Employment Rights Bill (Thirteenth sitting)

Greg Smith Excerpts

Committee stage
Tuesday 17th December 2024 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)]

Good morning, Mr Mundell; it is a pleasure to see you in the Chair. As is customary, I refer to my entry in the Register of Members’ Financial Interests and my membership of the Unite and GMB trade unions.

The clause will empower Ministers to reinstate and strengthen the two-tier code on workforce matters where contracts for public services have been outsourced to the private sector. It will ensure fair and equitable employment conditions for public sector workers who have been transferred into the private sector, and private sector workers who work alongside them on public service contracts, while maintaining a high quality of service for the public. It therefore directly supports the Government’s manifesto commitment to make work pay and will tackle the issue of unfair two-tiered workforces where staff working alongside one another to deliver the same contract do not have comparable terms and conditions of employment.

The powers are constrained so that the provisions of the regulations and the code, when developed, will apply only to new contracts entered into once the Bill comes into force, but can and will apply to re-procurements of services already outsourced where the re-procurement leads to a further transfer of workers. Ministers will have the power to make regulations specifying provisions to be included in relevant outsourcing contracts. The provisions may, for example, set out model contract terms that, where incorporated into contracts, will impose obligations on suppliers. Authorities will be required to take all reasonable steps to include those provisions in all relevant outsourced contracts.

The regulations made under the clause will, first, have the purpose of ensuring that transferring workers are treated no less favourably as workers of the supplier than when they worked for the public sector contracting authority and, secondly, have the objective of ensuring that workers of the supplier who are not transferred from the public sector but recruited by the supplier to work on the contract are treated no less favourably than those transferring workers. Alongside that, Ministers of the UK, Scottish and Welsh Governments will be subject to a duty to publish a code of practice addressing similar matters to which contracting authorities will need to have regard.

To ensure that the code is effectively enforced, there will be several forms of redress. Contracting authorities will be required to take all reasonable steps to ensure that suppliers meet their contractual obligations, as set out in the regulations. In addition, the procurement review unit, which will be established under our new Procurement Act 2023, due to commence in 2025, will be able to investigate whether a contracting authority has had regard to the code and taken appropriate steps in relation to provisions specified in the regulations.

These powers are being extended through amendments to the clause, which we discussed last week, to the devolved Governments of Scotland and Wales so that the benefits of a consistent approach to fair and equitable employment terms and conditions on relevant outsourced contracts can be spread throughout the UK. Fair and equitable working conditions are the right of all employees working alongside one other on the same outsourced contracts, and these measures will help to tackle that issue head on.

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to serve under your chairmanship once more, Mr Mundell.

Clause 25 has got me thinking about many moons ago, in 2006, when I was part of the team that won Hammersmith and Fulham council for the Conservatives for the first time since 1968. One of our first acts was quite literally to take the red flag down from the roof of the town hall. Part of the symbolism of that, which is why I mention it, was that the council, in 2006, was one of the last to outsource anything at all. Competitive tendering simply had not happened in that London borough. Everything was still a direct service run by the local authority, and we set about contracting out waste, grounds maintenance and many other services. Why? Because we wanted to deliver better value for taxpayers—indeed, we cut council tax by 20% over the eight years that we ran the council—and to improve service standards.

One of the things I learned in that process, and the reason my point is relevant to the clause, is that the first iteration of any contracting out—that first contract, be it for refuse collection, street cleansing, grounds maintenance or whatever—does not tend to result in economies and improvements. It is often in the second or third contract iteration where the cost savings and improvements in service standards start to be seen. That is partly because of the TUPE provisions that rightly exist to ensure that those staff who are being transferred from whatever part of the public sector we might be talking about—in this case, local government—transfer with the same rights, terms and conditions, and pay that they had at the point that they ceased to be direct employees of the council, or whatever other public service, and became employees of whoever won the contract.

The rub comes in the real-world application. In such cases, the staff members who transferred are on favourable terms and conditions, and probably better pay, than some of the staff that the contractor brings into the team. If it is immediately locked in that everybody new has to be on the same terms and conditions and pay scales, we will never achieve value for money for taxpayers, and we will never enable the contractor, be that a refuse collection company or whatever, to find efficiencies and savings at the same time as increasing service standards in the way that we all want to see. It might as well never be done in the first place. That makes me question whether that is in fact the ideological position that the Government want to take. I can see the Minister grinning; perhaps I have hit upon something.

I gently remind the Committee of the time when every refuse service and local government service was provided directly, in house, before competitive tendering and the revolution of the 1980s and the Thatcher Government. We can all remember what delivery of those services looked like in the 1970s: the rubbish piled up on the streets with no one collecting it.

[Steve Darling (Torbay) (LD)]

It is a pleasure to serve under your chairmanship, Mr Mundell. I just reflect that when I was a unitary authority leader, we were effectively a hostage client of the private sector, since the previous Conservative authority had set up a joint venture with it. That was far from the land of milk and honey. Well, it was the land of milk and honey for the private sector, whereas local taxpayers had to suffer under a system that was set up to benefit the private sector. The reality is that often it is more appropriate for local authorities to run these services so that they are run in the interests of local communities rather than the profits of the private sector.

[Greg Smith]

The hon. Gentleman is clearly not of the orange book wing of the Liberal Democrats.

[Nick Timothy (West Suffolk) (Con)]

Are there any left?

[Greg Smith]

My hon. Friend indicates that perhaps there are not any left. I fundamentally disagree with the point made by the hon. Member for Torbay. It is not about profits for the private sector, although the profit motive is an important element in driving up service standards and ensuring that if a company wants to keep a contract, it has to deliver on it.

Some councils have failed on this front by failing to set the specification of a contract correctly and failing, as the client, to enforce against the contract. That is where we see failure on so many fronts; it has little to do with terms and conditions or the points covered by the clause. Often, an ill-equipped council, be it the members or the officers—I have seen this from both sides—fails to properly specify in the first place, when it goes to market, and then fails to deliver proper contract management. That is where we see gremlins creep into the system and unintended consequences come about.

I gently point out to the hon. Member for Torbay that when I was in local government, we saw many benefits from competitive tendering over multiple iterations of the contract. I can ensure him that in the cabinet portfolios that I held in that local authority, where I was directly overseeing the waste, street cleansing and grounds maintenance contracts, I was pretty tough on those contractors in ensuring that they did drive up standards. But sometimes it is not the right step. The Labour council we took over from had outsourced housing, which we as a Conservative council brought back in house. We ended the arm’s length management organisation to bring it back within direct council control to deliver a better service for the tenants of those properties. So if it is not done properly in the first place, that model does not always work.

The measures in clause 25 are once more a sledgehammer to crack a nut. They do not recognise the practical realities of how competitive tendering has worked, excepting the flaws that I raised about how well contracts are specified and enforced against. If we want to ensure that we are delivering the best possible value for money for taxpayers—the people who pay for public services—at the same time as increasing the standard of services delivered, which I expect is a universal aim that all of us hold, there have to be flexibilities to ensure that efficiencies can be found, and that the fat is taken out of all systems, processes and ways of doing business. If we lock contractors into absolutely having to match every term and condition, with every pay scale being exactly the same, we are never going to deliver that.

[Sarah Gibson (Chippenham) (LD)]

It is a pleasure to serve under your chairmanship, Mr Mundell. I really welcome the clause. Despite the fact that their uniforms, pensions and contracts said “NHS”, staff at a community hospital in my constituency only realised that they had been effectively TUPE-ed over to a private business when they failed to receive the £1,000 bonus that all their colleagues in the main hospitals got. One may say, “How naive of them; they should have read their contracts better,” but most of them had been NHS workers for 25 years, so they were completely unaware that this had happened to them and that they were no longer entitled. I must thank the then contractor, a charity, for lobbying hard to make sure that eventually they got some kind of bonus, but to be suddenly without those conditions was quite frightening for them. So I welcome these measures.

I take some issue with what the hon. Member for Mid Buckinghamshire said. For many years, I served as part of Wiltshire council, which is a Conservative-led council. It was locked into a service contract for maintenance that was poor and used to lower wages, producing a system where we had very little maintenance. Our town councils are now having to pick up the bill for repairing grounds and play areas because the company, although it had the contract and was paid by the local authority, was not carrying out the works. Therefore, I welcome this measure and I am pleased to support it.

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[Greg Smith]

How does the hon. Gentleman feel that the NHS in Wales is doing—better or worse than in England?

[Laurence Turner]

I would say better, having had some experience. The hon. Gentleman might want to return to that point.

On the substance of the clause, there were some concerns about the original incarnation of the two-tier code. It was purely voluntary and did not contain meaningful provisions for redress where an employer who had signed up to uphold the standards of the code did not follow through. I hope that that deficiency will be remedied when the associated regulations appear.

It is legitimate to have differences on points of principle. After the current Lord Maude abolished the two-tier code, the Secretary of State—now Baron Pickles—said that the Government of the time had

“Abolished the…two-tier code that…hindered the voluntary and independent sector from delivering better value for money.”—[Official Report, 26 March 2015; Vol. 594, c. 166WS.]

The shadow Minister has made much the same point. This was explicitly about driving down wages for the large number of people who are contracted out to deliver public services. I very much welcome the fact that this Government have a policy objective of making work pay. For a large number of people in the labour market who have been overlooked by politicians for too long, the clause represents an important step forward for remedying that deficiency.

[Justin Madders]

We have had a broad debate—very broad from my hon. Friend the Member for Birmingham Northfield, who took us on a canter through the history. He was right that it was the coalition Government who abolished the two-tier code, which is why it is welcome that the Liberal Democrats have realised the error of their ways; I welcome their support on this. Their spokesperson, the hon. Member for Chippenham, made the important point that the inherent unfairness of people doing exactly the same job for the same employer finding out that they are on different terms and conditions and are earning less is a big morale sapper. It is also a big issue in terms of workforce retention—one problem that we often see with outsourced contracts.

I will turn to the shadow Minister’s misty-eyed days at Hammersmith and Fulham, and I will raise him Ellesmere Port and Neston borough council, which was a great believer in direct provision of services; we certainly felt that was the best way to deliver value for the taxpayer and good-quality services. In his contribution, the shadow Minister alighted on the illusion of outsourcing—the fact that consultants can demonstrate that savings can be made, but when you drill into the detail, those savings are always off the back of the workforce. They are not some magical way of doing things differently. It is about cutting terms and conditions and it is about a race to the bottom, which we are determined to end.

[Greg Smith]

I do understand the ideological difference between the two sides on this point, but I take issue with the Minister that this is about a race to the bottom and cutting terms and conditions; it really is not. From my experience, it was not a matter of consultants, but of properly probing contracts, setting the right specification to deliver for the residents in the place that the council served, and requiring the flexibility to ensure that some people would be doing very different jobs in a different way from before in order to deliver that. It was not about wanting to cut anyone’s pay or terms and conditions; it was about service delivery and value.

[Justin Madders]

I take the shadow Minister’s point. I am not familiar with the machinations of Hammersmith and Fulham council in the 2010s, and it may well be that savings were made by doing things differently. But there is absolutely no reason why that cannot be done directly from a public body: if it is well led, if it is able to have constructive dialogue with its work force, savings can be made.

The difficulty with the shadow Minister’s analysis is that, while he may have been able to find savings for the taxpayer through those kinds of measures, too often the savings are made by cutting terms and conditions for new workers. That is why, as he said in his original contribution, the second or third outsourcing is usually where the savings happen, because it is when those new workers come in on lower terms and conditions that the savings begin to emerge. That is why the whole outsourcing trick is a con, because it is how those savings tend to be made.

When we add in the contract monitoring costs and the profit motivations for the outsourced company to make a living from these things, we can quickly see why it becomes a bad deal for the taxpayer. I certainly make no apologies for putting forward this proposal, because we think it is the right thing to do, to respect and value those who work in public service and ensure that they are paid the same as their colleagues for doing the same work. I therefore commend—

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[Sarah Gibson]

I beg to move amendment 112, in clause 26, page 38, line 35, at end insert―

“(c) supporting employees with menstrual problems and menstrual disorders.”

This amendment would add menstrual problems and menstrual disorders to “matters related to gender equality”, in relation to any regulations made under the Bill to require employers to produce equality action plans.

I am very pleased to move this amendment. First, as the Bill stands, there are provisions for businesses to report on the impact of menopause on women in the workplace as part of the equalities impact assessments. I think the hon. Member for Sheffield Brightside and Hillsborough (Gill Furniss) is right to table this amendment and to remind us all that menstrual problems can hinder women at any point in their working life, not just as they enter menopause. She is the chair of the all-party parliamentary group on women’s health and an officer on the APPG on endometriosis; I feel confident that she has tabled this amendment with the best intentions. It seems an omission that this issue was not included in the original Bill.

Several constituents have contacted me about endometriosis, and specifically its impact on them at work. Endometriosis costs the UK economy £8 billion a year in treatment, loss of work and healthcare costs, and it takes an average of eight years to get a diagnosis. One in six workers with endometriosis leaves the workforce due to their condition—an issue that the Government and employers cannot afford to ignore. Those people could go back to work and stay in work if there was additional flexibility for them.

As one of my constituents told me—she does not wish to be named for these reasons—many employees with endometriosis find that their employers do not believe them about their symptoms, that their flexible working requests are refused and that they are subject to discriminatory automated absence procedures that penalise short but intermittent time off work. The amendment seeks to address that injustice. I want to be very clear that I support it, and I hope that the rest of the Committee will see its importance.

[Greg Smith]

I hear very clearly what the hon. Lady and the hon. Member for Sheffield Brightside and Hillsborough have said. I do not take issue with anything that has just been said. The endometriosis point is a clear one, and well made. Where I challenge the hon. Member for Chippenham, and indeed the Minister, is that that women’s health issue is not exclusive; there are many health concerns that only women face, and indeed some that only men face. Given that the clause explicitly refers to gender equality, would it not be better, from a pure legislative drafting perspective, to say that gender equality will be the catch-all that encompasses all that?

Is there not a danger that by listing one or two medical concerns, we will lock out other health problems faced exclusively by women, or exclusively by men? Naming one or two things in legislation often creates a problem in the interpretation of the rule. Courts may look back at this debate, or at any other debate on the Bill, and understand that this gender equality provision is intended to be a general catch-all for anything that any man or woman may face. If we name one or two things in legislation, however, it could become dangerous for when a man or a woman presents with something that is not named.

[Sarah Gibson]

I cannot help agreeing that naming a few conditions in the Bill might well be a concern, and when I first looked at the amendment on its own without looking at where it would fit into the Bill, it did seem slightly incongruous to suddenly mention one aspect. But if we look at where it would be inserted into the Bill, following a direct reference to menopause, it seems far more appropriate to make the point that menopause is not the only ongoing issue that women face. Many women are quite relieved to go into menopause, because it has been so onerous for them to have periods that keep them off work or in bed for several days a month. If we are going to mention menopause, mentioning menstruation makes perfect sense. The amendment makes sense only in the context of the Bill.

[Greg Smith]

I am grateful to the hon. Lady for that clarification. There is a danger that we will end up dancing on the head of a pin, but I am always concerned about naming individual things in a catch-all provision. If amendment 112 were to be accepted, it might create an interpretive problem for the courts at a later date. Indeed, it might create a problem for employers in navigating whether they have to abide by legislation that mentions one condition but not another.

I would be grateful if the Minister, in his response to the amendment, gave the Government’s interpretation—[Interruption.] With two Ministers on this Bill, it is confusing to work out which one will be responding. I would be grateful if, in her response, the Minister gave clarity on the Government’s interpretation and the legal advice that they have received.

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[Steve Darling]

I beg to move amendment 162, in clause 26, page 38, line 35, at end insert—

“(c) supporting employees who provide or arrange care for a dependant with a long-term care need, as defined by the Carer’s Leave Act 2023.”

This amendment adds caring to the list of “matters related to gender equality”, on which regulations will require employers to produce an equality action plan.

This amendment relates to research showing that by the age of 46, 50% of women have taken on caring responsibilities, whereas the equivalent age for men is 57. Clearly, the impact of caring happens much sooner for women, and that is why it is appropriate to take carers into account under the equality action plan.

There are approximately 10.5 million carers in the United Kingdom, 2.6 million of whom work. That shows that a significant number of carers do not work. In an earlier debate I made the point about the pool of workers for whom there are opportunities in our workforce yet who are not able to access longer-term employment. I strongly contend that the amendment is a way to enhance the pool of opportunity by driving the culture change that I was delighted to hear the Minister say a lot of the Bill is all about.

Carers will often stay in lower-paid jobs or refuse promotion because of caring commitments. It is extremely important to include caring as part of the consideration and clearly flag that to people who consider the action plans, because it is not an obvious matter for an employer to take into consideration, but it affects such a large number of people in the United Kingdom that it would be an error in judgment not to include it in the Bill.

[Greg Smith]

I rise to address the technicalities of how the amendment would work in legislation and with the Bill’s gender equality provisions. I entirely accept the hon. Gentleman’s point about the disparity between the average age by which a woman might take on caring responsibilities compared with the average for a man, but those are averages and there will be outliers and exceptions across all age ranges and all genders.

I say clearly that the Opposition welcome the contribution of all carers and salute them as the heroes they are, but I am concerned that the amendment would shoehorn a very worthy and important matter into a provision on gender equality. I do not see how it fully fits; it would have been more sensible to have created provisions for the support and recognition of those with caring responsibilities in a new clause or in another part of the Bill. I worry that, like amendment 112, amendment 162 could confuse the Bill’s interpretation as it goes down the line and, potentially, is challenged in court at some point.

I accept the core argument about support for those with caring responsibilities, but it is dangerous to shoehorn provisions into clauses where that is not the primary intent. It is important that the gender equality points remain focused on gender equality issues, on which I think the Government have good intent. If the Bill gets changed too much by us bringing in things that—although clearly in scope, given that they have been selected—are on the edge of scope, that could cause an interpretative challenge later. Provisions on support for those with caring responsibilities would be far better in a new clause or a different part of the Bill, where they might fit more neatly and enable us to avoid judicial challenge.

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[Dame Nia Griffith]

The clause is the first step towards introducing equality action plans, and it provides the power to do so in subsequent regulations. Women are a crucial part of securing economic growth and improving productivity, but the national gender pay gap remains at 13.1% and eight in 10 menopausal women say that their workplace has no basic support in place. This lack of support adds up to a significant loss of talent and skills. Menopause affects 51% of the population, with one external estimate showing that the UK is losing about 14 million work days every year because of menopause symptoms.

Large employers have been obliged to publish gender pay gap data since 2017, with action plans being encouraged, but voluntary. Analysis in 2019 found that only around half of employers that reported data went on to voluntarily produce a plan saying how they would act to improve the figures. That demonstrates that only making it mandatory will push employers to act. The best employers already recognise that providing women with the conditions to thrive is good for their employees and good for business. In taking this step towards introducing mandatory action plans, we are making sure that all large employers in scope of this clause follow their lead.

We are using a delegated power, mirroring the approach taken for gender pay gap reporting. Just as with that requirement, we want to give employers as much detail as possible in legislation—more than would commonly be in a Bill. The use of regulations allows us to do that while maintaining flexibility. When drafting this power, we reflected on what we have learned from gender pay gap reporting and from the hundreds of employers we have engaged with as a result. Most organisations think about equality in the round. They have one diversity and inclusion strategy, recognising what is borne out by the evidence: the most effective employer actions have benefits for more than one group or identity. That is why this clause proposes that employers produce one plan that covers both the gender pay gap and the menopause, reflecting the way they already work, reducing the burden of duplication and ensuring that they can get on with putting the plan into action. I commend clause 26 to the Committee.

[Greg Smith]

We covered many of the issues relating to this clause when we discussed amendments 112 and 162. I am grateful to the Minister for citing the 2017 changes, which were brought about by the previous Conservative Government. It is morally right to completely close the gender pay gap. That will undoubtedly take some time, but every step taken to close it completely is a welcome one. It is important to make sure that employers are taking proper and serious account of the issue and action on ensuring gender equality in the workplace.

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[Dame Nia Griffith]

This clause is the first step towards requiring employers that already report gender pay gap data also to provide information about where they receive outsourced support from.

A 2019 YouGov survey found that seven out of 10 employer respondents had used third parties to provide key services. We know that the success of a business is down to everyone who contributes, including those who do some of the most demanding jobs but whose pay may be overlooked because they are employed by outsourced service organisations.

By getting large employers to disclose who they have outsourcing relationships with, we are building on what we have learned from gender pay gap reporting. Public accountability is an effective motivator for organisations. Instead of trying to get organisations to share employee data, which risks data relating to outsourced workers getting lost in the wider data, our approach will put those outsourcing relationships front and centre. That will act as a prompt for employers, and so achieve our original aim: getting employers to work throughout their networks and be invested in the pay decisions of those from whom they receive outsourced services.

We are taking a delegated power, mirroring the approach taken for gender pay gap reporting. That will enable us to provide as much detail as possible to employers in legislation, including the definitions and parameters of what will need to be reported. We recognise that outsourcing is not clearly defined and that we will need to work with employers to ensure that the measure works. The use of regulations will allow us to engage on an ongoing basis with experts in the area, provide as much clarity as possible in legislation and still maintain flexibility.

This measure is a step towards valuing and supporting some of the lowest-paid workers; it is a step towards businesses working together, rather than engaging in a race to the bottom; and it is a step in the right direction. I therefore commend the clause to the Committee.

[Greg Smith]

The clause builds on the gender pay gap reporting introduced by the last Government. Of course, in 2017 we were on the second of four female Conservative leaders, while the Labour party is still yet to show its commitment to gender equality in its leadership. Perhaps the Minister might be the first female leader of the Labour party—who knows? I gently and slightly naughtily make that point; it is the Conservative party that has shown a clear commitment to gender equality, particularly with the changes to gender pay gap reporting.

Expanding reporting to outsourced service providers does not seem a controversial move, but I urge the Minister to ensure that the provisions that the Government introduce do not create loopholes or miss anyone out; I can imagine various scenarios in which someone might argue that something is not outsourced, even though it is contracted. I urge her to double check that the specific language used does not create something that anyone can exploit or legally challenge. That is to ensure that the provisions build in spirit on the previous Government’s 2017 changes and do not create loopholes.

[Laurence Turner]

I will pick up the point just made about the changes made in 2017. Some of the opposition at that time came from the august institution of the Institute of Economic Affairs, which said that, if the regulations were introduced,

“they may encourage outsourcing of lower-paid jobs which happen to be taken by women (to avoid inclusion in a firm’s own return).”

That point has also been made by other organisations. King’s College London published a study on this matter three years ago, which said that

“focusing on the pay gap headline number can risk organisations seeking to window-dress their figures by outsourcing lower-paid jobs, which in turn worsens overall gender segregation within the labour market.”

Therefore, this extension of gender pay gap reporting to outsourced workers really does close that loophole and remove that perverse incentive—one example of many that we have heard about in this Committee.

We also heard from the Women’s Budget Group; Dr Mary-Ann Stephenson, giving evidence, said:

“We welcome the move to include outsourced workers in gender pay gap reporting…We are very conscious that you will quite often see that the lowest paid workers, particularly in the public sector, are now outsourced.”––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 163, Q176.]

The measures as proposed would effectively link the outsourced employer’s reporting to the reporting of the primary contracting authority. I hope that, when the regulations are drafted, they will shed some light on the extent of outsourcing across the economy; these workers are often invisible in official statistics, which is a wider problem for our understanding of the labour market. However, this move within the Bill is welcome.

I will just come back on one point; the shadow Minister referred to elected leaders of the Labour party. He is quite right to point out that the Labour party has not elected a woman leader—I very much hope that that will happen—but, for completeness, under the Labour party rulebook there is no role of “acting” or “interim” leader. It is therefore important to say, for the record, that in the eyes of the rulebook the noble Baronesses Beckett and Harman were as much leaders of the Labour party as any men who have fulfilled that role, and they served with distinction.

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[Justin Madders]

Clause 28 introduces schedule 3, which inserts proposed new part 8A into the Education Act 2002. Paragraph 1 of schedule 3 contains proposed new sections 148A to 148R of the 2002 Act and will be discussed separately.

The reinstatement of the school support staff negotiating body will give school support staff the recognition they deserve for the crucial role they play in children’s education and development. Establishing the SSSNB through the Bill will help ensure that schools can recruit and retain the staff needed to deliver high-quality, inclusive education and support the Government’s work to drive high and rising standards in schools, so every child has the best life chances.

