Employment Rights Bill

Debate between Lord Londesborough and Baroness Noakes

Report stage
Wednesday 16th July 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, Amendment 94 seeks to give the Secretary of State power to introduce exemptions from Part 1 of this Bill. I thank the noble Lord, Lord Londesborough, for adding his name to the amendment. In Committee and on Report, noble Lords have warned about the impact that this Bill could have on businesses. The right to guaranteed hours, the statutory sick pay changes and the day-one rights which we debated earlier all create problems for businesses, especially small businesses and micro-businesses. The Government are ignoring these concerns.

These provisions directly affect businesses, but noble Lords opposite should share our concerns that the real effect of these new rights will be fewer job opportunities. As we have heard, employees with risk factors, from the employer’s perspective, will find it harder to get work because of day-one rights and the statutory sick pay changes. These include young people, people with incomplete job histories, people with a history of illness and ex-offenders. People who value part-time flexible work—this particularly affects women and students—might find fewer opportunities because employers fear triggering the guaranteed-hours requirements.

The Government are introducing these changes at a time of great economic uncertainty. While the employment numbers continue to edge upwards, there are warning signs in a rising unemployment rate, falling job vacancies and falling average hours worked. Business surveys are consistently flagging a reluctance to hire among businesses and increased expectations of workforce reductions. Even the Governor of the Bank of England, not a man to be careless with words, has flagged a slowdown in the jobs market. Growth is virtually non-existent and our inflation rate is now the highest in the G7. This economic background increases the likelihood that this Bill will create real pain for some businesses, and that pain will inevitably end up being felt in the workforce.

In Committee, I argued for exemptions from Part 1 being hardwired into the Bill for small and micro-businesses. My noble friend Lord Sharpe of Epsom’s Amendment 159 in this group is similar. His Amendment 107 would exempt farm businesses of all sizes from some of the provisions. These are both great amendments, but my guess is that the Government are not yet psychologically ready to admit that some sorts of businesses would be so hard hit by this Bill that they should be exempt from its scope. The Government have rejected exemptions, citing the need to avoid creating a two-tier workforce, despite the fact that in an open economy such as ours, workforce tiering occurs naturally and is certainly a feature of the current UK workplace.

My amendment is a simple one. It does not require the Government to do anything. It is a reserve power which the Government can use to assist the UK economy if things turn out as badly as we fear. It gives the Government power to create exemptions from all or any of the Part 1 provisions to categories of employer as defined by the Secretary of State. It thus allows very targeted interventions if the Government believe that it is necessary.

Some of the potential pain points in the Bill can be dealt with in the way that detailed regulations are framed. Amendment 105 in this group helpfully requires the Secretary of State to have regard to seasonal work when making regulations. However, regulations cannot deal with removing burdens from, for example, small and micro-businesses, which are the focus of several amendments in this group in the name of my noble friend Lord Leigh of Hurley. They cannot address whole sectors, such as hospitality or agriculture, nor home in on subsectors of those sectors, such as the pub sector, which could be massively impacted by Clause 20, or particular types of farm.

It would do no harm to the Government’s position if they accepted Amendment 94. They can press ahead with plan A and see what happens. If, however, they discover real problems of the kinds that many noble Lords from across this House have described, it would give the Government a backstop power if they, and they alone, think that it is necessary. On this basis, I commend Amendment 94 to the Government and I beg to move.

[Lord Londesborough (CB)]

My Lords, I will speak to Amendment 94, tabled by the noble Baroness, Lady Noakes, and Amendment 159, tabled by the noble Lords, Lord Sharpe and Lord Hunt, both of which I have signed. I also support the amendment in this group tabled by the noble Lord, Lord Leigh, which calls for some scientific and statistical significance in polling a representative group of SMEs on the impact of certain provisions in the Bill. This Government’s consultation with SMEs is, to put it politely, curious and opaque, lacking, so far, any meaningful numbers or quantified response, and with barely any names. Consultation carries little weight if it lacks statistical credibility.

The entirely sensible and pragmatic amendment tabled by the noble Baroness, Lady Noakes, seeks to hand the Secretary of State regulatory tools to bring in exemptions to Part 1 for certain groups or sectors, for specified periods of time, should he or she decide that these are appropriate.

Noble Lords may remember that the Government were offered similar powers of exemption by amendment in the NICs Bill earlier this year, voted through enthusiastically by Conservatives, Liberal Democrats and the majority of Cross-Benchers, only to receive the custard pie treatment in the other place under the cloak of financial privilege, which was a great pity. The noble Baroness has, very generously in my view, made the same offer again, and I hope it gets a more constructive response this time.

