Employment Rights Bill (First sitting)

Chris Law Excerpts

Committee stage
Tuesday 26th November 2024 Public Bill Committees

[Steve Darling]

Q It has been said a number of times that this is almost a big bang approach around employment rights, where suddenly there are all these new rights appearing that people are having to deal with. What reflections might you have on a more staged approach to this, where it is implemented over a period of time so that employers are able to manage the new legislation?

Matthew Percival: If we were talking about staggering things, the way I would do it would be to start with areas where there is already cross-industry support and where workers, trade unions and businesses can already agree that there are areas where the Bill can be a helpful step in the right direction. To give a few examples, we have previously supported the idea that it is wrong that you should turn up for work expecting an eight-hour shift, be sent home after two hours and only be paid for two hours. There should be a right for compensation there. We have supported fixing that through legislation for years now. A Bill to bring that forward would be something we welcome and support.

We have previously supported removing the lower earnings limit within the statutory sick pay system. It feels like a hangover from when it was a publicly funded benefit rather than an employment right in a relationship between an employer and their employee. We have supported the extension around third-party harassment. We have supported what the previous Government were calling a single enforcement body and in this Bill is a fair work agency. Outside the Bill but within the wider “Make Work Pay” package, we have supported the introduction of mandatory ethnicity pay gap reporting and action plans to go alongside reports on gender pay gap reporting.

There are a number of areas where you can bring forward things in a way that can achieve consensus across social partners. But if we were staggering things, in a number of the other areas I would take more time to think how it actually will land. Beyond just staggering things, there are some aspects in the Bill—we have each touched on a number of them already so I will not repeat them—that feel like they are just a step in the wrong direction, and when the step in the wrong direction is made is less important than the direction of the step.

Jane Gratton: As I said earlier, there is lots in the Bill that we support, and there is lots that good employers are doing already. As Matthew said on the compensation of shifts, we certainly support that, and we would be very happy about the fair work agency to create a level playing field and measures around workplace equity. For us, it is about the difficulty that the SMEs will have in getting to grips with this. If you think about it, most will not have access to HR and legal support. They are going to need a lot of time to get to grips with this and to understand what is required of them. To get those processes in place, they are going to need a lot of guidance and support. We think ACAS and the tribunals system would need to be significantly boosted in their resources to cope with what we anticipate will be a lot of additional demands on them. On that very much phased approach, I would agree with Matthew about starting with the things we agree on and looking at the detail of some of the things in the Bill where we think more consultation is required.

Alex Hall-Chen: I would emphasise two factors for consideration in staggering, the first being cost. As we are all well aware, the additional costs that are coming up very shortly, particularly related to employers’ national insurance contributions, are substantial, so the more that increases to employment-related costs can be staggered, the better, such as around statutory sick pay. The other, to support what Jane said, would be around tribunal capacity. There is a particular concern that these changes, particularly around protection against unfair dismissal from day one of employment, will be introduced before the tribunal system has been sufficiently reformed to be able to deal with the influx of cases that will come with them.

[Chris Law (Dundee Central) (SNP)]

Q A number of parts of the legislation have been removed, and some are obviously there for consultation. I wanted to ask you as a panel where you would like to see the Bill go further. What more ambition would you like to see in the Bill? Matthew, maybe we could start with you. I can see you have a bit of a blank stare at the moment.

Matthew Percival: No; it is that I think there is so much in the Bill that it is not a question of where we could do more. What is already on the table is far too much for businesses to be able to engage with in its entirety. And bearing in mind that the Bill is only one aspect of the Government’s agenda, I am already finding that it is very hard for our members to engage on the breadth of topics at the pace at which the Government hope to get engagement. To squeeze anything more in at this time would just mean another issue that cannot be properly considered before we would get to legislation.

That is not say that there cannot be other conversations about other topics at other times. There are aspects of “Make Work Pay” that are not in the Bill because they are being developed; a number of them are being discussed and consulted on outside of this Bill process to support the development of those issues. But I would not be suggesting there is a lack of urgency in any way for any of these things.

The best legislation will come from having a process that stakeholders have the capacity and engagement to contribute to, rather than feeling that they have to choose one or two things to engage with and ignore the rest, which then does not get proper attention.

Jane Gratton: I would agree. The reflection from members is that they are overwhelmed with all the changes that are being put in front of them through the Bill and the wider plan to make work pay. We have said from the outset, “Please take your time with this, consult carefully and make sure we get it right.”

