Employment Rights Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

There is some good stuff here and there is potential, but there is also risk. I hope that, after we have progressed through the amendments, we can send legislation back to the other place that is in better shape than it is today.

[Baroness Neville-Rolfe (Con)]

My Lords, I am speaking from the Back Benches to make two brief points. I apologise for not speaking at Second Reading.

First, if we have to have a purpose clause—it is not an approach that I particularly favour—it has to include a reference to competitiveness, growth and perhaps, as the noble Baroness, Lady Carberry of Muswell Hill, has suggested, productivity. Does the Minister agree?

Secondly, like my noble friend Lord Hunt of Wirral, I am shocked at the number of government amendments made to the Bill at such a late stage, and to legislation that is so important to all parts of business, all employers in the public sector and of course all employees, and their representatives, whom the noble Lord, Lord Monks, rightly referenced.

I have some sympathy for the Minister. I had a similar experience with the Procurement Act, although it was not quite as bad because we had consulted extensively, and it was a Lords starter. But like this Bill, it was introduced before it was ready and needed a large number of amendments. As the responsible Minister, I was very keen to listen to criticism of the detail and respond by agreeing to amendments or tabling government amendments that responded to the genuine difficulties, and I think there are genuine difficulties with this Bill. We worked across the House very well and I hope the noble Baroness will consult her Front-Bench colleagues, the noble Baronesses, Lady Chapman and Lady Hayman of Ullock, who engaged constructively in scrutiny on all the procurement detail.

Another good example is the minimum wage legislation referenced by the noble Baroness, Lady O’Grady. I remember when I was at Tesco persuading the then Labour Government that they should not include a requirement to put the national minimum wage on all payslips. It was going to cost us millions and require a change in our IT systems. Labour listened and the implementation of the Act went more smoothly as a result. It is very important to listen to the practicalities when making these changes. They can affect different parts of the Bill in different ways.

Finally, we have heard a lot about Europe and comparisons with Europe. I have spent a lot of time in Europe, but I would be interested to hear also about what is going on in the growing markets of Asia and—I suppose until more recently—the growing market of the United States.

[Lord Evans of Rainow (Con)]

My Lords, I will speak briefly to Amendment 1 from the noble Lords, Lord Fox, Lord Sharpe and Lord Hunt. Paragraph (c) would

“make provisions about pay and conditions in certain sectors”.

My noble friend Lady Stowell of Beeston made some very good points about the tech sector—those entrepreneurs and businesses of the future. It was very important to hear what she had to say. However, I wish to stand up for the hospitality sector. Do any of the Members opposite know what it is like to run a hospitality sector business and the challenges of employing people to cater and serve in that sector?

UKHospitality recently launched the social productivity index, which shows that the hospitality sector is also a key driver in socially productive growth, not only contributing to economic expansion but fostering social mobility and regional development. With 57% of the workforce working 30 hours or fewer per week, the sector offers flexible employment options that make it particularly accessible to students, carers and parents—I do not know how many noble Lords in this Chamber today at some stage in their career worked in hospitality, but it is an excellent first opportunity to get into the world of work.

Unfortunately, in broad terms, the proposed changes in the latest set of amendments to the Bill seem destined to result in a framework of requirements that are more likely to hinder than to promote growth in the hospitality sector. In particular, without further addressing the concerns of businesses and considering alternative options, it is felt that the Bill is likely to lead to reductions in staff recruitment, the rate of wage growth and the level of investment. The Bill looks likely to hinder hospitality businesses and restrict growth. It seems to assume that all employers are bad actors with regards to their dealings with their staff. This is patently not the case for the majority of businesses, which recognise the need to recruit and retain staff and ensure they are supported and secure at work.

There still appears to be a disregard for seasonal business models and unpredictable trading in sectors such as pubs and wider hospitality businesses, which are required to adapt quickly to changes in trade patterns determined, for example, by weather or other events outside their control. A reduction in businesses’ ability to respond quickly and proactively to changing demand will undoubtedly result in higher operating costs. That will naturally need to be met by either increasing prices, reducing other staff costs or reducing investment.

These impacts are compounded by the Budget announcements on employer NICs and national living wage rates. Spiralling employment costs will be exacerbated by the additional cost and administrative burdens that the Bill will layer on top, all impacting investment and growth. The unintended consequences of this Bill are slower wage growth and recruitment. I am sure the Minister does not intend that to be the case. Can she reassure the Committee that it will not be the case if the Bill goes ahead as it is?

