Employment Rights Bill

Baroness Jones of Whitchurch Excerpts

Committee stage
Tuesday 13th May 2025 Lords Chamber

[Baroness Fox of Buckley (Non-Afl)]

My Lords, there have been some excellent debates in this group. I ask for some clarification, particularly from the Government, on something I am confused about. I am sympathetic to Amendment 74A. The noble Baroness, Lady Cash, made a very useful and insightful contribution that brought another layer to the discussion. There is a danger of us talking about these things technically, yet in a rather old-fashioned way, when there is a lot more evidence and new phenomena to consider.

Amendment 74A looks at the impact on—

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

I am sorry to interrupt the noble Baroness, but we are not debating Amendment 74A. It is grouped elsewhere.

[Baroness Fox of Buckley (Non-Afl)]

I have the right group; I have just said the wrong thing.

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[Lord Fox (LD)]

My Lords, I thank all noble Lords who have spoken in what has been a very interesting debate. I will try to reflect on what I have heard as I speak; that will make my job quite difficult and probably make my speech completely incoherent, but I will do my best.

We closed last week with a couple of de-grouped Conservative amendments. I promised to reserve what I would say on statutory sick pay for this group, which means that I am unlikely to speak on the next group. Last week the noble Lords, Lord Sharpe and Lord Hunt, spoke firmly against the Government’s proposed changes. I have seen evidence of businesses arguing strongly either for the status quo or for a two-day threshold.

I am not a behavioural scientist, but I can read a room politically. The party that is sitting on a huge majority in the Commons has made it very clear where it stands on this issue, and that has been reasserted by some of the even stronger comments we have heard from the Benches opposite. Businesses have drawn the same conclusion. Many of those I talk to are seeking ways to ameliorate this, rather than eliminate it, which is probably unlikely.

I was interested to hear the noble Lords from the Conservative Front Bench speak to Amendments 71A and 71B. Their version of amelioration appears to be to reduce the amount of SSP, or at least severely limit it. We heard a different story from the noble Baronesses, Lady Lister and Lady O’Grady, who set out why SSP is important and why the rate is meaningful. To contextualise poverty, we are talking about the poorest people who are working people but still extremely poor. It is difficult to overestimate the generosity of this scheme, but that is what I have heard from several on the Conservative Benches. This is a very modest offer. With her statistics, the noble Baroness, Lady Lister, set it out very clearly, as did the noble Baroness, Lady Smith.

Before I talk to my own Amendment 74 and Amendment 73, I will deal with the others. In Amendment 75, the noble Lords, Lord Sharpe and Lord Hunt, call for a reviewer to report within two years. I mentioned there is a subsequent group which also has impact assessment amendments in it. I am not really sure why we are debating them separately. Rather like the noble Baroness, Lady Fox, I am going to mention 74A to 74C, which have been shunted into a separate group. Taken together, there is a slightly curious mismatch of timings: Amendment 75 is after two years, 74B and 74C after six months and 75A after a year. I agree that there do need to be impact assessments following whatever your Lordships decide, perhaps on a more systematic calendar than the ones suggested.

I am interested in the pre-emptive impact assessment. For the benefit of your Lordships’ Committee, it would be good to hear the Minister spell out the detail of the impact assessment of business on the current proposed measures. If, as the Minister says, the costs will be relatively modest, the costs of Amendment 73 or 74 would also be relatively modest, which takes me to the point in question.

As we have heard very eloquently from the noble Baroness, Lady Coffey, she and I have come up with very similar suggestions in terms of amelioration, which is what I was talking about earlier. Rather like the noble Baroness, Lady Noakes, I slightly prefer the version from noble Baroness, Lady Coffey, but that is not the point—this is not a competition. We would like to sit down with the Government and thrash through a way whereby a rebate scheme can be reintroduced. This seems to be the sensible approach. We care deeply about SMEs—they drive a huge part of our economy. This is a way of making sure that they do not get disadvantaged as employees get what they deserve as SSP. That is what I am asking for from these Benches. Very sensibly, the noble Baronesses, Lady Coffey and Lady Noakes, and others supported it. I hope that the Minister will be able to make a positive noise about that and we can sit down and have that conversation.

Today, we have heard that SSP is absolutely vital for a section of society who are already massively disadvantaged. We should not be drawing lines and pushing them further down. We should be finding ways of making sure that they are not disadvantaged even more and, at the same, we should find ways of making sure that our SME sector is not also disadvantaged.