The body will bring together representatives of school support staff employers, representatives of support staff, an independent chairperson and a representative of the Secretary of State. The SSSNB will consider the remuneration, terms and conditions of employment, training and career progression opportunities for school support staff. Its remit will lead to the creation of a national terms and conditions handbook, fair pay rates and clearer training and career progression routes for school support staff in England.

Most school support staff are currently employed on National Joint Council for local government services pay and conditions. The NJC is a negotiating body made up of representatives from trade unions and local government employers. Existing NJC arrangements are not statutory or school specific. Moving to a school-specific body where pay rates and pay awards for support staff are negotiated by school support staff employer and employee representatives and ratified by the Secretary of State will both help to ensure fair pay rates for school support staff and allow central Government to have a strategic view of pay across the school workforce.

It is essential for the SSSNB to have a statutory remit so that all prospective and current support staff in state schools nationally benefit from a transparent, guaranteed core pay and conditions offer. The Bill re-establishes the SSSNB as an unincorporated body on a similar footing to the previous body from 2009 that was abolished by the coalition Government in 2010.

As education is a devolved matter, the extent of these measures is therefore England and Wales and the measures will apply to England only. This is consistent and in line with the remit of the School Teachers Review Body being England only.

The 2009 SSSNB included only those support staff employed by local authorities and governing bodies to work in maintained schools within its scope. Roughly half of schools are now academies, compared with around 200 in 2009 when the body was previously established. Support staff employed by academy trusts are now included within the SSSNB’s remit. It is crucial that the body has a remit for all state-funded schools in England in order to achieve greater national consistency, irrespective of which type of school support staff work in. That is a point that we may come on to debate in due course.

[Greg Smith]

The Opposition have tabled a number of amendments that probe what is introduced by clause 28 and schedule 3, which we will come on to in subsequent debates today. I will reserve the bulk of my remarks for those debates, although, as clause 28 introduces schedule 3, I will preview those debates now by noting our strong opposition to these provisions. There was a very good, solid and rational reason that the former Secretary of State for Education during the coalition years—now editor of His Majesty’s Spectator magazine—abolished SSSNBs, which was to give that flexibility and freedom to the quite right and good, educational standards-raising revolution in education that came through the creation of the academies by the last Labour Government and in particular the creation of free schools by the last Conservative Government, including in the coalition years. Clause 28 and schedule 3, which we will come on to shortly, seek to undo a lot of that. For the reasons I will outline when speaking on those amendments, I think this part of the Bill requires a rethink.

[Dr Tidball]

I draw your attention to my declaration of interests, Mr Mundell. I am a member of the Community union, Unison and GMB.

I found it difficult to hear, in anything the shadow Minister just said, any rationale for getting rid of this body all those years ago. I missed three years of school as a child because of the surgeries I needed. Incredible classroom teaching assistants helped me to build my confidence and learn to mix with other children again when I returned—making education and learning an escape, a way to express myself, to overcome people’s assumptions about my disability and to feel free.

I stood in my constituency because I wanted to use my skills and experiences to give back to the communities that gave me so much. To know that, because of this Bill and the clause before us now, teaching assistants and other school support staff like the ones who made school a less daunting place for me will once again have a collective bargaining system for pay and conditions—which will ensure that those staff are finally valued and recognised for their vital work—is a very great privilege indeed.

The reinstatement of the school support staff negotiating body in England, previously scrapped by the coalition Government for reasons that still remain unclear, will be key to providing professional recognition for a group of staff who have been overlooked for far too long. As Unison, of which I am proudly a member, has highlighted, the proposals in this clause

“demonstrate that the Employment Rights Bill isn’t just tackling worker’s rights—it holds the key to tackling long standing public policy failures that have been ignored because they affect workers and service users whose voices are too often neglected by decision makers. Tackling this neglect and allowing trade unions to engage in constructive social partnership and better represent their members is long overdue”.

This clause therefore empowers that group of working people, who have been so long overlooked by the Government, to have a better life at work. It will help trade unions to raise standards and pay across the labour market.

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[Laurence Turner]

That was quite a generous amount of time for an intervention. The hon. Member may wish to go back to the record, because the point I made was that the experiment over pay and terms and conditions has failed. The challenge to the Opposition was: do they recognise that there is a serious problem with school support staff remuneration and contracts? If they do, what are their proposals to fix it? I would be willing to take a second intervention on that point.

[Greg Smith]

Much as the hon. Member for Chippenham said, this is about political choices. If this new Labour Government, six months in, wish to make a political choice to fund schools to pay support staff more, why do they not make that political choice and make that money available? We all want people to earn more, to get more in their pay packet and to be richer.

[Laurence Turner]

I think we have it there: the Opposition do not see this as a political priority. They chose not to take steps or to put forward meaningful proposals to raise the employment standards of school support staff. My challenge was: do they have any proposals for this group of workers, particularly in light of the Low Pay Commission decision? We have not heard an answer.

[Greg Smith]

Will the hon. Gentleman give way again?

[Laurence Turner]

It is Christmas.

[Greg Smith]

I am glad the festive spirit is alive and well, but I remind the hon. Gentleman—there is no sugar coating it for Opposition Members—that the Labour party had a thumping victory in July. There is no general election on the horizon, and there is little chance of any change of Government before 2029, so it is on the Labour party to make political choices for the next four and a half years. Will the hon. Gentleman do that, or is he just going to deflect back to the Opposition?

[Laurence Turner]

I doubt I am going to do it personally; as with all these things, it is a collective endeavour. The hon. Member asked whether the Government are going to do this, but they are doing this—it is in the Bill. I ask again: what is the Opposition’s alternative? We are yet to hear it.

It is worth reflecting on the nature of these review bodies—not that this is a pay review body; it is a negotiation body—and the way in which we establish new agreements, because these things do not happen quickly. I think that the establishment of “Agenda for Change” in the NHS took seven years from initiation to completion. That exercise took a long time, but I do not think anyone would seriously argue for going back to the plethora of terms and conditions, and the mismatch between different grades of workers, that existed before, which created serious equal pay liabilities. That is the situation that we inherit in respect of school support staff.

These things do take time. If the shadow Minister goes back to the record of the original school support staff negotiating body—from 2009 to 2010—the progress made in that relatively short time was not on establishing the new pay system, but on drawing up model role profiles and moving towards a national handbook for terms and conditions. Those measures would be hugely welcome today. In fact, the Conservative Government acknowledged that some the school support staff negotiating body had done some important work during that time. They were on record as saying that there was a clear case for carrying forward some of it, but that never happened, and we have been left with an absence in that area of policy for almost 15 years. The changes to pay will be hugely welcome when they come. It will be a negotiation, so the outcomes will be a matter for the parties represented on the negotiating body, including the Department for Education.

We must go back to the problem: schools are finding it increasingly difficult to recruit and retain skilled school support staff. A number of private sector employers, including supermarkets, are increasingly offering term-time only contracts, with the intention of attracting people out of schools and into alternative roles. Freedom of information requests show that, where data is held, teaching assistant vacancy rates run at around 10%. That is having a real impact on the ability of schools to deliver inclusive education, which is a shame.

Draft Recognition of Professional Qualifications and Implementation of International Recognition Agreements (Amendment) (Extension to Switzerland etc.) Regulations 2024

Greg Smith Excerpts

Monday 16th December 2024 General Committees

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to serve under your chairmanship, Sir Roger. His Majesty’s loyal Opposition welcome this update. It is good to see the Government bringing into force an agreement made by the Department for Business and Trade when my right hon. Friend the Member for North West Essex (Mrs Badenoch), the Leader of the Opposition, was Secretary of State under the last Government. This legislation will reduce labour costs but will not impinge on Britain’s autonomy over immigration or regulatory policy. It is required to prevent a cliff edge after the previous agreement expires on 31 December.

Switzerland is the United Kingdom’s fourth-largest trading partner. The total trade in goods and services between the UK and Switzerland, in the four quarters to the end of quarter 2 in 2024, was worth £46 billion. According to the Department for Business and Trade,

“The agreement also safeguards the autonomy of UK and Swiss professional regulators to…set and maintain standards…assess against these standards…decide who is fit to practise the profession”.

The UK-Switzerland recognition of professional qualifications agreement, which this legislation implements, was welcomed by the Law Society for continuing the regime under the previous UK-Swiss citizens’ rights agreement.

I have just three questions for the Minister. Does he have plans to extend the mutual recognition scheme further with Switzerland, such as to include financial services, and with other countries, such as the United States? Will he confirm that the legislation will be enacted in Switzerland on the same date? Has he considered a data exchange for qualifications that regulators deem not comparable?

[Mr Alexander]

The questions one always fears are the short ones that come with no thinking time, but I shall endeavour to answer the hon. Gentleman.

[Greg Smith]

I am getting used to being in opposition.

[Mr Alexander]

Exactly—and I am getting used to the challenges of being in government, as distinct from in opposition.

First, in all seriousness, I thank the hon. Gentleman for what I anticipate will be his support for the measures. He is entirely right to recognise that the work was undertaken under the previous Government and he can rest assured that the lodestar for the incoming Government in the last six months has been continuity where it makes sense in the interests of the United Kingdom economy. In that spirit, I hope that we can find common ground this evening.

As I set out, the regulations implement the UK- Switzerland recognition of professional qualifications agreement and require regulators to operate routes to recognition for comparable Swiss professional qualifications in accordance with that agreement. On the issue of extending mutual recognition, we will take a phased approach to make sure that we avoid the cliff edge that the hon. Gentleman eloquently described.

The hon. Gentleman can rest assured, however, that one of the early negotiations that we have initiated is on a Swiss FTA, which again reflects work that was undertaken under the previous Government. We have looked carefully at the mandate and negotiators have begun that process. When one looks for equivalent countries around the world where there are clear synergies in the character of the economy and the economic opportunities, Switzerland is high on that list. In that sense, whether in relation to the mutual recognition of professional qualifications or other aspects of our regulatory arrangements more broadly, we continue to look carefully at opportunities for UK-Swiss co-operation.

On the date of introduction for the Swiss legislation, I do not have that to hand. As I said, Switzerland is passing legislation to require Swiss regulators to recognise UK qualifications to ensure that the benefits are mutual. I will write to the hon. Gentleman about what we understand the Swiss parliamentary timescale to be.

As I have emphasised, the regulations continue to uphold the principle of regulator autonomy as set out in the Professional Qualifications Act 2022. My officials have also engaged extensively with regulators and the devolved Governments on the implementation. I trust that hon. Members understand and recognise the need for the regulations, as the hon. Gentleman set out, and the benefits that they will bring to the UK services trade. I thank hon. Members and commend the regulations again to the Committee.

Question put and agreed to.

Employment Rights Bill (Twelfth sitting)

Greg Smith Excerpts

Committee stage
Thursday 12th December 2024 Public Bill Committees

[Greg Smith (Mid Buckinghamshire) (Con)]

I beg to move amendment 127, in clause 22, page 33, line 12, leave out from “that” to end of line 21 and insert—

“the reason for the variation was to provide for improved employment practices and to update and reform outdated working practices, in order to allow for the more effective running of a business or organisation.”

This amendment would provide an exemption to unfair dismissal for failure to agree to a variation of contract.

It is a pleasure to see you back in the Chair for the afternoon sitting, Ms Vaz. The amendment, in my name and those of my hon. Friends, is a probing one—I want to be clear about that from the outset—that would provide an exception to unfair dismissal for failure to agree a variation of contract.

The premise underpinning the Bill’s provisions on fire and rehire is that the only reason for an employer to want to re-engage employees on varied terms is to exploit them by giving them worse terms and conditions. I am in no way, shape or form suggesting that that does not occasionally happen, but I come at this debate from the other direction, presuming that most employers are good employers who care about their workforce and want to see a happy staff getting on, being productive and doing the things they do to make the business a success, be that making things, giving advice or providing a service.

The Bill basically says that a business needs to be going bust for the process of varying a contract to be justified. Again, I am not certain that that is the right starting point. What if there were a legitimate reason for wanting to vary certain terms and conditions? We touched on this in our debate on SNP amendments 160 and 161 before the break, and I gave some examples thinking about the pace of change in a business. Let us say a manufacturing business moves from a very manual process for putting a product together—be it a car, a piece of furniture or some smaller product—to invest in robotics or something.

I can think of a farm in my constituency that was a traditional dairy farm but, thanks to a not insubstantial grant from the previous Government, has built a robotic dairy. That means that the people who work on that farm are doing a fundamentally different job. They no longer have to get up at 4 am to manually hook the cows up to the milking machines; believe it or not, the cows now form an orderly queue for the milking robots. I am not joking, Ms Vaz. I invite anyone to come and see it with their own eyes. There is a vending machine where people can buy the milk direct. The point at which staff intervention is needed is if an alarm indicates that a machine has clogged or broken, the pasteurisation room has hit the wrong temperature, or whatever. It is a fundamentally different job. Sometimes, that happens in a workplace where the employer wants to keep the staff—they do not want to let anyone go and they do not want the robots to replace them—but it involves different terms, different conditions and a different physical thing to do on a daily basis. I offer that as a practical example of how businesses change.

[Alex McIntyre (Gloucester) (Lab)]

I refer the Committee to my membership of the GMB and Community unions. I have two short questions for the shadow Minister. First, if the changes are so positive for employees, can they not simply accept a change to their terms and conditions? Secondly, let us take the scenario that he describes, where there is a change in processes, and put that in a business-to-business context. Say a business moves from wooden cogs and to metal cogs, and it has a contract with the wooden cog supplier. Is he aware of any circumstances in which that business would be able simply to break that contract without any notice or legal recompense to the other business?

[Greg Smith]

I understand the point that the hon. Gentleman makes. He is right that the businesses in the situation he describes would have to go through a legal process, probably involving very expensive contract lawyers, to alter such a contract. I do not think it is helpful to directly compare those supply chain contracts with employment contracts, because on one level we are dealing with human beings and on the other we are dealing with the flow of parts, services or whatever.

The hon. Gentleman is also right that a change in terms and conditions can sometimes be very positive for the employee. Perhaps it involves fewer hours for more money—that sometimes happens—or longer holidays. Of course, if something better is being offered, employees should have the flexibility to accept that, having exercised due diligence and looked it over properly—dotted the i’s, crossed the t’s and all that. What I am trying to get at is where the business model, and the day-to-day operation of the job, has fundamentally changed, through robotics or whatever.

[Laurence Turner (Birmingham Northfield) (Lab)]

I want to continue on the shadow Minister’s theme of milk. It used to be common in factories where there were particulates in the air to include a clause in someone’s contract that said they were entitled to a glass of milk during the day, because it was believed at the time that a glass of milk would remove those particulates from someone’s airway. It was completely misguided, but those contracts still exist, and I have been in situations where I have looked over similar, very outdated terms and conditions. If it is raining on a site, someone might be entitled to a 2p payment, for example. Such contract conditions are very easy to remove; it can be done by agreement.

Does the shadow Minister accept that if a contract is worded appropriately, such variations can be made by an employer—the key factor is whether there has been genuine consultation—and that the circumstances that clause 22 will remedy are really quite separate? It is for those extreme examples that Grant Shapps, the Conservative Business Secretary at the time, spoke out against.

[Greg Smith]

I am grateful to the hon. Gentleman, although he was possibly milking it with the length of that intervention—[Hon. Members: “Oh!”] It is nearly Christmas.

I accept the hon. Gentleman’s points about some of those very outdated provisions. I really hope that my children do not find a job out there that involves free milk, because they might jump at it a little too quickly. This probing amendment seeks simply to understand a little further where the flexibilities lie, and to get underneath some of the detail around when a variation of contract might be a good thing on both sides, or when things have just changed and there needs to be a variation in order for the jobs to be saved. I would hope that Members on both sides of the Committee would come at this from the perspective of the real world and wanting to save jobs, create more jobs, grow the economy and grow employment.

There may be legitimate reasons for wanting to vary terms and conditions, such as to provide for improved employment practices, or to update and reform outdated working practices—as the hon. Member for Birmingham Northfield referenced—in order to allow for the more effective running of a business or organisation. The amendment seeks to understand the Government’s position should such a situation arise, and to understand why they are legislating to prevent businesses from acting in such a way.

[Michael Wheeler (Worsley and Eccles) (Lab)]

On a point of clarity, is it the purpose of the amendment or an unintended consequence of the drafting that it would completely delete the subsection, rather than adding to it? If the purpose is to completely delete the subsection it is amending, are Opposition Members trying to remove the protections for those going concerns?

[Greg Smith]

The hon. Gentleman asks a perfectly legitimate question. I repeat that this is a probing amendment: we are not going to press it to a vote or try to put it in the Bill. The purpose behind it is to get the evidence base, the justification and some clarity of thought from the Government about why the clause is necessary and proportionate. Sometimes we have to suggest getting rid of something to get a good example or a good justification for going there, doing it and putting it in primary legislation.

The Opposition certainly do not want to see exploitative fire and rehire in any workplace. From talking to businesses, and from the evidence we have heard, we know that there needs to be solid grounding and an evidence base to show that the wording in the Bill is justifiable and does not justify shutting down many businesses that are growing, adapting and changing—hopefully, for the better, so they are more successful. They should be able to keep and grow their staff, rather than go down the redundancy route or other scenarios whereby jobs are lost.

Matthew Percival from the CBI said:

“In the fire and rehire proposals, there is a risk that we might be making it easier to make people redundant than to change contracts”.––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 7, Q1.]

That is the absolute nub of the matter. It would be nothing short of a total disaster if the unintended consequence of the exact wording of the clause or the Bill perversely incentivises companies to make people redundant, so people lose their jobs and have to go home and have that difficult conversation with their loved ones and say that they need to find a new job, with the devastation that that brings to real people’s lives. I cannot imagine that the Government want that to happen. With this probing amendment, we are seeking to kick the tyres. We want an explanation, or at least to encourage the Minister and the wider Business and Trade team to find a better way that does not have that unintended consequence.

A recurring theme of our debates in recent days, and from the Bill Committee witnesses—other than trade union representatives—is that the measures in the Bill on dismissal and re-engagement will be too restrictive for employers. I gently ask the Minister to reflect on that and think about whether the measures will actually work and will not have unintended consequences, so that people’s jobs are protected and saved. We do not want people to be unintentionally forced down the route of job losses.

[Michael Wheeler]

I agree with the comments of my hon. Friend the Member for Gloucester. I appreciate that this is a probing amendment, but I want to talk to its specifics. It appears to me that there are plenty of consensual mechanisms for achieving most of what the shadow Minister is suggesting about the variation of contracts to reflect working practices. If anything, they are inherently better than anything that is imposed. Quite often, when working practices, organisations and business practices are modernised, communication between those doing the work and the managers and owners leads to a much better outcome.

I suggest that we need to remember that we are talking about fire and rehire, which is inherently quite extreme. The amendment seems to refer to the particulars of normal working practices, looking at updating mechanisms to account for modern technology and suchlike, that are much better handled by the existing consensual mechanisms. While I appreciate that it is a probing amendment, it seems entirely unnecessary and does not necessarily speak to the heart of what the clause is about: ending the extreme practice of fire and rehire.

--- Later in debate ---

[Justin Madders]

Yes, they do get worse—it is Thursday afternoon.

The shadow Minister did raise some important points, though. He gave the example of a dairy and its changing practices. Of course, a change in job function does not necessarily mean that terms and conditions have to change or indeed become worse. History is full of examples where technology has come in and made jobs different. As we look forward to the advent of automation and AI in our economy, I hope that people find new jobs and new roles and that those jobs are more fulfilling as a result of technological development.

I will say a few words about the comments from the hon. Member for Bridgwater. We are talking about overall impacts in this Bill of 0.4% of employers’ total costs—a very small price to pay for a comprehensive set of reforms that really are needed for workers. It is about rooting out bad practices and making sure that those bad employers, who we all rightly condemn, are not able to exploit existing loopholes. It is about stopping the race to the bottom. It is about creating a level playing field. One reason why P&O said that it took the action that it did was that its competitors were undercutting it. We do not want to see that race to the bottom continue. We want to see good employers rewarded for respecting and rewarding their employees well by being able to compete on a level playing field.

The general thrust of the shadow Minister’s remarks was interesting. There is nothing to stop an employee agreeing to changes to terms and conditions. Indeed, proposed new section 104I(2)(b) of the Employment Rights Act 1996 makes it clear that these provisions will not apply if the employee agrees to the changes. Changes and discussions happen every day of the week in industry—that is called negotiation, and that is what good industrial relations looks like. That is the sort of thing that we want to encourage.

We are trying to stop a situation that we have seen far too often, where an employer might just say, “Well, here are your new terms and conditions. If you don’t like it, there’s the door.” That, I am afraid, has become far too prevalent in our country. We have heard plenty of evidence about how many employers have been doing that. It is about recognising that there is a loophole in the law. This may be a probing amendment, but it would certainly make this clause ineffective, and arguably, it would make the situation worse than the status quo, because it would effectively legitimise some of those actions by employers. They could point to this legislation and say, “Well, the law says that we are able to do it.”

The way the amendment worded is quite broad. There is a reference to “outdated” terms and conditions. My hon. Friend the Member for Birmingham Northfield gave a good example of where reasonable dialogue between the trade union and the employer would see that change. The shadow Minister’s old colleague, Jacob Rees-Mogg, might have a different view about what “outdated” means. He might think anything after 1874 could be considered modern—[Interruption.] He probably does, yes. There would be very broad latitude for an employer to say that something was outdated. That is why I am concerned that the amendment would make things worse than they are now.

The Bill as drafted makes it very clear what the obligations of a responsible employer are. They are the sort of things that responsible employers do already. We recognise that there will be unfortunate situations in which an employer has no alternative but to change terms and conditions, but the Bill makes sure that, if there is a positive for the employees—there often is from a change in terms of conditions; that is what negotiations often involve—there is a way for that to continue. We are not going to stop that. If employees consent to changes, they will be able to be made under this Bill. I urge the shadow Minister not to press the amendment to a vote.

[Greg Smith]

I understand the argument that the Minister has set out, and I appreciate that this particular probing amendment was at the extremer end of the spectrum in trying to probe that response from him. I accept that there are many mechanisms whereby employees can consensually work with their employer to change contracts, and that is clear. I am still a little nervous—the proof of the pudding will be in the eating, as the Bill progresses and no doubt becomes legislation—about the nightmare scenario of businesses simply saying, “Rather than trying to engage in this process, as we were warned by the CBI, we will just make everyone redundant instead.”

There needs to be a clear, previously set out mechanism from the Government so that, if that disaster-zone eventuality comes to pass—I hope I am wrong; I do not want to see people being made redundant—there is a quick snapback or sort of provision to allow secondary legislation to throttle those measures down, or to fix them in some other way that still stops the exploitative practices without tying businesses’ hands behind their backs, because the net result will be job losses. I would be incredibly disappointed and sad if these issues, which both the Opposition and businesses have warned about throughout the passage of the Bill so far, became a job killer. The Government need to be ready, if they have got it wrong, to have a process that will give businesses the confidence again to properly engage in negotiations, such as those good industrial relations that the Minister spoke of, and not just make people redundant. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Justin Madders]

We are back on fire and rehire again; I should probably count up how many times I have spoken in debates on this issue in the last few years. It has taken a lot of parliamentary time, and rightly so. We all remember the obloquy directed towards P&O when it took those actions, several years ago, and I am afraid that fire and rehire has become far more prevalent in our economy than anyone would want to see.

Investigations by the Trades Union Congress found that around 38,000 employers were using fire and rehire as a tactic. Research from the Chartered Institute for Personnel and Development found that, between August 2021 and 2023, the proportion of firms that had used fire and rehire had almost doubled. The impact assessment estimates that there are around 178,000 workers facing the threat of fire and rehire at this very moment, so the problem is not going away—indeed, because of the way that P&O has been allowed to get away with it, employers see it as a golden opportunity to take a sword to hard-fought terms and conditions.

Other Members have spoken about the household names that have attempted to do that, and USDAW’s written evidence included some notable household names. Once upon a time, fire and rehire was a seldom-used part of the employment law and industrial relations landscape but, as part of the wider pattern of insecurity at work, it has become a much more common tool. I am afraid, as we have seen, it is far too often an act of first—rather than last—resort, and the Government are committed to ending that practice.

The solution to dealing with many of the concerns raised by the shadow Minister and others is to point to what good and bad industrial relations look like, and to say, “This is what bad employer practice looks like.” Good employers and industrial relations will take workers with them. Again I refer to USDAW’s written evidence, which noted occasions where negotiations had begun with fire and rehire on the table almost from the start. That is not a healthy place to have sometimes very difficult discussions about changes to terms and conditions. The impact assessment notes that the power asymmetry can provide incentives for the more powerful party, in this case the employer, to act in a strategic manner to suppress wages and conditions. Such tactics are why we have seen such a slump in wage growth over recent years.

