Employment Rights Bill

Baroness Noakes Excerpts

Report stage
Monday 14th July 2025 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, this first group of amendments, in the names of the noble Lord, Lord Goddard of Stockport, and my noble friends Lord Sharpe of Epsom and Lord Hunt of Wirral, is significant and I am pleased to support it. I declare my interest as an employee of Marsh Ltd, a large insurance broker. Noble Lords might think that this will therefore not have much effect on me. They would be right, but I have other views.

Many individuals, for a wide variety of reasons, do not wish to have a permanent contract with guaranteed hours. While the Government might like to think that everyone wants guaranteed work, that is simply not the case. Flexibility for employees who desire zero-hours contracts is surely what everybody wants. In my experience, happy employees inevitably are more productive than those who are not. This goes directly to the heart of what the Government are trying to achieve—growth.

At the same time, many others would welcome the certainty and stability of fixed-hours contracts. It is essential, therefore, that we provide clarity in this legislation where ambiguity might otherwise lead to dispute or, worse still, legal action. That is why I welcome Amendment 2, which introduces a clear definition of a threshold below which it is not reasonable for an employee to request a guaranteed-hours contract. Setting this threshold at eight hours a week—essentially a day’s work—offers helpful clarity. It strikes a sensible balance between flexibility and fairness.

On Amendments 3 to 5, there also needs to be fairness in any arrangement, otherwise it will not stand the test of time. Therefore, it is entirely reasonable to allow a reference period during which both parties can assess the suitability of the arrangement before any request for a fixed-hours contract is made. This period of mutual assessment is not only practical but necessary. Mistakes can be made on both sides, and both employer and employee should have the opportunity to part ways without undue burden if the relationship is not the right fit. The 26-week period proposed in these amendments is an appropriate length of time for such assessments to take place.

As mentioned before, unhappy or mismatched employment arrangements serve no one. They can harm the individual’s well-being and morale and, in time, may undermine the company’s productivity, particularly for smaller businesses, where every member of staff has a significant impact—the smaller the company, the bigger the impact. We must remember, as we were reminded in Committee, that small businesses make up the majority of the companies in this country, unlike those I work for. For these reasons, I support the inclusion of a minimum number of hours’ work per week for a clearly defined reference period before the employee may request a guaranteed contract. I believe these amendments strike a fair and practical balance that will benefit both employers and employees.

[Baroness Noakes (Con)]

My Lords, in this group I have Amendments 9 and 22, both of which seek to amend government amendments in identical ways. I shall speak to Amendment 9, which seeks to amend government Amendment 8, but my remarks apply equally to Amendment 22, which seeks to amend government Amendment 21. Before doing so, I offer my support to the other non-government amendments in this group; other noble Lords have already spoken well in favour of them.

My Amendment 9 is based on the premise that the Government should be trying to balance employee rights with the need of businesses to be successful and to grow. The Government want to end what they call “one-sided flexibility” but that would not be a good thing if the outcome was to destroy the labour market flexibility which is the hallmark of the UK’s international competitiveness and has been a major contributor to the country’s overall economic resilience.

Government Amendment 8 amends the provisions of Clause 1 which would have allowed the Secretary of State to create exemptions from the duty to offer guaranteed hours on a very broad basis. That power was a glimmer of light in a part of the Bill that was otherwise quite dark, especially for those employers whose businesses could be harmed by the new duty. It is clear that the Government wanted to use that new power very sparingly but it was drafted in a broad way and would therefore have offered the Government an elegant solution if they discovered that certain types of businesses simply could not stay in business if the duty applied to them.

Unfortunately, the Delegated Powers and Regulatory Reform Committee of your Lordships’ House, for which I generally have a high degree of respect, declared that this power was “inappropriately broad”. I suspect that if the DPRRC had attended some of the debates on the Bill earlier in its passage, it would not have been quite so quick to damn this power. Even more unfortunately, the Government have chosen to respond to the DPRRC’s recommendation by making the power virtually useless.

My little glimmer of light has been virtually extinguished by the Government’s Amendment 8. This now requires that when the Government try to use the regulations to create exemptions, they have to take account of two things. The first is the benefits of workers receiving a guaranteed-hours offer. I would have absolutely no problem with that if it were balanced by an equivalent need to avoid having adverse effects on employers, but Amendment 8 goes further and says that the needs of the employers concerned can be taken account of only if they are dealing with “exceptional circumstances”. I do not know what “exceptional circumstances” means but it is probably something like a pandemic; it would not deal with those businesses which face fluctuating demand patterns as part of their natural business model. Unpredictable work demands are therefore difficult to see as exceptional circumstances.

