Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Thursday 8th May 2025 Lords Chamber

[Lord Londesborough (CB)]

My Lords, I will speak briefly to Amendment 19A in the names of the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, and offer my support for Amendments 20 and 21.

My main concern, as I expressed on the first day in Committee, is over the impact of guaranteed-hours contracts on the small and micro-business sector, specifically those with fewer than 50 staff. Amendment 19A is particularly relevant to start-ups and scale-ups, and we cannot ignore their high-risk operational context. Again, I declare my interest as set out in the register: I chair, advise and invest in a range of start-ups.

Clause 1’s right to guaranteed hours will inhibit job creation but also job mobility and flexibility, as we have heard, if applied to such businesses, to the detriment of both employer and employee. Rigidity—I think the noble Lord, Lord Hunt, used that word—is especially dangerous in a flat economy environment such as we have at the moment.

Small business planning requires agility and flexibility when creating new jobs. As we know, business circumstances will change, often on a month-to-month basis, given the natural volatility around budgeting, forecasting revenues, forecasting bookings and indeed anticipating demand. When we talk about

“the reasonableness of entering into a limited-term contract”,

we simply cannot afford to ignore the early-stage development of these companies and watch them avoid risk-taking.

The Member’s explanatory statement to Amendment 19A quite rightly points to

“unforeseeable changes in business conditions”,

and that is especially relevant to small businesses. As I know through bitter experience, as both an employer and an investor, there is often a huge delta between entrepreneurs’ forecasts and the actual outcomes. This is about not just seasonality, events or the weather but unpredictable customer demand.

We should therefore not handicap entrepreneurial risk-taking, which this economy so desperately needs to encourage, and specifically the creation of new jobs, by applying such blanket restrictions on limited-term employment contracts. We need a more nuanced approach, as this amendment suggests, and I ask the Government to give it serious consideration.

[Baroness Noakes (Con)]

My Lords, I support the amendments in this group in the names of my noble friends on our Front Bench. I have a number of concerns about the guaranteed-hours provisions in the Bill, one of them being that they are drafted almost wholly from the perspective of workers and pay little heed to the needs of employers. I do not believe that is a good way to create employment law to underpin a healthy economy.

On our first day in Committee, the noble Lord, Lord Barber of Ainsdale, who is not in his place today, and the noble Baroness, Lady Carberry of Muswell Hill, both spoke about the work of the Low Pay Commission on zero-hours contracts. I was grateful to them for being pointed in that direction. I have a great deal of time for the work of the Low Pay Commission, which is always balanced and very careful, so I went back and looked at the 2018 report. Unsurprisingly, I found that it does not provide the copper-bottomed support for the Bill that noble Lords opposite have claimed—I should also say that the employment bodies represented on the Low Pay Commission have told us that as well.

The Low Pay Commission did indeed recommend that workers should be offered guaranteed-hours contracts, but, importantly, it also recognised that there would be circumstances in which it would not be reasonable for the employer to have to do that. There is not a trace of that in the Bill. The Low Pay Commission was clear that the Bill should set out specific circumstances in which the employer would not have to offer guaranteed hours. The commission cited with approval some equivalent legislation which was at that stage going through the Irish parliament, which provided, among other things, that adverse changes in the employer’s business or the existence of temporary factors would allow employers not to offer guaranteed hours.

Like the noble Lord, Lord Londesborough, I believe that Amendment 19A is eminently reasonable in that context. It does not give an employer carte blanche to ignore guaranteed hours but allows for some genuine business circumstances to be taken into account by the employer when looking at whether guaranteed-hours contracts should be offered.

At the end of the day, if we do not have successful businesses, there will not be any jobs on any kind of contract available. As I said on our first day in Committee, I am particularly concerned, as is the noble Lord, Lord Londesborough, about small and micro-businesses, which really need to be allowed the flexibility if we are to protect the work opportunities of around half the private sector workforce.

Even if those small and micro-businesses survive the incredible bureaucracy associated with these guaranteed hours, they will potentially not survive the substantive impact of the hours if they are required in all circumstances to offer guaranteed-hours contracts. Of course, this is particularly the case in the hospitality sector, the largest user of zero-hours contracts; my noble friend Lord Hunt spoke about the problems in that sector. There are also very large numbers of small and micro-businesses in that sector.

Recognising some very limited flexibility, my noble friend’s Amendment 19A is actually very modest. It would go some way towards making this new requirement to offer guaranteed hours work in the context of businesses that have to face difficult circumstances, and at the moment the Bill pays no attention to that.