[Baroness Jones of Whitchurch (Lab)]

My Lords, we have had a really good debate on these issues, and I hope that I can do justice to all the questions and points that have been raised.

I begin with Amendment 75, tabled by the noble Lords, Lord Sharpe and Lord Hunt, on independent reviews into the effects of SSP reforms on small and medium enterprises. As noble Lords will be aware, the Government have already undertaken a regulatory impact assessment, which was published on 21 November 2024 and can be found on GOV.UK. This considered the likely direct business impact of the SSP changes, including on small and medium enterprises. In the regulatory impact assessment, the Government estimated that delivering these measures will cost businesses a modest £15 extra per employee. I assure noble Lords that the Government remain committed to monitoring the impact of these SSP measures. We intend to conduct a post-implementation review of the measures in the Employment Rights Bill within five years of implementation. Additionally, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of the SSP changes on a range of employers and employees.

I draw attention to the Keep Britain Working review. We asked Sir Charlie Mayfield to lead this independent review, which will consider recommendations to support and enable employers to promote healthy and inclusive workplaces, support more people to stay in or return to work from periods of sickness absence and retain more disabled people and people with health conditions.

While I am speaking about the variety of illnesses that people on sick leave incur, let me address the issue of mental health absences, which was raised by the noble Baronesses, Lady Cash and Lady Smith, the noble Lord, Lord Sharpe, and my noble friend Lord Davies. Our proposals have to be seen in the wider context of the Bill. The Bill is intended to improve the experience of employees at work, so measures such as flexible working, guaranteed hours and protection from harassment could—we believe will—reduce stress at work, potentially leading to fewer incidents of burn-out and better employee mental health, and therefore fewer related absences. For us, that is an important challenge that we intend to monitor.

Amendment 73, in the name of the noble Baroness, Lady Coffey, would introduce a rebate scheme to reimburse SMEs for the cost of SSP for the first four days, although I think she clarified that she meant three. I thank her for her interest in SSP, and of course I appreciate her extensive knowledge and experience in this area, as a former Secretary of State for Work and Pensions. As previously mentioned, regarding waiting days, the changes we are making to SSP will cost businesses around an additional £15 per employee, a relatively modest amount in comparison with the benefits of reduced presenteeism and the positive impact that this will have on our lowest paid members of society. As the noble Baroness may recall, we previously delivered SSP rebate schemes such as the percentage threshold scheme. This was abolished due to SMEs underusing it, and feedback that the administrative burden was complex and time consuming. So I suggest that a rebate scheme that covered only the first three days of sickness and absence would also be quite administratively burdensome, both for businesses to claim and for the Government to process.

Previous SSP rebate schemes also did not encourage employers to support their employees. We know that employers having responsibility for paying sick leave helps maintain a strong link between the workplace and the employee, with employers encouraged to support employees to return to work when they are able.

Sticking with the theme of rebate schemes, Amendment 74, from the noble Lord, Lord Fox, would introduce an SME rebate scheme for the whole duration of sickness absence. I reiterate the points I made earlier about the limited cost to business as a result of SSP changes and the experience of previous rebate schemes. I agree with the noble Baroness, Lady Lawlor, that we have moved a long way from the Beveridge system of social insurance. The costs and the mechanisms are very different now.

A rebate for the full cost of SSP could cost the Government up to £900 million a year. I do not believe that a rebate scheme is the best way to support our SMEs at this time. We will be considering the findings of the aforementioned Keep Britain Working review, which is expected to produce a final report with recommendations in the autumn. The noble Lord, Lord Fox, challenged me to keep talking about this, and of course I am very happy to do so.

Amendments 71A and 71B were tabled by the noble Lords, Lord Sharpe and Lord Hunt. As they may be aware, the Government consulted on what the rate of SSP should be for those who currently earn below the lower earnings limit. There was no clear consensus from stakeholders on the percentage. The Government believe that the 80% rate strikes the right balance between providing financial security to the lowest paid employees when they need to take time off work to recover from illness and limiting the cost to business. As the noble Lord, Lord Fox, said, if we are not careful, we will be penalising the very poorest in our society.

Crucially, the total amount saved by business, if the rate were set at 60% compared to 80%, would be around £10 million to £30 million per year. That is about a £1 difference per employee per year, or less than 0.01% of total spending on wages annually by businesses. On the noble Lord’s Amendment 71A, which would set the rate at 60% for the first three days of a period of incapacity for work, the amounts potentially saved by business become even smaller, with the difference in cost being a matter of pennies. Given the minimal savings for businesses, the complexity for employers in administrating different rates is difficult to justify.

