed on us in this year’s Budget, we have made the difficult decision to close. Our final day of service will be 28 June 2025”. That is a real business going out of business—that is disgraceful.
The Government’s impact assessment of the Bill, which we have debated a number of times and which I know irritates the Minister every time we bring it up, was simply inadequate. There is not enough detailed rigorous analysis to understand how these enforcement measures will affect businesses and employment across the country. Without that, we are walking blindly into serious economic risks. At this rate, if the Bill proceeds without the necessary amendments and safeguards, it will not just fall short, it will create unemployment. The additional burdens on employers, especially small and medium-sized businesses and crucial sectors like manufacturing, threaten to reduce hiring, stall investment and ultimately cost jobs. This is not speculation; it is happening, as my noble friend Lady Noakes pointed out. It is a clear and present danger based on the evidence that we have seen, and the trend is unlikely to diminish.
We support workers’ rights, but not at the expense of widespread job losses and economic harm. The Government have to provide a proper, thorough impact assessment—one that honestly addresses these risks—before we proceed further. I am grateful to the noble Lord for his offer of a meeting to discuss this, but I am not sure what there is to discuss without the actual impact assessment or the commitment to hold it as soon as possible. If this does not happen, the Bill will fail both workers and employers, and we will face the consequences of higher unemployment as a result. That is something no one wants. I beg leave to withdraw the amendment.
“(2) Any reference in section 134 to HMRC information includes a reference to any information mentioned in sub-paragraph (1)(a) or (d) which—(a) was disclosed to the Director of Labour Market Enforcement or a person falling within paragraph (a), (d), (e), (f) or (g) of paragraph 6(4) by the Commissioners for His Majesty’s Revenue and Customs or a person acting on behalf of the Commissioners, and(b) was not obtained by an officer in the course of acting for the purposes of the National Minimum Wage Act 1998 or by virtue of section 26(2) of the Immigration Act 2016.”Member's explanatory statement
This amendment provides for information previously disclosed by HMRC to enforcement authorities, and treated by paragraph 13 of Schedule 11 to the Bill as having been obtained by the Secretary of State in connection with the exercise of enforcement functions under Part 5 of the Bill, to be treated as HMRC information for the purposes of clause 134, which imposes restrictions on the onward disclosure of such information without authorisation from HMRC.
Member's explanatory statement
This amendment corrects an incorrect cross-reference.
Member's explanatory statement
This amendment is consequential on my amendments of clause 148 at page 146, line 43 and page 147, line 9.
““employer” has the meaning given by subsection (1A);”Member's explanatory statement
This amendment is consequential on the definition of “employer” being inserted into Part 5 by my amendment of clause 148 at page 146, line 43.
Member's explanatory statement
This amendment is consequential on the definition of “worker” being inserted into Part 5 by my amendment of clause 148 at page 147, line 9.
“(1A) In this Part “employer” means any of the following—(a) an employer within the meaning of section 230(4) of the Employment Rights Act 1996 or Article 3(4) of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16));(b) a person who is an employer for the purposes of Part 4A of the Employment Rights Act 1996 in relation to a worker mentioned in section 43K(2) of that Act;(c) a person who is an employer for the purposes of Part 5A of the Employment Rights (Northern Ireland) Order 1996 in relation to a worker mentioned in Article 67K(2) of that Order;(d) a person who is the principal for the purposes of section 47A or 63A of the Employment Rights Act 1996 or Article 70A or 91A of the Employment Rights (Northern Ireland) Order 1996 (right to time off for young person for study or training);(e) a person who is—(i) an employer for the purposes of Chapter 3 or 4 of Part 2A of the Employment Rights Act 1996 (zero hours workers) by virtue of section 27BJ(7) or (as the case may be) 27BP(8) of that Act,(ii) an employer in relation to a zero hours arrangement within the meaning of Part 2A of that Act (see section 27BZ2(1) of that Act), or(iii) an employer in relation to a non-contractual zero hours arrangement within the meaning of Article 59A of the Employment Rights (Northern Ireland) Order 1996;(f) in relation to an individual who is an agency worker within the meaning of Part 2A of the Employment Rights Act 1996—(i) a person who is the hirer within the meaning of any Part of Schedule A1 to that Act (agency workers: guaranteed hours and rights relating to shifts);(ii) a work-finding agency within the meaning of Schedule A1 to that Act (see section 27BV(4) of that Act);(iii) a relevant person within the meaning of section 47I of that Act (agency workers and Schedule A1 rights);(g) in relation to an individual who is an agency worker within the meaning of the Agency Workers Regulations 2010 (S.I. 2010/93) or the Agency Workers Regulations (Northern Ireland) 2011 (S.R. (N.I.) 2011 No. 350)—(i) the hirer within the meaning of the relevant Regulations;(ii) (where the worker is not actually employed by the temporary work agency) the temporary work agency within the meaning of the relevant Regulations;(h) in relation to an individual seeking to be employed by a person as a worker, that person.”Member's explanatory statement
This amendment defines “employer” for the purposes of Part 5. In particular, the definition reflects the persons on whom requirements are imposed by clauses 1 to 5 (zero hours workers, etc).