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[Baroness Jones of Whitchurch (Lab)]

Obviously, we want all sectors to have the right facilities for them. I am not sure whether the noble Baroness is talking about home care or the care home sector. Perhaps we can have a conversation outside; I will attempt to set up a meeting with her, because I do not want to be misconstrued.

Amendments 10 and 31 seek to amend the Bill so that agency workers do not have a right to guaranteed hours. We are determined to ensure that agency workers who seek more certainty of hours and security of income are protected. Some workers choose agency work because they value flexibility, but they can also experience one-sided flexibility in the same way as other workers. Failing to include agency workers in the scope of the Bill could also see employers shift to using more agency workers to avoid the zero-hours measures altogether. As with other eligible workers, agency workers who prefer the flexibility that agency work provides would be free to turn down the guaranteed-hours offer.

After public consultation, the Government brought forward amendments to the Employment Rights Bill so that hirers, agencies and agency workers are clear where responsibilities will rest in relation to the new rights. However, we recognise that some measures may need to apply in a different way to agency workers because of the tripartite relationship between the end hirer, the employment agency and the agency workers. The Government will consult further and continue to work in partnership with employers’ organisations, the recruitment sector and trade unions to develop the detail of regulations in a way that avoids unintended consequences for employment agencies and hirers.

Amendment 32 seeks to remove from the Bill the power to place the duty to make a guaranteed-hours offer on the work-finding agency, or another party involved in the supply or payment of an agency worker instead of the hirer. We included this power in line with the responses to the Government’s consultation on applying zero-hours contract measures to agency workers. Responses from stakeholders were split about whether this new duty should lie between the hirer, the agency or another party in the supply chain. We are clear that, as a default, the hirer should be responsible for making the offers of guaranteed hours because they are best placed to forecast and manage the flow of future work.

However, given the unique and complex nature of agency worker relationships, which vary in different parts of the economy, the power is required to allow the Government flexibility to determine specific cases in which the responsibility to offer guaranteed hours should not sit with the hirer. For instance, this could be the case with vulnerable individual hirers who receive or procure care from agencies—I am not sure whether that is the point to which the noble Baroness referred earlier—where instead the agency might be in a better position to offer guaranteed hours. We are aware of the importance of this power and the impact these regulations could have on agency workers, hirers, agencies and others in the supply chain. For this reason, this power will be subject to the affirmative procedure, ensuring both Houses of Parliament get further opportunity to debate its use.

[Baroness Neville-Rolfe (Con)]

Can the Minister talk us through the agency question a little bit more? If you need emergency care, you go to an agency and it finds you someone, then you pay a very large sum of money for agency care. Is the Minister suggesting that in future, and considering the ups and downs, the agencies will have to guarantee those who are involved in emergency care these very high salaries, which they will have to pay, even if they do not find clients? Is that how she thinks it will work out in practice? Is it enough to say it is going to go into regulations, when this is so important for the care sector and emergency care?

[Baroness Jones of Whitchurch (Lab)]

I was making the point that this has complications because there are some people who are individual hirers. Some people get benefits to employ people directly, so it is not always done through a third party. That is why we need to have clearer rules about this. I am happy to write to noble Lords or explain this in a little bit more detail if that helps.

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[Lord Leigh of Hurley (Con)]

My Lords, it is a great honour to follow my noble friend Lady Noakes and the noble Lord, Lord Londesborough. My noble friend and I worked on the Small Business, Enterprise and Employment Act, which I am pleased has provided good use here on in. Of course, she has a most distinguished business career, not just, as we all know, in very large financial services companies but as my president at the Institute of Chartered Accountants, where she interacted with many small and medium-sized businesses. The noble Lord, Lord Londesborough, and I spent the turn of the year discussing the Bill and its ramifications.

I speak as someone who takes a particular interest in SMEs, for reasons I will explain. I am, of course, in full support of this small group of amendments—as are, I think, all business representative bodies. The FSB, which is the UK’s largest employer group, has said that this will

“wreak havoc on our already fragile economy”.

We have had survey after survey: 1,270 companies were surveyed. Two-thirds of them said that they will curb hiring, and one-third said that they would reduce staff as a result of this Bill. The aforementioned Chartered Institute of Personnel and Development discovered that 25% of its members will be considering lay-offs as a direct result of this Bill. The Institute of Directors called it

“a sledgehammer to crack a nut.”

