Employment Rights Bill

Baroness Verma Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, I rise to speak in support of Amendments 3, 6 and 9 in this group, tabled by my noble friend Lord Sharpe of Epsom and supported by my noble friend Lord Hunt of Wirral. I also support Amendment 8 tabled by my noble friend Lord Wolfson of Aspley Guise, but for different reasons. I will not speak on that, but I like the idea of a low-hours contract. I will speak about zero-hours contracts, because I do not believe they are getting a fair look in.

These amendments would give workers the right to request, rather than putting an obligation on employers to guarantee hours. I think they are worth while and worth supporting. In the labour market this year, there are 33.9 million people employed. Of them, 1.3 million are on zero-hours contracts. There has been an increase since 2000 of 805,000 people on this type of employment contract. This is 3.1% of employment in the UK. Most are young people in the 16 to 24 age group. This is a popular way of working; the figures speak to that. There has been far more significant an increase in this type of contract than in the overall type of working arrangements chosen by employees and their employers.

Much of the popularity lies in the flexibility on both sides. The evidence is that the majority of people on zero hours, 60%, do not want more hours, although some, 16%, do. Amendments that would allow an employee to request guaranteed hours as distinct from obliging the employer to guarantee certain hours seem more in tune with people’s wishes. Of those on zero-hours contracts, around 1 million are young people. However, 946,000 16 to 24 year-olds are not in employment, education or training; that is around 50%. Yes, people on these contracts may work fewer hours than other workers—I gather the average is around 21.8 hours a week compared with 36.5 hours for all people in employment—but is it not better that there are jobs which people want and can get, particularly young people who may not yet be in the labour market or who may have been thrown out of the labour market or left it for one of the many reasons we hear about it? I am afraid that it seems from the Government’s approach that they do not think so.

This Bill and Clause 1 must be seen in the overall context of the party opposite’s approach to labour market and economy reform. Not only is the NIC tax hike on the productive sector along with the decrease in the NIC threshold taking £24 billion out, affecting 800,000 businesses and their ability to employ people and offer opportunity to the 16 to 24 age group, but other costs have been piled high, one on top of the other, since the party opposite came to power. Of those employed in December 2024, 27.8 million were in the private sector and 6.14 million in the public sector. If employers are obliged to move to guaranteed hours, that will most likely serve to cut the number of people productively employed under these arrangements, with a corresponding decrease in output and growth. Surely these amendments speak for themselves, and a Government whose priority is to increase economic growth should accept them.

[Baroness Verma (Con)]

My Lords, I declare my interests as laid out in the register. I regret that I was unable to speak at Second Reading. As someone who has been an employer for over 40 years for various small businesses, and knowing that these amendments were coming up, I spent the weekend speaking to small and medium-sized businesses, particularly the small businesses in my home city of Leicester. All were very concerned about the impact that the Bill may have, if it becomes law, in providing a set amount of guaranteed hours.

I come from the home care sector—that is one of my businesses—which really does work on contracts in which we do not, and cannot, guarantee hours, simply because of the nature of the job. We do not know when people will require care or for how long, how long they will be in hospital for, or whatever. The hospitality sector is in exactly in the same place.

--- Later in debate ---

[Lord Barber of Ainsdale (Lab)]

My Lords, this group of amendments deals with the hugely important issue of zero-hours and short-hours contracts. As the noble Baroness, Lady Lawlor, said, well over a million people in the UK work on zero-hours contracts. In sectors such as retail, it is also common for workers to have a small number of guaranteed hours but to work the equivalent of full-time hours.

These arrangements are not a win-win for worker and employer. More than eight in 10 zero-hours workers want regular hours of work. Without guaranteed hours, workers do not know whether they will be able to pay their bills or organise their caring responsibilities. The flexibility is invariably on the employer’s side. Research has shown that more than half of zero-hours contract workers have had shifts cancelled at less than 24 hours’ notice. Many experience being sent home mid shift and very few are compensated. The vast majority of those who ask for guaranteed hours are turned down, so I fear a right to request would not resolve that issue.

There is also significant evidence that employers do not use zero-hours contracts just as stopgaps but will often park workers in these insecure arrangements long term. Two-thirds of zero-hours contract workers have been with their employer for more than a year, and one in eight for more than a decade.