--- Later in debate ---

[Lord Vaux of Harrowden (CB)]

My Lords, like the noble Lord, Lord Fox, I am a little puzzled by the groupings between this and the previous amendments. I have gone the opposite route and decided to speak to this group rather than the last one, but everything that I say in this group applies equally to Amendment 75, which would have created a review of the impact of the changes on small and medium-sized businesses. This group would require impact assessments to carried out for the various other effects that the Bill would have—so really it is the same subject.

Frankly, a lot of this would not be necessary if the Bill had been properly thought through from the beginning, if there was not so much detail to be filled in later by regulation and, in particular, if a proper impact assessment had been carried out on the various changes proposed. The Bill will, by the Government’s own admission, impose costs on business, disproportionately on smaller businesses, of around £5 billion, and will, again by the Government’s own admission, have potentially negative impacts on employment opportunities for those with poorer employment records. It is deeply unsatisfactory that it should not have been properly impact-assessed.

The Regulatory Policy Committee rated the impact assessment as “not fit for purpose”. It is worth reminding noble Lords what it said:

“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis, to understand the overall impact on employment, wages and output, and particularly, the pass-through of employer costs to employees. The eight individual IAs and the summary IA need to provide further analysis and evidence in relation to the rationale for intervention, identification of options (including impacts on small and microbusinesses) and/or justification for the preferred way forward”.


It is damning that that was not done before the Bill was presented to us.

Now, before the Minister points this out, I concede that the statutory sick pay individual impact assessment is the only one of 23 that is rated as good—in itself a pretty damning statistic. However, the impact assessment for the monitoring and evaluation plan for the statutory sick pay part is rated as weak. The noble Lord, Lord Hunt, has already referred to the potential behavioural aspects that arise, which are not in any way covered in the impact assessment. In fact, there is a complete cop-out; it says, “We can’t do this because of the behavioural impacts”.

Sadly, these proposed amendments and Amendment 75 in the previous group are clearly necessary, as are the others that we will debate later today and throughout the Committee process. The five-year review that the Minister referred to earlier frankly does not cut it, given the significance of the measures in this Bill and how quickly how they will have impact. Five years is way too long to wait to understand whether it is damaging.

I do not wish to test noble Lords’ patience by repeating this speech multiple times during the process of the Committee, so I ask the Minister to take as read my support for proper and timely reviews and assessments of the impacts of this Bill as we go forward.

[Baroness Jones of Whitchurch (Lab)]

My Lords, as noble Lords have identified, we are now continuing the important debate on statutory sick pay and specifically to address the impact of these measures on businesses.

It is important to highlight that the statutory sick pay system, and the changes that we have brought about as part of this Bill, is designed to balance providing support for the individual with minimising the costs to the employer. This group of amendments, Amendments 74A, 74B and 74C, tabled by the noble Lords, Lord Sharpe and Lord Hunt, would require impact assessments on absenteeism, enhanced sick pay schemes, occupational health, and short-notice shift working.

As I mentioned earlier, and as the noble Lord, Lord Fox, has already identified, the Government have already undertaken a regulatory impact assessment which considered the likely direct business impact of SSP changes. This included considering the impact on small and medium enterprises and sectoral impacts.

Overall, in the regulatory impact assessment, the Government estimated that the cost of delivering these measures would be approximately £15 extra per employee, a relatively modest amount when compared to the positive impacts that these changes will have for employees and overall productivity. I thank the noble Lord for the three amendments tabled in this group, all of which would require impact assessments. I look forward to debating those with the other 23 or so requests for impact assessments that the Opposition have already tabled. We have a plethora of requests for impact assessments. I reassure the noble Lord that we are at the same time updating our regulatory impact assessment and operating a post-implementation review of the measures—so the Opposition’s requests are probably not necessary.

On the noble Lord’s Amendment 74A, requiring an assessment of the impact of the changes to SSP in the Bill on absenteeism, we acknowledge that overall sickness absence may increase as a result of this Bill. This is not a loophole, nor are the Government not considering businesses; rather, it is the very objective of these changes to enable the lowest-paid employees to take time off when they are sick. Under the new system, employees will be able to take the time that they need to recover from short-term illness without struggling through work and often risking the spread of infectious diseases such as influenza. Similarly, employees with long-term or fluctuating conditions should feel able to take a day of sickness absence to manage their condition to prevent it worsening. The noble Lord, Lord Hunt, suggested that employees might be encouraged to misuse the system. However, if employers have the right policies and practices in place, the risk of inappropriate absenteeism can and should be mitigated.