--- Later in debate ---

Even then, there are a number of requirements on the employer to act responsibly, as we hope they would. That is where we will hopefully see a sea change in how employers treat these issues. We want them to be open and collegiate with trade unions. We want them to bring the unions along, discuss the issues and negotiate in good faith. We do not want to see a repeat of people having their P45s issued over Zoom with no dialogue or discussion. It is about time we got rid of this outrageous practice and that is why the clause should stand part of the Bill.

[Greg Smith]

Most of my concerns have been outlined in the amendments to the clause, but I want to ensure that it is placed on the record that the Opposition want to see employers engage in good faith and believe that most employers do. I accept the Minister’s point about the scandal of P&O Ferries—I was on the Transport Committee at the time, so possibly looked into it in more detail than most colleagues from the previous Parliament.

Where we perhaps still have a difference is that taking that unacceptable, scandalous situation at P&O and legislating for everybody on the back of it is not necessarily the best starting place. As I said in the previous debate, working on the presumption that all businesses are trying to exploit their workforces is not healthy or, I would suggest, reflective of the real world. Although there have to be measures to shut down things like what happened at P&O so that it does not happen again, there must equally be flexibility and understanding so that, when employers have engaged in good faith and really are trying to save the business—to save the jobs in the first place—we do not find ourselves in that nightmare scenario of people saying, “It’s too difficult—we’ll just have to make everyone redundant.”

I fully accept that this clause will pass in a few moments, but perhaps the Minister could consider, before we come to Report, some additional safeguards on that so that we do not end up with job losses and employers slamming their heads down on the desk, unable to find another way to save the jobs and the workforce. That would keep giving people the living they need to get on and prosper as part of our country, part of the business they are engaged in and part of our vibrant UK economy.

[Laurence Turner]

I will not speak for long, because most of the points have been made in the debate, but I want to come back to the point made by the shadow Minister and the hon. Member for Bridgwater. There is perhaps a legitimate difference in principle between the two sides: when there are extreme examples, should there or should there not be legislation in response? It is important to respond to that, because we have seen extreme examples of abuse across different parts of the labour market. To go back to the example of blacklisting, I suggest that that was a failure of successive Parliaments to tackle a practice that had been thought to be relatively rare, but proved to have been carried out on an industrial scale. It was right for Parliament to enact the blacklisting regulations.

I go back, too, to the Grunwick dispute, the ancestor of the statutory recognition regime. At the time, it was thought that the abusive patterns of employment behaviour on full display in that particular employer would be unlikely to recur. The Government of the day commissioned a public inquiry under Lord Scarman in the belief that, if the inquiry concluded that there should be trade union recognition, it was inconceivable that any employer would not abide by that—but that is exactly what happened.

Where we see those extreme abuses, other employers—by no means the majority, or even a substantial minority, but enough to have a seriously deleterious effect on the lives of many workers—will follow. Since P&O, we have seen other examples; hon. Members have referred to particular employers and sectors, and I could add parts of the retail, utilities and even the public sector, where such tactics have become more common. The previous Government made strong statements—I could quote some—about the practice, but I suggest that the action that was subsequently taken, the code of practice, was not sufficiently strong. In the case of P&O, where the employer made it clear at the time that it intended to ignore the existing legislation, it did not prove sufficient remedy.

We do need stronger action. The measures in the Bill will only ever affect a tiny minority of employers. It is important to stress that, but it is necessary to put this action into the Bill. P&O will always loom large in discussions of this topic, but the practice is by no means confined to that particular employer, and it is right to take the action that was not taken in the previous Parliament.

--- Later in debate ---

[Justin Madders]

I beg to move amendment 58, in clause 23, page 34, line 27, at end insert—

“(3A) In section 197 (power to vary provisions), in subsection (1)—

(a) in paragraph (a), for “188(2)” substitute “188(1A)”;

(b) in the words after paragraph (b), for “188(2)” substitute “188(1A)”.”

This amendment would correct incorrect cross-references in section 197 of the Trade Union and Labour Relations (Consolidation) Act 1992.

This is a purely technical amendment to fix an incorrect cross-reference in section 197(1)(a) of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 197(1)(a) provides that the Secretary of State may make secondary legislation to amend the minimum time period for collective consultations in section 188(2) of the same Act. However, as I am sure the shadow Minister had already noticed, that reference is incorrect: “section 188(2)” should read “section 188(1A)”. A consequential amendment was missed when section 188 was amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995. That instrument renumbered section 188(2) as section 188(1A). Of course, it should have also made a consequential amendment to section 197(1)(a), but did not.

The amendment will not change the law, which can already be interpreted to refer to the correct cross-reference by way of the Interpretation Act 1978. The 1978 Act provides that where an instrument repeals and re-enacts a provision then, unless the contrary intention appears, any reference in any other enactment to the repealed provision is to be read as a reference to the re-enacted provision. The amendment will improve the clarity and accessibility of the law, which I am sure we will all be relieved to hear.

[Greg Smith]

I can be very brief on this amendment, Ms Vaz; in fact, I will channel the questioning style of my right hon. Friend the Member for New Forest West (Sir Desmond Swayne). This is what happens when a Bill gets rushed to meet an arbitrary political deadline, is it not?

[Justin Madders]

The shadow Minister will be pleased to hear that we have picked the error up at this stage, so that when the Bill is enacted it will of course be absolutely correct.

Amendment 58 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

[Greg Smith]

I have a couple of brief questions. I am grateful for the Minister’s clarification that the clause does not provide for a consultation of the whole workforce. That was a legitimate concern for many as they looked at the drafting of the Bill. The clarification will be welcome.

My bigger question is about the practicalities where an organisation has in excess of 20 employees. For example, a small chain of five or six pubs could easily have that volume of employees across bar and kitchen staff—chefs—cleaners and perhaps security, but in that sort of setting it is very rare for staff to be unionised, or even organised among themselves. In that scenario, where a smaller business employs that number of people across multiple sites, how does the Minister expect the requirement for the involvement of a trade union or employee organisation that does not exist to be engaged with? What is the mechanism for that? I appreciate that many Government Members would quite like everybody to be in a trade union—

[Sir Ashley Fox]

They all are.

[Greg Smith]

Indeed, we know from their declarations of interest that they all are. I hope the Minister takes the question with the good intent with which it is asked. Not everybody is in a trade union and not everybody organises in that way, so how would the mechanics of the measure work in those circumstances?

That leads to the wider question, “Why 20?” Why not 19, 18 or 15? Why not 25? It seems like an arbitrary number. I accept that a number needs to be put down. In some ways, in specifying a number, this clause is more detailed than most in the Bill, and it gives certainty, but I would like to understand why it is 20. It seems like a number picked from thin air. It could negatively impact an organisation if it led the employer to decide, “Well, we’ll just get rid of 19 of them, and we won’t have to comply.” That seems at odds with the other provisions in the Bill, where the Government seem to want to move all rights back to day one, yet they do not seem to want to apply that to organisations where, for whatever reason, 20 people are, sadly, being consulted on being made redundant. I would like clarity on that point.

[Michael Wheeler]

I will keep my contribution relatively short, but I did not want to let the clause pass without warmly welcoming its inclusion in the Bill. In a previous life, I worked to represent shop and retail workers. While P&O and the scandal of fire and rehire entered the collective consciousness, the Woolworths redundancy situation was burned into the consciousness of the workers I represented at that time. That is exactly the loophole that this measure is trying to close. Thousands of workers affected by the Woolworths redundancy missed out on the compensation they deserved as part of the lack of consultation because they worked in individual establishments that were small and fell below the threshold. The interpretation of the law at that point meant they were isolated, divided and not included as part of what was clearly, to everyone—

[Greg Smith]

Perhaps I can test the hon. Gentleman a little bit on that. I remember many happy hours as a child in Woolworths in the town where I grew up. They were fantastic stores, and they are greatly missed. Given where he is coming from, is he content with the number being set at 20? While Woolworths was a substantial business, I can think of smaller businesses with separate sites, retail outlets, pubs, restaurants or whatever that might employ 19 or 15 people.

[Michael Wheeler]

The hon. Gentleman invites to me to say whether I am content. I draw his attention to the fact that the clause removes the single establishment loophole while leaving in place the thresholds that are already part of the law around consultation and the time period. I have not examined and, despite the invitation, I will not speculate on where those thresholds should be, but I warmly welcome the removal of the single establishment loophole, so that where the numbers in a redundancy cross those thresholds—legitimately and apparently to everyone looking at it—there are not legalistic mechanisms for those workers to be left out.

Having warmly welcomed the removal of the loophole, let me reassure the shadow Minister. In a previous, previous life I was in a different job—we have all had many jobs—where trade unions were not recognised. I speak for myself alone when I say that I would love for every worker in this country to have the benefit of trade union representation. I confirm for the shadow Minister that I would love to see that, because I think it has genuine benefits.

[Greg Smith]

Not a surprise.

[Michael Wheeler]

I am sure it is not. I worked in a retail establishment that did not benefit from trade union representation and that went through consultation, not on redundancy but on a variation of contracts, so it is relevant to what we were talking about before. It was actually a relatively smooth and easy process for employee representatives to be appointed and elected from among our number, despite the lack of an existing structure, and to engage with the company in those consultation exercises. While I would love there to be a trade union fighting the corner for every worker, when it is absent it is not a burdensome process to have employee engagement in these processes.

[Justin Madders]

I recognise that the shadow Minister welcomed the clarification I provided. No doubt there will be debate to come, as is often the case with legal issues, but the Government are fairly clear and confident that the clause will not have the unintended consequences we heard raised in evidence.

The shadow Minister asked, “Why 20?” He will pleased to know that that was a product of EU regulation. It is in existing law as part of the Trade Union and Labour Relations (Consolidation) Act 1992, which has been amended many times, so I could not say exactly when it came into force, but—

[Greg Smith]

The Minister can of course look back in history at when these measures were put in, but the Bill seeks to change all sorts of things across all sorts of sectors. We are free from the European Union! He could change it if he wished.

[Justin Madders]

I will remember that next time the shadow Minister tells me that we are trying to do too much in this Bill. With the Retained EU Law (Revocation and Reform) Act 2023, the Bill Committee for which I had the great pleasure of serving on, his Government could have done something about this before they left office.

The figure of 20 is long established, and we have no current plans to change it, but we are keen to ensure that the scenario my hon. Friend the Member for Worsley and Eccles described cannot continue. As he said, Woolworths made 27,000 people redundant, and about 3,000 of those were completely exempt from collective redundancy consultations because of this issue. There has been a number of high-profile retail redundancies where people have missed out on collective redundancy obligations because of this law, which we are pleased to be able to change.

On the question of smaller employers where there may not be trade union representation readily available, the regulations already provide for employee representatives to be engaged and elected in those circumstances, so there is no change to the law in that respect. There is already provision to deal with that situation.

Question put and agreed to.

Clause 23, as amended, accordingly ordered to stand part of the Bill.

Clause 24

Collective redundancy notifications: ships’ crew

Question proposed, That the clause stand part of the Bill.

[Justin Madders]

The clause will address the loophole that allowed P&O Ferries to avoid prosecution when it dismissed 786 seafarers without notice in March 2022. It will require operators of frequent services to British ports to notify the UK Government when making 20 or more redundancies even if those affected work aboard ships registered in another state. The clause means that if an operator of frequent services to a British port chooses to copy P&O Ferries and make collective redundancies without providing notice to the Government, it could face prosecution under the Trade Union and Labour Relations (Consolidation) Act 1992 and ultimately be liable for an unlimited fine.

The clause will apply to services calling between Great Britain and another place in the UK. It will also apply to any services entering Great Britain from a place outside the UK on at least 120 occasions in a 12-month period before the redundancy notification, or to new services that have been operating for less than 12 months and have called 10 times or more per month while they have been operating. We estimate the number of operators in scope of the measure to be around 2,000. The cost to businesses will be minimal; it is estimated to be around £20 per notification. We hope that the prospect of an unlimited fine will deter operators from making mass redundancies without the appropriate notification.

While this measure may not prevent redundancies from being made, it will mean that the Government and any employee representatives must be notified before any dismissals take effect. It will prevent the sort of disruption seen following the P&O Ferries dismissals and will mean that the Government will be able to provide valuable support to seafarers facing redundancy. I therefore commend the clause to the Committee.

[Greg Smith]

I understand where the Minister is coming from, particularly on the expansion of the requirement to notify the flag state. I spoke earlier about my time on the Transport Committee watching the P&O scandal unfold; we held some pretty tough evidence sessions as part of that. I understand that the clause is very specifically to protect seafarers from that sort of engagement. I very much hope that it works to protect those seafarers, and we will not oppose it.

[Steve Darling]

We are strongly supportive of the measure.

--- Later in debate ---

[Justin Madders]

Amendment 59 will expand and restructure the provisions in clause 25, which amends the Procurement Act 2023, to reinstate and strengthen the two-tier code for relevant outsourced contracts for public services so that the powers and duties in clause 25 extend to Scottish and Welsh Ministers. Amendments 60 to 64 make changes that are consequential on those made by amendment 59, including by updating various definitions in the Procurement Act 2023 and by providing that regulations made by Scottish and Welsh Ministers must be made using the affirmative procedure of the Scottish Parliament and the Senedd.

We are making the amendments at the request of the Scottish and Welsh Governments. They are necessary because to get the benefits of a consistent approach to fair and equitable employment terms and conditions on relevant outsourced contracts, it is essential that a reinstated two-tier code applies throughout the UK.

We continue to engage with our counterparts in Northern Ireland about whether the powers should also extend to Ministers there. The regulations and code of practice created in our provisions will apply to reserved Northern Irish authorities. I commend the amendments to the Committee.

[Greg Smith]

I am reminded of the old chestnut about rushing out a Bill in 100 days and forgetting about the devolved settlements as part of the process. Given that devolution was largely the product of the previous Labour Government, I am slightly surprised that the current one would forget about Holyrood and Cardiff Bay. However, it is good that we now have clarity. We will of course want to test how things are actually going to work. Indeed, the question of Northern Ireland—which is just as important a part of our country as England, Scotland and Wales—really should be resolved sooner rather than later, so that there can be clarity that the Government are seeking to legislate for the whole of our United Kingdom of Great Britain and Northern Ireland, and not doing it in a piecemeal fashion.

[Justin Madders]

I gently correct the shadow Minister: we did not forget to engage with the Scottish and Welsh Governments. We were making sure that we had agreement before we tabled amendments, which is why they have appeared as they have today.

Employment Rights Bill (Eleventh sitting)

Greg Smith Excerpts

Committee stage
Thursday 12th December 2024 Public Bill Committees

[The Chair]

Welcome back. Will everyone please ensure that all electronic devices are turned off or switched to silent mode? We will continue line-by-line consideration of the Bill. The grouping and selection list for today’s sittings is available in the room and on the parliamentary website. I remind Members about the rules on declarations of interests as set out in the code of conduct.

Schedule 2

Right not to be unfairly dismissed: removal of qualifying period, etc

[Greg Smith (Mid Buckinghamshire) (Con)]

I beg to move amendment 156, in schedule 2, page 112, line 19, after (b) insert “, (c)”.

This amendment makes the reason that the employee was redundant a reason in relation to the dismissal of an employee during the initial period of employment.

[The Chair]

With this it will be convenient to discuss amendment 157, in schedule 2, page 112, leave out lines 32 to 34.

This amendment removes the provision that may be made by regulations that the dismissal of an employee is to be treated as fair only if the employer has taken any steps specified in the regulations.

[Greg Smith]

It is a pleasure to serve under your chairmanship, Ms Vaz. This pair of amendments on unfair dismissal stand in my name and those of my hon. Friends from the official Opposition.

Amendment 156 would make the fact that the employee was made redundant a reason in relation to the dismissal of an employee during the initial period of employment. The Bill stipulates that the modified protections against unfair dismissal in relation to the initial period of employment mean that an employee can be dismissed for the reasons listed in section 98(2) of the Employment Rights Act 1996, which include

“the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do…the conduct of the employee”

or

“that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under an enactment.”

The 1996 Act also includes a fourth reason,

“that the employee was redundant”,

which is not replicated in the Bill. This is a probing amendment—we do not intend to press it to a Division—to try to tease out from the Government a little more detail and to establish why that fourth reason is omitted from the Bill.

Amendment 157 is also a probing amendment. We want to understand what steps will be specified in regulations that an employer must follow in order for the dismissal of an employee to be treated as fair. That will come back to the test of subjective reasoning rather than specific guidelines or regulations in the Bill. It is only right that the Committee and businesses out there in the real world can fully understand the scope with which the Government are defining “fair” or “unfair”. Inherent to that is the question, why is it not in the Bill? Why is it not as clear as day in the words printed in this quite substantial tome? I know that the Government want to table more amendments, so perhaps those could be a little more specific. Critical to amendment 157 is the question how burdensome the Government intend this measure to be and how proportionate that burden will be on businesses in relation to the problem that the Minister thinks the Bill in its current form—its current vagueness—will solve.

[The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)]

It is a pleasure to see you in the Chair, Ms Vaz. I refer to my entry in the Register of Members’ Financial Interests and my membership of the GMB and Unite trade unions.

The shadow Minister has posed some questions that underlie amendment 156, which seeks to include redundancy as one of the reasons for dismissal to which the lighter-touch standards will apply during the statutory probationary period. As he has rightly identified, the Bill sets out that the reasons for dismissal to which the lighter-touch standards may apply are the statutory grounds of capability, conduct, illegality and some other substantial reason.

It is important to note that those four areas relate to the individual employee, which is why redundancy is not included. Redundancy can affect entire workforces, whereas the other areas are included because of the overlap between the potentially fair reasons for dismissal in the legislation, particularly suitability for work, and the sorts of issues that might come up in a probationary period. A redundancy situation would not ordinarily come up within a probationary period, because it would be about the wider business condition rather than the individual employee’s performance or suitability for the job. I hope that explains why redundancy has not been included.

I turn to the shadow Minister’s more general points. We are trying to strike a fair balance between strengthening employee protections against unfair dismissal and maintaining businesses’ ability to hire, assess and dismiss new employees. The Government are committed to ensuring that businesses retain the confidence to do so. We do not wish the new procedures to undermine existing fair dismissal processes for redundancy, which already provide a robust, straightforward and fair process for employees facing redundancy.

We will work closely with ACAS, in consultation with businesses and trade unions, to ensure that there is clear, straightforward and easy-to-follow guidance on how to carry out a redundancy process under the new measures. It will be an easily accessible process. One of our concerns about including redundancy is that if an employer decided to make a significant number of their workforce redundant, it would be an additional administrative job for them to identify which employees they did not need to include within a redundancy process because they were part of a statutory probationary period, and which would be subject to the wider process. That would lead to unintended consequences and possibly risk of discrimination claims.

[Justin Madders]

The hon. Member may be conflating two slightly different issues. I say to him very clearly that existing laws on redundancy will not be changed as a result of the Bill. We expect employers to follow the same processes, regardless of the length of service of the employee. In that situation, I do not imagine that there would be a particularly lengthy process if it involved only one individual and a small employer. There would not need to be a pool for selection, for example, or selection criteria. We would expect the employer to comply with the law in those circumstances.

Amendment 157 questions whether regulations should be able to set steps that an employer must follow for a dismissal to be considered fair when prescribing lighter-touch standards to apply during the statutory probationary period. We have set out clearly our intention to have a light-touch process, and we know that around 9 million employees will benefit from that. The intention behind setting out those steps in regulations is to ensure that we take account of further consultation, which we will undertake not just with employers but with trade unions and civil society, to ensure that we have the right balance of process and fairness in a statutory probationary period. We will be developing that in due course. As is often the case with the ACAS code of practice on disciplinary and grievance procedures, there are already lots of examples of really practical guidance out there, which we intend to replicate. I invite the shadow Minister to withdraw the amendment.

[Greg Smith]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Greg Smith]

I beg to move amendment 155, in schedule 2, page 112, line 23, after “period” insert

“of no less than six months”.

This amendment makes the initial period of employment at least six months in length.

[The Chair]

With this it will be convenient to discuss amendment 5, in schedule 2, page 112, line 23, leave out from “period” to the end of line 24 and insert

“of not less than 3 months and not more than 9 months from the day on which the employee starts work.”.

This amendment will ensure that the initial period of employment is between 3 and 9 months.

--- Later in debate ---

[Greg Smith]

Amendment 155 would make the initial period of employment six months, to align with a standard probationary period. The Government have admitted that they do not have robust data on instances of dismissal for those under two years of employment; in other words, we do not know if there is even a problem with unfair dismissal that the Bill is seeking to solve. Without knowing the problem, how can the Government identify a solution or even know that one is necessary? This is a flimsy basis for enacting a measure that the Government estimate will cost businesses in excess of £40 million a year overall.

[Laurence Turner (Birmingham Northfield) (Lab)]

It is a pleasure to serve under your chairship, Ms Vaz. I draw attention to my declarations in the Register of Members’ Financial Interests and to my membership of the GMB and Unite trade unions.

Before we move past the hon. Gentleman’s point about information, which we have talked about a lot, is the core problem not that there is a wider issue with UK labour market statistics? We heard during the evidence sessions from the Resolution Foundation, which said:

“The Office for National Statistics’ labour force survey is in the doldrums”.––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 119, Q125.]

This is not a party political point. The ONS’s collection methods, which broadly worked until the pandemic, have not worked subsequently. The statistics body is going through a period of transforming the labour force survey, but the criticisms that the hon. Gentleman makes of the information available to this Government would have held true for the Government between 2020 and 2024. This is a much wider issue. We could look at that problem and say, “We didn’t even really know what the UK unemployment rate was for some time,” and if that was an absolute barrier, all employment legislation would be on hold. It is important that those practical challenges are acknowledged.

[Greg Smith]

I do not disagree with what the hon. Gentleman says, but where we do disagree is on the conclusions that we draw from that. I would strongly argue that to introduce primary legislation without an adequate evidence base is foolish, whereas he seems to be arguing that it is fine to do that.

I fundamentally agree with the hon. Gentleman that there is often a problem with data collection, particularly on complex things such as overall employment numbers, the number of people in multiple jobs or whatever. He certainly hit the nail on the head about the post-pandemic understanding of the labour market. The pandemic brought about almost a fundamental reset in a lot of working patterns; nobody seems to work quite in the same way as they did before the pandemic. I acknowledge his point, but I suggest that this was actually the time to take a bit of a pause and a step back to think through new measures more carefully, rather than to rush ahead with a Bill in order to publish it within 100 days of the Government’s taking office.

I return to my questions to the Minister. What estimate has he made of the additional cost to business, including salary costs during performance management or disputes, retention costs from tribunal risk aversion, and increased settlements offered to avoid legal claims? Are those costs worth it for a problem that, as we have just discussed, nobody can actually prove exists in the UK market right now?

--- Later in debate ---

The hon. Member for Mid Buckinghamshire asked about the total cost to businesses. The impact assessment, which I am sure he has read with great interest, gives a figure of between £41.5 million and £43 million for the annual cost to businesses. Of course, there is also the benefit to employees of greater protection and enhanced rights, which is really the whole point of the Bill.

[Greg Smith]

Where does the Minister think the cost to businesses will be borne? Will it mean lower wages for employees, no Christmas bonuses or perhaps pay rises that are not as great as employees might be expecting? Or will it ultimately get passed on to customers, consumers and purchasers of the services that those businesses provide? Where will the cost actually be borne?

--- Later in debate ---

[Sarah Gibson]

I am happy not to press amendment 5.

[Greg Smith]

As I hope I made clear in my opening remarks, amendment 155 is a probing amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Justin Madders]

I beg to move amendment 55, in schedule 2, page 112, line 36, at end insert—

“3A In section 15 of the Enterprise and Regulatory Reform Act 2013 (power by order to increase or decrease limit of compensatory award), after subsection (5) insert—

‘(5A) The power conferred by subsection (1) includes power to provide that, in the case of the dismissal of an employee that meets the conditions in section 98ZZA(2) and (3) of the Employment Rights Act 1996 (dismissal during initial period of employment), the limit imposed for the time being by subsection (1) of section 124 of that Act is a different amount from that otherwise imposed by that subsection.

(5B) Subsections (3), (4)(a) and (5) do not apply for the purposes of specifying the amount of the limit in such a case.’”