As well as causing financial uncertainty and disrupting workers’ private lives, this distorts workplace relations, with workers fearful of challenging inappropriate conduct in case it leads to them losing their work. Recent accounts of poor behaviour at McDonald’s branches, where zero-hours contracts are prevalent, included a 17 year-old reporting that she had been asked for sex in return for shifts. Also, when employers rely on zero-hours contracts, what incentive do they have to invest in skills? The answer is: little or none, with predictable consequences for productivity.

The Bill implements measures first developed by the Low Pay Commission, with the support of both trade union and employer-side representatives. An employer will have to offer a contract based on a worker’s normal hours of work in line with a 12-week reference period. That gives a clear indication of a worker’s usual hours while evening out peaks and troughs. Any period longer than that, such as 26 weeks, would simply allow employers to park workers on a zero-hours contract for a prolonged period.

The Bill contains powers for Ministers to specify the notice period for shifts that employers must give to workers and compensation for cancelled shifts, and these are an essential part of the package. Currently, workers on variable-hours contracts bear all the risk of any changes in demand, and they are usually low-paid workers who can ill afford the sudden changes to income.

In the House of Commons, the Bill was amended to ensure that those rights also apply to agency workers. That is crucial in order to close the loophole that could have led to employers hiring zero-hour staff by agencies and entirely subverting the intent of the legislation. I know the TUC would strongly oppose any amendment that would exempt agency workers or fixed-term contract workers on variable-hours contracts from these provisions.

Employers will still be able to put in place arrangements for coping with fluctuations in seasonal work—for instance, via fixed-term contracts. What will change is that workers will not bear alone the burden, in reduced wages, of sudden changes in demand. The current situation allows manifest injustices to take place. It is time that we level up the labour market.

[Baroness Verma (Con)]

My Lords, what will the noble Lord do when all those small businesses—I emphasise small businesses—start to close down because of this rigid approach to flexible hours?

[Lord Barber of Ainsdale (Lab)]

I say to the noble Baroness that I have more confidence in the adaptability of British businesses to cope with intelligent, progressive legislation like this to even up the labour market.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

As we have said when other people have suggested fixed rates, we need to avoid unintended consequences or the gaming of those arrangements. I am inclined at the moment to resist what the noble Lord has said, but we can consider that further as the Bill progresses.

[Baroness Verma (Con)]

My Lords, in adult social care or care, you are at the mercy of people going into hospital or passing away and those hours suddenly becoming contracted. Where are the safeguards for the employers at that point? There is no guarantee that people will come out of hospital. You cannot wish more hours to happen; you are at the mercy of people wanting care. I do not understand how this will work in the care sector, so it would be really helpful to understand the Government’s thinking on that.

[Baroness Jones of Whitchurch (Lab)]

The same thing would apply as for seasonal workers, in the sense of that unpredictability. The Bill allows seasonal work to continue; fixed-term contracts can be an effective way for an employer to meet temporary or seasonal demands for work—

[Baroness Verma (Con)]

Forgive me; I thank the Minister for her patience. Seasonal work is incredibly different from care, which is about the elements around you. We cannot predict when somebody will fall sick, go into hospital for long or short periods or pass away. It is a very different discussion point. I want us to be mindful, in thinking about the overall picture, of how certain sectors fit in.

[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 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.

[Baroness Verma (Con)]

The problem with direct payments is that you are making the person who receives the payment into the employer. They are usually individuals who are looking after their own care; they will not have the facilities to go through the quagmire of rules and regulations. I say this just to give some assistance.

[Baroness Jones of Whitchurch (Lab)]

I take that point. I was attempting to explain in my description, which I obviously need to develop a little bit more, that we understood some of those issues and are trying to find a way through it.

Amendments 3, 4 and 6 seek to change the model for the right to guaranteed hours from a right to be offered to a right to request. We have debated this at some length. These amendments would mean that a qualifying worker experiencing one-sided flexibility would need to make a request to their employer to access their right to guaranteed hours. Noble Lords underestimate the imbalance of powers that employees in this circumstance face. The noble Baroness, Lady Lawlor, mentioned young people, which is the group that is likely to be the most intimidated by having to request guaranteed hours. Therefore, we are attempting to make sure that these rights are balanced in a proper and more effective way.