Additionally, the noble Lord’s amendment would be quite difficult to deliver in practice. There is not a standard measure of absenteeism versus legitimate sickness absence, and in many instances, it would depend on whether you asked the employer or the employee. The Government intend to build on the regulatory impact assessment and, as I have said, we intend to conduct a post-implementation review of the measures in the Employment Rights Bill.

I turn to Amendment 74B, to assess the impact of the reforms in the Bill on employers’ ability to continue offering enhanced sick pay and occupational health services, particularly in low-margin sectors such as retail. I appreciate the noble Lord’s concern about the potential impact on this matter, and the Government certainly agree that it would not be in anyone’s interest for there to be a rollback of occupational sick pay or occupational health provision. However, the Government’s view is that these changes will serve only to strengthen the link between the workplace and the employee. I question why any business would want to use these changes as a reason to reduce the support that they provide their employees to help them stay in, and return to, work.

The noble Baroness, Lady Fox, asked about the Government’s policy on getting people back to work, and she was right to raise the issue. We are talking about a balance here; when people are sick, they should have the right to be off sick. I also accept the point that she made that being at work can in itself be a healing experience, and we should not lose sight of that—that there can be a positive health impact from being at work.

I once again draw noble Lords’ attention to the Keep Britain Working review. As I set out earlier in the debate, Sir Charlie Mayfield will consider recommendations on how the Government can support and enable employers to promote healthy and inclusive workplaces and support more people to stay in or return to work from periods of sickness absence. That review is expected to produce a final report in autumn this year. I believe that much of what the Keep Britain Working review is doing will address the noble Lords’ concerns, and I hope this reassures them that the Government are taking this matter seriously. We look forward to the results of the review.

Finally, I turn to Amendment 74C, which seeks to review the effects of the SSP changes on shift management and short-notice scheduling in the workplace. As discussed in relation to Amendment 74A, the number of sickness absences may go up as a result of these changes. This is because it would enable employees to take time off when they are sick.

I again reassure noble Lords that the Government are committed to understand the impact of these changes on businesses. We intend to conduct a post-implementation review of these measures in the Employment Rights Bill within five years of implementation. Additionally, as I set out in the earlier debate, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of SSP changes on a range of employers and employees.

However, this amendment would require the Government to collect a significant amount of data from businesses on what noble Lords will understand is quite a wide range of issues. We believe that this would be administratively challenging for them to provide, particularly in less than six months. This is the very thing that the noble Lord is seeking to avoid—the extra bureaucracy that he has talked about. For example, asking employers, including SMEs, to accurately record and report to government the frequency of shift cancellations and redeployments because of sickness absence is not practical or reasonable.

We have had a worthwhile, short debate on these issues, but I hope I have persuaded noble Lords that we are on the case and therefore that the amendment can be withdrawn.

[Baroness Noakes (Con)]

My Lords, the Minister said during her remarks that there would be a cost per employee of £15; I think she said that in the earlier group as well. Can she provide any more information on this? It seems counterintuitive. If the average number of sick days per employee is around eight, which is what the most recent survey data showed, that implies that employers are already bearing the cost of something like seven and a half days and are going to pay only for an extra half day. That does not seem to be consistent with the evidence of the nature of absences that also exist, which implies that most are at the shorter end and probably are going to be below the level at which they are currently being reimbursed by statutory sick pay.

It has been troubling me for some time, but I hope that the Minister will be able to provide some further information. I do not expect it from the Dispatch Box, although I would be delighted if it were to come from the Dispatch Box right now, but if she could write to me, I would be most grateful.

[Baroness Jones of Whitchurch (Lab)]

I suppose the simple answer to that is that it is in the regulatory impact assessment, which the noble Lord, Lord Vaux, acknowledged was one of the things that we got a fair rating for. I refer the noble Baroness to that, which I think will give more details.

[Baroness Noakes (Con)]

I have read it. There is no more detail in that impact assessment on the £15. That is why I am asking whether the Minister can provide further detail on how that £15 was arrived at.

[Baroness Jones of Whitchurch (Lab)]

I am happy to write to the noble Baroness.

[Lord Fox (LD)]

It would be very useful if she could share it with the other Front Benches as well.