For there is broad consensus across business that Part 1 of the Bill will have a significant impact on the jobs market, especially for SMEs, but let us be frank: the degree or level of impact is highly unpredictable. If we see the sorts of outcomes suggested by membership surveys from such bodies as the ICAEW and the FSB, then the Secretary of State would be well advised to grab the option of these exemption tools with both hands rather than doggedly sticking to a one-size-fits-all mantra.

Turning briefly to Amendment 159, seeking the disapplication of certain provisions for small and micro-businesses with fewer than 50 employees, this gets my wholehearted support. I will spare the House a repeat of my arguments in Committee. But for the Government to argue, as I am sure they will, against this amendment, because they do not want to create a two-tier workforce, simply does not reflect economic reality or indeed the jobs market or the structure of businesses.

SMBs cannot compete with large businesses when it comes to pay scales, training, promotion opportunities, pensions and a whole range of other benefits. That is a reflection of their size, their culture and their stage of development, yet they succeed in delivering strong employee loyalty and identification. This is true of family businesses, start-ups and scale-ups. To apply all the provisions in this Bill, and specifically those listed in this amendment for disapplication, to a micro-business employing five staff as it does to a multinational employing 10,000 is wilfully indiscriminate and, I suggest, economically illiterate. That is why I put my name to the amendment.

Employment Rights Bill

Debate between Lord Londesborough and Baroness Noakes

Committee stage
Monday 16th June 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, the amendments just spoken to by the noble Lord, Lord Carter of Haslemere, are clearly very important. I hope the Government will take them extremely seriously. I have three amendments in this rather strange group, which seems to be the dustbin for amendments broadly about the fair work agency but which have not found their way into a separate group through the degrouping process.

My Amendment 269 calls for some transparency about the advisory board which Clause 90 requires the Secretary of State to set up in connection with their enforcement functions. Under Clause 90, the Secretary of State decides on what matters the board should provide advice, but there are no provisions about what happens to that advice. The Secretary of State can ignore it and no one, importantly including Parliament, will be any the wiser. My amendment is modest, requiring a report setting out the advice given to the Secretary of State at least once a year. Importantly, that report would be laid before Parliament, which would be an additional tool allowing it to hold the Secretary of State accountable for the discharge of the huge new powers under the Bill. I am sure that the Minister supports effective parliamentary accountability, so if this amendment does not find favour, I invite her to set out how the Secretary of State will be held accountable by Parliament in relation to the enforcement functions.

My Amendments 270 and 279 return to one of our recurring themes on this Bill: its effect on small businesses. I am grateful to the noble Lord, Lord Londesborough, for adding his name to the amendments. Amendment 270 is directed at the labour market enforcement strategy that the Secretary of State is required to produce under Clause 91. My amendment merely requires a separate analysis of, and a strategy for, enforcement for small and micro businesses—that is, those with fewer than 50 employees. Enforcement really should not be one size fits all. What is reasonable to expect from a large corporation with a well-funded HR function is not the same as can reasonably be expected from a business with 10 employees.

I am not seeking to say that small businesses should not comply with employment legislation; I am trying to ensure that the circumstances and needs of smaller enterprises will be taken into account in the enforcement strategy. For example, the impact of heavy-handed use of the entry and seizure powers would be drastically different for a well-resourced organisation compared with a small organisation. In a small business, the burden of dealing with enforcement activity would almost certainly end up at the door of the business owner, who would inevitably then be distracted from running the business.

We have to remember that small and micro businesses account for the vast majority of businesses in the UK and are the backbone of the UK economy. We all in your Lordships’ House want to see growth in the economy, but—as the Minister will be aware—growth does not come from what Governments do, it comes from what businesses of all shapes and sizes do. Therefore, imposing onerous enforcement mechanisms and powers could threaten the ability of small businesses to operate and play their part in the success of our economy.

We need small businesses to thrive because they employ nearly half the private sector workforce in our country, and because small businesses are where large, successful businesses start; without the success of small businesses, we will not have businesses that grow to be large ones in due course. So my point is that enforcement needs to be sensitive to the circumstances of small businesses; that is all my amendment is seeking to achieve. I hope that the Minister can support that.

My final amendment, Amendment 279, is inspired by the same concerns about the impact of the new powers on small and micro businesses. Clause 141 creates a new set of offences for officers of corporate bodies and makes those officers personally liable for prosecution if they have consented to whatever action has broken the law or been negligent.

Again, we have to look at how this is likely to impact on small businesses. They are often family affairs. The directors are often the main entrepreneur, together with the entrepreneur’s spouse and maybe some representatives of the adjacent generations; outside directors are not common at the small end of the spectrum. Under this Bill, a small company will already be liable to be prosecuted for the full range of offences set out in the Bill. So what is gained in public policy terms by allowing the enforcement authorities to proceed against individuals as well in such cases?