I am grateful to my noble friend Lady Carberry for reminding us that the Low Pay Commission also looked at a right to request and, understandably, rejected it for exactly that reason. It understood that the people in those circumstances had the least power in the labour market and would therefore, quite rightly, feel intimidated about coming forward. She also raised the issue of what happens if the request is denied. I know the noble Lord, Lord Fox, attempted to address that, but I do not know that the amendments necessarily do so. The noble Lord, Lord Sharpe, says that employment has changed since those days. I would say that employment has become even more unpredictable and unreliable. Nothing that the Low Pay Commission said—or indeed that I said—addresses the potential exploitation which the commission identified. There is an imbalance, and it is very difficult for people to come forward and make that request; that is why we are insistent that it is done in the way that we have suggested.

After receiving an offer, the workers would then be able decide whether to accept it, based on its specific terms. That would empower the worker to decide for themselves, having seen the offer on the table. This addresses the point that some people do want to work flexible hours, and we understand that.

Amendment 15 would allow workers on limited-term contracts of four months or less to voluntarily waive their right to guaranteed hours. We believe that workers should be able to retain the flexibility of a zero-hours contract or arrangement if they wish, which is why those who are offered guaranteed hours will be able to turn them down and remain on their current contract or arrangement if they wish. This amendment would add an additional opt-out mechanism for workers that could create needless confusion for both employers and workers.

Amendment 17 would provide workers with the ability to opt out of receiving guaranteed-hours offers. We understand the importance of workers being able to retain the flexibility of zero-hours contracts or arrangements if they wish, which is why those receiving a guaranteed-hours offer will be able to turn it down. However, to ensure that all qualifying workers will benefit from the legislation, all workers should be able to receive a guaranteed-hours offer. We want to ensure that employers and workers are starting from a position of equal bargaining power. Therefore, through the Bill we have allowed for employers and unions to collectively agree to opt out of the zero-hours contract measure, if they agree. Unions can make these deals based on their knowledge of the industry and a holistic view of what is best for the workers. We feel it is more appropriate than individual workers opting out of receiving offers. After receiving an offer, qualifying workers would then be able to decide whether to accept, based on their individual circumstances.

Finally, Amendment 2 would remove from the Bill the right for qualifying workers to be offered guaranteed hours. We think that all employers should be required to offer their qualifying workers guaranteed hours, as this is the best way of addressing one-sided flexibility in the workplace and ensuring that jobs provide a baseline of security and predictability.

Without guaranteed hours, workers do not have any form of certainty as to their earnings, making it difficult to apply for credit or a mortgage, to rent a flat, to plan for major events, or even to manage their day-to-day life expenses. As I have previously iterated, those who are offered guaranteed hours will be able to turn them down and remain on a current contract or arrangement if they wish. We believe that this is the right balance. I therefore hope that I have persuaded noble Lords not to press their amendments.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

As I said, I read out the names of a number of businesses that are broadly supportive, but we have not gone through clause by clause asking which particular pieces of the Bill they are supporting. However, businesses that are household names are in support of the Bill.

[Baroness Verma (Con)]

My Lords, very quickly, large businesses may be able to be supportive. Could the Minister name any small business that she has come across that supports this?

[Baroness Jones of Whitchurch (Lab)]

Again, there is a list of SMEs that support the basis of the Bill. I do not think it is going to help anybody if we go back and ask them for the specifics of whether they agree with each clause. The fact is that they agree with the direction of travel and a number of businesses, big and small, are already carrying out many of these practices, so it will not be unusual to them. This is about good employment practice and I am sure a lot of businesses will support it.

--- Later in debate ---

[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.

[Lord Ashcombe (Con)]

My Lords, it a pleasure to support my noble friend Lady Noakes and the noble Lords, Lord Londesborough and Lord Vaux of Harrowden, on Amendment 5 and their other amendment.

Small businesses and microbusinesses form a vital component of our national economy. These enterprises, while often agile and innovative, are particularly vulnerable to regulatory and financial pressures. Like all businesses—I should declare that I work for a very large American insurance broker—these enterprises have had to absorb the recent increases in the national minimum wage and adapt to the changes in national insurance contributions legislation. However, unlike larger businesses, they often lack the structural resilience and financial buffer to absorb such changes with ease. The impact on them is therefore disproportionate. This amendment proposes a sensible and measured opt-out for SMEs from additional obligations stemming from the proposed changes to zero-hours contracts—specifically, the move towards tightly prescribed guaranteed hours. As the Government’s own impact assessment acknowledges, these reforms are likely to have a disproportionate cost on small businesses and microbusinesses. I stress that this is not speculation but is drawn directly from the Government’s impact analysis.