This amendment would enable the Secretary of State to specify the maximum amount of the compensatory award available where an employment tribunal finds that an employee has been unfairly dismissed during the initial period of employment provided for by new section 98ZZA of the Employment Rights Act 1996.

[Justin Madders]

Amendment 55 will expand an existing delegated power to enable the Secretary of State to specify a different maximum compensatory award where an employment tribunal finds that an employee has been unfairly dismissed under the new light-touch standards during the statutory probation period. Amendments 56 and 57 will make consequential changes to the provisions for uprating maximum awards for inflation.

In the event of any successful unfair dismissal claim, an employment tribunal will consider compensation as a remedy. Compensation will usually consist of a basic award and a compensatory award. The tribunal will determine the compensatory award by considering what it thinks is just and equitable, having regard to the financial loss suffered by the claimant that has been caused by the employer’s actions. This will include reference to salary and benefits, including pension, until the claimant finds alternative employment. The maximum compensatory award is currently the lower of 52 weeks’ pay or £115,115.

The Government have listened to concerns that changes to unfair dismissal law could lead to an increase in unfair dismissal claims, even where there is no merit, and to an increased burden on businesses and tribunals in having to deal with those claims. We have heard that uncertainty of outcome makes it hard for businesses to judge how much to invest in either defending or settling a claim. The introduction of a lighter-touch standard for fair dismissal during the statutory probationary period aims to reduce burdens on businesses and to create certainty, but it will not apply to all dismissals during the statutory probation period.

Having listened to those concerns, the Government committed in our “Next Steps to Make Work Pay” document to consulting on what a compensation regime for successful unfair dismissal claims during the statutory probation period should be. Although we want employers to pause and make considered decisions about dismissing employees during probation, the Government do not think that employers should face the full potential liabilities of unfair dismissal remedies when dismissing an employee for reasons related to performance or suitability for the role during the statutory probation period.

To have the option of implementing reform once we have consulted, it is necessary to introduce this delegated power. The power is limited to making changes to the compensatory award for unfair dismissal claims during the statutory probation period only, and only where the new lighter-touch standards apply. The Government recognise the importance of employers being able to assess new hires. We are committed to introducing a statutory probationary period in which there will be lighter-touch standards for an employer to meet in order to dismiss an employee fairly if they are not suitable for the job.

The power will not enable the Secretary of State to make changes to the level of compensation for other day one unfair dismissal rights, such as automatically unfair reasons including maternity-related dismissals, or for “ordinary” unfair dismissals such as redundancy. The power will not enable the Secretary of State to make changes to reinstatement or re-engagement as a remedy available to tribunals for unfair dismissal during statutory probationary periods, nor will it allow changes to be made to the additional compensatory award where an employer does not comply with an order of reinstatement or re-engagement by the tribunal. There may be some concerns that the power could be used to undermine enforcement of the day one right to unfair dismissal, but I assure the Committee that this is not the intention.

The Government are making basic protections against unfair dismissal a day one right for employees. They will be able to enforce their rights and take a claim to the tribunal if they have been unfairly dismissed. It is important, however, that employers are able to assess new hires and see whether they are suitable for the job without facing the full potential liabilities of unfair dismissal remedies during this period.

[Greg Smith]

I have a straightforward question. We are back once more with our old friend of not having full clarity and having consultation after legislation. The Minister gave a figure, but it is not clear exactly what the Secretary of State might consider specifying as the maximum compensation that can be awarded under this measure.

I acknowledge that there is a consultation to come, but the reason that we need greater clarity relates to the point about business confidence in making new hires, putting new job adverts out, seeing who applies and trying to recruit. If there is a risk that the figure will be disproportionately high, it will make businesses more risk-averse about growing their businesses and thereby growing the economy and creating more jobs in our country. My only substantive question is “Where is the ceiling going to be?”

[Sarah Gibson]

I share some of the shadow Minister’s concerns. Consultation to find out what most concerns businesses is obviously commendable, but if a large amount of the Bill is left to secondary legislation, a lot of it will not come back before the whole House for scrutiny. Can we be assured that decisions that are not taken before the Bill is passed can at least be considered by a Committee when they are finally made?

[Justin Madders]

I take on board the comments that the Opposition spokespersons have made, but if we put something in the Bill now, we would be pre-empting the consultation. It is very important to get this right, acknowledging the balance that needs to be struck and the points that have been made. It is worth bearing in mind that this measure will not be implemented until autumn 2026 at the earliest, which is still a considerable time off. The reason we want to take the time between now and then to engage and consult with businesses is to ensure that we get that figure to a spot that gives justice to individuals and certainty to businesses about the potential liability they may face.

[Greg Smith]

I am grateful to the Minister for that clarification. I understand the point about autumn 2026, but would he acknowledge that the vast majority of businesses are probably already working on their 2026 business plans? They are not just planning for tomorrow, next week and January; they are making medium and long-term plans. Those decisions about creating a new role, filling a vacancy or whatever it might be will already be baked into business planning for 2026, 2027 and maybe through to 2030, so it is not good enough to say, “It’s not coming in until 2026, so don’t worry.” Businesses are already in that planning space.

[Justin Madders]

I take the shadow Minister’s point, but that presupposes that businesses bake into their business plans compensation for unfairly dismissing their staff, and I do not think any business would want to proceed on that basis. This is about a potential liability that might come in at a future point.

Of course, we all want employers to retain their staff and have a productive working relationship, but if they do not, we want them to comply with the law and dismiss employees fairly. There will be a small number of cases where that does not happen, but I would not expect a business to be able to anticipate what might happen in two or three years’ time with an individual employee and whether a process was followed or not. That is probably not on a business’s desk at this point.

Amendment 55 agreed to.

Amendments made: 56, in schedule 2, page 114, line 20, at beginning insert—

“(1) The Employment Relations Act 1999 is amended as follows.”

See the explanatory statement for amendment 57.

Amendment 57, in schedule 2, page 114, line 23, at end insert—

“(3) In section 34 (indexation of amounts, etc)—

(a) in subsection (1)(c), for “124(1)” substitute “124”;

(b) omit subsection (4);

(c) in subsection (4A), for “124(1)” substitute “124”;

(d) in subsection (4B)—

(i) for “124(1)” substitute “124”;

(ii) after “1996” insert “in relation to cases of any description”;

(iii) for the words from “such a sum” to “that date” substitute “, with effect from a day within 12 months before that date, a sum specified in that section in relation to cases of that description”.”—(Justin Madders.)

This amendment and amendment 56 are consequential on amendment 55.

Question proposed, That the schedule, as amended, be the Second schedule to the Bill.

--- Later in debate ---

We will publish an enactment impact assessment when the Bill gains Royal Assent, in line with the requirements of the better regulation framework. That will account for where the Bill has been amended in such a way as to significantly change the impact of the policy on businesses. The impact assessment will be published alongside the enacted legislation. I invite the hon. Member not to move new clause 28 and amendment 134, and to let schedule 2 stand part of the Bill.

[Greg Smith]

The Minister tempts me, but I will set out our rationale for new clause 28 and amendment 134. I acknowledge that he has published a series of impact assessments, but the Regulatory Policy Committee has not exactly given the Bill a glowing bill of health, and there are a significant number of red ratings in its assessment. I gently push back and suggest to the Minister that the impact assessments need to be looked at again across the piece, so that we can be absolutely certain that the Bill will do what the Government want it to do.

As the Minister rightly said, new clause 28 would require the Government to report on the impact of the Bill’s provisions on unfair dismissal on employers and the economy. That goes beyond the impact assessments that the Government have already conducted, in the sense that the assessment we are calling for must

“include labour market and broader macroeconomic analysis… examine the impact of the measures in section 19 and Schedule 2 …on employment, wages and economic output…consider the likelihood the dismissal measures leading to lower employment, and greater use of temporary contracts, and…examine the likely effect of section 19 and Schedule 2…on productivity…wage growth…equality of opportunity…job security…economic activity, and”—

last but not least—“employment.”

All that work should have been done before the Government proposed this legislation, so the Opposition think it is only right to try to ensure that the Government present the House with the necessary information before the changes to unfair dismissal come into effect. That is the bedrock of a democracy, and it is only right that all Members of this House and, indeed, the other place can see that information before they permit the Bill to complete its passage and gain Royal Assent.

We heard from several witnesses that the provisions will tip the balance of risk for employers, who will choose to not hire people, rather than take a chance on whether a new hire will work out. We also heard that people on the edge of the labour market represent a riskier proposition for employers and are most likely to be disadvantaged by the changes. I do not believe that any Member of this House—of whatever political party or none—wants to see people on the edge of our labour market denied a second or third chance. They deserve the ability to get on in life if, for whatever reason, they have not been able to get on the job ladder and into gainful employment.

All the evidence indicates that the Bill’s provisions on unfair dismissal will have a chilling effect on business growth. How will the Bill support the Government’s first mission of economic growth, when all the evidence—written and oral—and the reports in the press and from other bodies point to the contrary? Even the Government’s own impact assessment cannot provide reassurance that the measures in the Bill will lead to growth. The new clause would introduce safeguards and provide the clarity and detail that all Members no doubt want on whether clause 19 is even necessary for the intent of schedule 2.

--- Later in debate ---

[The Minister for Equalities (Dame Nia Griffith)]

Clause 20 amends an existing power in section 49D of the Employment Rights Act 1996, which allows the Secretary of State to make regulations

“about redundancy during, or after, a protected period of pregnancy.”

Regulations made under that power took effect in April, bolstering the protections against redundancy for pregnant women. However, redundancy is just one of five reasons for which an employee can be fairly dismissed. The changes delivered by clause 20 are required so that regulations can be made in regard to dismissal more broadly beyond redundancy, both during and after pregnancy.

The existing provisions for redundancy allow regulations to set out three things. The first is how the protected period of pregnancy is to be calculated. The regulations can provide that the protected period begins after a pregnancy has ended, which means that protection can be extended to a woman who has miscarried but has not yet told her employer that she is pregnant. The second is that employers must offer alternative employment to pregnant women at risk of redundancy. The last is the consequences of a failure to comply with any protections, including stipulating that this will result in the dismissal being treated as unfair. Those provisions for redundancy will all be extended, and therefore made available for dismissals for reasons other than redundancy, through this clause. This approach is necessary to then deliver enhanced dismissal protections in the regulations for pregnant women.

A 2016 Equality and Human Rights Commission survey found that 1% of mothers were dismissed following their pregnancy each year. Analysis by the Department for Business and Trade estimates that that equates to around 4,100 mothers—that is how many women could benefit from the new dismissal protections annually. Using secondary legislation to set out the policy detail is a standard approach in this area of employment law and supports working with stakeholders to further shape the policy before confirming the final approach in the regulations.

Clause 21 amends existing powers that allow the Secretary of State to make regulations concerning dismissal during several kinds of family-related statutory leave. The amended powers will continue to allow for regulation of dismissal during the period when an employee is away from work on maternity leave, adoption leave, shared parental leave, neonatal care leave or bereaved partners paternity leave. The amended powers will also apply to a period after the employee has returned from one of those types of leave.

Additionally, clause 21(5)(b) clarifies that parents looking to take bereaved partners paternity leave who have adopted from overseas or had their children via a surrogacy arrangement can be included in regulations creating protections against redundancy, as well as the new protections against dismissal for other reasons. It also makes it clear that the cohort of parents taking bereaved partners paternity leave can be included in the regulations allowing access to keeping-in-touch days, which allow an employee on statutory leave to be able to do some work for their employer without that leave coming to an end.

Our primary focus with the enhanced dismissal protections is supporting pregnant women and new mothers during and after maternity leave. However, as is the case with clause 20, we want to consult and work closely with stakeholders on whether new parents more generally should be covered by the enhanced dismissal protections. The final policy design will then be reflected in the regulations, as is typical in this area of employment law.

Before I commend the clause to the Committee, I put on record my entry in the Register of Members’ Financial Interests, including my membership of USDAW and the National Education Union.

[Greg Smith]

I think this is one of the least contentious parts of the Bill, and we do not seek to oppose in any way the important protections for pregnant women and new mothers. I note that what the Government are really doing with these clauses is building on the regulations that, as the Minister rightly said, came into force in April off the back of legislation brought forward by the hon. Member for Barnsley North (Dan Jarvis) and my noble Friend Baroness Bertin in the other place.

Again, we have the challenge of consultation after legislation. It is important that the Government move quickly to ensure that the protections for pregnant women and new mothers are not left to drag out as part of that consultation. Although consultation is important, the objective that the Government are trying to meet is quite clear. The desire to build on existing legislation should make it less controversial, and it should make getting it right quickly less of an open-ended question. That will enable pregnant women and people who are trying to conceive and start a family—or to have a second, third or fourth child, or whatever it may be—to plan with the confidence that those protections will be in place. I am not in any way speaking in opposition to this measure; I am just urging the Government not to let the consultation drag on.

--- Later in debate ---

[Chris Law]

It is a pleasure to see you in the Chair, Ms Vaz. Fire and rehire is one of the most contentious issues that we have heard about over the last years, and I will speak to it in some depth.

First, I want to welcome the measures within this Bill, specifically those in clause 22, that tackle fire and rehire by considering a situation to be an unfair dismissal where an employee is dismissed for refusing to accept contractual variation, or where they have been dismissed to enable the employer to employ another employee, or to re-engage a dismissed employee on inferior terms. Over recent years, there have been several egregious examples of fire and rehire from large and very successful companies in the UK. In January 2021, the TUC found that

“nearly 1 in 10 workers…had been told to re-apply for their jobs on worse terms and conditions since the first lockdown in March”—

that is, March 2020. That is 10% of the working population. Notably, almost twice as many black workers faced fire and rehire as white workers.

The SNP completely opposes fire and rehire, which is an appalling and abusive practice, and I am sure that most members of the Committee feel the very same. It must be outlawed. We have long campaigned to ban fire and rehire tactics and ensure that workers are not the victim of bosses looking to cut costs. I pay tribute to my former colleague, Gavin Newlands, who twice brought forward Bills in previous Parliaments to outlaw the practice, which had the support of over 100 MPs and the backing of all major trade unions, including Unite, the British Airline Pilots’ Association and GMB Scotland. I also commend the work of Chris Stephens who, on a regular basis, stood up for workers against the previous Tory Government and called for an immediate end to fire and rehire.

However, there appears to be a loophole, and amendments 160 and 161 seek to remove it. Amendment 160 would delete subsection (4) to proposed new section 104I, which provides an opportunity for fire and rehire to continue where

“the reason for the variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business, and…in all the circumstances the employer could not reasonably have avoided the need to make the variation.”

Along with many others, I have reservations about that. If employers can point to their likelihood of financial difficulty, they will deploy fire and rehire tactics.

Let me ask some questions. Does the Minister agree with Martyn Gray, who gave evidence to this Committee just a couple of weeks ago? He is the director of organising at Nautilus International, and he made it clear to the Committee how high the bar should be set when he said:

“Quite simply, if directors can sign off the business as still remaining as a going concern, fire and rehire should not be an option…I would set a really high threshold and then allow for scrutiny from the relevant bodies.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 65, Q61.]

Employers’ unions have encountered those who have threatened or implemented fire and rehire to reduce workers’ pay and/or conditions, including companies such as British Airways, Heathrow Airport, Argos, Weetabix, Tesco, Asda and British Gas. All members of the Committee know all those names and are very familiar with them. In fact, more than half of those are in my constituency of Dundee and employ a large number of people.

I want to give an idea of the scale of the profits that those companies have made just this year. Asda made £1.1 billion—we are right in the middle of a cost of living crisis, and that is over £1 billion profit for a retail store. Tesco made £2.3 billion profit, and British Gas’s parent company has said that its profits have fallen to a humble £2.8 billion. Those are just three examples and the others—Heathrow Airport, Argos and Weetabix—are also all in profit. One simple cereal company made £368.8 million. Those are hardly companies in dire financial straits. Can the Minister explain how many of the high-profile fire and rehire cases known since 2010 would fall foul of the requirements within the Bill, and how many would be exempted under this loophole?

I think we all know that although the Bill is well-intended—and we fully support it—if it is not revised, it will fail under that loophole. As Andy Prendergast, the national secretary of GMB, explained in his evidence to this Committee:

“We have seen lots of financial engineering. We see inter-company debt. I think there is a concern long term that we may find cases where companies have engineered a financial position that allows them to do something they otherwise would not. That will have to be dealt with on a case-by-case basis.”––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 131, Q135.]

That is twice this Committee has heard evidence that should make us really think about the purpose of the Bill, which I totally agree with on fire and rehire, to ensure that it is watertight.

Can the Minister outline what changes the Government will make to the Bill and what regulatory regime will be put in place to prevent the provision from being exploited in the manner described? For example, will employers have to evidence the financial difficulties before making any decisions on firing and rehiring, or will they need to be evidenced only if an unfair dismissal claim is brought forward? We can clearly see now who holds all the cards. If it is the latter, and claims of financial difficulties are discovered at a tribunal to be unfounded, will employees who have been affected be reinstated on their original terms? These are important questions we need to ask.

In the absence of the detail and guarantees sought, the amendment seeks to remove the loophole altogether. We cannot allow this aspect of the Bill to pass without cast-iron protections against fire and rehire. We cannot wait and see how it plays out in reality, with people’s jobs and lives at stake.

If the provision is to remain—I can clearly see and many others so far have seen that it is a loophole—it is important that further amendments are proposed, not just to clarify definitions of financial difficulties and processes on establishing their veracity, but to ensure that there are further protections to strengthen an employee’s position in relation to any consultations and negotiations that take place when the employer is in financial difficulty. Does the Minister agree that the employer should take all reasonable steps prior to cutting workers’ wages and altering other terms and conditions? Does he agree that all material information should be provided to each union and that as much time as possible must be made available to consult? Does he agree that the employer must comply with any procedural requirements for varying contracts of employment or collective agreement?

Critically, does the Minister agree that the employer should have reduced the remuneration of partners, directors and managers at least to the extent equivalent to that which applies to the workers subject to variation of contract? After all, if an employer is struggling with his company, we cannot have the managerial class carrying on as if it is not affecting them while others have their contracts reduced and their terms and conditions worsened. Does he agree that the employer should have stopped paying dividends to shareholders, buying back shares, or making loans to partners, directors or shareholders, as soon as the financial difficulties became apparent, and renegotiated, to the greatest extent practicable, loans to third parties?

If the Minister does agree, will he give assurances that he will support such amendments being made to the Bill?

[Greg Smith]

I will speak briefly to amendments 160 and 161, standing in the name of the hon. Member for Dundee Central and the Scottish National party. These amendments seek to make the fire and rehire provisions more restrictive, saying that employers cannot vary contracts or re-engage staff on different contracts

“to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business,”

and remove the ability for the employer to do so if in the circumstances

“the employer could not reasonably have avoided the need to make the variation.”

I appreciate that it is quite a convoluted position, but it is clear to me that the SNP is siding with the trade union position that Martyn Gray set out, which is that

“if directors can sign off the business as still remaining as a going concern, fire and rehire should not be an option.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 65, Q61.]

But we heard from almost every witness—

[Chris Law]

I will re-declare that I have been an employer in the past, as well as an employee, and have employed staff; this is not just a union position. I have talked about companies. I can appreciate small businesses and even microbusinesses being really concerned about such issues, because they would impact them directly.

Typically, small businesses keep a very keen eye on where things are going in the future. If people want a good team in their employ, they make sure that their employees know very well what is going on with such issues. We had this debate earlier. I will list again, just to remind people, the relevant companies: Asda, Tesco, British Gas, Argos, Weetabix and Heathrow Airport. They are big companies, with billion-pound profits, that are taking advantage of the current situation. They have already taken advantage up until now—why will this loophole mean that they will not do it in the future?

[Greg Smith]

I understand the hon. Gentleman’s point. He likes to point to the profit lines of many of those businesses. Just because a business is making a substantial profit does not necessarily mean that it does not have to go through significant change in businesses practices in meeting market demands, manufacturing processes as technology moves on, or whatever it might be. I am really not seeking to advocate for anybody to be abused in the way he talks about. I am trying to acknowledge that things change in lots of businesses all the time. No one should be unfairly treated as part of that process, but sometimes, even for the very largest companies, significant change happens—as I say, to manufacturing processes or whatever—that requires a fundamental shift in job descriptions.

I am sure that most of those businesses want to keep their workforces on, but if the contract under which the employee was originally employed talks specifically about processes or ways of manufacturing, or uses of particular bits of equipment, that just do not exist anymore because technology has moved on, there is a requirement for contracts to change. Ideally, that will always be done in a consensual, negotiated manner, but the amendments put forward by the hon. Gentleman and the SNP go too far in shutting down that restriction. I agree with his point about small and microbusinesses, which really will struggle, in an ever-changing world with technological advancement and so on, to meet the conditions he is putting down.

[Chris Law]

We are not talking about technological changes, though, are we? We are not talking about advances that would mean changes to the structure of a business. We are talking about the language that is being used about the likeliness of financial difficulties. To any lawyer, the word “likely”—how long is a piece of string? Someone could argue the case that “likely” means this, while someone else could argue it means that. The language is lax, which is part of the issue.

In terms of financial difficulties, what is a financial difficulty? Does it mean, “We can’t afford the loo roll in the staff toilets so we will fire and rehire,” or something more structural? What I seek from the Minister is assurances that the purpose of the Bill on fire and rehire is very specific: we want to end fire and rehire. Given the current loophole, we have already heard not just from trade unions, by the way, but from businesses—

[Chris Law]

I apologise. I just wanted to remind the shadow Minister that we are already hearing from businesses. They are clearly looking at this loophole as an opportunity for them in the future.

[Greg Smith]

Of course there will always be some who look for loopholes, but I gently suggest that the vast majority do not. They are good employers who care for their workforce, because, as we have discussed many times over, no business is anything at all without both parts—the workforce and those who risk their capital and so on to make those jobs happen, and to produce the products and sell the services in the first place.

The intervention from the hon. Member for Dundee Central neatly leads on to where I was going anyway. The Committee heard from almost every witness who was an employer or who represented employers that the dismissal and re-engagement provisions in the Bill were already too restrictive and would lead to staff being laid off. The SNP amendments make those even more restrictive, so it is not hard to work out where those witnesses would have gone on this front. Given that risk of lower employment and higher unemployment, I gently ask the hon. Gentleman to consider how the SNP would actually answer that challenge were the amendment to go through.

[Michael Wheeler (Worsley and Eccles) (Lab)]

As ever, it is an absolute pleasure to serve under your chairmanship, Ms Vaz. As usual, I draw the Committee’s attention to my declaration in the Register of Members’ Financial Interests, and particularly to my membership of the USDAW and GMB trade unions.

I am sure it will not surprise the hon. Member for Dundee Central to hear that I share some of his concerns about the practice of fire and rehire, and I welcome the significant steps taken in the Bill to outlaw the practice. However, I disagree with his amendment 160. What might be seen by some as a loophole is actually an important safeguard against the perverse potential for the law to mandate redundancy when there might have been other options on the table. I am sure that none of us would want to be party to including that in the Bill.

As I said, I share some of the hon. Gentleman’s concerns, and I hope the Minister will look closely at proposed new section 104I(4) of the 1996 Act, because the words

“likely in the immediate future”

are doing some precariously heavy lifting. However, if the amendment were accepted, the focus on a business being a going concern, which is the most important part of that subsection, would be removed completely. When we are passing legislation that protects jobs and promotes good employment, we absolutely cannot allow the unintended consequence of mandating redundancy when there are other options.

I look forward to the Minister’s comments. I understand the concerns of the hon. Member for Dundee Central, but this is a sledgehammer of an amendment to crack a nut of a possible loophole, with significant potential consequences.

Oral Answers to Questions

Greg Smith Excerpts

Thursday 12th December 2024 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

[Greg Smith (Mid Buckinghamshire) (Con)]

There is no clearer pointer on business confidence than the Bank of England’s recent survey on employers’ responses to the Budget. Some 59% expect lower profit margins; 54% expect to raise prices; 54% expect lower employment; and 38% expect to pay lower wages than they otherwise would have. Now City AM reports that Labour has carelessly lost all its business backers. Will the Secretary of State show any contrition, admit that business confidence is through the floor, and start standing up for business, rather than the Treasury?

[Jonathan Reynolds]

Well, what can I say? Was it the Conservative party that increased corporation tax from 19% to 25% in one Budget, and that crashed business investment and confidence because of the way it mishandled Brexit, failing to prepare for either outcome of a yes/no referendum? And which Opposition Front Benchers played a role in the mini-Budget? Frankly, it was all of them. With respect to the hon. Gentleman, I will not take advice from him. Since the Budget, I have heard repeatedly from Conservative colleagues that they want to lower taxes and increase spending, even though they cannot account for the promises that they made when in government. That is not credible unless they engage with reality, as this Government are doing. Whether it is the response to the Chancellor’s speech at Mansion House or finally sorting out Marks & Spencer this week, this Government are getting on with the job and looking to the future.