“(4) In this Part “worker” means any of the following—(a) a worker within the meaning of section 230(3) of the Employment Rights Act 1996 or Article 3(3) of the Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)); (b) an individual who is not a worker as defined by section 230(3) of the Employment Rights Act 1996 but who is a worker for the purposes of Part 4A of that Act (see section 43K(1) of that Act);(c) an individual who is not a worker as defined by Article 3(3) of the Employment Rights (Northern Ireland) Order 1996 but who is a worker for the purposes of Part 5A of that Order (see Article 67K(1) of that Order);(d) an individual who—(i) is a worker for the purposes of Chapter 3 or 4 of Part 2A of the Employment Rights Act 1996 (zero hours workers) by virtue of section 27BJ(7) or (as the case may be) 27BP(8) of that Act,(ii) works under a zero hours arrangement within the meaning of Part 2A of that Act (see section 27BZ2(1) of that Act), or(iii) works under a non-contractual zero hours arrangement within the meaning of Article 59A of the Employment Rights (Northern Ireland) Order 1996;(e) an individual who is an agency worker within the meaning of Part 2A of the Employment Rights Act 1996;(f) an individual who is an agency worker within the meaning of the Agency Workers Regulations 2010 (S.I. 2010/93) or the Agency Workers Regulations (Northern Ireland) 2011 (S.R. (N.I.) 2011 No. 350);(g) an individual seeking to be employed by a person as a worker.”Member's explanatory statement
This amendment defines “worker” for the purposes of Part 5. In particular, the definition reflects the persons on whom rights are conferred by clauses 1 to 5 (zero hours workers, etc).
Lord Hunt of Wirral
“(2) Subject to subsection (3), this section is repealed three years after the day on which it comes into force.(3) The Secretary of State may, following a full independent review of the operational impact of the section on tribunal efficiency and access to justice, by regulations made by statutory instrument provide that the provisions of this section are not repealed in accordance with this section but shall continue in force indefinitely.(4) The regulations in subsection (3) are subject to the affirmative resolution procedure.”Member's explanatory statement
This amendment introduces a sunset clause to ensure that the extension of time limits for bringing employment tribunal claims is subject to periodic parliamentary oversight.
Lord Hunt of Wirral (Con)
My Lords, Amendment 279GA would introduce a sunset clause to ensure that the extension of time limits for bringing employment tribunal claims is subject to periodic parliamentary oversight. I will speak also to Amendments 330ZA, 330D and 334A in my name.
I have tabled these amendments along with my noble friend Lord Sharpe of Epsom because I believe that the state of the employment tribunal system is deeply concerning and urgently requires our attention. The proposals before us introduce a range of new rights for workers, including the critical right to claim unfair dismissal from day one of employment. We must therefore confront the uncomfortable truth that the current tribunal system is simply not prepared to handle the additional burden that this Bill will place upon it. Indeed, we have heard from a respected law firm that there is broad consensus among legal professionals that the employment tribunal system is, in its words, the “biggest problem in the legal world”.
The Government’s own impact assessment suggests that tribunal cases will increase by around 15% as a result of these reforms, yet I must ask how this figure has been calculated. Given the scale of the backlog we are currently witnessing, can this be anything other than a gross underestimate? The reality is that, by extending the time limits within which individuals can bring claims, the Bill itself may actively incentivise an increase in the volume of cases. If people have more time to bring claims, it is only natural that more claims will be submitted—claims that must then be processed by a system that is already groaning under enormous pressure.
To put this in perspective, we are currently facing, we are told, an employment tribunal backlog of nearly 50,000 cases. This backlog has now reached record levels, with preliminary hearings being scheduled as far away as April 2026, and full hearings not likely to take place until well into 2027. This must be a crisis. A delay of this magnitude means that justice for many is effectively denied. When someone has to wait years for their case to be heard, the protection that the law is supposed to afford becomes little more than an empty promise.