Small businesses and microbusinesses span a wide range of sectors, but many are embedded within the UK as world-renowned creative industries that bring global acclaim and substantial economic benefit to this country. Many are driven by the energy, passion and commitment of individual entrepreneurs and small teams. I have had the privilege of speaking with several such business owners during the course of this Bill, and a recurring concern has emerged: the smaller the business, the harder it is to digest and manage such legislative change. Some have gone so far as to tell me that they are considering closing their operations altogether. That is a deeply troubling prospect. It is no exaggeration to say that measures such as these, if applied without nuance, risk undermining the very entrepreneurial spirit that we so often celebrate in this House.

There seems to be a regrettable habit forming on the Government Benches of legislating in ways that hinder rather than help the economic engines of this country. This approach is not conducive to national growth. It is not conducive to competitiveness. It is not conducive to job creation. It is certainly not conducive to easing the burden on the Exchequer—quite the opposite. Driving small businesses to closure will reduce tax receipts and increase demand for state support. We need to encourage investment, not chase it away.

Can the Minister explain clearly why this legislation must apply so rigidly to a critical sector of our economy? Why must we impose further burdens on the very businesses that we rely on so much for our innovation, employment and growth? Is there no room for proportionality and no scope for recognising the distinct challenges that are faced by the smallest enterprises? What I have said applies, to a great extent, to the middle-sized companies mentioned in Amendment 282, tabled by my noble friends Lord Sharpe and Lord Hunt of Wirral.

I leave your Lordships with a quote from the Spirit of Law by Montesquieu:

“Commerce … wanders across the earth, flees from where it is oppressed, and remains where it is left to breathe”.

--- Later in debate ---

[Lord Leong (Lab)]

I thank the noble Lord for that. I might turn that around and say that, if I am looking for a job, I have a choice of big or small companies. I am taking a chance and a risk working for a very small company. I am not sure whether that company will last. That risk works two ways. I strongly believe that most people work for companies not because of what the company does but because they look at the owner or the founders and whether they want to work with such people. At the end of the day, the employees will also be taking a chance on the employer.

[Baroness Verma (Con)]

My Lords, there is a huge difference between a large business—and its culture and the ability to respond to all the new burdens that will be placed on it—and a small business. The Minister himself said that a happy business and happy employees add to a good bottom line. The problem is that, if an employer is so burdened by so many things to comply with because it is a small employer, that happiness is soon going to disappear. All I think that all noble Lords around the House are asking is that we ease the burdens for small and micro-businesses by removing not the rights but just the burdens.

[Lord Leong (Lab)]

I thank the noble Baroness for that. There are other additional responsibilities, not only in terms of HR. A company that sets up needs to have IT support and payroll support. How many SMEs have their own IT department or payroll department, let alone an HR department? There will be big businesses that will be providing services to support SMEs. The whole argument is about responsibility: basically, when you set up a business, you have all these responsibilities, and this is part of those responsibilities.

[Baroness Verma (Con)]

My Lords, I do not want to labour the point but, if the Minister were to speak to the small businesses that people like us are speaking to, I think they would really argue that these are huge implications for them.

[Lord Leong (Lab)]

I thank the noble Baroness. I will not hold the House for too long, because I think the dinner break is coming up, but I will obviously meet up with her to talk further on this.

To conclude, the Government believe that having an entitlement to fair, flexible and secure working should not be reserved for those people who work for large companies. It is fundamental that our “make work pay” reforms, including those in this Bill, apply across all employers. Any exceptions to this provision based on the size of the business would create a two-tier labour market, with some workers facing fewer rights, entitlements and protections. This would reduce the talent pool from which SMEs could attract employees, as I mentioned earlier. This in turn would lead to an uneven playing field between employers of different sizes and reduced incentives for small businesses to grow. I therefore ask the noble Lord, Lord Sharpe, to withdraw Amendment 282 and the noble Baroness, Lady Noakes, to withdraw Amendments 5 and 124.