[Greg Smith]

Sorry seems to be the hardest word. [Interruption.] I am talking about the Government’s Budget. Further proof of how low business confidence is getting under this Government was given in evidence to the Employment Rights Bill Committee. Jane Gratton of the British Chamber of Commerce predicted

“a reduced hiring appetite were this legislation to come in, and that”

their members

“would be less likely to recruit new employees due to the risk and difficulty, particularly under the day one rights”.––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 8, Q2.]

If business confidence is low, employment goes down. We already know that every Labour Government leave unemployment higher than when they took office, but is it not a bit extreme for this Labour Government to legislate for that outcome?

[Jonathan Reynolds]

If the hon. Gentleman googles that statistic, he will find that it is not actually true, but I appreciate that it is demanding being in opposition, and that there may not always be the capacity and resources required. As we heard on the excellent Second Reading of that legislation, the vast majority of employers in the UK already operate to a higher standard than the level to which the floor is being raised in the Employment Rights Bill. I do not in any way pull back from saying that some of the most vulnerable, insecure and low paid members of our society will benefit from the Bill; that is exactly what it is about. Those people may have given up on politics or think that the mainstream political system will not deliver for them. I reject the claim that certain industries require a supply of labour from jobs that do not give people the security and dignity that they need. This is a set of proportionate, reasonable reforms that will make a difference—

Employment Rights Bill (Eighth sitting)

Greg Smith Excerpts

Committee stage
Thursday 5th December 2024 Public Bill Committees

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to see you in the Chair, Sir Christopher. I understand the Minister’s explanation of the amendment, which appears to be a logical consequence of the other provisions on guaranteed hours, although we have the old chestnut about why it was not in the Bill when it was first introduced. It seems a pretty straightforward measure that reflects where the Government have always said they are coming from, so it is peculiar that it is coming at this stage. I might go so far as to ask the Minister whether Government amendments 50 and 51 are in fact correcting mistakes, as opposed to adding to the original drafting of the Bill.

I have some specific questions about the amendments. How does the Minister envisage that it will be proven that an employer believes that a worker is entitled to an offer of guaranteed hours? Some clarification would be helpful, not just so that the Committee and the House can understand the scope of the amendment, but so that businesses can plan for what might be coming down the line.

May I also ask the Minister for clarity about what amendment 51 will mean for dismissal during the reference period? I am not sure that we have enough clarity on that point to satisfy the Committee. Given how the schedule and the amendments are drafted, there is a possibility of a legal opinion indicating that it is possible for employers to dismiss employees during the reference period. From everything else that the Minister has said, I would be surprised if that were the Government’s intent. When he sums up, it will be useful if he clarifies whether that is indeed his intent. Is that one of the many loopholes that he is seeking to shut down with the Government’s amendments, and does it need shutting down further? Or is it the Government’s intent that that should be possible for employers within the scope of the Bill?

[Justin Madders]

I am grateful for the shadow Minister’s questions. I feel that we are embarking on an employment law masterclass, although I am not sure that I consider myself a master.

The first point was about how an individual would demonstrate that an employer had believed that they were entitled to particular rights and therefore had reason for dismissal. It is akin to existing case law and legal precedents from other jurisdictions: a set of facts can be presented to the employment tribunal to determine its judgment. I accept that it is not the easiest thing to prove, but that is how the law is currently structured and there will be no departure from that.

On the second point, clearly we would not want this to have the unintended consequence of not relating to a dismissal during the reference period. Proposed new section 104BA(3) logically demonstrates that if there is a termination during the reference period, the same protections would still apply. I am happy to seek further advice, but my understanding is that the Bill, as drafted, covers that situation. Clearly we would not want a loophole of that nature. I hope that that deals with the shadow’s Minister’s questions.

Amendment 50 agreed to.

Amendments made: 51, in schedule 1, page 108, leave out lines 39 to 41.

This amendment removes a requirement about the timing of a dismissal from proposed section 104BA(3) of the Employment Rights Act 1996.

Amendment 52, in schedule 1, page 109, leave out line 1. —(Justin Madders.)

This amendment is consequential on amendment 51.

--- Later in debate ---

[Justin Madders]

Amendment 53 will ensure that the provisions in section 225 of the Employment Rights Act 1996 on the calculation date for the purposes of calculating a week’s pay will work in relation to the new right to guaranteed hours. It is a small amendment: it will replace the word “last” with “latest” to reflect the fact that the date of termination will not necessarily correspond with the final day of the reference period. It sits alongside Government amendment 54; combined, the amendments will ensure that there is clarity for employment tribunals on calculating a week’s pay for the purpose of determining compensation for a well-founded complaint brought under proposed new section 27BF. The maximum number of weeks’ pay that may be awarded by a tribunal for a claim brought under proposed new section 27BF is to be defined in regulations.

[Greg Smith]

This is a minor and technical amendment that brings, on this specific point, the clarity that we have been asking for on so many other clauses and Government amendments. It appears to be correcting defective drafting in the version of the Bill originally presented to the House.

The need for such amendments suggests that the arbitrary target to publish the Bill in 100 days has once again been found wanting. As I have said before, I understand the political imperative for the Government to have done so, but it brings little comfort to employers or employees, who need certainty and clarity on the Bill. At least with Government amendments 53 and 54, that certainty and clarity has now come. I urge the Government to apply the same rigour to their other amendments so that businesses planning for the future can do so—perhaps not with jubilant support for the Bill, but with an understanding of what the Government are legislating for.

Amendment 53 agreed to.

Amendment made: 54, in schedule 1, page 109, line 31, at end insert

“on which the worker was employed by the employer under a worker’s contract”.—(Justin Madders.)

See the explanatory statement for amendment 53.

Question proposed, That the schedule, as amended, be the First schedule to the Bill.

[Justin Madders]

Schedule 1 will make various amendments to the Employment Rights Act 1996 and the Employment Tribunals Act 1996. Among those amendments, which are consequential on clauses 1 to 3, I highlight the insertion of proposed new section 47H of the Employment Rights Act 1996, to make provision for a worker not to be subject to detriment on various grounds relating to the right to guaranteed hours. The employer cannot penalise the worker for accepting an offer of a guaranteed hours contract, for example, or for challenging an offer that is not in compliance with the obligations on the employer regarding guaranteed hours.

Amendments have been made to extend these detriment provisions to situations in which a worker brings a claim or alleges the existence of a claim in relation to a breach of the duties relating to information rights and notice requirements. The detriment provisions are also extended to situations in which a worker suffers a detriment because they qualify for the right to guaranteed hours or the employer believes that they do. Whether a detriment has occurred in such instances will of course be for an employment tribunal to determine. Likewise, the employer cannot penalise the worker for declining to work a shift that the worker reasonably believed was offered with unreasonable notice. This is an important right that helps to address the potential power imbalance between an employer and a worker who is seeking to enforce their statutory rights.

Schedule 1 will also insert proposed new section 104BA of the Employment Rights Act, which makes provision for an employee to be treated as unfairly dismissed if the reason—or principal reason—for the dismissal is that the employee accepted or rejected, or proposed to accept or reject, an offer of guaranteed hours. Likewise, an employee will be treated as unfairly dismissed if the employer was under a duty to offer guaranteed hours but the employer dismissed the employee during the reference period to avoid having to comply with that duty. Amendments have been made to ensure that unfair dismissal protections extend to cases where a worker is dismissed because the employer believes they have a duty to offer guaranteed hours, even if that belief is mistaken.

[Greg Smith]

My argument is similar to the arguments that we have had in substantive debates on previous groups of amendments to the schedule. With this Bill, we have consistently seen an approach of legislating first and consulting second. I understand why that might be appropriate in some circumstances, but certainly for many of the schedule 1 provisions that the Minister has outlined, businesses will find it inadequate. They will find it too difficult to start making their business plans, their plans for growth, their plans for new contracts or their plans to expand in the next financial year, the year after, or even the year after that. It is not unusual for businesses to engage in medium and long-term planning, but too many aspects of the schedule mean that they cannot. Real businesses in the real world are trying to scope out where their next capital investment, their next expansion or their next acquisition of another business is coming from.

Because of those holes, the Opposition are deeply concerned that the Bill, which was incredibly rushed to meet an arbitrary 100-day political rather than legislative objective, will bring too much uncertainty to the economy and to business. At the end of the day, judging from the evidence that we heard in last week’s four sittings, it is having the net effect that businesses will simply take a deep breath and draw back from employing more people. They will not take the risk of taking on new hires. Given our debates on Tuesday, I am thinking particularly of that all-important risk of giving a second chance in life to a marginal candidate.

Sometimes an employer is not entirely convinced that a candidate is the best fit for their workplace, for any of a number of reasons—they may be a rehabilitated former offender or they may have had a number of struggles in life—but is willing to give them a chance. We heard from witnesses that those employers who were going to give people in those circumstances that chance in life—that chance to better themselves—might not now do so. That would be an absolute tragedy for the individuals involved and a travesty of justice when it comes to employment numbers in this country.

--- Later in debate ---

[Laurence Turner (Birmingham Northfield) (Lab)]

Does the hon. Gentleman accept that if the Bill were to go back to the Department as he suggests, the period in which changes to employment legislation are considered by Parliament would be extended and the uncertainty of which he speaks would be prolonged? Does he further accept that one of the business community’s key requests was for ongoing consultation as the Bill makes its way through its parliamentary stages, and that if we were to take the action he suggests, the Government would be breaking that commitment to business that business has asked for?

[Greg Smith]

I understand the hon. Gentleman’s point, but I believe that it was the Deputy Prime Minister who, in the media over the weekend, could not name a single business that supports the Bill. I will gladly take another intervention from the hon. Gentleman if he can name a single business that supports the Bill. [Interruption.] Not an umbrella body, but an actual business.

[Laurence Turner]

We heard from the Co-op, in the evidence sessions that we all attended last week, that that support is there. Off the top of my head, I would add Octopus and Centrica, two examples of very significant businesses that have welcomed provisions in the Bill.

--- Later in debate ---

[Greg Smith]

I am grateful to the hon. Gentleman. There are clearly thousands of businesses in this country; I notice that he did not name a single business from his constituency. I actually know Northfield very well: my late grandmother worked in Walter Smith butchers in Northfield for many years, well into her 80s.

I fully understand the need for any Government to have ongoing dialogue with business, but I gently say to the hon. Gentleman and all Government Members that there is a big political cost when any Government legislate too swiftly without fully thinking things through and without clarity of thought and of objectives. Yes, there are principles—they are clearly Labour principles—running through the Bill, but there is not that clarity of thought as to many measures in schedule 1.

I say gently, perhaps from bitter experience in the four and a half years prior to the general election, that I know what happens when legislation is rushed. From the Nationality and Borders Act 2022 to the Illegal Migration Act 2023, there were multiple pieces of legislation, none of which hit the nail on the head. Perhaps they were a little bit too rushed. They failed to meet the objective that we, the previous Government, clearly set out to achieve of ending small boat crossings in the channel.

I raise that clearly very out-of-scope point only as a warning to the Government that if they insist on going too quickly and rushing the Bill through just to meet the headline of having published it in 100 days, it could turn out to be a very painful experience not just for them as a Government, but for the business community in this country. These are the businesses that will be the backbone of our economy and will actually create the jobs that I think the Government also want to see, but the Bill might have the unintended consequence of damping them down.

[Justin Madders]

My irony meter has reached overload. I think it is fair to say that in the last four years of chaos under the previous Government, uncertainty was brought to a new level. That was not about legislation; it was just about the way that the Government operated, or failed to operate, as the case may be.

Let me try to put the shadow Minister’s mind at ease about the process. We consulted extensively in opposition, we consulted in government before the Bill was published, and we are continuing to consult. The Bill will set out the broad powers that the Government wish to take in respect of employment rights. There will then be more detailed consultation as we get into the secondary legislation, where the detail—the real meat and veg of this law—will be dealt with. There is not going to be a rush for this provision to be enacted, because we understand that it is important to get the details right. Many of these measures will not come into force until 2026, because we want to get this right.

We want to make sure that we take businesses with us and listen to their concerns, to workers’ concerns and to trade unions’ representations. The impact assessment is clear that there is no expected impact on the number of jobs available.

[Greg Smith]

The Minister talks about further consultation. Can he give a commitment right here, on the record, to consultation on all the measures in schedule 1 and the rest of the Bill that go through to his 2026 deadline? First, can he commit that 2026 really is the deadline? Secondly, can he commit that consultation with trade unions and with business will have equal billing, and that one of the two will not outweigh the other?

[Justin Madders]

I think there was a suggestion there that we may favour one stakeholder group over another. I assure the shadow Minister that when we tot up the engagements that we have had so far, the number of businesses and business organisations is far in excess of the number of trade unions. Actually, we want to consult with everyone, broadly: we do not think that there should be an arbitrary limit on who we discuss this with.

On the time limits, the “Next Steps” document is very clear about the timetable. If it takes more time, it takes more time. We do not want to rush the Bill through and create unintended consequences of the type that the shadow Minister is rightly concerned about. We want to get it right. That is why we are committed to consulting as we go forward.

--- Later in debate ---

[Justin Madders]

Clause 5 is the first of several clauses that will repeal previous legislation, although it may not be the most controversial of our repeals. The clause will repeal the previous Government’s Workers (Predictable Terms and Conditions) Act 2023, which if commenced would have brought in a right for workers to request a more predictable working pattern. Requests could still be turned down by the employer. That approach is clearly different from the right to guaranteed hours that we have set out in the Bill. We do not want to confuse employers and workers with two different models, so the Bill will repeal the 2023 Act entirely. Nevertheless, the work that was done to develop the 2023 Act has been useful in the drafting of our new measures and will continue to be taken into account as we evolve and develop our policies.

We want predictability and security to be the baseline in all jobs, creating an economy that works for all. We think responsibility for offering guaranteed hours should therefore rest with the employer. Without guaranteed hours, workers do not have any form of certainty as to their earnings, making it difficult for them to apply for credit or a mortgage, rent a flat, plan for major events such as weddings or holidays, or even manage day-to-day expenses.

In addition, when people have a better idea of how many hours they will be working, it is easier for them to organise their family and social life, plan time together and organise travel and childcare—all things that are just so important for the wider welfare of our society. These provisions of the Bill will apply to all employers, levelling the playing field so that best-practice employers are rewarded rather than placed at a competitive disadvantage against employers who want to place risk wholly on the worker.

[Greg Smith]

On the one hand, the Minister says that he wants certainty. On the other hand, he is repealing legislation that is but a year old. I fully appreciate that a new Government will want go through the legislation that the previous Government put on the statute book: it is vital in our democracy that we maintain the principle that no Parliament can bind a future Parliament, and I fully acknowledge and accept that the Government have a mandate to deliver their manifesto. However, I gently put it on the record—I direct this point towards the Minister—that certainty does not come from abolishing year-old legislation that businesses have only just started thinking about, let alone implemented.

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[Justin Madders]

Clause 6 will amend section 27B of the Employment Rights Act 1996 to reflect the new definition of “zero hours arrangement” in clause 4, which will apply to the whole of part 2A. As has been discussed in relation to clause 4, the definition has been amended to ensure that it does not inadvertently exclude any zero-hours workers in cases where they have a contract with the employer but the contract does not, in itself, make them a worker. The definition of “zero hours arrangement” captures those who have an arrangement to work for their employer when work is provided but have no obligation to accept work, and the employer has no obligation to provide it. Such an arrangement between the employer and the individual could, however, include other obligations that amount to a contract, albeit that they are not a workers’ contract. The clause will ensure that individuals caught in that situation are also covered by the Bill.

On a technical point—I put this on the record for clarity—the definition of “non-contractual zero hours arrangements” in section 27B of the 1996 Act is amended by clause 6, but a new definition for the whole of part 2A will be inserted by clause 4. The definition of “non-contractual zero hours arrangements” in part 2A is being changed by clause 6, as well as being inserted by clause 4, which may well be commenced after clause 6 for the rest of the provisions. The changes in clause 6 will ensure that the definition in section 27B operates as intended before the commencement of other provisions on zero-hours arrangements. The definition in section 27B will then be repealed on commencement of the other provisions, as is provided for in schedule 1.

I hope that that was clear to everyone. I commend the clause to the Committee.

[Greg Smith]

I feel that we have gone over those details multiple times, particularly on Tuesday, so I will not take up a great deal of time. However, it is important to put on the record the Opposition’s concern about cases such as the one that I outlined in this morning’s sitting. The Minister conceded that it probably was a zero-hours contract, but it did have an element of certainty of pay as that individual was contracted to be up at a certain time of day to find out whether he had work that day, so there was payment for it but not necessarily guaranteed hours. Such cases still need an answer, whether from the Government’s legal counsel or within the Department. I take the Minister at his word: he said this morning that he would look into such cases and test how the Bill will apply. That is as relevant to clause 6 as it is to other clauses that we have discussed.

The worst-case scenario is that the Bill becomes too prescriptive and takes away arrangements that individuals enter into freely and want to enter into; perhaps it suits them to do so. I accept that that is probably not the majority of cases, but there will be people out there in the economy who perhaps do not need to work. Perhaps they do not need the money. There are such people, believe it or not—I am certainly not one of them. There are people who want to take on a zero-hours contract for something to do. I fully accept and place it on the record that that will be a very small number of people, but if they are completely wiped out by some of these prescriptions without flexibility, that will be a problem for the economy, much as it is if employers just take everybody on a zero-hours contract and offer them nothing further. That, equally, would be a tragedy.

I understand where the Government are coming from in clause 6. I understand the principles behind it. Again, however, I urge the Minister to double-kick the tyres and check that there will not be unintended consequences that have a negative impact on employment in this country.

[Justin Madders]

I am grateful for the shadow Minister’s comments. I have been reflecting on his scenario from this morning. Actually, the first thing I thought about over lunch was how the employer would be checking that the individual was up and dressed at 5 o’clock in the morning to make sure he had complied with the terms of his contract. However, the intention behind the Bill is to make sure that we do not get into lots of debates about whether someone is covered by this legislation or whether everyone who is in some sort of arrangement or contract is covered by it. Of course, if they do not wish to have an offer of guaranteed hours, they are entitled under the legislation not to accept it. I think that this clause will bring clarity and consistency across the board in that respect.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Right to request flexible working

[Greg Smith]

I beg to move amendment 136, in clause 7, page 25, line 5, at end insert—

“(1AZA) But where the employer is—

(a) the Security Service;

(b) the Secret Intelligence Service, or

(c) the Government Communication Headquarters,

the test of reasonableness in subsection (2)(b)(ii) does not apply, and the notification under subsection 1(aa) need not explain why the employer considers that it is reasonable to refuse the application on that ground or those grounds.”

This amendment would exclude the security services from the Bill’s provisions on flexible working.

Amendment 136 is essentially a probing amendment—I make that clear from the outset—but one that should go to the nub of exactly where the Government want to go with this measure, not least bearing in mind the Minister’s comments at the end of the last debate about ensuring that everybody falls under the same set of rules. There may be organisations where it is impractical for their employees to be under the same set of rules. The amendment seeks to probe the matter of exempting those working in the security services from clause 7. We define the security services as MI5, GCHQ and the Secret Intelligence Service.

The Regulatory Policy Committee has explained that the Government have not proved that the measures on flexible working are necessary or undertaken any proper assessment of the costs to business. We therefore want to probe the Government’s thinking on how the provisions might apply in practice. There may be certain occupations, such as the security services, where it is harder for the employer to agree requests for flexible working. I am sure that everyone can see the practical realities and the potential consequences for national security and the safety of everyone in our great United Kingdom if the security services were to suddenly have flexible working arrangements.

Has the Minister given any consideration to which sectors may find these provisions either more difficult or completely impractical to comply with? The amendment takes the example of the security services, where irregular hours are worked. I am sure that hon. Members can think of other occupations, such as policing—and perhaps ours, if I may be so bold, Sir Christopher—where irregular hours are more than commonplace.

We would like to understand how the provisions of the Bill will apply to the security services and to understand the Minister’s thinking as to why. That is the critical question in politics—my early mentor in politics, the late, great Eric Forth, was clear that it is the only question that matters in politics—so I put it to the Minister. We want to understand the balance between the right to request flexible working and public protection. Again, I do not believe that any Member of this House wants to undermine public protection and the safety of our nation. The first duty of Government is the defence of the realm and the security of its citizens.

The security services will not be the only profession that might find the requirements difficult to administer. Will the Minister let us know, when he responds to what I repeat is a probing amendment, where the Government stand? What is his assessment of those areas that simply will not be able to comply with the provisions of the Bill? What safeguards will the Government put in place for them? We seek to understand the practicalities of the requirements that the Government are seeking to impose.

[Laurence Turner]

It is a pleasure to serve under your exemplary chairmanship, Sir Christopher.

Before I get into the clause, may I say that I enjoyed my discussion with the shadow Minister about the Northfield constituency? I am half tempted to cite my great grandparents, who were confectioners and newsagents, to burnish my small business credentials, but some on the Labour Benches can do it better. I appreciate that he said that the amendment is probing and that he is taking a particularly unique case in order to test the limits of the Bill.

Focusing on the words of the amendment rather than on the wider issues, because it is the words that matter, it is important to look at the history of employment rights as they relate to the intelligence services, because this is an area that was tested in the 1980s and 1990s in particular. The consequences of not extending these rights to the intelligence services speak to the argument against making the amendment.

For those of us who come from a trade union background, there is an uncomfortable reminder of the ban on trade union activity at GCHQ in the 1980s, which led to a number of skilled professionals leaving the employment of that service. It is important to remember the 14 trade unionists who were sacked because they did not give up their trade union membership. Many of them were re-employed 13 years later, because they still had their skills, which were in high demand.

The shadow Minister talked about the unique nature of flexible working in the intelligence services. I suspect that employees of those services have flexible working arrangements that are hard for any of us on the Committee to imagine, but when employees of the intelligence services did not have recourse to most of the normal procedures of employment law, it was an acknowledged problem that dissatisfaction among employees of the services in itself became a security risk. Some hon. Members may recall that there were a number of very high-profile cases of dissatisfied members of those services who went on the public record in breach of the Official Secrets Act. In some cases, that was attributed to dissatisfaction with employment situations. I can do no better than quote from the Intelligence and Security Committee’s annual report of 1997-98. At that time, the Committee was chaired by Baron King of Bridgwater, the predecessor of one of the Conservative Members who tabled the amendment. It stated:

“The Committee also believes that everything possible should be done to ensure that employees of the Agencies have the same rights as employees elsewhere.”

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[Dame Nia Griffith]

What really matters is that flexibility is in-built, and I am sure that colleagues in the Home Office will be able to use it.

The other point that the hon. Member for West Suffolk might like me to address is whether giving a reason could expose something that it would be undesirable to expose—in other words, whether any explanation given would incur a breach of security. In many cases—probably the majority—the reason for refusing a flexible working request will not involve matters of national security. It might be a matter of not being able to reorganise the work among existing staff to facilitate a requested working pattern, or there being insufficient work during the period someone has asked to work. Those reasons will be no different from what other employers are considering. In most cases, it will be possible for an employer to give reasons for their refusal without disclosing any sensitive information.

There will certainly be cases where matters of national security come into play, but there are already protections in place. The grounds for refusal given by the employer have to be made public only at the point at which legal proceedings are started. In the unlikely event that an employee makes a claim in the employment tribunal, the tribunal is able to conduct all or part of the proceedings in private, or to order a person not to disclose any document. I therefore invite the hon. Member for Mid Buckinghamshire to withdraw his amendment.

[Greg Smith]

I am grateful to the Minister for her responses. I highlight that this is a probing amendment designed to test the Government’s thinking. I appreciate the flexibilities that she has outlined, but as my hon. Friend the Member for West Suffolk set out, the security services are a particularly unique element within public service.

I can see a multitude of reasons why some of those flexibilities will not be good enough to ensure that those predominantly charged with our national security can comply with every measure in the Bill. I urge the Minister to have those conversations with relevant Ministers in the Foreign, Commonwealth and Development Office and the Home Office, who are responsible for our security services, to double-check that they are entirely comfortable with the provisions in the Bill, which I dare say has been through the write-around process. Sometimes minutiae and detail can be lost in that process, and it is vital for our national security that the Bill should be properly road-tested to the nth degree.