[Baroness Coffey (Con)]

My Lords, I support the amendments tabled by my noble friends. I am just thinking of my career. I have had quite a conventional career in many ways, but I have also had many extra roles, particularly when I was a student—I am conscious that we will come to Amendment 19B separately later. It is important to reinforce the challenges in starting up or expanding a particular business. It is well said that a coffee shop will know within the first week whether it will succeed. You could argue that there are different factors, but within the first month a business will certainly know whether the footfall and the sale per customer justify the number of people it is employing and adapt accordingly.

As my noble friend Lord Hunt of Wirral mentioned, there is also this extended element about things such as holidays. It may surprise your Lordships to know quite how many jobs are, frankly, based on whether it rains and people cancelling going out to do different things. That is one of the reasons why, in particular but not exclusively, many hotel chains have started having a price differential: basically, you get a better deal if you book up front, but you cannot cancel or get your money back. Indeed, it is why even more restaurants are, effectively, starting to pre-charge an amount of money that is expected so that people do not cancel. Having lived in touch of the coast for most of my life, I can assure your Lordships that the fluctuation in how many people actually turn up to a resort for the day in a town is real, and what that means for temporary jobs.

That is why I think my noble friend Lord Hunt has found a good way of trying to help the Government to consider some of the everyday decisions that employers have to make as to whether they open up in the first place, whether they try to expand, and whether they try to get the growth. If I go further on to Clause 20, at the same time that the Government are trying to encourage businesses to go into artificial intelligence and see all that can be embraced in that regard, they need to bear in mind that businesses will not invest in such technologies if they are concerned that the other costs will be so detrimental to them.

We keep having this Catch-22 situation: if the Government want growth, they need to recognise the success where employers have been given the chance to scope and to be flexible, although I understand entirely the Government’s intent that the employer should be reasonable with the people that they take on. It is for these reasons—and I will speak more in the next group—that I believe that the Government should seriously consider how they operationalise this. We keep hearing about more and more consultations. We have heard people from the British Retail Consortium, from retailers and from hospitality saying that these are the real issues. We are almost doing their consultation for them by putting forward these amendments, so I hope that the Minister will look on them carefully in his consideration.

--- Later in debate ---

[Baroness Lawlor (Con)]

My Lords, I speak in favour of Amendment 22, which would allow the duty to provide reasonable notice not to apply in certain cases, and Amendment 24, which would do likewise for the duty to provide compensation under new Section 27BP(1). The Bill’s approach is likely to damage the effective working of the labour market, for which any sensible law needs to take account of the delicate balance between the needs of a business, which needs a workforce, and those of a workforce, which depends on a business succeeding to provide work and income for the future.

If a Bill does not account for exceptional circumstances, it becomes a straitjacket on all parties. In the case of this Bill, in providing for exceptions to guaranteed-hours, reasonable notice and compensation obligations, it should take account of the difficulties businesses have to navigate to keep afloat and continue to make a success of things, as well as contribute to the whole economy and the country’s overall welfare, provide jobs for the labour market, and offer opportunities for people to work, earn and, sometimes, get their first job on the jobs ladder.

We understand that businesses have both quiet periods and busy periods—such as hospitality events—where they need extra hands. A business must allow for periods of extra business as a matter of course—some of these are predictable, others not. Businesses know there are times when cover is needed with no notice, such as when a team member is off sick or at a funeral, but by the same token they need to be able to avoid adding to their problems and costs when they are a victim of circumstances that unexpectedly change. Yet the Bill requires the employer to give notice of changes and make provision for compensation if a shift is cancelled, moved or shortened without sufficient notice.

These amendments simply ask that a Government can make regulations so that the duties under new Sections 27BI and 27BJ need not apply. That would give power to a responsible Government to ensure that there can be exceptions, so that businesses are not burdened with the costs and time involved in the tribunal process and potential compensation payments in cases where, due to unlikely and unforeseen circumstances, the guaranteed-hours work was not available at short notice.

We have already heard examples, but no business is exempt from the difficult changing circumstances with which they contend. Given the burden that the business sector will face under the guaranteed-hours clause, a Government will have few tools at their disposal to tackle what could be an unfair obligation—one that might be mitigated by circumstances in the normal course of events—to exempt the reasonable notice required for changes or cancellations that have an impact on the business, and the compensation obligation, which will add unfair costs to a business.

I will take three sectors—each very different—to illustrate a potential example. The first is the retail sector, where extra help is needed to deal with a delivery and prepare it for the shelves overnight. What if the delivery van does not arrive, or the motorway is closed due to an accident or roadworks? The business has little or no notice of the failure, yet it will lose custom and income on lost sales. None the less, there is no provision in the Bill to allow for it to give less than what, under the measure, will be reasonable notice, or to protect it from paying compensation.