As I mentioned, I am particularly close to the SME sector, not least because, in 1989, I started a small business with one partner and one assistant. I should therefore declare an interest that I still own a chunk of shares in that small business, which, when we started, was called Cavendish Corporate Finance and is now Cavendish plc. At this point I normally take a pot-shot at the Labour Front Bench as not having any business experience to talk of—certainly not in the other place—but I have to be much more deferential in this Chamber, not least because the noble Lord, Lord Leong, two years after I started Cavendish Corporate Finance, started Cavendish Publishing, except, of course, that he had much greater success than me. According to Wikipedia, in his first year made £250,000 profit, which is very impressive, because in my first year I lost money, so I have to be suitably deferential. None the less, I am sure the noble Lord will remember those formative years of starting a business, when one was focused on nothing else but that business. Clearly, we desperately need people to do the same as the noble Lord and me: to take the risk, start a business, have a go and then employ people.

The decision to employ a person is a very big one. It is the toughest decision for the first person, but it is still tough for the second, third, fourth and fifth. As it happens, we now have 220 people employed at Cavendish, but it took a long time to get there and we had to merge with a number of other companies so to do. For many years my small business would have been covered by my noble friend Lady Noakes’s exemption, and it would need it because, to take on people in a small business, you are recruiting someone not just to do a job of work but to join your culture and your aspirations, and to fit in. Sometimes it works and sometimes it does not, and when it does not you have to make difficult decisions to make changes. The fact that we are now allowed to let people go relatively easily encourages people such as me to take a chance and employ someone where I would not otherwise do so.

I am very worried that this Bill will lead to a reduction in business growth and, in particular, in employment. Its main burdens will be borne by small businesses. I think the Minister cited five companies that she said were broadly supportive of the Bill. All but one were larger companies, and one was actually the Co-op—I am not sure that entirely counts. Another was IKEA, but I would be very grateful if the Minister could cite the support from IKEA, because I cannot find it. The SME sector realises that the financial burden that the Bill imposes of some £5 billion will largely fall on it, and it is very worried. So the first issue is financial.

The second issue is operational. SMEs do not have an HR department. They simply do not have the facility to wade through this enormous amount of legislation about how they are supposed to treat their staff. The only way round it is, of course, to deploy an agency at great expense to advise and consult every time there is any HR issue, and it is just another cost for businesses which are, for the most part, feeling pretty fragile, and much more fragile after the horrendous NIC increases that are being imposed on them.

The third hammer blow is that those business just will not hire. They just will not take the risk of hiring new employees, which will, of course, restrict their growth, because the only way a business can grow is to recruit new people with fresh blood, fresh ideas and fresh reach. It is impossible for a business to grow without making hires.

Fourthly, the Bill will make businesses risk averse. The Institute of Chartered Accountants in England and Wales has specifically said that this will make businesses risk averse in all their decisions, because of the extra risks that are imposed on those businesses by the Bill because of the costs and burdens they have to undertake.

Lastly, the fifth problem with the Bill is the lack of consultation. It has been rushed through to meet the 100-day deadline and, as a result, there has not been proper consultation and we are wading through a vast number of amendments that we are trying to get our heads round.

For all those reasons, one accepts that the Bill is in the manifesto and that it has to happen—it is in, in many ways appropriate that it does—but please can we leave out the SME businesses that will struggle with this Bill? Maybe we can bring it in later, suitably amended, but not now.

[Baroness Neville-Rolfe (Con)]

My Lords, I think the Government would do themselves a great deal of good if they made special arrangements for small business. They are well precedented: we have the VAT threshold, the employment allowance and the small business audit, and it would be a powerful addition to their forthcoming White Paper or Green Paper on small businesses.

Everyone knows that I often speak in favour of small business and have very good relations with the Federation of Small Businesses, so I obviously support the expert trio of my noble friend Lady Noakes and the noble Lords, Lord Londesborough and Lord Vaux of Harrowden, who we should listen to. To put it simply, either we need some special arrangements for small businesses, or—and it might be even better—we need changes to the Bill to remove the bureaucratic provisions that are going to get in the way of success; to look at the lack of flexibility and remedy it; and to avoid the inevitable huge increase in tribunal cases and the overuse of delegated powers. I encourage the Minister to think creatively in this important area.

[Baroness Verma (Con)]

My Lords, I also support these amendments from my noble friend and other noble Lords. It would be really helpful if the Government took a hard look at this. I spoke to coffee shop owners over the weekend, and to a very small business that is trying to manufacture British products in this country. They are all very worried about how they are going to cope with the burdens that will be placed on them.

It may well be useful for the Government to go back and look at whether they can make an exception for small businesses up to a certain number of employees—maybe three, maybe five and at least for those that have no ability other than to reach out and pay for very expensive advice, which often they cannot afford. These small businesses are at the heart of our high streets in local communities. They add value and are familiar to customers. The very small business—the micro-business, but particularly businesses with 10 employees or less—should be exempt from this Bill.