The causes of this backlog are clear. There is an acute shortage of employment judges. There is insufficient funding. There is inadequate administrative support. Although the Government have pledged to recruit hundreds of new judges, the practicalities of ensuring that those judges have the necessary expertise and that adequate administrative support is in place remain significant challenges.
That is why I believe these amendments are vital. They do not seek to block or delay the introduction of important workers’ rights, but they instead insist on responsible, measured implementation. It is essential that before these new rights come into force an independent and thorough assessment is conducted to evaluate the capacity and effectiveness of the tribunal system. This assessment has to address current delays, judge numbers, funding and the likely impact of this Bill’s provisions on tribunal caseloads. Moreover, the Government must commit to implementing all necessary measures identified in this assessment to reduce the backlog to a manageable level, specifically to fewer than 10,000 outstanding claims. Only then should these rights be activated.
This is all about ensuring that, when workers exercise their rights, they have access to a tribunal system capable of delivering timely, fair justice. Additionally, the amendment regarding the extension of time limits for claims rightly insists that this measure cannot come into effect until the Senior President of Tribunals certifies that the system can handle the expected increase in cases without further lengthening hearing times. Without such a safeguard, we risk compounding the problem and turning an already overstretched system into something unworkable.
There is another important point that I must raise. Nowhere in the Government’s impact assessment is there any explanation of why the option of introducing a right to claim unfair dismissal between day one and two years was not considered. If the intention is truly to balance the employment relationship and provide fair protections, why do we have to leap to day one? This decision is not just a legal technicality; it carries real risks. One such risk is the disincentive it creates for employers to hire workers who may be perceived as risky or less secure in the labour market—such as individuals with a history of mental health challenges, younger workers or others on the margins of employment —by exposing employers to potential unfair dismissal claims from the very first day. This Bill may inadvertently make it even harder for these vulnerable groups to find work in the first place. This would be a tragic and unintended consequence, compounding insecurity rather than alleviating it.
We have debated at length the potentially vast powers of the new fair work agency, its funding and the role it might play. However, many questions remain. Will the fair work agency with its undefined enforcement officers and unclear operational framework genuinely take on the enforcement of workers’ rights in a way that meaningfully reduces the burden on the already overstretched employment tribunals? Or will tribunals continue to bear the brunt of this increased workload without adequate support or relief?
I now look to the Government to provide this House, workers, businesses, law firms, and no doubt the tribunals with some assurance, clarity and ideally a timeline for the day-one rights provisions in this Bill. Perhaps this is the moment when the Minister will at last share with us, at least in draft, the implementation plan that we have heard so much about during the course of this Committee. Will she please undertake to ensure that we have the implementation plan before we reach Report?
Baroness Lawlor (Con)
My Lords, I support Amendment 279GA for a sunset clause. I perfectly understand the reason for extending the period in which employees can make claims, but I am quite sure it will increase the burden on the tribunals. We have heard about the very long delay, with even preliminary hearings not scheduled until April 2026, and these delays have continued for some years. People going to tribunal sometimes have to wait more than 18 months just to have the preliminary hearing. If numbers increase, as they are likely to, as my noble friend suggested, it is going to put far more pressure on the tribunals. The parliamentary oversight proposed and the sunset clause must take account of that.
Not only is there no point in law in having a claim left unsettled for years, but it is very bad for business to have the uncertainty. It is very bad for employees and their lives to be subject to such delays and uncertainties in what is going to happen to them professionally, because taking a claim to tribunal is not an easy matter. It can be expensive and full of obstacles. Not knowing how it will pan out is very worrying for people. For businesses, being subject to constant pressures of claims in a tribunal, whether they are justified or not, brings insecurity and a lack of confidence.
For these reasons, I think this moderate request for a sunset clause and coming back to Parliament for an affirmative vote are a good proposal, and I hope the Government will listen kindly to it.
Baroness Jones of Whitchurch (Lab)
I thank the noble Lord, Lord Hunt, for introducing these amendments, but I say to him that the problem he has described so vividly was one we inherited from the previous Government. We are acutely aware that these issues need to be addressed, and I share his desire to ensure that the employment tribunal system can manage its existing caseload and the potential increase from the Bill’s measures. I assure your Lordships that we are working across government and with business and the unions to identify ways to improve a system that we inherited that is not working currently for anyone.
We are already recruiting more judges and legal case workers and providing additional resources to ACAS. On top of that, we are considering other things, such as the role that the expanded fair work agency could play in reducing the time spent awaiting costly and lengthy tribunal claims.
I would be delighted to receive any constructive suggestions from the noble Lords on this issue, but it would be entirely disproportionate to make the vital improvements to workers’ rights contained in the Bill dependent on the kind of review that their amendments propose. It would be wrong to take workers’ rights to challenge unfair practices away from them when they are not to blame for the backlog that we are currently grappling with.