In the care sector, extra hours may be needed to help with certain residents needing extra support, or someone due to arrive on a given day. What happens if the person dies or the resident falls ill, has a heart attack and must go to hospital right away? There is no notice of that, and the extra work does not materialise. The care home will lose income on its empty room and overhead, yet payment will be expected. Where is the money to come from—the local authority, the care recipient, or the estate if it is a death? What will the care home do to tide over an income shortfall when having to pay its suppliers for everything from food and cooking to linen, room cleaning and care?

The CEO of the Carers Trust explains that social care providers are often forced to rely on zero-hours contracts because of a “lack of funding” from local authorities. She says:

“If zero-hours contracts are banned”—


or, I would add, made more difficult or costly—

“social care providers must be given the funding to afford the increased costs that brings”.

The CEO of the National Care Forum says that

“these measures must be accompanied by the financial and wider support necessary for providers to implement them, as well as interim measures to boost care worker pay”.

These changes must be reflected in its funding so that it can continue to do its vital work. So are the Government prepared to make a commitment to cover the costs that will be incurred if these clauses go through unamended?

Another example would be a conference organiser where the IT system fails. Despite a service contract in place to repair it instantly, nothing can be fixed because the failure lies elsewhere: a cyberattack or an energy blackout. This can happen overnight. The business loses its data, it loses customers, who are unable to pay an entry price, and it loses an overhead. Depending on how long it is before the system can be got back to normal, it may lose so badly that, ultimately, if the problem recurs, it may have to curtail operations and overheads. Without the amendments allowing the Government to provide for exemptions from the clause, there will be higher costs that may ultimately lead to the failure of the business.

There are enough uncertainties and costs for employers without making these worse, but the obligations of the Bill and these clauses could add significantly to costs and complications. Who will pay these extra costs? We know that this Government have been in the habit of saddling the taxpayer with additional costs in respect of workers in the public sector but not for businesses or charitable trusts, or indeed independent schools in the case of imposing VAT. What about the care homes taking local authority work? What about the costs of the uncertainties of the Bill itself? Although the compensation clause stipulates that compensation will not exceed pay for the lost shift, we do not yet know what the amount will be, what “short notice” is supposed to mean and what is meant by “qualifying shift”. We have to wait for regulations.

There are good reasons for these amendments. If we want businesses and the labour market to flourish, and to enable businesses to navigate the unwelcome outcomes of unexpected problems preventing expected workloads without adding to their costs, there are good reasons for the Government to accept them and for the regulations to respect the spirit in which they have been made.

[Baroness Noakes (Con)]

My Lords, I will comment briefly on my noble friend Lord Sharpe of Epsom’s Amendment 28, which replaces the test of reasonable belief with that of formal confirmation. I mentioned earlier the work done by the Low Pay Commission on zero-hours contracts when it reported in 2018. It also examined the issue of compensation for short-notice cancellation of shifts. It emphasised in its report that there would need to be fairly rigorous record-keeping. It said that both employers and employees would need

“proof a shift had been offered”.

That speaks to the content of Amendment 28. It does not seem to me to be sensible to have something that rests solely on reasonable belief, because that is impossible to prove and would result in difficult questions being put to an employment tribunal. Although I am obviously not in favour of imposing bureaucratic requirements on employers, this is one area where the legislation should point towards there being some formality of record-keeping so that there can be no dispute about whether shifts have been offered or cancelled.

[Lord Fox (LD)]

My Lords, in the main, this is a reasonable debate—or, rather, a debate about “reasonable”. We have yet to hear the proposal from the noble Lord, Lord Sharpe, on Amendments 22 and 24, which sit outside the theme of the other amendments in this group, which I expect to be about Henry VIII powers. We shall see.

My noble friend Lord Goddard proposed his amendment, and I am here to speak to my Amendment 27. My amendment is about the definition of “reasonable notice”, and what that means. The noble Lord, Lord Lucas, proposes a different time for reasonable notice in his Amendment 21A. Either way, this is an opportunity for the Minister to walk us through what the Government are thinking around reasonable notice.

My noble friend set out a probing amendment to ask about “reasonably believed”, and in Amendment 28 the noble Lord, Lord Sharpe, essentially seeks to replace that. If the noble Baroness, Lady Noakes, is an official spokesperson for the noble Lord, Lord Sharpe, I can see many reasons for adopting something that is clear—albeit bureaucratic. I never thought that I would hear the noble Baroness speak to bureaucracy. However, somehow being able to show that belief is backed up by documentation may well prove to be essential in the good managing of workers’ relationships.