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[Alex McIntyre]

Will the shadow Minister give way on that point?

[Greg Smith]

I will finish the line, and then I will. I make that point just to highlight that there are sometimes circumstances in which the flexibilities that the Minister spoke of may not fully apply. I am sure a witticism is coming.

[Alex McIntyre]

Sadly, I am not very funny. Would M’s HR adviser not say, “That might have a detrimental impact on your performance, Mr Bond”? That flexible working request could therefore be reasonably denied.

[Justin Madders]

I am sure that was in “GoldenEye”!

[Greg Smith]

I think that has probably been a plot line already. The hon. Member for Gloucester understands the point that I am making here within certain elements of employment in this country. This was a probing amendment, and we will come back to the principle of this discussion—although maybe not the detail of the Bond example—later in the Bill’s passage. For the time being, I urge the Minister to have those conversations with colleagues in other parts of Government to double-check that they are fully appreciative of the measures in this Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

New clause 26—Consultation and assessment on the right to request flexible working—

“(1) The Secretary of State must carry out an assessment of the likely impact of the right to request flexible working provided for in section 7 of this Act.

(2) As part of the assessment, the Secretary of State must carry out a consultation on the proposed right to request flexible working.

(3) The assessment must—

(a) include labour market and broader macroeconomic analysis,

(b) examine the impact of the measures in section 7 on employment, wages and economic output,

(c) consider the likelihood of the costs of flexible working measures being passed on to employees through lower wages, and

(d) examine the likely effect of the right to request flexible working on—

(i) productivity,

(ii) wage growth,

(iii) equality of opportunity,

(iv) job security,

(v) economic activity, and

(vi) employment.

(4) A report setting out the findings of the assessment must be laid before each House of Parliament no sooner than 18 weeks after the consultation has been initiated.”

This new clause requires the Secretary of State to assess the impact of the provisions of Clause 7.

Amendment 132, in clause 118, page 105, line 20, at end insert—

“(3A) But no regulations under subsection (3) may be made to bring into force section 7 of this Act until the findings of the report under section [Consultation and reporting on the right to request flexible working] have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown.”

This amendment is linked to NC26.

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[Dame Nia Griffith]

I thank my hon. Friend for her valuable contribution; she reminds us that flexible working can often be a real help in getting people into work.

The changes in the Bill will support employers and employees to agree solutions that work for both parties and increase the take-up of flexible working. The Opposition amendments, new clause 26 and amendment 132, proposed by the hon. Member for Mid Buckinghamshire, include a requirement for an assessment of the impact of the Bill’s provisions on flexible working to be produced before the provisions can be commenced. The Government resist those amendments. They have already produced a comprehensive set of impact assessments, which was published alongside Second Reading and based on the best available evidence on the potential impact of the Bill’s measures on business, workers and the wider economy.

Our proportionate assessment included labour market and broader macroeconomic analysis considering the impact of these changes on individuals and businesses. It also provided a breakdown of the impacts on employment tribunals, small business and individuals with protected characteristics. We intend to refine that analysis over time, working closely with businesses, trade unions, academics and think-tanks. The analysis published alongside the Bill describes the overall business impact as neutral. Businesses may see benefits in improved productivity, employee loyalty, worker satisfaction, staff retention and the ability to attract a wider range of employees. It is important to remember that businesses can still reject flexible working requests on eight valid business grounds, including the burden of costs.

As is standard practice, the Government will publish an enactment impact assessment once the Bill reaches Royal Assent, in line with the requirements of the better regulation framework. That will account for where the primary legislation in the Bill has been amended in its passage through Parliament in such a way as to change the impacts of the policy on business significantly. That impact assessment will be published alongside the enacted legislation. We will then publish further analysis alongside future consultations, ahead of secondary legislation to meet our better regulation requirements. I therefore ask Opposition Members to withdraw their amendments.

[Greg Smith]

New clause 26 and amendment 132 are about impact assessments of flexible working. Amid her speculation about the Mid Buckinghamshire pantomime, to which I trust she will be buying a ticket, the Minister talked about impact assessments that have already been made. But we know what the Regulatory Policy Committee has said about those impact assessments:

“there is little evidence presented that employers are rejecting requests”

for flexible working “unreasonably”.

We should remember that the previous Conservative Government, although they want to repeal it, introduced the right to request flexible working from the first day of employment through the Employment Relations (Flexible Working Act) 2023, which came into force in April. The RPC has said that the Government have not considered the effectiveness of the previous Bill—it might be difficult to do so given how recently it has come into force—and that it is therefore

“difficult to assess the justification for the additional measures”

in the Bill. The RPC also says that the Government have not considered the effectiveness of non-regulatory options such as raising awareness of the right to request flexible working. So the Government have not made the case for why this is necessary. I do not believe the Minister gave a clear explanation either. I am sure she will have a second chance to do so in summing up.

The RPC rebukes the Government for failing to take into account the costs this measure will impose on business, namely

“the costs to employers of engaging with more ET cases and hearings taking longer because they will now be considering wider and more subjective factors”

and that the Government’s own impact assessment

“assumes that there are no net costs to employers of accepting requests, on the basis that they would do so only if the benefits at least matched the costs. However, this does not necessarily hold as rational, risk averse employers will also factor in the increased cost/risk of rejecting requests under the proposal, seeking to avoid costly employment tribunals and, especially for SMBs”—

[Alison Hume (Scarborough and Whitby) (Lab)]

The hon. Member is talking about costs, but does he not agree that the lack of flexible work locks out far too many women? Some 40% of women who are not currently working say that access to flexible work would mean that they could take paid work. If we are talking about the cost to the economy, does he not agree that guaranteeing flexible working would boost the economy?

[Greg Smith]

The Opposition are not against flexible working; as I said, we actually legislated for it in the previous Parliament. We can see the benefits of it, as we discussed this morning, for anyone with childcare responsibilities—I count myself and my wife in that; I do not think it is quite a declarable interest—a caring responsibility or a need to have those flexible hours.

We fully recognise and accept the challenges around the nuts and bolts of the details proposed in this legislation, but I gently put it to the hon. Lady that it is our job, as His Majesty’s loyal Opposition, to road-test any legislation that the Government bring forward, which is what we are seeking to do. We are not against flexible working, but we are focused on the potential unintended consequences, the potential cost to business and the potential cost to jobs in the overall workforce, as I argued in a debate on an amendment this morning.

If employers do not have confidence—if they think that something will go wrong or that it will lead to countless days and months in employment tribunals—they may not make those hires in the first place, and then everyone and the whole economy will suffer. Opposition Members cannot stand by and not challenge or test that to ensure that the Government have got it right. To return to what I was saying before the intervention, for SMEs, the opportunity cost of their chief executive officer or another senior director spending time on employment tribunals is also considerable.

New clause 26 in my name and the name of my hon. Friends merely gives the Government an opportunity to do their homework and test whether the provision will work. We do not believe that they should casually pile more regulation on to business without knowing whether these specific measures—the detailed measures in the Bill—are actually needed to achieve their objectives.

We are asking the Government to consult on the impact of the measure and to report on it, and for the House of Commons to approve that report before the measure comes into force. Given the RPC’s verdict on the Bill’s impact assessments, business would find it reassuring if the impact assessment could be done and placed before the House so that we could study it and debate it, and so that Members on both sides of the House—Government Back Benchers and Opposition Back Benchers, as well as those in the smaller parties—can fully understand it. We believe that it is important for the Government to have to come back again for the approval of the House before the measure comes into effect.

[Laurence Turner]

The hon. Gentleman seems to be looking for statistical evidence about employers unreasonably refusing flexible working requests. I must say that it is a shame that the workplace employment relations study was last carried out in 2011. The Government at the time declined to repeat the exercise; had they not, we might have the information in front of us that he is looking for.

Does the hon. Gentleman accept that there are precedents—blacklisting, for example—in which there were widespread but anecdotal reports that the practice was occurring? It was difficult to prove, and on that basis, the regulations on blacklisting were not enacted. Then, lo and behold, it became apparent years later that the practice was not just widespread but had been carried out on an industrial scale. Had the measures been put in place at the time, many lives would have been left unbroken.

[Greg Smith]

I will take on the chin the hon. Gentleman’s point about the 2011 dataset, which was published under the coalition Government, led by my noble friend Lord Cameron. The current Government is seeking to make this legislation, however, so the onus is on them—right here, right now—to provide the datasets, evidence, proper analysis and impact assessments for the legislation that they are putting before the House of Commons and, later, the House of Lords in this Session of this Parliament. I hope the hon. Gentleman accepts the good will with which that comment is made—it is not a political attack. It is the duty of any Government at any time, as they seek to legislate on any matter, to provide the impact assessments, the real data and the real-world evidence of why it is necessary to put that legislation in place.

As I said earlier, it is simply a case of asking the Government to do their homework properly, and to provide, not just to Parliament but to businesses and employees up and down the land, the basis for which they are seeking to change our statute book.

[Alex McIntyre]

I will return briefly to a couple of the shadow Minister’s comments. I take some quantum of solace in the fact that he now seems to be accepting the principle of consultation. Over the past couple of weeks, we have often heard that he would prefer there to be certainty for business in some of the provisions, and now there is some certainty.

[Greg Smith]

I understand the hon. Gentleman’s point, but my argument throughout our debates on the amendments has been that it is normal practice to consult first, legislate second, but in many parts of the Bill the practice is to legislate first, consult second. That, I gently suggest to him, is probably the wrong way round.

[Alex McIntyre]

The “cake and eat it” argument is the point I was trying to make. I advised on flexible working requests regularly when in private practice, where individuals and, in particular, employers were asking what their rights were in respect of a request.

The hon. Gentleman raised two points, the first of which was about costs. Again, I point to the exemptions. The burden of additional costs is one of the exemptions by which an employer can say that it is not reasonable to accept a flexible working request. The balance between having rights for employees and making sure that they are not too much of a burden on business is important. The burden of additional costs is already explicitly covered in the legislation.

Secondly, in relation to tribunals, one of the issues with the current system is the lack of explanation provided. Employees often believe the worst, even if that is not always the case. They might make their request, with valid reasons, and if their employer tells them a flat no, with no further explanation, they often believe the worst and bring a tribunal claim.

Providing that explanation at the beginning requires the employer to think about the request. Not every employer is an excellent, flexible employer; some employers think that by offering flexible working, they will somehow lose productivity, whereas lots of studies have shown the opposite. Through that provision, employers will think about the request, engage with the process and the exemptions, think about what that means for their business, and provide a reasoned explanation.

That will not take as long as we might think, because there are only eight exemptions and people know their business very well. When they give that written explanation, it can be relatively short. It does not have to be “War and Peace”—I should have mentioned another James Bond novel—because it is just to give some background. We will then have an explanation that can be used in a tribunal. That will really assist tribunals in dealing with these cases, because there will be a written explanation of why the decision has been taken.

There are loads of cases in which people bring claims of discrimination because their flexible working requests have been rejected. Those can take up lots of time, when there has been just a misunderstanding between the employer and the employee. By introducing the requirement to provide an explanation, and for the employer to think through the reasonableness of it, there might hopefully be fewer claims in the employment tribunal.

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New clause 5 extends to Northern Ireland the benefits of strengthening statutory sick pay by removing the waiting period, allowing employers in Northern Ireland to benefit from the same increased productivity as businesses in Great Britain. Enabling employees to take the time off they need to recover from short-term illnesses will help to reduce the overall rate of sickness absence. Statutory sick pay is a transferred matter in relation to Northern Ireland. Following official-level engagement, the Minister for Communities in Northern Ireland has agreed for us to bring this measure forward and will be seeking a legislative consent motion for it.

[Greg Smith]

I will not take long. I understand the principle that the Minister has outlined and accept his arguments about workplace sickness and the evidence that the Committee has heard, but I want to reflect for a moment on the challenge that he raised about the potential—I emphasise the word “potential”—for abuse of day one sick pay.

The Government need to put in place safeguards, rather than just saying, “It’s up to businesses to manage their own practices.” Of course it is up to businesses to manage their own practices for the vast majority of things, but if a clear and unambiguous case of abusing day one provisions is found, we need protections for businesses as they seek to deal with those staff members. I have no doubt that the vast majority will not seek to abuse them, but there is always that scope, as in any walk of life.

I will ask the Minister for some clarity about new clause 5. On one level, it is perfectly sensible to make sure that there is a united policy approach to this issue across the whole of our United Kingdom, but why has it taken a new clause in the Bill for the Government to remember that Northern Ireland is part of our country? I sense the hon. Member for Dundee Central potentially tingling at the mention of our United Kingdom, but I thought that one thing that could unite the Conservative and Labour parties was that we are both Unionist parties—we both believe in keeping the United Kingdom of Great Britain and Northern Ireland together.

I hope that the answer is that, like many other things in relation to this rushed, 100-day Bill, the reference to Northern Ireland was simply left out. I think the Committee needs an explanation, however, as to why, rather than a reference to Northern Ireland being put straightforwardly in the first version of the Bill, a new clause was needed to show that the Government remember that Northern Ireland is part of our great United Kingdom.

[Alison Hume]

It is a pleasure to serve under your chairship, Sir Christopher.

We in this place enjoy the employment rights that come with our job, which is to serve our constituents to the best of our ability. When we are unwell, we can take time off but we are still paid. Before I arrived here, I spent a considerable number of years working as a freelancer while bringing up my family; I believe that is now called being a worker in the gig economy. I understand all too well the pressure for people to work when they are unwell, as they juggle work around caring responsibilities, as I had to for my disabled son, and worry about money, as our family worried about how we would pay the rent and the other bills if I did not work.

At present, large numbers of workers either rely on statutory sick pay or receive nothing at all if they are absent from work due to illness. Those workers are more likely to be low paid than others. We also heard in the evidence sessions last week that women are currently more likely to miss out on statutory sick pay than men, because they do not earn enough to meet the threshold or have not been in their jobs for long enough. It is estimated that 1.1 million workers earn less than £123 a week and most of them are women who are not eligible for statutory sick pay at all.

In practice, as we heard in the evidence sessions last week and as Minister just referred to, that means that people drag themselves into work despite the fact that they are ill. As it stands, our sick pay system pushes far too many people to go to work when they are ill. Working while in poor health is more common among those from marginalised ethnic groups, people in lower-quality jobs and workers lacking formal qualifications.

Under the Bill, hundreds of thousands of people will qualify for sick pay from the first day that they are ill. That change and other changes will help to increase productivity, reduce prolonged illness due to exacerbating existing conditions, and lead to better public health outcomes. Lower-paid workers will no longer have to face the unpalatable choice between coming to work and risking spreading infection, or struggling to put food on the table and to pay bills. Those are very real concerns that, as I mentioned, I have faced.

In conclusion, I believe that the Bill will transform the world of work for millions of people across the country. If I may say so, it is a privilege to have played a small part in scrutinising it.

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[Justin Madders]

Clause 9 provides for the removal of the requirement for an employee to earn at or above the lower earnings limit to be eligible for SSP. This requirement means that currently up to 1.3 million people, primarily women, are not entitled to receive SSP from their employer. This group are some of the lowest-paid in society, meaning that they and their families are most at risk of financial hardship if they cannot work. The clause ensures that all eligible employees can access statutory sick pay and the peace of mind it brings when they need to take time off due to illness.

However, we do not want to create a situation where anyone is entitled to receive more through SSP than they would otherwise earn. The clause therefore provides that an employee will be entitled to a certain percentage of their average weekly earnings or the current flat rate of SSP, whichever is lower. The clause therefore includes a power for the Secretary of State to determine that percentage rate by secondary legislation. However, it is our intention that the percentage rate is enshrined in primary legislation. I hope that gives the hon. Member for Dundee Central some comfort. We therefore published a consultation, which closed on 4 December, asking respondents what that percentage rate should be. We will now take time to carefully consider the responses we have received, before tabling an amendment to the Bill.

The changes that we are bringing in through the Bill will mean that up to 1.3 million low-paid employees will now be entitled to statutory sick pay and all eligible employees will be paid from the first day of sickness absence irrespective of their income, which will of course benefit millions of employees.

It is important to highlight that many employers choose to go further and provide more financial support to their employees during a sickness absence, with around 60% of all eligible employees being entitled to contractual sick pay. Those who need additional financial support while off sick are able to claim additional benefits through the welfare system, depending on their individual circumstances.

New clause 6 extends to Northern Ireland the benefits of strengthening statutory sick pay by removing the requirement to earn at least the lower earnings limit and creating a new percentage rate. These measures will ensure that all eligible employees have access to statutory sick pay irrespective of their income level, with the peace of mind that this brings when they need to take time off work due to sickness. The clause includes a power for the Minister for Communities to determine that percentage rate by secondary legislation.

Statutory sick pay is, as we have discussed, a transferred matter in relation to Northern Ireland. However, Northern Ireland has historically maintained parity with Great Britain on social security matters, including statutory sick pay. The Minister for Communities, Gordon Lyons MLA, has agreed to ask Westminster to legislate on the Northern Ireland Assembly’s behalf and to seek a legislative consent motion for the proposed changes in order to maintain parity in relation to statutory sick pay.

Finally, amendment 107 is consequential on new clauses 5 and 6; it limits the extent of the new clauses to Northern Ireland only.

[Greg Smith]

I shall be brief. On the Northern Ireland issues, I accept the Minister’s earlier explanation.

I have one straightforward question. The Minister says he has consulted and will consider the responses around the percentage rate going forward, and has said he will seek to amend the Bill to lock the percentage rate into the face of the Bill. The question remains when that amendment is likely to come. I appreciate it takes time to go through responses; it is unlikely to be done overnight, and potentially with Christmas coming up that will get in the way of any chance of the matter’s being considered by this Bill Committee. Therefore, is the Minister envisaging such an amendment on Report? Does he anticipate that it may come forward when the legislation is in the House of Lords? At what point will we see the detail? I do welcome the Minister’s commitment to get it into primary legislation, because that is important and is consistent with some of the things that I have been arguing for in relation to other amendments, but in order for Parliament to take a considered decision, it is important that we know when the amendment is likely to come—later in Committee, on Report in the House of Commons, or in the other place.

[Justin Madders]

That is a reasonable question. It is another Department’s consultation so there are only so many levers I can pull, but I envisage that the amendment will be tabled at Report stage at the latest. I hope that is sufficiently clear.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Anna McMorrin.)

Employment Rights Bill (Seventh sitting)

Greg Smith Excerpts

Committee stage
Thursday 5th December 2024 Public Bill Committees

[The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)]

I beg to move amendment 30, in clause 3, page 18, leave out lines 7 to 19 and insert—

“(b) in relation to the movement of a shift, or the movement and curtailment (at the same time) of a shift, notice given less than a specified amount of time before the earlier of—

(i) when the shift would have started (if the shift had not been moved, or moved and curtailed), and

(ii) when the shift is due to start (having been moved, or moved and curtailed);

(c) in relation to the curtailment of a shift where there is a change to when the shift is to start (but there is no movement of the shift), notice given less than a specified amount of time before the earlier of—

(i) when the shift would have started (if there had not been the change), and

(ii) when the shift is due to start (the change having been made);

(d) in relation to the curtailment of a shift where there is no change to when the shift is to start, notice given—”.

This amendment has the effect of clarifying what “short notice” means for the purposes of proposed Chapter 4 of Part 2A of the Employment Rights Act 1996 in cases where a shift is both moved and curtailed and makes associated drafting changes to the definition of “short notice”.

It is a pleasure, Mr Mundell, to see you in the Chair this morning. I start by referring to my entry in the register of interests and my membership of the GMB and Unite trade unions.

Government amendment 30, alongside Government amendments 31 and 32, will ensure that employers are clear about their responsibilities where a shift is both moved and curtailed at the same time. Under the Bill as introduced, it may not have been clear to employers or workers when the short notice period in these cases would run until. Under current drafting, the calculation of the short notice period for a moved and curtailed shift could be done based on the rules for either a moved shift or a curtailed shift. This could produce two different outcomes.

For example, if a shift were due to be worked from 2 o’clock until 6 o’clock, and it is moved and curtailed so that it must be worked from 4 o’clock to 7 o’clock, it is not clear whether the notice ends at 2 o’clock or 4 o’clock. The amendment clarifies that in cases where a shift is both moved and curtailed at the same time, the short notice will be the same as if the shift had been moved only. It will therefore run until the earlier of when the shift would have started before the change or when the shift is now due to start.

In terms of what payment a worker will be entitled to when their shift is both moved and curtailed at the same time, we are committed to consulting on what that amount should be and will, of course, specify that in the regulations. The maximum amount, however, cannot be higher than what the worker would have received from working hours that were changed, as is the case for shifts that are cancelled, just moved, or just curtailed.

We believe that compensation in these circumstances is only fair, given that the movement of a shift at short notice disadvantages a worker. It impacts their ability to plan their lives and can cause financial disadvantage such as excessive childcare costs. Our measures will ensure that workers do not bear all the financial risk of shift allocation and cancellation, and will compel employers to give reasonable notice. Through good leadership and planning, an employer is in a position to reduce the instances of short-notice shift changes, which the worker is unable to influence.

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Mundell. I am grateful to the Minister for his explanation of Government amendment 30, but I gently suggest to him that starting by saying that he wished to be clear, and then going on to say that the Government will be consulting on it, possibly does not give businesses the clarity that they are seeking from this clause of the Bill. I would be grateful, when the Minister sums up the debate on Government amendment 30, if he could actually clarify what he believes, in plain English, to be reasonable notice, and, while not necessarily when future regulations will be laid, the window in which they will be consulted on.

I posed a similar question about an amendment in our sitting on Tuesday. I cannot imagine that the Government will want to simply put out a blank piece of paper consultation—there will be a floor and a ceiling that is consulted on. It would be helpful for all Members, but more importantly real businesses out there in the country, to understand that as soon as possible, so that they can most fully share their thoughts formally when the consultation launches. Can the Minister give the Committee any clue about what employers will need to comply with, or was Allen Simpson, CEO of UKHospitality, right when he said that he understood that

“the Government are intending to leave it to case law and employment tribunal systems to figure out what ‘reasonable notice’ means”?––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 43, Q39.]

We will shortly come on to debate Government amendment 31, which is relevant to this discussion.

[Laurence Turner (Birmingham Northfield) (Lab)]

Will the hon. Member give way?

--- Later in debate ---

[Greg Smith]

I will just finish this point. As the hon. Gentleman knows, I am not shy of taking interventions.

Government amendment 31 will cap the compensation an employee can receive if the employer does not give reasonable notice of cancellation or curtailment of a shift to the remuneration they would have gained if they had worked those hours.

[Laurence Turner]

I draw attention to my declaration in the register of members’ interests and my membership of the Unite and GMB trade unions.

We will of course see the consultation on the definition of reasonable notice in due course. Does the hon. Member accept that the meaning of reasonableness will be dependent on the circumstances of each case? What is reasonable in the case of, say, an early years setting might be quite different to that for an offshore oil rig.

[Greg Smith]

The hon. Gentleman makes a perfectly sensible point. We will come on to that issue shortly. The central point that I ask the Government to reflect on, before any consultation—post-legislation or during the passage of legislation—goes live, is that it is reasonable that those who are expected to put in meaningful and thoughtful contributions to that consultation on how the measures will affect them, will be applied in the real world and will need to be complied with, have as much notice as possible, so that they can put their thinking caps on and, if necessary, bring in professional advice where that is practicable or affordable.

In that way, when the Minister ultimately has the opportunity to read through every single consultation response with, I am sure, great attention to detail, before coming to a recommendation and drafting the necessary statutory instrument to bring about the exact regulations, the detail will be there. This should not be a rush job, but something to which the people out there in our country who actually run businesses, risk their capital and fundamentally create jobs and employ people are able to give as much thought as possible, so that the Government can come to a proper conclusion.

While I am glad that remuneration will be capped, I am still worried that the provisions in the Bill are not necessarily as proportionate as they could be for businesses. Sometimes an employer will have to cancel or curtail shifts through no fault of their own. We went through that issue at length on Tuesday, on a different point. I will not repeat the arguments now, other than to remind the Committee of force majeure. Events outside any employer’s control can happen; that is a reality of life.

It seems unfair in those instances that employers should have to bear the costs of not being able to complete the work on time, as well as having to remunerate employees for hours not worked. I stress, as I said on Tuesday, that that will be a minority of cases. It will be the exception, not the norm, but it is vital, when looking at this amendment and clause that there is an acceptance that those rare cases can and unfortunately will happen in the real world.