Baroness Lawlor (Con)
The Minister made reference to the number of judges that the Government are busily recruiting so as to help the backlog, and this is part of the Government’s response. Of the 35,000 extra civil servants recruited since March 2024—these are the March 2025 figures—how many are judges, and how many of them will be in the employment tribunal service? I do not expect the Minister to have the figures to hand, but I would be pleased if she could write to me.
Baroness Jones of Whitchurch (Lab)
My Lords, 50 new fee-paid employment judges were appointed in 2024-25, and a further three recruitment exercises to further increase capacity are now being undertaken in 2025-26.
Lord Hunt of Wirral (Con)
My Lords, I am very grateful to my noble friend Lady Lawlor for putting all this in the context of the security or insecurity of workers right across the board faced with this terrible backlog. The Minister upbraided me for the previous Government’s culpability in this, but she will know that we have been expressing serious concern about this backlog for a very long time. The fact is that it has got worse: it is 20% up on what it was when the Government came into office last year. The Minister was quite right to say there was a backlog, but my plea to her is not to make it worse.
As we draw this debate to a close, I worry that the Government have not fully grasped the critical importance of these amendments. They are not obstacles to progress but necessary safeguards to ensure that the rights we are creating are not rendered ineffective by an overwhelmed tribunal system. We urgently need clarity on the implementation plans.
The Minister promised that we would have the implementation plan “shortly”. The definition of “shortly” is “within the next hour or so”. In the dictionary, we are told that shortly means that something is about to happen. So where is it? I would like to believe that the noble Baroness’s reference to the word, which she must have carefully considered, means that tomorrow we will get it. I am very happy for her to interrupt me if I am incorrect—perhaps she could clarify.
Baroness Jones of Whitchurch (Lab)
I was trying to be helpful to the noble Lord, but since he provokes me, I will simply say that I have used my interpretation of “shortly”, rather than the dictionary definition. It will not be happening in the next hour, I can assure the noble Lord of that.
Lord Hunt of Wirral (Con)
Could I possibly have a copy of the noble Baroness’s dictionary? She has just quoted from her dictionary, but sadly I do not have it to hand. We would all like to see the implementation plan, so please can we, if possible, before our next day in Committee next Tuesday?
There are all sorts of issues we have discussed that have not been answered. Why a measured approach between day one and two years? Was it ever seriously considered? There has been no answer from the noble Baroness on that. Did she look at it or did she move straight to day one? The gap in reasoning leaves many of us deeply worried about the unintended consequences for workers and employers alike. Regrettably, these are crucial issues which remain unresolved, and the Government have yet to provide the assurances we need. As we approach Report, we will have to return to this matter with a determination to secure the clarity and commitments that are so essential if the Bill is ever to be successful. I beg leave to withdraw the amendment.
Lord Jackson of Peterborough (Con)
My Lords, I will be very brief. I feel like the support act, really, because the substance, the meat, of this issue and this clause has been debated, although I am delighted that this is the final schedule and the final part, so we are on the final stages of the Bill. I just say very briefly, with respect, to the Minister, that we often ask the Minister to write to elucidate the remarks that she and her colleagues have made in the course of the Committee’s proceedings. We are watching that and making sure that we do get replies and, if we do not get proper replies, we will raise those issues on Report. I do hope, very gently, that the Minister is aware of that. Of course, we understand that information is not always at her disposal or her colleagues’ disposal, but we will need that information in order to make an informed decision on Report if the House divides at that juncture.
The second issue that I think it is appropriate to raise, raised several Committee days ago by my noble friend Lady Coffey, is impact assessments. The Cabinet Office guidelines say that impact assessments should be updated as the Bill goes through. To the best of my knowledge, that has not happened, and I am not sure that the Minister has satisfactorily answered the question that my noble friend asked earlier. With that in mind, I think that the rationale that the Minister used for the extension from three to six months was not even tepid and not even weak; it was just non-existent. To say that the Law Commission has done a consultation I do not think cuts the mustard. We on this side believe firmly that extending that period will bring more uncertainty to business, will be more costly, will encourage more litigation and workplace strife and will be a false economy.
I look over at the Government Benches and I see the pawprints of the trade unions in this. I do not know why they would want to do this, but, as on so much of the Bill, they are seemingly pulling the strings and I think that, in the end, it will not be in the best interests of workers for this to happen, not least because, as my noble friend Lord Hunt of Wirral said, the system is creaking. It is no good saying, “Oh, well, it was creaking under you”; this Government have been in power 12 months now, it is incumbent on them to fix the system with their legislation and I think that this is a retrograde step. It will not work, it will backfire, and on that basis, I think that neither Clause 149 nor Schedule 12 should stand part of the Bill.