The biggest concern we have with all this is the cost and complexity for SMEs. They are very much behind the Government in wanting to get 80% employment. They want to help tackle economic inactivity and bring people back into work. It is good for all of us to be able to utilise those skills and resources that are under-utilised at the moment, and to help people, and to go further to support people who may be on the margins of the workforce and need additional help. But SMEs cannot do that if they are faced with additional complexity and more restrictions on what they can do, and more risk of getting it wrong. It is the risk of getting it wrong that is the problem. Someone said to me, in respect of the harassment and the inclusion of the word “or” in terms of the reasonable steps that employers have to take, “I want to comply, but as drafted, I don’t know how I could guarantee that I am compliant.” It is that complexity that is the problem. I would say, “Let’s not go further right now; let’s do this at the right pace and bring employers with us.”

Alex Hall-Chen: I would agree with what others have said. I would add that if there are areas where more ambition is needed, it is around how we can make sure that the policies that will be implemented via the Bill are sustainable and can actually be implemented on the ground in business. That partly returns to the point I made earlier around the already creaking tribunal system, but also a recognition of the costs that this will have, particularly for SMEs. That is why, for instance, we have been calling for the reinstatement of the statutory sick pay rebate scheme for SMEs. That is where we would like to see more ambition.

[Alex McIntyre]

Q I used to work on a zero-hours contract in the hospitality industry, as many do. Everyone who worked in that small business was on a zero-hours contract, which led to a situation where colleagues of mine would be on 60 hours one week and then given five hours the following week by the boss, who was doing that for personal reasons, frankly. I was a student at the time—I was growing up and at school—but they had a family and bills to pay. Would you not agree that there does need to be reform in a system that puts all the flexibility in the hands of the employer and none in the hands of the employees? Particularly on zero-hours contract reform, would you not agree that most seasonal businesses understand the seasonality of their business and, with some planning, would be able to put employees on permanent contracts for their baseline business throughout the year, but then use fixed-term contracts for the seasonal part of their year so that they had additional employees for the fixed term of their season?

--- Later in debate ---

[Steve Darling]

Q From Torbay to Tyneside, productivity in the British economy is the biggest challenge that we face. Cathryn has alluded to productivity a number of times during evidence. What opportunities do you see in the Bill for driving productivity and the culture change needed to drive that agenda through our workforce?

Ben Willmott: The Bill is focusing businesses’ minds on how they recruit, manage and develop their people. I will refer to comments I made earlier. If the measures in the Bill are designed the right way, they can support improvements in overall employment standards. But if consultation is not effective and measures are introduced that are not workable, it will have the opposite effect. It is about finding the right balance.

Cathryn Moses-Stone: Similarly, we have a lot of data that shows that policies like flexible working, enhanced family-friendly rights and day one rights make employees feel valued and supported, which in turn drives better performance.

We did a study last year looking at the impact of trained managers in effectively delivering hybrid working. By way of example, 68% of our managers said that hybrid working made it easier to increase their work productivity, and that was a result of managers being trained to manage teams that work in a hybrid way. We know that where managers trust their direct reports—this is what our evidence shows—they find that productivity rises. As I have already said, poorly managed teams face lower motivation, satisfaction and retention, and ultimately impact on business delivery. So really good management in designing work that allows employees to thrive is important.

We must remember that managers are employees themselves. Managers want it to work for themselves as much as they want it to work for employees. That in turn will boost productivity at the higher levels of the organisation as well. We have lots of data that backs that up. Again, it is all about how the legislation is implemented and all about the time and space that is given to support managers to do that.

Ben Willmott: The other thing I would add is that our members are certainly supportive of the ambition behind the Bill. Our member survey shows that there is significant support for changes to improve statutory sick pay and to improve parental leave.

There are definitely areas of the Bill that have support, but I will give an example of an issue. When talking to members in sectors that might bear more cost from changes to statutory sick pay, we found they were much more sanguine in September than they were after the Budget, because they are now thinking about it in the context of broader changes. The cumulative effect of changes and increases in employment costs needs to be taken into account when we think about individual measures.

Carly Cannings: On the point about productivity, if you look at what makes a workforce productive, there are lots of things that go in the mix, such as feeling engaged in the work you are doing and valued by your managers, as well as having an environment around you that offers things such as flexibility. The factors that lead to productivity are broad. We need to be realistic about the measures in this Bill and how far they will go to support productivity, given that lots of employers are probably already meeting lots of these minimum thresholds.

It is a step in the right direction. It raises the profile of things such as flexible working, so hopefully more businesses will adopt it—it is now a day one right anyway. It definitely moves in the right direction in terms of creating that happy, engaged workforce who feel valued and able to work in a way that works for them and their employer. Again, it is back to that point about raising minimum standards. There is more to this element about workplace culture and productivity than just minimum standards of employment legislation.