When we debated this clause in Committee, my noble friend Lady Verma, who is not in her place, talked about the need for employers providing domiciliary or home care to be responsive to the actual fact pattern of demand for care. I suspect that would not count as exceptional, even though it is an intrinsic part of the business model of those who provide home care; nor would it, I suspect, apply to any of those businesses that are affected in any way by seasonal demand patterns, as has already been mentioned. Therefore, the ordinary everyday needs of businesses will be ignored if Amendment 8 is accepted without amendment. In practical terms, all the Secretary of State can take account of is the benefits to workers of receiving a guaranteed-hours offer.

Therefore, my Amendment 9 removes the constraint of needing to satisfy the exceptional circumstances limb; the Secretary of State would simply be having regard to, on the one hand, the benefits for employees and, on the other, the adverse effects on employers. I hope in that way a proper balance would be achieved in the Bill and that the Government will be prepared to rethink their Amendments 8 and 21.

[Lord Wolfson of Aspley Guise (Con)]

My Lords, Amendment 2 stands in my name. I declare my interest as a shareholder and the chief executive of Next plc, a job I have held for 24 years. I should add that Next employs nearly 50,000 people in the UK, of whom around 20,000 are part-time.

I hasten to add that the company I work for does not use, and never has used, zero-hours contracts. I am not in favour of them. As the noble Lord, Lord Barber, said at Second Reading, eliminating bad employment practices serves the interests of good employers. He was right. As I said in Committee, I support the Government’s aim of eliminating the unfair practices associated with zero-hours contracts. The problem with this section of the Bill is not the tight regulation of zero-hours contracts; nor is it the understandable intention to extend those protections to low-hours contracts, preventing employers from circumnavigating zero-hours provisions by offering token contracts. The problem is the failure to define what low-hours contracts are for the purposes of the Bill or give any hint as to what that limit might be.

Amendment 2 aims to address this problem by placing a reasonable cap on the discretion of the Secretary of State to define what low-hours contracts should be at eight hours a week. This is important because it materially changes the nature and scope of the Bill; if this number is set too high, the provision will profoundly change the working arrangements of 8.5 million part-time workers in the UK.

I can assume only, having read through the provisions of the Bill, that the Government have not really understood the near impossibility of managing the process they are proposing if it extends to millions of people. Employers will have to track their low-hours employees’ extra hours every day of the year, and at the end of every employee’s individual reference period, businesses must offer those employees a new permanent contract. These hours will have to be offered in a compliant way, with no hint as to how you comply with the Bill itself. They will have to be offered the hours regardless of whether those hours are actually needed.

This process creates two problems. The first is the problem of complexity of implementation, and the second is that businesses, if they comply with the Bill, risk being chronically overstaffed. To start with complexity, I estimate that in the company I work for, it will take us at least a year and several million pounds of systems development to develop a system to adequately cope with the implementation of the Bill. I work for a company that has more than 1,600 systems and software professionals. Small businesses will find this process almost impossible to manage. I would be very grateful if the Minister could share any details as to the cost and scope of work that will be required to be undertaken by councils, hospital trusts and other public sector employers for the purposes of developing these systems.

The second problem is that, even if an employer successfully implements a system, they will have to offer contracts regardless of whether there is any work for those people going forward. Your Lordships will not be surprised to hear that restaurants, shops and pubs simply cannot afford to have the same number of people working in their establishments in February as they have in December. Nor can we take the risk that the extra hours required to cover many different seasonal peaks and sale events become permanent costs for the rest of the year.

The complexity of implementation, along with the risk that businesses leave themselves overstaffed, will mean only one thing, and it is very important that the Government understand this: businesses simply will not be able to offer additional hours to workers on low-hours contracts. Instead, they will be forced to employ temporary staff to cover those peaks, depriving loyal and skilled employees of income at times when they need it. Whose interest does this serve? Neither business nor employees, and certainly not a Government that I believe are genuinely interested in promoting growth.

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It is deeply ironic that, in their eagerness to legislate for protection, the Government are undermining precisely the competitive mechanisms that have driven better employment practices in the first place. Competition raises standards; compulsion often flattens them. I beg to move.