Lord Sharpe of Epsom (Con)
My Lords, most of what I needed to say was said in the last group, so I will not labour the points, except to add a bit of colour, because my noble friend Lord Hunt of Wirral and I consult quite widely. We consulted this morning with a distinguished employment lawyer, who told us that, if you apply now to an employment tribunal, you will have no chance at all of getting even a preliminary hearing for 10 months. That is next April. In order to get a resolution, a case resolved, you would be looking probably at December 2027. That is nearly two and a half years away. It will take a lot more than the number of judges the noble Baroness mentioned that they have recruited so far in order to fix that particular problem. I wish her good luck and I hope she succeeds, but I really do not think that we should be doing this.
Baroness Jones of Whitchurch (Lab)
My Lords, the first thing I will say to the noble Lord, Lord Jackson, is that if we say we are going to write, we will write: we do not need to be told that this is being monitored in some way. I would say that I feel that we on these Benches have bent over backwards to engage with noble Lords, not only in debates but outside, by having meetings and trying to work through some of these issues in more detail. So I do resent the accusation that we are somehow hiding from accountability on these issues. We are bending over backwards to be accountable.
I also say to the noble Lord, Lord Jackson, that we have updated the impact assessment and written to the noble Baroness, Lady Coffey, about it already. As noble Lords have said, we have now debated this issue quite extensively. We argue that the proposals we are putting forward will benefit not only employees but employers, by increasing the time within which workplace procedures and conciliation can be completed, creating an opportunity for more disputes to be resolved without the need for litigation.
Current ACAS performance data shows that that around a third of early conciliation notifications go on to submit an employment tribunal claim. Therefore, the longer period of time for resolving disputes internally and/or via conciliation will simplify the time limits for making employment tribunal claims and improve access to justice.
I have heard the arguments of the noble Lord, Lord Jackson, and, as I say, we have now debated this extensively. I can assure your Lordships that this clause and schedule are essential for those who need to bring a claim to a tribunal in order to have adequate time to prepare a robust claim. I therefore ask that they stand part of the Bill.
“Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006
13A In the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 (S.I. 2006/349) (employment rights and protections in connection with consultation), in paragraph 4(2)—(a) in paragraph (a), for “three” substitute “six”;(b) in paragraph (b), for “three” substitute “six”.”Member’s explanatory statement
This amendment extends from three to six months the time limit for bringing a claim in an employment tribunal under paragraph 4 of the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006.
Baroness Penn
“Substitution clauses: duties of company directors(1) The director of a relevant company has a duty to ensure that the company keeps a register of all dependent contractors.(2) The director must supply details of the register under subsection (1) with the Secretary of State within 12 months of the passing of this Act and every 12 months thereafter, subject to the provisions of the Data Protection Act 2018.(3) The Secretary of State may by regulations make provision about what information must be supplied in the register of dependent contractors.(4) For the purposes of this section―(a) a “relevant company” is a company that―(i) provides services in relation to postal and courier activities, food and beverage service activities or taxi operation,(ii) has more than 250 employees in the UK and overseas, and(iii) includes provision within the company’s contracts with contractors which allow the contractor to send another qualified person (a “substitute”) to complete the work in the contractor’s place if the contractor is unable to complete the work,(b) a “director” includes any person occupying the position of director, by whatever name called, and (c) “dependent contractor” means a person who—(i) performs work or services for the relevant company,(ii) is paid according to tasks performed rather than hours of work,(iii) depends partially or primarily on the relevant company for employment and income,(iv) is not required to perform services for the relevant company, and(v) is not specified as an employee or worker for the relevant company within a statement of employment particulars or a contract of employment.”Member’s explanatory statement
This amendment seeks to require certain company directors to keep a register of the people carrying out work for the company under so-called “substitution clauses”, which allow companies to permit their suppliers – including some delivery couriers – to appoint a substitute to supply services on their behalf.
Baroness Penn (Con)
My Lords, Amendment 280 is designed to address the use of substitution clauses that allow for illegal working. There are different ways of measuring it, but on some estimates there are 4.7 million gig economy workers in the UK, including around 120,000 official riders at Uber Eats and Deliveroo, two of the largest delivery companies in the country.