Cathryn Moses-Stone: Echoing that, it is important to acknowledge that lots of forward-thinking employers are already doing a lot of this stuff anyway. They are doing it for a reason, because they are seeing the impact on their business. That must not be forgotten.

[Chris Law]

Q This is a question for the whole panel but, Carly, you mentioned that regulations here set the minimum standards. Does this Bill go far enough, and which bits would you like to see go further?

Carly Cannings: It was not a criticism when I said that it was about minimum standards. As I said, creating a happy, thriving, engaged workforce is more than just legislation. It is not to be misunderstood as a criticism of those minimum levels, but equally, you do not want to tie the hands of good employers by making them jump through too many hoops around legislation.

For me, this Bill is about raising the standards of those employers who are not necessarily doing, and need a bit of encouragement to do, the right things. We need to be mindful of the balance. The previous panel mentioned the impact on small businesses and the importance of not going too far the other way in over-legislating that ties the hands of small businesses. It is very much not a criticism; it is a realistic statement of the Bill being part of the package.

Ben Willmott: We have done a lot of research over the last few years looking at the level of HR capability and people management capability in small firms, and what sort of support they need. The research has involved more than 500 small firms, and shows the very low level of HR knowledge and capability within them. They do not have in-house access to professional HR practitioners; most of them do not use any sort of external professional HR consultancy support either.

There are a lot of issues that you probably would not imagine. A lot of small firms may not even have written employment contracts or written terms and conditions of employment. There is a lot of informality still in that part of the economy. That is the point I was making earlier. We really do need to find ways of providing better quality, more accessible advice and support to help these small firms meet their obligations and improve the overall level of employment standards in the economy.

Cathryn Moses-Stone: From our perspective, we would hope that this is a broader catalyst and a driver to see better-led and managed organisations across the board. We want to see more investment in management and leadership in general. We have lots of evidence looking at the impact of better-trained managers in the public sector and how that can support public service reform. We have evidence for what that looks like in healthcare education settings. We have evidence for what that looks like for delivering green skills and AI, and for how that is a driver of more investment in management and leadership across the board, given the evidence we have and what it does for workplace growth, productivity, our economy and people’s happiness.

Again, I emphasise the point that 82% of people are accidental managers. We have all heard—I am sure everyone in this room has, in their time—about a bad manager and the impact that that can have on an organisation. We see this, hopefully, as a bit of a catalyst for further investment and the thought given to M&L in general.

[Nick Timothy (West Suffolk) (Con)]

Q Employment standards are obviously important and can contribute to higher productivity, but also, if you guarantee and legislate for certain standards, there will be trade-offs, because that brings cost and opportunity costs through lost time. Real improvements to productivity come from things like investment in tech and training.

May we explore the trade-offs a little? With this kind of legal framework, to what extent will managers be able to focus properly on the core purpose of their businesses, as opposed to compliance with the law? To what extent will managers be able to invest properly in training and new technologies to aid productivity, rather than have the costs set out in the impact assessment?

Ben Willmott: That is a really important point. I alluded to it earlier. We know that one of the things that will drive productivity will be looking at how businesses can identify and address skills gaps, which will require thinking about how we train and develop our staff and managers. We know that responsible technology adoption will, to a large degree, depend on the people element—things like job design, or making sure that people are trained and have the right skills to use technology, and that we are consulting employees in advance so that their views help shape how the technology is implemented.

Businesses only have so much bandwidth, so I think that there is a real challenge there, particularly for our members, who are on the frontline of trying to ensure compliance. At the same time, the business will be asking them to help improve workplace productivity through those other activities. That needs to be thought about when we think about how regulation interacts with other factors that might support workplace productivity.

Carly Cannings: You are right—there is an inevitable trade-off. Even employers who are now broadly compliant or doing good things will have some costs associated with bringing in changes to policies that reflect the actual detail of the Bill, for example. They might be broadly doing something good in that space, but it might not quite align with the provisions of the Bill. It is important to make the point that it is going to have an impact on employers, even those that are doing good things in that space already. But the way to offset that is by phasing the changes through—not dumping them all on employers all in one go, but helping them to navigate the changes. This has already been alluded to, but it is making sure that they have that support through the implementation phase.

Cathryn Moses-Stone: I am pretty much in agreement with Carly. Obviously, there will be an initial trade-off, and investment will be required, but I guess our point is that it is for longer-term gain. Once we have got those happier and more supported managers, and therefore workplaces, these things will become elements that save the business money in the long run. Understanding that broader piece is important, and making sure that the process is there in order to upskill and train people in the right ways. It will be about a clear understanding of, “Will this agency be there to support them in the right ways?”, rather than just being a place to go as a last resort, assuming a slap on the wrist and ill intent. What is the support package alongside this to manage some of those trade-offs?