[Alex McIntyre (Gloucester) (Lab)]

I refer the Committee to my membership of the GMB and Community unions. We had a lot of back and forth on this point on Tuesday. I want to clarify what the shadow Minister said on Tuesday. In the extreme circumstances where employers are not able to continue with their work, the shadow Minister made the point that it was not fair on the employer to bear the cost. He also said that it was not necessarily fair for the employee to bear the cost, and that the cost should be shared. If the cost is not being borne by the employer, who does the shadow Minister expect to share that cost, other than it being placed solely on the employee?

[Greg Smith]

I do not want to repeat the whole debate that we had the other day as we might not hit the clause that the hon. Gentleman’s colleagues are trying to get to today. I fully accept his point that the situation is not fair on the employee, but equally it is not fair on the employer, given that those circumstances, events or eventualities are quite literally outside anybody’s control.

I urge the hon. Gentleman and his Front-Bench colleagues to reflect on how to put in place a better and more proportionate system to share the burden. I accept that nobody wants or plans for those eventualities. I refuse to believe that any employer ever wants to have to turn somebody away at the door as they turn up for work. They actually want to make those products, provide those services, ensure people have a good night out or whatever it might be. That is the core of their business. That is how they make money. That is how they grow and create more jobs in the first place. I refuse to believe that any business wants to turn someone away and say, “Sorry, that shift isn’t available,” or, “Only half that shift is available today.”

[Uma Kumaran (Stratford and Bow) (Lab)]

I refer Members to my entry in the Register of Members’ Financial Interests and my membership of the GMB trade union.

The hon. Gentleman makes a good point. The Association of Convenience Stores tells us:

“90% of colleagues in the convenience sector report that they have never had a shift cancelled with less than 48 hours’ notice, reflecting a strong track record of responsible scheduling. Furthermore, 86% of retailers state that they always offer alternative hours to employees if a shift is cancelled or reduced, demonstrating the sector’s commitment to fair treatment and employee support.”

It says that it

“can be confident that this will support existing provision by employers across the sector”,

and it welcomes amendment 30, which it says

“provides clarity in relation to short notice for when the shift is both moved and curtailed.”

It tell us that there is a counter-argument that the proposals may present challenges to convenience retailers and other small businesses, but that it has spoken to businesses and that

“these businesses tell us that they are already doing what the Bill makes provisions for.”

We are mindful of the impact on businesses, but there are a lot of businesses out there that are already doing what is proposed, and we have received representations from them welcoming the measures.

[Greg Smith]

I am grateful to the hon. Lady for that intervention, because she underlines the fundamental point that I am making: most businesses do not want to turn people away. Convenience stores are a great example of that, and are actually some of the most flexible employers out there. My constituency, which is spread across 336 square miles of rural Buckinghamshire, has a lot of small convenience stores, and they are exemplary employers. I cannot think of a problem I have ever encountered with any of them.

I come back to my central argument, which is that sometimes things happen. Nobody has planned for it, nobody wants it, and nobody is in any way happy in that situation, but sometimes these things happen. I fully accept the hon. Lady’s point that the vast majority of employers in this country are good employers. We should celebrate them, and not try to see them through the lens of some sort of Victorian novel. That is not what employers are in this country. They are responsible and want to look out for their workforce.

We had a debate the other day about the symbiotic relationship between the worker and the business owner, which are two sides of the same coin: no successful business could have one without the other. I am not saying that there are not rogue traders out there who seek to exploit their workforce—there are, and there must be proportionate, proper and robust measures in place to combat poor behaviour—but that does not undermine the central point that there must be flexibility that accounts for the realities of the real world.

[Chris Law (Dundee Central) (SNP)]

I am hearing this argument repeated again and again, but I am struggling. I need an example. Employers insure themselves against floods, fire and everything else. We talked on Tuesday about an empty restaurant giving notice if it was empty. So I am trying to find out what is the exceptional circumstance that the hon. Member is concerned about that he can see in real-life circumstances where the employee would have to lose out rather than the business.

[Greg Smith]

I can think of businesses in recent times in my own constituency that are particularly affected by shipping delays, some as a result of the covid pandemic, which I accept was an exceptional period in our history, where we saw shipping delays of parts that businesses were waiting for to put their products together. Buckinghamshire has a proud manufacturing base as well as other business sectors. Businesses simply did not have the bits, the parts, to be able to put their products together. I accept that some of those businesses are quite well established brands that will carry insurance and reserves or contingency funds for such eventualities, but some of them do not.

On Tuesday we talked about furniture manufacturers. Again, we are all creatures of our own experience. In my own constituency there are some very big furniture manufacturers such as Ercol and Hypnos and they face some great challenges. But I am also in regular contact with one, two or three-employee cabinet makers and kitchen fitters and other skilled trades businesses who would not be able to cope if they did not have the delivery to fulfil a particular order that has been placed. They are hard-working but very small businesses that might be working on one project at a time. They have to take one order on; if they cannot fulfil that, there is not the resilience to automatically just move on to the next.

[Chris Law]

I will just probe a little further. All those points are valid, but they are the responsibility of the business, not the employee—most notably because they have no shares in the business and will not benefit from any profit. Why should they have only the rough end where they end up without income? A company might have five shareholders in a small company. A cabinet-making firm is a good example—I have one in my constituency in Dundee where they all have a stake in it and can equally share the risks and the rewards. The problem with what the hon. Member is suggesting is that the employees are burdened with the risks without any of the rewards. I cannot see where there is a benefit at all. That in many respects insulates the employer and puts all the burden on the employee.

[Greg Smith]

I do accept the point that the hon. Gentleman is making. It is helpful to have this debate to tease out the core issues. The point I would put back to him is that those small microbusinesses faced with that eventuality almost certainly will not have the reserves or contingencies in place to be able to weather such a storm. A catastrophic event that delays perhaps their biggest order of the year by six months, a year or longer—some of the shipping delays in recent years have been undoubtedly severe—means they might go bust. If they go bust, there are no jobs at all. Although I am in no way, shape or form advocating a position where an unfairness is felt by employees, there can in the real world sometimes be an eventuality where it is undesirable—I will concede unfair—but a reality.

[Alison Hume (Scarborough and Whitby) (Lab)]

Will the hon. Member give way?

[Greg Smith]

I will finish this point and then give way —the hon. Lady knows that I am up for the debate.

There could be a pretty stark choice: go bust and no jobs, or some short-term undesirable pain that requires flexibility in order to get the business back on track to secure jobs. The last thing I want to see in this economy is businesses being forced to the wall and ending up shedding jobs, and overall employment numbers in this country going down. I want to see the economy growing. I want to see the number of jobs being created growing every single day. That is how we get ourselves to greater prosperity for everybody. I really worry that if flexibilities are taken away, it could go the other way.

[Alison Hume]

It is a pleasure to serve under your chairmanship, Mr Mundell. I refer to my entry in the Register of Members’ Financial Interests and my membership of Unison and of the Writers’ Guild of Great Britain.

The hon. Member talks about shipping companies and furniture companies, and I would like to talk about my constituency of Scarborough and Whitby. As of last year, 4,500 people there—11% of the workforce—were employed in retail, and 8,000—20% of the workforce—in hospitality. Those sectors employ a lot of women, and those women—I was one myself—rely on childcare, which is extremely expensive. Does he accept that when shifts are cut short or curtailed at short notice, those women still have to pay for their childcare and are therefore taking on board an expense? It is not force majeure for them; it is a day-to-day struggle to pay the childcare bills.

--- Later in debate ---

[Greg Smith]

I can assure the hon. Lady that I am intimately aware of the cost of childcare. It is something that challenges families—men and women, mums and dads, carers, grandparents and all sorts of people—on a daily basis. It is a very expensive reality of life. I do not want to get off topic, but the previous Government did a lot to increase the free childcare offer, and I fully acknowledge that the current Government are carrying through with that. We need more measures like that to ensure that people have the childcare arrangements in place to enable them to go to work.

I fully accept the hon. Lady’s argument: there is a cost to going to work. There is a cost of travel, as we all know as Members of Parliament travelling in from and getting around our constituencies. There are the costs of getting to work, of childcare or, perhaps, if someone is caring for a relative or someone else, of ensuring that alternative provision is there while they are at work. I fully accept that point and in no way wish to advocate for people to be left in that place. I do not want that for anybody in this country. But as I said to the hon. Member for Dundee Central, there are sometimes circumstances—very few, exceptional circumstances—where it could be a stark choice for the business and jobs could end up being lost altogether if there is not a little bit of flexibility. We are dancing on the head of a pin here, and it is about exceptional cases, but I do not want to see exceptional cases suddenly reducing the overall employment numbers in this country.

[Chris Murray (Edinburgh East and Musselburgh) (Lab)]

In response to the hon. Member for Dundee Central, the shadow Minister struggled to come up with a concrete example of a business that might be in the situation he is describing, with very small margins and staff costs not meeting the demand. I can think of two examples from my experience before coming here and from my constituency. One is car washes, where we frequently see very low-paid employees being recruited on demand and very small margins. Another is nail bars, which we see on high streets across the country, where fluctuating demand requires small amounts of work to be done, so people are employed on very short contracts with hours cancelled at very short notice.

The shadow Minister will also have noticed last week that the net migration figures for the last year of the Conservative Government reached almost 1 million. The point I am making is that we need to think about not just the impact on individual workers and businesses, but the bigger, broader impact on society as a whole. The problem we have seen with small businesses such as car washes and nail bars is that there is a high supply of labour, generally from exploited migrant workers. It is not a coincidence that the two industries I have just described are also where we see the highest incidence of modern slavery. That is because workers in those industries have very few rights, so they can be treated as almost expendable by their employers, and have their hours cancelled at very short notice, and they have absolutely no recourse. So, it is not a coincidence that it is the most exploited workers, or the most vulnerable workers, who have ended up taking such jobs.

On high streets across the country we have seen the growth of multiple small car washes and small nail bars. The industries are not struggling, but the employers are deliberately working on incredibly small margins. The point is that the dynamic between employer and employee is unbalanced, which is what the Bill seeks to correct.

[The Chair]

We just have get the balance correct between a speech and an intervention, if we can.

[Greg Smith]

The hon. Gentleman makes a fundamentally good point about issues such as modern slavery. Actually, it was a former Conservative Prime Minister—I accept that we had a few in the last Government—my noble Friend Baroness May of Maidenhead, who did an enormous amount to tackle modern slavery in this country. Is it a case of job done? No, clearly not. However, we have made enormous strides and I encourage this Government to do all they can to continue the fight against modern slavery, which is a particularly evil crime that needs to be stamped out for good.

The hon. Gentleman asked for concrete examples. I felt that I gave one, with the example of the two-employee furniture maker. However, I will give another example of where force majeure may come in. Let us take the example of a small business. In fact, let us take a bathroom fitter, where there is perhaps one business owner who has, say, two employees who support him or her in fitting those bathrooms. They take on a big job in a hotel to refit all the bathrooms. Let us say that it is a 25-room hotel; I can think of a couple of those in Buckinghamshire. However, that hotel goes bust. It is not the fault of the company whose owner thought they had just taken on a really lucrative contract to refit 25 bathrooms. Clearly, it is the fault of the hotel that, sadly and for whatever reason, has ceased to trade, or perhaps it has been taken over as an asylum hotel. Obviously, that order to refit the bathrooms would have fallen.

What does that business do? It cannot suddenly magic up 25 bathrooms to fit in the space of a month, or a quarterly period, or whatever period it might be. However, it has probably already had to fork out for the parts, bathtubs, showers, toilet cisterns and everything else that goes into a bathroom. I gently suggest to the hon. Gentleman that that is a concrete example of where it is a lose-lose situation for the business owner and their employees, until they can get themselves back on track.

Nobody wants to see that type of thing happen, but it does happen. It is a reality of trading, not only in this country but worldwide, that sometimes bad things happen. So, there has to be flexibility around such events. That is notwithstanding the good points that the hon. Gentleman made about modern slavery and businesses exploiting those who perhaps are less able than other workers to stand up for themselves in workplaces in this country. However, I accept the broad sweep of the points the hon. Gentleman made in that regard.

I am conscious of how long I have been speaking about this amendment, but I am always up for a good debate. I will conclude by returning to the evidence that—

[Jon Pearce (High Peak) (Lab)]

Will the shadow Minister give way?

[Greg Smith]

I am tempted not to give way to the hon. Gentleman, since he seemed less than keen to take my interventions in the farming debate yesterday, but I will grant him an intervention today.

--- Later in debate ---

[Greg Smith]

I understand the point that the hon. Gentleman makes, and I fundamentally agree with his point about bereavement leave and dependant leave. As we heard in the evidence sessions, I have an enormous amount of sympathy for extending certain elements of bereavement leave, including to pregnancy loss before 24 weeks, which we will come on to later in the Bill. Those circumstances are arguably more about humanity than some of the practical realities of market failure, supply chain failure or whatever it might be. I think they should be kept in very distinct columns. One is a human response to tragedy and the facts of life with dependants, or people to whom individuals might have a caring responsibility, as opposed to the need for flexibilities to exist, such as with the example of the lost contract or supply chain problems. I accept that this is a slightly different point to being told, “No bookings today” in a hospitality setting, or whatever it might be. I accept the point made by the hon. Member for High Peak, but I see it as a distinct column as opposed to something that is all in the same category.

[Jon Pearce]

Will the shadow Minister allow me to clarify?

[Greg Smith]

I will give the hon. Gentleman one more go.

[Jon Pearce]

The principle is, though, that with dependant leave in those emergencies, whether that is childcare or anything else, there is no right to pay; that is the point I am trying to make. The shadow Minister is saying that if there is an emergency for the business they should bear no cost of it. If there is an emergency for the employee, that employee will, under the statutory provisions on dependant leave, bear the cost of it. In both scenarios, the shadow Minister appears to be asking the employee to bear the cost. Is that correct?

[Greg Smith]

I understand the point that the hon. Gentleman makes. Actually, at no point have I said there should be no cost to the employer; I have said there needs to be flexibility, as opposed to a hard and fast rule. On Tuesday I had an exchange with the hon. Member for Birmingham Northfield on the point around, “Okay, what else?” While I put that problem list back in the column for the Government to address, there are other safeguards; there are other things that the Government could look at so that the burden is more shared, as opposed to zero cost to the business. The key word here, which I have probably said 100 times this morning, is “flexibility”, as opposed to hard and fast rules.

I will get back to my conclusion. Allen Simpson from UKHospitality made some sensible points when giving evidence to the Committee last week, so I pose his questions to the Minister. I should be grateful for a response on each, as I imagine employers throughout the country would be. Could a different approach be taken to what constitutes “reasonable notice” for different employers in different sectors? That goes back to the point made by the Opposition earlier. Will shift swapping still be allowed, and if so, how will the regulations account for it? If shift swapping will not be allowed, why not? What will be considered “reasonable notice” within shift-swapping provisions? If an employee wants to change their shift at the last minute, are they allowed to do so, and in what circumstances? What would happen if an employer were to put out a message saying, “There is a shift available right now. Does anyone want it?” Does that constitute an offer of employment? Will there be a time after which employers will not be able to do that, because it does not constitute reasonable notice? Those were very sensible, thoughtful questions from UKHospitality, and as this legislation progresses through Committee it is only right that the Government and the Minister give a clear and full answer to them.

[Justin Madders]

Well done to the shadow Minister—he must have had his Weetabix this morning. He has clearly put in a great deal of time and we appreciate the way that he has engaged with the debate and some of the issues. He is taking a much broader look at the principles behind the legislation, rather than a quite narrow technical amendment about when shifts are moved or curtailed, but I am happy to address his points as far as I can.

I understand that the shadow Minister accepts the principle that we are trying to create some additional fairness in the workplace. That is welcome to hear, and I can assure him that this will not be a rush job. We do not anticipate these measures being implemented until 2026, and he will not be surprised to hear that the reason is that we intend to engage deeply with business and workers’ representatives on the details. There will be a consultation, following which we will set out in regulations what periods of notice should be presumed unreasonable; we will also set out factors for tribunals to take into account when considering whether notices are reasonable. That will go a long way towards addressing some of the concerns he mentions from Allen Simpson of UKHospitality. I think it is fair to say he generally welcomed the approach, but clearly some of the detail is to be worked on.

I do not think there will be any prohibition on workers swapping shifts, but if the employer, having been notified that worker B has taken the shift instead of worker A, then cancels the shift at short notice, we would intend that the regulations would then be engaged.

--- Later in debate ---

[Greg Smith]

So that we are absolutely clear on the shift-swapping provision—[Interruption.] I correct the Minister on the Weetabix; it was the Tea Room black pudding.

If worker A and worker B consensually decide that they wish to switch, worker B being the one who will take the shift and worker A the one whose shift is now displaced either to another time or not at all, and worker A being quite happy with that, will the employer be penalised?

[Justin Madders]

I am grateful for the details of the shadow Minister’s dietary exploits today.

We are looking in quite close detail at that situation, because there are a number of knock-on consequences, but we do not envisage that, in a situation where two workers agree of their own volition to swap shifts, the employer should in any way be penalised. We do not think that is in the spirit of what we are trying to achieve here.

I return to the points that my hon. Friend the Member for Edinburgh East and Musselburgh made about particular workplaces. The Director of Labour Market Enforcement has undertaken quite a lot of work in respect of those issues; considerable evidence is emerging about concerns in those sectors, and I encourage him to undertake some further reading on that.

There will be further consultation on what reasonable means. We all understand that there could be different factors applying, but what we want at the end of this process is for businesses to be clear about their obligations. That could mean a particular time period, but it could be different depending on the industry or the circumstances. It is right for us to take our time to consult and engage on that.

The shadow Minister referred to the force majeure issue; there is a power in the Bill for us to provide for exemptions for short-notice shift cancellation—that is always a tricky phrase to get out—but in some of the examples he gave where a huge contract was lost, a notice cancellation payment was probably the least of the employee’s and the employer’s problems in that situation; there may be bigger questions about whether there is enough work at all. Those are the kinds of things we will be looking at, as the power in the Bill gives us that opportunity.

Amendment 30 agreed to.

--- Later in debate ---

[Justin Madders]

These amendments should be considered alongside amendment 30, because they clarify what happens when a shift is both moved and curtailed at the same time. The Bill provides a power to specify the amount that must be paid by employers when they cancel, curtail or move shifts at short notice. It cannot be used to specify a payment amount in excess of what the worker would have earned from working the original hours.

However, the Bill was not clear whether the maximum payment due when a shift is both moved and curtailed at the same time should be calculated based on the provisions on movements or on curtailments, which would create different effects. For example, if a worker’s shift was due to be worked from 2 o’clock to 6 o’clock, but is moved and curtailed to 4 o’clock to 7 o’clock, the maximum payment could be based either on one or two hours of work, as the shift was moved by two hours but was curtailed by one hour.

Amendment 31 clarifies what happens in such cases. The maximum payment in this scenario would be what they would have earned from two hours’ work, reflecting the maximum they would have earned had they worked their original four-hour shift. That will ensure that workers are compensated appropriately, and it will also provide clarity for employers.

Amendment 32 clarifies for workers and employers how to calculate what amount of contractual payment can be offset against payments under clause 3 in cases where there is a combined short notice movement and curtailment of a shift. Again, the Bill is unclear whether the calculation should be based on the provisions on movements or on curtailments, which would create different effects. For example, if a worker’s shift was due to be worked from 2 o’clock to 6 o’clock, but is moved and curtailed to 4 o’clock to 7 o’clock, then after deducting the two hours in the shift that have stayed the same—4 o’clock to 6 o’clock—the remaining hours to be offset could be based on either one or two hours’ work.

The amendment clarifies that the hours to be offset should be for two hours’ work, as the worker should be entitled to the payment under proposed new section 27BO of the Employment Rights Act 1996 for two hours. That will ensure that it is clear that an employer is not doubly liable for some hours in such scenarios.

Although I appreciate that the amendments may appear complex, they will have the overall effect of simplifying the policy for employers and workers, so that it is very clear what happens when a shift is both curtailed and moved at the same time. They therefore prevent us from ending up with a whole load of litigation to decide what the correct outcome will be.

I reassure the shadow Minister that the changes will not be rushed: they will not be implemented before 2026, which will give us time to consult further and provide some more information on how the measures will work in practice so that employers understand what is expected of them. We will provide clear guidance throughout.

Many employers already guarantee hours, give reasonable notice of shifts, and make payments when they cancel shifts at short notice, so they will not need to alter their behaviour at all. In fact, data from the Chartered Institute of Personnel and Development suggests that around 33% of employers already pay some form of compensation for shifts cancelled with less than 24 hours’ notice.

[Greg Smith]

I am grateful to the Minister for his explanation of amendments 31 and 32. As he said, these amendments clarify the maximum amount of payment and the hours to which a payment relates in cases where there is a cancellation, movement or curtailment at short notice of a qualifying shift that the worker has agreed to work for the employer. Amendment 31 establishes that the payment should be for the hours that would have been worked.

The amendments make sense given the policy direction of the Bill but, once again, I gently suggest—as I will probably do multiple times during our discussions—that it is unclear why these provisions could not have been included in the Bill on its introduction. They seem like a fundamental part of the Bill. I would be grateful if the Minister could explain why it took so long to come to the conclusion that this was the way forward.

--- Later in debate ---

[Justin Madders]

Proposed new section 27BT of the 1996 Act makes provision for a payment to be made to the worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that either was not given or was inadequate or untrue.

Amendment 37 will require the employment tribunal to additionally make a declaration in cases where the employer failed to make a payment for a qualifying shift, confirming that the worker’s rights have been violated. The declaration will be accessible not only to the directly affected worker but to others, including those working for the same employer. That will ensure that it is clear to other workers where and how such payments should apply if they have a shift cancelled, moved or curtailed in a similar way.

Amendment 38 will require the employment tribunal to additionally make a declaration where an exception applied and a notice was not given or where the notice was inadequate or untrue, confirming that the worker’s rights have been violated. Again, that will ensure that workers always receive a remedy in such cases, even where the tribunal decides that an award of compensation is not justified in the circumstances. That should ensure that it is clear to other workers where exceptions do and do not apply if they have a shift cancelled, curtailed or moved in similar circumstances.

Mandatory declarations of that nature are a common remedy across employment law. The amendments are in line with other similar provisions that concern complaints to the employment tribunal. Proposed new section 27BT also makes provision for the tribunal to order an employer to pay a worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that was either not given or was inadequate or untrue.

Amendments 39 and 41 will allow an employment tribunal discretion to award an appropriate level of compensation in cases where an exception applied but the employer either failed to give notice or gave an inadequate or untrue notice. That will remove the need for a tribunal to take an all-or-nothing approach by awarding the full, maximum amount or nothing. The amendments will instruct an employment tribunal to consider the seriousness of the matter when determining what payment to award the worker, which might include, for example, considering whether the employer had acted in bad faith.

That is a more appropriate approach than under the previous drafting, and there may be cases where the maximum award is not reasonable. For example, if a worker has a shift curtailed by an hour and their employer relied on an exception but did not give notice of that, it would not be logical for their award to be greater than the amount that would have been owed for the curtailment of a single hour. The award itself is discretionary and it is appropriate that the payment amount should equally be discretionary up to a specified amount, which will allow employment tribunals to make awards that are just and equitable to all parties.

On amendment 40, proposed new section 27BT makes provision for a payment to be made to the worker where an employment tribunal finds that the worker’s employer failed to make a payment for a qualifying cancelled, moved or curtailed shift, or where an exception was relied upon but notice of that was either not given or was inadequate or untrue.

The amendment is minor and technical, correcting drafting so that the provisions do not make reference to a scenario that could never arise. An employer cannot be found both to have unreasonably failed to give a worker notice of an applicable exception in relation to a payment, yet also to have been liable to make that payment and have failed to do so: either no exception applies and payment is due, or an exception applies and a notice should be given as no payment is due. The amendment removes the potential confusion caused by the drafting as introduced. I apologise for that, but as the Committee will appreciate that we have been working to a very swift timetable. We hope that brings some clarity to the situation.

[Greg Smith]

The word “clarity” is doing quite a lot of heavy lifting there, so I will probe it a bit. Amendments 37 and 38 concern provisions in the Bill about how employees may make a claim to an employment tribunal where they have not been paid or received reasonable notice of shifts, or the employer had purported to give notice in compliance with the rules on right to reasonable notice, but in a way that was inadequate.

The amendments specify that if an employment tribunal finds claims to be well founded, it must make a statement to that effect. Why were these amendments, along with those increasing the time limit from three to six months, not included in the Bill when introduced? Those provisions do not seem like a loophole being closed or a minor technical drafting error; they seem fundamental to what the Government are trying to do here, so that was one of the bigger surprises. Why were they not locked into the Bill from day one?