For years we have heard stories of labour market fraud and visa abuse committed by contractors related to those companies, and much of that abuse has come through the legal loophole created by substitution clauses. These clauses have traditionally been used to give flexibility to businesses, but in the gig economy they are being used to allow illegal working. From late 2018 to early 2019 there were 14,000 fraudulent Uber journeys, according to Transport for London. During random checks two years ago, the Home Office found that two in five delivery riders who were stopped were working illegally.
I acknowledge that some action is being taken that will address part of this issue. Ministers have said that they will consult on employment status and moving towards a two-part legal framework that identifies people who are genuinely self-employed. I support that ambition, but as someone who worked on the original proposals in this area that stemmed from the Taylor review, I also understand the complexity of resolving this, and I fear that it could end up being put in the “too difficult” pile in Ministers’ in-trays.
The Government have also brought forward amendments to the borders and immigration Bill to include a legal requirement for organisations to carry out right-to-work checks on individuals they employ under a worker’s contract or as individual subcontractors, and for online matching services that provide details of service providers to potential clients or customers for remuneration. What are the timescales for the consultation and the secondary legislation to bring those measures into force? On my understanding, these provisions will not extend to the use of substitutes, meaning that this loophole will remain.
Amendment 280 seeks to go some way to addressing this through the introduction of a comprehensive register of all dependent contractors. Such transparency would help to ensure that employment rights are upheld and pay is not suppressed through illegitimate competition, and would also support the enforcement of right-to-work checks. An alternative approach would be to ban substitution clauses altogether, or at least for those companies and sectors where abuse is the most prevalent—or, as Amendment 323E in a later group from the noble Lord, Lord Berkeley, seeks to do, restrict their improper use.
Given that substitution clauses have played an important part in case law on determining employee or worker status, this could have broader implications, so I have focused on transparency as a first step. But I would be interested to hear the Minister’s view on removing or restricting the use of substitution clauses and whether that is preferable to a register delivering transparency, for example.
A further alternative would be to introduce right-to-work checks for substitutes by the original engaging business. While this was deemed to be out of scope for this Bill in the Commons, I had hoped that the Government’s amendments to the borders Bill would fill this gap. However, unless I have misunderstood—I would be grateful if the Minister can clarify this for me—their approach leaves this loophole untouched. The impact assessment for the Government’s amendments to the borders and immigration Bill reflects the harms that illegal working has on our economy. It says:
“Illegal working creates unfair competition, negatively impacts legitimate businesses, and puts additional pressure on public services. A rapid growth has been observed in the UK in modern labour market models where businesses can currently engage workers without the requirement to complete right to work checks”.
Without further action to address the abuse of substitution clauses, as the App Drivers and Couriers Union has said:
“Unfortunately there is this loophole that allows some bad people to come through. They are not vetted so they could do anything”.
The Government need to take action to guarantee fairness and justice in our labour market. A register of dependent contractors provides a way to resolve this abuse and hold big employers in the gig economy to account. I beg to move.
Lord Hunt of Wirral (Con)
My Lords, I congratulate my noble friend Lady Penn on tabling this important amendment. The requirement for certain company directors to maintain and report a register of dependent contractors under substitution clauses is a measure that would bring much-needed transparency to a complex area of employment. It recognises the evolving nature of work arrangements in sectors such as courier services and taxi operations. Of course, there are compliance burdens associated with maintaining such registers, especially for large companies operating over multiple jurisdictions. Additionally, data protection considerations must be carefully addressed to ensure sensitive personal information is handled appropriately and securely. These are important factors that require careful balancing against the benefits of increased transparency. We look forward to hearing the Minister’s response.
Lord Leong (Lab)
My Lords, I thank the noble Baroness, Lady Penn, for her Amendment 280 and for meeting with my noble friend Lady Jones and me last month to discuss this very important issue.
I reassure the noble Baroness that the Government are already taking action to tackle the main risks that arise from substitution, including illegal working. As she mentioned, substitution is a complex area on which we are still gathering data.
An ONS online survey of around 10,000 businesses from across the UK, published this month, found that close to 3% of UK businesses use substitution clauses. While we do not know the number of substitution clauses used in the gig economy, we know that this could impact a large number of individuals. Although estimates of the number of gig economy workers vary vastly in various surveys, from around 500,000 to 4.4 million people—the noble Baroness mentioned some 4.7 million people—the CIPD finds that roughly 75% of those in the gig economy consider themselves to be self-employed.
We have introduced an amendment to the Border Security, Asylum and Immigration Bill, as was mentioned by the noble Baroness, to extend the scope of employers required to carry out right-to-work checks to those who engage limb (b) workers or individual sub-contractors, such as those working in the gig economy. This requirement will cover those working as substitutes.