Let us say that the directors include the business leader’s husband and business leader’s father, who founded the business. Such companies operate on informal lines, unlike the large corporations, which have legal teams and all sorts of compliance functions with adequate forms of documentation. It would be too easy for enforcement to be aimed at individuals just because they were directors of very small companies that did not see the need for highly formalised decision-making processes. That is not how small businesses actually operate in practice. They would probably be very soft targets for enforcement teams, especially those trying to earn their spurs by securing some convictions. My contention is that we should not let that happen.

My amendment takes small and micro businesses out of the scope of Clause 141 entirely. If the Government do not like that—and I suspect they will not like it—can the Minister explain what protections will be built into enforcement to ensure that prosecutions are aimed at the most egregious behaviour rather than at the most convenient targets?

[Lord Londesborough (CB)]

My Lords, I rise to speak to two amendments in this group, 270 and 279, which are both under the name of the noble Baroness, Lady Noakes. I support and have added my name to both of them. I will start with Amendment 270, which addresses Clause 91 and calls—quite reasonably, in my view—for separate analysis and proposals for a labour market enforcement strategy for small and micro businesses.

As the noble Baroness pointed out, here we have another section of the Bill where the one-size-fits-all approach will be very difficult to enforce without running the risks and incurring the costs of applying the proverbial sledgehammer to crack nuts—the nuts in this case being the small and micro businesses with fewer than 50 staff.

Given the huge scope of this Bill, which has approaching 200 clauses, small businesses are very likely to have much higher levels of non-compliance—much of it inadvertent—compared with their medium-sized and larger counterparts. This is for two principal reasons. First, they simply do not have the in-house HR compliance or legal resource to cover all this legislation, and very often it will fall on the business owner or manager to keep up, while he or she struggles with all the other challenges of trying to run a business profitably and sustainably in the face of all sorts of macroeconomic and microeconomic headwinds.

Secondly, there are the disproportionate costs associated with being fully compliant that fall on small and micro enterprises. They simply do not have the budget or cashflow to spend on external advisers and employment lawyers who can advise them on how to navigate all the new clauses and conditions that run across the hundreds of pages of this Bill. As we have heard, a visit to a small or micro business from an enforcement officer, however well trained they are, will have a far greater and more unsettling impact on the owner and their staff than a visit to a medium-sized or large business.

As the noble Lord, Lord Sharpe, pointed out, I note that the Government appear not to be planning to provide any material assistance to SMBs to help them understand and comply—or are they? I throw that question to the Minister. As we know, the impact assessment for the Bill rather shrugs its shoulders by admitting that SMBs will be disproportionately hit, in terms of costs and their time, and they are apparently just expected to suck it up. As the noble Baroness said, this is not to argue against an enforcement strategy per se, but it needs to be tailored and proportionate to the size of the business, specifically for micro and small companies.

On Amendment 279, it is for very similar reasons that I support this exemption for officers of micro and small businesses from the extension of liability in Clause 141. I support an exemption because these businesses typically do not have boards of directors or advisory groups, or non-exec chairs or governors; they tend to be managed by one or two principals who hold responsibility for pretty much everything to keep the business going, including finance, sales, marketing, customer engagement, product or service development, not to mention general HR which, as we all know, is going to get more far more complicated.

Finally, speaking from my own lived experience as an adviser to several small companies, and having run an SME myself for nearly 30 years, I say that we really must guard against deterring business owners and entrepreneurs from starting up and scaling businesses, and specifically from creating new jobs, often at high risk, without threatening them or, indeed, their officers with excessive and menacing levels of extended liability. I say this, mindful of the fact that the ONS reported last week that we had lost 109,000 payroll jobs in the space of one single month. It is not a great time to be spreading fear and uncertainty.

Employment Rights Bill

Debate between Lord Londesborough and Baroness Noakes

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.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Debate between Lord Londesborough and Baroness Noakes

Committee stage
Wednesday 29th January 2025 Grand Committee

[Lord Londesborough (CB)]

My Lords, I shall speak to Amendments 22, 39 and 53 in my name in this group, to which the noble Baroness, Lady Kramer, and my noble friend Lady Neville-Rolfe have added their names. I shall also speak to Amendments 6 and 33, tabled by my noble friends Lady Neville-Rolfe and Lady Noakes respectively.

Rather than taking a sectoral approach, about which others spoke passionately last week, my three amendments focus on the size of businesses and organisations impacted by the measures in the Bill, specifically those categorised as small businesses, which means that they employ between 10 and 50 full-time staff. I should again declare my interests as set out in the register, as I advise and invest in a number of businesses of this size, predominantly start-ups and scale-ups. These are the companies that grow and create jobs at the fastest rate and, through their size and agility, seize the nettle of productivity. If I may mix my metaphors for a moment, these are the acorns that seek to become unicorns or, at the very least, sturdy oaks.

