Employment Rights Bill

Debate between Lord Holmes of Richmond and Lord Sharpe of Epsom

Report stage
Wednesday 16th July 2025 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, I will be blessedly brief. I tabled a similar amendment on this issue in Committee to ask the Government, through the Bill, to introduce regulations to designate a body to bring clarity, consistency and fairness and, in effect, to level the playing field in this area of umbrella businesses, on which the Bill is curiously silent. These entities differ dramatically from other sectors of the employment market, the recruiter market and many other sectors of the economy in not having consistency and clarity of approach in how they are treated.

My amendment in Committee suggested the designation of a body to address this issue. At that stage, it was taken by the Government and others around the Committee that I was suggesting the creation of an additional body. Not a bit of it. It was about the designation of an existing body rather than the creation of a new one. With this amendment on Report, I have moved that on and seek to ask the Government to introduce regulations to ensure that existing codes of practice in good standing—ways of operating that all bona fide businesses in this sector of the market already adhere to—apply to all umbrella businesses.

This extraordinarily moderate amendment would bring fairness, clarity, consistency and a levelling of the playing field. I very much hope the Government will accept it. I beg to move.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank my noble friend Lord Holmes of Richmond for his Amendment 110. What this amendment does is simple but important. It encourages the Secretary of State to ensure that in bringing forward regulations under the Employment Agencies Act 1973, they draw upon existing recognised certifications and industry standards. These standards, developed and refined by responsible actors within the market, offer a ready-made baseline for compliance which the Government can and should use.

There is consensus that regulation of umbrella companies is overdue, but as we take this opportunity, let us ensure that the regulation is done well and in a way that is pragmatic, proportionate and effective. This amendment helps point us in that direction, so I hope the Minister can offer some reassurance that the spirit of the amendment will be reflected in the Government’s approach to umbrella companies.

[Lord Katz (Lab)]

My Lords, I am grateful to the noble Lord, Lord Holmes of Richmond, for tabling Amendment 110, which covers the regulation of umbrella companies. The amendment seeks to place an obligation on the Secretary of State to utilise pre-existing industry codes and accreditations as a basis for the regulation of umbrella companies.

We recognise the important role accreditation and trade bodies play in sharing information and best practice with their customers and members. The work of these bodies in the umbrella company industry has had some success in driving up standards. However, this success has been fairly limited, and we would not want to assume that an organisation that is a member of an accreditation or trade body is necessarily compliant with everything. We therefore believe that now is the right time for the Government to step in to protect businesses that already do the right thing and also protect workers.

Many in the umbrella company industry, and those who use umbrella companies, welcome regulation, especially as it will help to level the playing field. This includes public positions taken by the Freelancer & Contractor Services Association, Contractor Calculator, the Recruitment and Employment Confederation and several other bodies’ responses to the consultation run under the previous Government.

We have been clear since Clause 34 was introduced to the Bill that the Conduct of Employment Agencies and Employment Business Regulations 2003 will be amended to apply to umbrella companies. The Government recognise that the regulations in their current form are not appropriate to regulate the activities of umbrella companies. That is because the regulations predominantly focus on entities providing work-finding services or supplying individuals to end clients, which, generally, umbrella companies do not do. Where umbrella companies do provide such services, they would indeed already be covered under the regulations.

The Government have a statutory requirement to consult before any changes are made to these regulations, and as referenced in the recent roadmap publication, the consultation on umbrella companies regulation will be published this autumn. As part of the consultation process, the Government are keen to get views from trade unions, workers and industry bodies in the umbrella company sector. This will enable the Government to better shape policy development. Following consultation, an appropriate and proportionate umbrella company regulatory regime will be introduced in 2027. Once those regulations come into force, they will be enforced by the Fair Work Agency, which will take a risk-led and intelligence-led approach to its compliance regime.

I hope this provides some of the reassurance that the noble Lords, Lord Holmes and Lord Sharpe of Epsom, were seeking, and for that reason I ask the noble Lord, Lord Holmes, to withdraw his Amendment 110.