We understand the complexity of these issues, and of employment status more widely, and that is why we have committed to consult in detail on a simpler framework for employment status. Comprehensive consultation will better account for the full range of today’s employment relationships, while addressing the minority of employers who will seek to avoid legal obligations.
We were clear that some reforms in our plan to make work pay will take longer to undertake and implement. We do not have a set timeline for consulting on employment status at this point, and I assure the noble Baroness that we will keep her up to date as and when this happens. We understand the complexity of employment status, as I mentioned earlier, and we are definitely committed to consulting in detail. Comprehensive consultation will better accounts for the full range of today’s employment relationships, while also addressing the minority of employers who will seek to avoid legal obligations, as I mentioned.
The noble Baroness’s amendment would create significant additional reporting burdens for businesses and would not necessarily change how those businesses use substitution clauses, as I mentioned in my earlier speech. I therefore ask the noble Baroness, Lady Penn, to withdraw Amendment 280.
Baroness Penn (Con)
Before the Minister sits down, could I confirm what I think I heard, that the amendments to the borders and immigration Bill will cover the use of substitute workers and substitute clauses with the extension of right-to-work checks?
Lord Leong (Lab)
I had better clarify this. I said that the amendment to the Border Security, Asylum and Immigration Bill will extend the scope of employers required to carry out right-to-work checks to those who engage limb (b) workers—perhaps one could classify that as those without many rights—or individual sub-contractors, such as those working in the gig economy. Perhaps that answers the question of the noble Baroness.
Baroness Penn (Con)
So not, therefore, the use of substitute workers. That answers my question, but it leaves the issue unaddressed. The challenge before the Government is that they have acknowledged the existence of this problem, with amendments brought to the borders and immigration Bill on Report, but they propose to leave this loophole unaddressed. The powers they are bringing in that Bill will require further consultation and then secondary legislation, and the Minister was not able to put a timeline on that. If this is not addressed by those proposals in that Bill, then when will it be addressed?
Lord Leong (Lab)
I thank the noble Baroness. I stand corrected on that point. The officials have just given me a note that it does cover substitute workers.
Baroness Penn (Con)
Okay. Perhaps it might be good to sit down between now and Report and clarify the exact proposed powers in that Bill. If it does—although the powers are then for secondary legislation and the detail is to be worked through—if the Government are taking the powers to address this loophole and can do it through secondary legislation under that Bill, that is welcome news. The transparency measures proposed in my approach were really an interim measure due to scope and other wider considerations. If we can directly place the obligation to carry out right-to-work checks on those organisations engaging people and their substitutes, then that would be very welcome news indeed. In the meantime, I beg leave to withdraw my amendment.
Baroness Noakes
“Employment Law Advisory Committee(1) There shall be a committee, to be known as the Employment Law Advisory Committee (in this Act referred to as “the Committee”), for the purposes of—(a) giving advice and assistance to the Secretary of State in connection with the Secretary of State’s functions under this Act and any other relevant labour market legislation, and(b) performing such other duties as may be assigned to the Committee under any enactment.(2) The Committee shall consist of no more than 10 members appointed by the Secretary of State and include equal numbers of each of the following—(a) persons appearing to the Secretary of State to represent the interests of workers,(b) persons appearing to the Secretary of State to represent the interests of employers, and(c) persons who have relevant expertise but who do not fall within paragraph (a) or (b).(3) The Chairman of the Committee shall be appointed by the Secretary of State from one of the persons falling within subsection (2)(b).(4) The Secretary of State may by regulations set out matters relevant to the constitution and operation of the Committee.” Member's explanatory statement
This amendment sets up a Committee to advise the Secretary of State on regulations made under this Act and other labour market legislation. It is intended to be similar to the Social Security Advisory Committee which advises the Secretary of State in relation to social security regulations.
Baroness Noakes (Con)
As noble Lords know, this is the final group of amendments, and I must say that I am very flattered that so many noble Lords on the Benches opposite have stayed to hear it.
The inspiration for these amendments is the Social Security Advisory Committee, which has been in existence for over 40 years and has established itself as an impartial and expert committee in the highly complex area surrounding our benefits system. Much of the benefits legislation is set out in secondary legislation.
It is an area marked by highly complex law, which has very important real-world effects for the people affected by the secondary legislation. If the Department of Social Security gets it wrong, people can suffer genuine detriment. The SSAC has been an important underpinning to the parliamentary approval of complex social security secondary legislation, and it gives parliamentary accountability some real substance. Parliamentary accountability is the key driver of these two amendments.