The Department for Business and Trade reports that there are some 220,000 businesses across the UK that employ between 10 and 50 staff—that is 4.3 million of the 28 million jobs in the private sector and they generate £780 billion in annual turnover. However, this group involves not just fast-growing early-stage start-ups but a huge swathe of family and local businesses spread across the country and, indeed, businesses that have been struggling to keep their heads above water in what have been five very difficult trading years.

While the Government have sought to protect the majority of our micro-businesses, those employing between one and nine staff, from rising NICs, they have left all other small businesses exposed to these sudden and dramatic increases. In terms of impact, the Government tell us that 250,000 employers will see their NICs decrease, 940,000 will see theirs increase, while about 800,000 employers will see no change. This has allowed the Government to claim that the majority of employers will see no increase. With respect, that is deeply misleading. The question that matters is what proportion of jobs will attract increased national insurance contributions. I ask the Minister that question. Can he confirm, if he does not have the numbers at hand, that in fact the number is close to 80%?

I turn to the financial impact of Clauses 1, 2 and 3 to small businesses. For businesses of 25 staff paying the national full-time median salary, which is put at £37,000 by the ONS, their NICs bill will rise from £90,000 to £110,000. That is an increase of more than 20%.

However, most small businesses, given their nature and stage of development, pay less than the median national average. For them, the increases get even steeper. For those employing 25 staff and paying an average salary of £25,000, as is common out in the regions, their NICs bill will rise by no less than 30%. For those employing 50 staff at that salary, they face an eye-watering 33% increase. As we know, the main culprit for those outsized increases is Clause 2: the brutal and, in my view, economically illiterate drop in the per-employee threshold from £9,100 to £5,000. Ironically, this hits the lowest-paid jobs the hardest. In short, it is a regressive tax.

Then we come to retail and hospitality, with thousands of outfits that rely on part-time shift workers. For those employing 20 part-timers, typically earning £300 per week, their NICs bill goes up by an extraordinary 70%. I will stop there with the examples but noble Lords, including the Minister, will be delighted to know that I have here all the spreadsheets to prove it; I will happily share them out later. In the interest of transparency, on the impact for 5 April, I strongly suggest that the Government have the honesty to publish these figures.

These increases are of course bad news for the working person, especially the 4 million of them who work in small businesses. They rather grate against Rachel Reeves’s statement this morning about kick-starting the economy. Let me turn to my Amendment 22, which seeks to address this in what I hope noble Lords will agree is a measured, proportionate way to help protect our small businesses. In short, the per-employee threshold would remain at £9,100 for those employing fewer than 25 staff, while those employing fewer than 50 but more than 25 staff would see their threshold reduced to £7,500. Somewhat reluctantly, I have left the £9,000 threshold for all businesses employing more than 50 staff.

By my calculations, the nominal cost to the Treasury of this key amendment would be less than £2 billion—that is, to support and sustain 4 million jobs and almost £800 billion in turnover. I humbly suggest that this amendment would more than pay for itself in economic growth and increased revenues to the Exchequer. Commencing Clause 2 without undertaking a full impact assessment on small businesses—addressed by Amendment 33 in the name of the noble Baroness, Lady Noakes, which I fully support—strikes me as reckless.

I turn now, much more briefly, to my Amendment 53, which addresses the increase in the employment allowance. Clause 3 is designed to soften the increase in NICs from Clauses 1 and 2. It offsets the costs but, having crunched the numbers, it does so only for those employing seven staff or fewer. My Amendment 53 would raise the employment allowance from £10,500 to £15,000 for all small businesses employing fewer than 25 staff. This would help around 200,000 businesses across the country. I estimate that the cost to the Treasury would be less than £1 billion. Again, I argue that such an amendment would more than pay for itself in the medium term.

I hope that the Minister will carefully consider the amendments in this group, given the severity of these increases to SMEs and the potential damage to both jobs and economic growth. I have spoken to Amendments 22, 39 and 53.

[Baroness Noakes (Con)]

My Lords, I have Amendment 33 in this group; I thank my noble friends Lady Neville-Rolfe, Lord Ahmad of Wimbledon and Lord Howard of Rising for adding their names to it. As my noble friend Lady Neville-Rolfe said, my noble friend Lord Ahmad of Wimbledon is unfortunately unable to join us for the early part of this Committee. He very much regrets that he is not able to take part because he cares a lot about the fate of small and medium-sized businesses.

My amendment would delay the commencement of the Bill, and therefore the extra national insurance contributions, until the tax year after an impact assessment focusing on the impact of the Bill on smaller businesses has been published. My amendment is similar to Amendment 59, tabled by the noble Baroness, Lady Kramer, which was debated on our first day in Committee. Amendment 59 required an ex-post impact assessment, while mine is on an ex-ante basis. Amendment 59 also used a rather broad definition of SMEs, including those with employees of up to 250; my amendment is more granular and focuses on the smaller end of the SME spectrum, which is where most SMEs are.