[Baroness Noakes (Con)]

My Lords, I support Amendment 28, which has been so well moved by my noble friend Lord Hunt of Wirral. My main problem with the statutory sick pay clauses in this Bill is that the Government are proceeding without a reliable evidence base. The Government do not collect data on sick leave taken by employees. Instead, they have relied on some modelling by the Department for Work and Pensions, and that modelling in turn rests on some surveys that are carried out by the DWP. Those surveys have some problems, which the DWP itself owns up to, in terms of statistical quality. The Office for National Statistics also published some data on sickness absence. These data are labelled “statistics in the course of development”, and we all know that the ONS currently has major problems with its labour market statistics.

Nevertheless, the Government have used these data and made some challengeable assumptions of their own, such as that there will be no increase in sickness days taken off if the changes in Clauses 10 to 14 go ahead. They have come up with an additional cost to business of £420 million, which they then calculate as £15 per employee. I do not think that £15 passes the common-sense test. It implies that employers will bear the cost of not much more than an extra half a day of statutory sick pay at the rate that is specified in the Bill.

Part of the problem is that the Government’s calculations average those costs over 24 million employees, which is roughly the size of the whole private sector workforce. Within that, nearly a half of employees are employed in large businesses, many of which have their own sick pay arrangements and do not rely on the statutory sick pay arrangements that my local friend Lord Hunt outlined. I tried to find the complete set of costs for small and micro businesses. It looks as if the costs for the smaller end of the scale of businesses are roughly double the amount per employee, but it is very difficult to tie it down, because the dataset is incomplete—certainly the one that is available in public. As my noble friend has already pointed out, the Government’s own assessment has owned up to the fact that these costs will disproportionately bear on small and micro businesses.

Even if we double the £15 per employee to £30, I am not sure that even that is a realistic estimate of the costs that will fall on individual businesses, because it amounts to just a bit over a day of statutory sick pay at the new rate in the Bill. That does not seem to me to make any sense at all. The Government should have done proper studies of current sickness patterns and costs for the various businesses that are affected by these clauses before going ahead. In particular, I believe that the costs to small and micro businesses should have been evaluated before the clauses were proceeded with. The only thing that we know for sure about these clauses is that the impact on small and micro businesses will be disproportionately large.

However, I recognise that the Government would probably have gone ahead with these provisions even if they had gold-standard data and analysis, and even if that analysis showed that the cost was 10 times the amount that the Government currently estimate. That is the reason I support my noble friend’s Amendment 28, with a one-day waiting period and a qualifying threshold of two days, which would go some way towards reducing the impact on smaller firms. Survey data shows that nearly 60% of sickness absences are for one or two days. The small change that my noble friend’s amendment seeks could have a major impact on businesses and the bureaucratic burdens that they would have to bear.

I support Amendment 30, which would reintroduce a statutory sick pay scheme. I would have confined it to small and micro businesses, because that is where the greatest harm is, but, in this uncertain economic environment, with costs being piled on businesses in all directions, businesses deserve protection from the Government’s policies. For that reason, I support Amendment 30.

[Baroness Coffey (Con)]

My Lords, I have added my name to Amendment 30, tabled by the noble Lord, Lord Goddard of Stockport, which builds on something that I raised in Committee. I have been asked to do a statement for the Covid inquiry regarding the economic response and so have been going through a variety of notes from five years ago. One of the most successful things that we did then was to support employers in the deployment of statutory sick pay by ensuring that people could stay at home and not be spreading coronavirus at work.

For me, that reinforced something that made sense for the country as a whole and its public health and was fair. It was fair to businesses that, while the country was being asked to do something and they were being asked to do something as employers, the Government helped with the cost.

Part of this entire debate is the fair work agency and it being fairer for employees—and apparently it will be fairer for employers, around productivity. I do not want to repeat all that I have said on this but I recall that, when there used to be a rebate, it was recognised that this was the bare minimum, with many employers paying a lot more than the statutory sick pay rate. It was about co-working and recognising that, as a mature country, we believe that people should continue to be paid when they are off ill, and that the Government have an interest in that too. That is why I was particularly keen to sign Amendment 30, although I am conscious that some of its finer details could be worked out further.

Amendment 28 was tabled by my noble friends on the Front Bench. Of the variety of changes that are happening through this Bill—many of which, I remind the House, could have been done through statutory instruments—statutory sick pay from day 1 has come up time and again with most of the employers that I have met or heard from. The impact is genuinely worrying, particularly for people in the hospitality sector, the retail sector and so on. Going straight to day 1 is a step too far backwards. That is why I am supporting my friends on the Front Bench.