Baroness Penn (Con)
My Lords, given the hour, I will be incredibly brief. My noble friend and I do not always find common cause—even though we are on the same Benches—but this is an extremely sensible amendment, and my noble friend has explained the extent to which she has shaped it in accordance with the Government’s wider thinking in their approach to the Bill. Given the amount in the Bill that is being left to secondary legislation, if I was in the department I would welcome a proposal like this, even if it did not stem from our own proposals and officials. In having this proposed expert committee review the secondary legislation and help the department get it right first time, this is a good example of giving very careful consideration to what it would bring. That can only be welcome, so I add my support to my noble friend’s amendment.
Lord Sharpe of Epsom (Con)
My Lords, I thank my noble friend Lady Noakes for so expertly introducing her amendment, and I welcome the contribution from my noble friend Lady Penn regarding the establishment of an employment law advisory committee.
We believe my noble friend’s amendments would significantly strengthen the framework for effective and balanced labour market regulation. The creation of a dedicated advisory committee, modelled on the Social Security Advisory Committee, seems a prudent and timely measure. It would provide the Secretary of State with expert independent advice that draws from a diverse range of perspectives: employers, workers, and independent experts alike. This inclusive composition is vital to ensuring that any regulations developed under the enacted Bill are well-informed, fair and workable in practice.
Moreover, the proposed committee’s clear statutory function to scrutinise draft regulations before they are laid before Parliament would introduce an important additional layer of oversight and transparency. It would help to ensure that regulations and the views of all relevant stakeholders are carefully considered. The requirement for the Secretary of State to publish the committee’s report alongside any laid regulations, including an explanation when recommendations are not followed, would enhance accountability and public confidence in the regulatory process.
In sum, we think that these amendments represent a balanced and constructive approach to policy-making in the complex area of employment law. They would help guard against rushed or poorly considered regulations, support better policy outcomes and uphold the principles of consultation and transparency that are essential to good governance.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the noble Baroness, Lady Noakes, for her Amendments 299 and 300. The Government have already committed to consulting on the detail of implementation and have already undertaken extensive engagement with employers, businesses and workers’ representatives, trade unions and experts. We will continue with this approach as we develop our secondary legislation.
There are some specific instances, such as in the enforcement space, where we are proposing setting up an expert group. Upgrading the enforcement of workers’ rights is an important and complex task, where it is right to draw on expertise from businesses, workers and independent representatives.
That is why the Bill requires the Secretary of State to establish an advisory board. It will play a critical role in providing advice and insight to the Secretary of State on their enforcement function under Part 5 of the Bill, which they will in practice deliver through the fair work agency. This is a proportionate and necessary step to help ensure the agency’s effectiveness. But this is not required across the Bill and wider labour market legislation as a whole. The committee proposed by the noble Baroness would be a repetition of the planned engagement and consultation on the Bill. We have already engaged with more than 190 different stakeholder organisations on our Plan to Make Work Pay, including employers of all sizes, from SMEs to large corporations, trade unions and representative organisations representing thousands of businesses and millions of workers.
We have held round-table discussions focused on particular topics, such as zero-hours contracts, and with particular groups, such as leaders of small businesses or retailers. As a Government, we are committed to engaging closely on our plans, and we will continue to do so. This engagement will continue throughout implementation, including as we develop regulations under the Bill.
On parliamentary scrutiny, the Select Committees will of course scrutinise the government proposals and reforms as they are rolled out. The Economic Affairs Committee had an inquiry on the labour market, and the noble Baroness was herself a member of that committee, so we know that there are already bodies in the parliamentary network that can be used to provide that scrutiny. On the basis of our proposed consultation and the parliamentary scrutiny available, I ask the noble Baroness to withdraw her Amendment 299.
Baroness Noakes (Con)
My Lords, I will not detain the Committee for long. With the exception of the expert group, which I was not aware of, I could have written the Minister’s speaking notes myself. They ran along the lines of, “Blah, blah, blah, consultation; blah, blah, blah, Select Committees” and, basically, “We know best”.
My amendment was a genuine attempt to try to enhance the process of parliamentary scrutiny. As I am sure the Minister is aware, Select Committees are simply not set up to deal with the detail of secondary legislation; they are set up to do some things very well—usually broader-ranging topics such as those undertaken by the Economic Affairs Committee of your Lordships’ House—but they never attempt to look at secondary legislation. I can see a lot of secondary legislation coming down the line and the need for a better process and greater information to help Parliament in its job on that.
I am not surprised by the Minister’s response. Before we get to Report, I will consider again what to do with my ideas, which I had hoped would be constructive contributions to the Government’s Bill. I beg leave to withdraw.