I understand the point about political priorities and commitments to publish something in 100 days, because sometimes these things take a lot longer than 100 days to get right. Whether one agrees with the principle and practicality of the provisions or not, it is tough on those in the civil service and those who are drafting the Bill to be able to deliver something of this complexity in 100 days, but these seem to be fundamental provisions. I would also be grateful for clarity from the Minister about how much the Government estimate that the provisions in these amendments, as well as in the wider Bill, will increase employment tribunal claims.

On amendments 39 to 41, if an employee brings a claim to an employment tribunal for their employer breaching the duties imposed by the Bill, amendment 39 provides that the court can award compensation up to a cap to be set in regulations. We are back to our old friend: we do not know what those regulations are going to be. I have a set of what I hope will be straightforward questions for the Minister. What is the cap planned to be? I am sure that it will be open to consultation, but again, the Government must have a window in mind. That is a reasonable question that businesses up and down the land will be interested to know the answer to, so that they can start preparing their viewpoints and evidence base to present to the Minister for any future regulations.

In our oral evidence sessions, we heard witnesses ask several questions about how the provisions on the right to reasonable notice of cancelled, curtailed or moved shifts will work in practice, because there is precious little detail in the Bill. Can we now have that detail? Will the Minister provide a timeline by which the Government intend to provide some information not just to this House, but to businesses up and down the country, about how the measure will work?

When will we be able to see the draft regulations? It would be helpful if we could see them during the passage of the Bill, be it prior to Report, which would be the best case, or before it goes to the other place for consideration, so that the House of Lords can fully explore them, which would be better than nothing. Can the Minister explain why the clauses on award of cost are proportionate to the benefit that they may bring to employers?

[The Chair]

Government amendment 37—sorry, Minister, I should allow you the opportunity to respond.

[Justin Madders]

I am sure that the shadow Minister and the whole Committee are delighted that I have the opportunity to respond.

The shadow Minister asked some perfectly reasonable questions. On the first issue, it is a well-established principle that employment tribunals have the right to make declarations in a whole range of claims. Again, I can only refer him to my previous answers with regard to why that was not in the original Bill—we were up against a tight timetable. It is also worth bearing in mind that the Bill will not become law until it has passed through this House and received Royal Assent, so when it finally appears before the public, all those issues will be ironed out. I give him the same answer about regulations, because—as we are doing as we go along—the Bill can be amended here, on Report and in the other place.

It may be that the final Bill does not entirely reflect what we have before us, so it would be premature to draw up regulations at this stage. However, part of our ongoing dialogue with businesses, workers’ representatives and trade unions is about what regulations we will look at.

[Greg Smith]

I understand the Minister’s point, but this is a Government Bill; I accept that it is derived from their manifesto and from their political priority. Notwithstanding the Minister’s perfectly correct point that the Bill can be amended before it receives Royal Assent, does he at least accept the point that as this is a Government Bill, they should at least give a starting point on any consultation or proposal that people could then work around, as a test of reasonability for business owners and the wider public? People around the country, as well as Members of this House, could then let their views be known as they seek to challenge and amend the Bill.

[Justin Madders]

We are taking this approach because we want to be reasonable and engage with businesses and trade unions on what the shape looks like. That is why the full consultation, which will look at the broad range of issues, is not yet ready. It is not really in the spirit of that for us to nail down everything in the Bill. Most employment rights have their detail in secondary legislation.

There are some clear principles about the levels of compensation that we will set out. Clearly, a worker should not be compensated for more than the number of hours that he or she has lost. If other heads of loss occur, there are already principles about wages, for example, whereby ongoing losses have to be compensated for. That is the kind of thing where the detail ought to be put into secondary legislation and consulted on fully, which is what we intend to do.

--- Later in debate ---

[Justin Madders]

I am sure you always intend to be helpful, Mr Mundell.

I will briefly go through the provisions of clause 3. I appreciate that we have covered a lot of the issues already, but I think it is important to set out what the clause does in the round, because after discussions on quite a few amendments, we may not have followed exactly where we are.

It is obvious that predictability of income is a crucial part of a secure future. We need to address the scourge of insecurity at work. Equally, we understand that businesses want clarity about their obligations. The right to reasonable notice of shifts and of changes to them is important and will be enforceable at employment tribunals. While we regard the right to reasonable notice as appropriate, we also see a need for a rather speedier mechanism to provide some reimbursement to a worker when a shift is cancelled, moved or shortened at short notice. Of the 2.4 million people potentially eligible for these new rights, we estimate that around 600,000 have shifts cancelled at short notice. Clause 3 clearly sets out the obligations on both workers and employers, and I will go through the amendments that it will make to the Employment Rights Act 1996.

New section 27BO of the 1996 Act outlines the new duty that will be placed on employers to make a payment to workers if they cancel, move or curtail shifts at short notice. The duty will apply to workers on zero-hours contracts and arrangements, and workers on contracts to be specified in regulations. When workers have the timing of their usual shifts set out in their contract but are sometimes asked to work extra or longer shifts, the duty will also apply to the additional hours. The new section also provides the power to set what period constitutes short notice; what the payment amount should be; how quickly the payment should be made; when notice is treated as having been given; and the maximum delay of a shift, or bringing forward of a shift, for which payment is not due.

New section 27BP adds several supplementary details on the powers to make regulations provided in new section 27BO and therefore on the functioning of the right to payment. It restricts the period that can be set in regulations as “short notice” to no more than seven days, and it ensures that the payment due to a worker cannot be more than they would have been paid had they worked their original shift. It allows for regulations to vary the amount of the payment according to how short the notice of cancellation is. It also provides that the contracts in scope of the right to payment may be specified in regulations by setting an hours or pay cap.

New section 27BQ provides a delegated power to make exceptions to the right to payment, and states that where an exception applies, the employer must notify the worker of it and explain why it is considered to apply. The section enables regulations to specify how the notice of the applicable exception should be given and when it is deemed to be received.

New section 27BR ensures that a worker is not entitled to receive payment both under their contract and under new section 27BO in respect of the same hours. New section 27BS enables workers to complain to employment tribunals that their employer has failed to comply with the duties. New section 27BT establishes the remedies where a complaint to a tribunal is found to be well-founded.

I commend the clause to the Committee.

[Greg Smith]

Mindful of your comments, Mr Mundell, I will not speak at length to the clause, other than to underline the points that I and my hon. Friend the Member for Mid Leicestershire have made about certainty. I understand the political priorities of the Government, and I understand the principle of what they are trying to do. However, as my hon. Friend said, businesses need to be able to plan.

I accept that not all legislation can give detail on everything to the nth degree, but I think it is reasonable and proportionate for businesses small, medium and large in this country to expect to be given at least a hint of what is coming down the line. That way, they can begin the process of planning and putting their thoughts together, so that when the consultations come they can give as full and frank an account of their circumstances as they can, and describe what the proposals will mean for them and their employees, so that the Minister can come to a reasonable judgment before laying any regulations.

The Opposition are not opposed to the principle of the clause, but because of the holes in it, we cannot support it.

Question put, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

[Justin Madders]

Amendment 42 is another technical amendment that concerns not the function of the Bill but parliamentary procedure, so if we want another dry, technical debate, we certainly have the opportunity.

Clause 4 makes provision for new section 27BW to be inserted into the Employment Rights Act 1996. New section 27BW(3) would allow regulations made under part 2A of the 1996 Act, relating to the provisions concerning zero hours, that are subject to different or no parliamentary procedure to be included in regulations subject to the affirmative procedure. New clause 11 amends section 236 of the 1996 Act and makes the same provision to allow the combining of instruments, but applies to any orders and regulations made under that Act, rather than to only those made using powers in part 2A. This is a technical amendment intended to ensure that implementation can be undertaken as efficiently as possible.

On what instruments might need to be combined, we will be setting out further details required to implement zero-hours provisions through secondary legislation, but existing powers in the 1996 Act, such as the power in section 10 regarding pay statements, may play a part in supporting implementation. It may be that it would be appropriate to exercise that power to prescribe that pay statements must specify where payment has been made under proposed new section 27BO for the short-notice cancellation, movement or curtailment of a shift. Should that be the case, this provision would allow that amendment to be made in the same regulations as others to be made under new powers being inserted by this Bill that are—I am sure that the shadow Minister will be pleased to hear this—subject to the affirmative procedure. That will mean that provisions to be detailed in regulations that would have been subject to the negative procedure, or no procedure, receive greater scrutiny from Parliament before becoming law.

In the light of the amendment made to section 236, amendment 42 removes the provisions that apply only to part 2A of the 1996 Act, as they will be redundant.

[Greg Smith]

As the Minister says, this is a very technical amendment—and who doesn’t love a dry, technical debate? However, I am not sure that anyone seeking a dry, technical debate over some hours is going to be happy. I gently suggest that the Government should reflect on the procedural nature of these provisions and their intersection with the Employment Rights Act 1996, which is very complex to unpick and fully understand, not necessarily for those who sit in this House, or indeed in the other place, but certainly for businesses out there, which will require a lot of professional services and advice to navigate it.

On the particular, technical nature of the procedure, I heard what the Minister said about the affirmative procedure, but can he explain something to the Committee? This question could result in a very short answer or a very long one—I apologise for asking it if it prompts a longer one, although in some ways that would be better—but can he explain which powers in the new clause will not be subject to the affirmative procedure? Is there a list? And—it would be remiss of me not to throw this in—why could this not have been on the face of the Bill from day one?

[Justin Madders]

I am afraid that I will not be able to tell the shadow Minister what will not be subject to the affirmative procedure. I think that the intention is actually for the amendment to bring everything that is in scope of the clause under the affirmative procedure, but I will endeavour to confirm that and come back to him, if that is okay.

Amendment 42 agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

--- Later in debate ---

Finally, proposed new section 27BW provides that regulations made under part 2A, on zero-hours workers and similar, may make provisions for different purposes or subject to exceptions. Given the novelty of clauses 1 to 3, this provides the flexibility to make different provision as is necessary and relevant to the circumstances. I am sure the shadow Minister will be pleased to hear that, given that he has raised the issue on several occasions. I commend the clause to the Committee.

[Greg Smith]

I will not speak at length on this clause because, as the Minister said, it has a bit more clarity in it than many of the others. He has just outlined the new definitions, but perhaps I can put to him an example case showing how they would meet someone on what I believe he may describe as a zero-hours contract, but which also has some compensation for being a zero-hours contract. I will explain what I mean by that.

This is a live example of someone who explained their working relationship with their contracted employer to me the other day. He is required to be up, dressed and ready to go at 5 am every day—perish the thought—and he will receive a call by 5.30 am about whether there is a number of hours to be worked that day. He receives a payment for doing that. Each week, he receives a payment for being up at 5 am and being ready to go if required, but of course if he is not required he does not receive anything further for the shift or the full day of work.

There are probably not many such contracts in the economy, but that is a real-life one. I happened to be briefed on it by the individual involved the other day. The employee is happy. Not everybody is happy at 5 am, but he gets his payment for doing that. He accepts the quid pro quo that he may or may not get a full day’s work off the back of that. If he does not, he can go back to bed or do whatever he fancies with the rest of the day. How do the definitions in the Bill fit somebody who is quite happy with such an arrangement?

[Justin Madders]

At the all-party parliamentary beer group’s reception last night, the shadow Minister and I talked about pubs. His question sounds perfect for a pub quiz for retired employment lawyers: it is the sort of thing that might end up getting taken to a group of KCs to understand the precise relationship. My best guess is that it would be classed as a zero-hours arrangement and would therefore be covered by the legislation. However, I do not wish to set a precedent inadvertently, so I will take further advice and come back to the shadow Minister. I hope he has some more interesting teasers like that: I am sure the entire employment law community are furiously scrabbling through their books to find the answer to his conundrum.

Question put and agreed to.

Clause 4, as amended, accordingly ordered to stand part of the Bill.

Schedule 1

Consequential amendments relating to sections 1 to 3

[Justin Madders]

I beg to move amendment 43, in schedule 1, page 106, line 8, at end insert—

“In section 27 (meaning of ‘wages’ for purposes of Part 2 of the Act), in subsection (1)—

(a) after the paragraph (ce) inserted by the Neonatal Care (Leave and Pay) Act 2023 insert—

‘(cf) a payment under section 27BO(1) of this Act (payment for a cancelled, moved or curtailed shift),’;

(b) renumber the paragraph (ce) inserted by the Employment (Allocation of Tips) Act 2023 as paragraph (cg).”

This amendment provides for a payment under proposed section 27BO(1) of the Employment Rights Act 1996 in respect of a short-notice cancellation, movement or curtailment of a shift to be treated as “wages” for the purposes of the provision about protection of wages in Part 2 of that Act.

The right of a worker to bring a claim for unlawful deduction of wages is an important principle in employment law. It is right that payments for cancelled, moved and curtailed shifts are included in this provision. Although a worker can already claim through the employment tribunal that their employer has not made a payment for a cancelled, moved or curtailed shift, in some cases it may be more appropriate for workers to bring a claim under the unlawful deduction of wages provisions, for example if there are instances of non-payment covering a period of months or years; if they want to claim for financial loss as a result of non-payment, for instance because of bank charges; or if a claim covers non-payment of cancellation payments and other wages.

The amendment will provide workers with an alternative remedy for non-payment, in addition to the new provisions in proposed new sections 27BS and 27BT of the Employment Rights Act 1996. That is in line with other statutory rights to payment, such as remuneration during suspension of work on medical grounds. I hope that that is a clear explanation.

[Greg Smith]

I do not say so often in this Committee, but that was actually a helpful clarification. I can only come back to a point that I will make countless times in this Committee: why on earth could that not have been clearer at the start, when businesses up and down the land were submitting their written evidence, or indeed when they were providing us with oral evidence last week? I stress that it is helpful to have that clarity now. I take no issue at all with the Minister’s explanation, other than to gently repeat the point about certainty and planning going forward.

[Justin Madders]

I am grateful for the shadow Minister’s support for the amendment.

Amendment 43 agreed to.

Amendments made: 44, in schedule 1, page 107, line 10, after “27BA(1)” insert “or 27BD(5A) or (5B)”.

This amendment is consequential on amendments 11 and 14.

Amendment 45, in schedule 1, page 107, line 10, after “27BA(1)” insert “or 27BEA(1) or (2)”.—(Justin Madders.)

This amendment is consequential on amendment 13.

--- Later in debate ---

[Justin Madders]

Amendment 46 will broaden the detriment provisions in respect of the right to guaranteed hours. It will ensure that a worker has a right not to be subjected to detriment on the grounds that the worker is, or the employer believes that the worker is, entitled to an offer of guaranteed hours. The existing provisions protect workers from detriment only where a worker accepts or rejects an offer of guaranteed hours or proposes to do so; where the worker declines to work a shift, as they believe their employer has failed to comply with their obligation in relation to notice of shifts; or because the worker alleges the existence of such grounds to take a case to an employment tribunal.

Amendment 47 is a consequential amendment that clarifies the definition of “reference period” in amendment 46.

The amendments will extend the protections to ensure that detriment to the worker arising from the right to guaranteed hours can be addressed. The detriment experienced by the worker may include cases in which a worker’s contract is terminated. Whether a worker experiences a detriment on those new grounds will be a matter for the employment tribunal to determine in the usual manner.

[Greg Smith]

I am grateful for the Minister’s explanation. The Opposition can clearly see that amendment 46 will ensure that a worker’s right not to be subjected to detriment includes a case of detriment on the grounds that the worker is, or the employer believes that the worker is, entitled to a guaranteed-hours offer under proposed new section 27BA of the Employment Rights Act 1996. The question—our old friend—is why that was not in the Bill in the first place.

I would be grateful if the Minister explained what sort of detriment the Government are concerned about and are trying to prevent with the amendments. It is another point of clarity: it is about giving businesses an early understanding of where the Government are trying to go. This is one of the areas in legislation that could be widely open to legal opinion, if I may put it that way: a sort of lawyers’ charter, whereby if a bunch of lawyers are put in a room they could easily come up with many different interpretations of detriment and of the scope of amendment 46.

We see uncertainty in legal opinion all the time on the legislation that passes through this House. Once the Bill, in some form, has become an Act—as undoubtedly it will, given the parliamentary arithmetic—and a case comes to court, it will be helpful for the judiciary to look back at the parliamentary debate and see the full meaning of this provision.

[Justin Madders]

I am grateful for the shadow Minister’s question. I recall on one or two desperate occasions quoting Hansard in an employment tribunal. I always felt, “If you’re explaining, you’re losing,” as the old phrase goes.

We are not actually creating a new category of detriment. Detriment is something that already applies across a whole range of employment rights, so we are not inventing something that is not already there. At the moment, there is quite a live academic debate about how far the extent of detriment reaches, which we may come to at a later point.

To answer the shadow Minister’s points, the amendment will not create a whole new area of litigation about understanding what detriment means in this circumstance. It will still be the same detriment that would apply in other employment-related claims.

Amendment 46 agreed to.

Amendment made: 47, in schedule 1, page 107, line 29, at end insert—

“(7) In this section ‘reference period’ has the same meaning as in Chapter 2 of Part 2A (see section 27BA(4)).”—(Justin Madders.)

This amendment is consequential on amendment 46.

--- Later in debate ---

[Greg Smith]

I have two questions for the Minister—hopefully simple ones—about Government amendments 48 and 49, which relate to the maximum award for a detriment claim.

First, there does not seem to be a set limit for the maximum award. Can the Minister explain that? Can he give an indication whether a maximum award will be set further down the line, either via a consultation process or in regulations?

My second question is possibly less straightforward, but it will be important as we look at the practical application of the Bill once it receives Royal Assent and comes into force. How much does the Minister envisage that tribunals may award under amendment 49?

[Justin Madders]

I am grateful for the shadow Minister’s questions. They cannot be answered in the round, as all cases will be very fact-specific. The maximum that a tribunal awards will be down to the circumstances in which workers find themselves. With a zero-hours contract, there will be a whole range of issues relating to the kind of work that they would have expected if the detriment had not taken place. It is a well-established principle that a tribunal will award what is just and equitable in the circumstances. Tribunals are well versed in understanding the factors that they would need to take into account in making such awards. The shadow Minister tempts me to get into details, but as this is a Bill Committee and not an employment tribunal, I cannot give him the kind of detail that he is looking for.

[Greg Smith]

I am grateful to the Minister for that answer. I understand the broad principle that he outlines, but there could be a mechanism, without putting a pounds-and-pence limit on any award, to bake in some formula that would cap an award according to proportion of original pay, contracted hours, length of service or some other factor. For the clarity of the record, is the Minister saying that no such framework is envisaged and that it will be a totally open-ended question for any employment tribunal?

[Justin Madders]

The amendments relate to detriment claims only, whereas the shadow Minister’s question is a slightly broader one. The point about compensation in other situations would be far more detailed. As this is about people on irregular contracts who may have suffered a detriment that we cannot possibly predict in advance, it is normal to say at this stage that the usual principles of the just and equitable compensation that an employment tribunal would award will apply in those circumstances.

Employment Rights Bill (Sixth sitting)

Greg Smith Excerpts

Committee stage
Tuesday 3rd December 2024 Public Bill Committees

[Justin Madders]

Amendment 11 will introduce a duty on employers to inform workers when an exemption applies and the employer is exempt from their obligation to offer a worker a guaranteed hours contract. Any exemptions to the duty to offer guaranteed hours will be defined in regulations.

Amendment 11 will also introduce a duty on employers to inform workers where an offer of guaranteed hours already given is to be treated as withdrawn because a relevant termination has taken place. That will ensure that workers are aware of when they are not receiving a guaranteed hours offer because an exemption applies. It will allow workers to check that the exemption is applicable to them, and then enable them to enforce their right to guaranteed hours where an exemption is not applicable.

Associated consequential amendments 14, 19 and 44 will ensure that workers will be able to take a complaint to an employment tribunal if the worker is not provided with a notice of exemption or a notice of the withdrawal of an offer already made. That will also be the case where a notice has been provided but should not have been, or where a notice has been provided but cites the wrong exemption.

Amendment 13 will introduce a new duty on employers that will ensure that workers who would likely qualify for a guaranteed hours offer are aware of certain information about the right to guaranteed hours. That will help to ensure that workers are informed about the new right and can therefore take decisions about their working hours during their reference period based on the information they receive about their possible right to a guaranteed hours offer.

Further consequential amendments 15, 23 and 45 have been made to ensure that a worker may enforce their right to be informed about the right to a guaranteed hours offer by taking a complaint to an employment tribunal. A consequential amendment 20 has been made to define the period within which a complaint of this nature may be taken to a tribunal. I think we might get to that later in relation to the general application of extended time limits.

[Greg Smith (Mid Buckinghamshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Stringer. As a precursor to my comments on these specific amendments, I note that the sheer volume of Government amendments that we are considering really goes to show that the Bill might have met a political objective in being published in 100 days, but that it was not ready to be published in those 100 days. At worst, that is a discourtesy to the House and, at best, it shows that the legislation simply has not been drafted properly. These changes simply would not have been necessary had due diligence been done on the Bill before it was published.

I would like to focus on amendment 13 from this group of amendments. That amendment requires employers to give their employees access to certain information to be specified in regulations—we are back to our old friend of regulations to come. Let me ask the Minister the following: what information will amendment 13 require employers to make available? Why? And what further burden will be imposed later down the line by regulations, thanks to the power taken in the clauses? Employees will be able to take their employer to a tribunal for not providing this information, as provided for in amendment 15, so I suggest to the Committee and the Minister that it is vital that we can understand the requirements that the clause will place on employers.

[Justin Madders]

I am grateful for the shadow Minister’s questions. No doubt during the passage of the Bill we will come back on several occasions to that point about the number of amendments. I just place on record my gratitude to the civil service and the Office of the Parliamentary Counsel for their work in getting the Bill published to the parliamentary deadline that was politically set. Of course, lots of Bills have amendments as they progress. As is consistent with our wish to engage thoughtfully, we may still have further amendments.

As for the shadow Minister’s questions, it is entirely usual to put that sort of detailed information in regulation, and we would not normally specify it in a Bill. We are trying to ensure that workers who are captured by the zero-hours legislation are aware that they are captured by it and are entitled to certain rights, such as the offer of a guaranteed hours contract. This is about making sure that some of the most vulnerable people in society, who are often exploited by zero-hours contracts, are at least given the information to ensure that their rights are enforced. We will work with businesses and employers, and representatives and trade unions on the precise detail of the information to be provided, but this is about making sure that all parties are aware of their legal obligations. I hope that the shadow Minister understands that this is an important part of the legislation.

Amendment 11 agreed to.

[Justin Madders]

I beg to move amendment 12, in clause 1, page 8, leave out lines 8 and 9 and insert—

“(6) For the purposes of subsection (3)(c) (and subsection (4)(b), which applies subsection (3)(c))—

(a) subsection (8) of section 27BB (when it is reasonable for a worker’s contract to be entered into as a limited-term contract) applies as it applies for the purposes of that section;

(b) it is to be presumed, unless the contrary is shown, that it was not reasonable for the worker’s contract to have been entered into as a limited-term contract if the work done by the qualifying worker under the worker’s contract was of the same or a similar nature as the work done under another worker’s contract under which the qualifying worker worked for the employer—

(i) where the period in question is the relevant reference period, during that period;

(ii) where the period in question is the offer period, during that period or the relevant reference period;

(iii) where the period in question is the response period, during that period, the relevant reference period or the offer period.”

This amendment adds a rebuttable presumption to the existing provision made by proposed section 27BD(6) of the Employment Rights Act 1996. The presumption will apply when determining whether there has been a relevant termination for the purposes of that section such that the duty to make a guaranteed hours offer does not apply or a guaranteed hours offer that has been made is to be treated as withdrawn.

The amendment will close a potential loophole that could mean that workers might not be entitled to a guaranteed hours offer if they are employed on a series of limited-term contracts to undertake the same or similar work. It will do that by adding a rebuttal presumption, that it will not be considered reasonable to have entered into a limited-term contract where a worker undertook work that was the same or similar in more than one contract during the relevant period. That means that the relevant termination provisions would not apply and the employer would not be excepted from its duty to offer guaranteed hours. An employer would have to offer guaranteed hours to the worker, even if that worker’s last contract was terminated at the end of the relevant period, unless it was reasonable for the employer to have entered into a limited-term contract with the worker and the presumption is rebutted, which could then lead to a relevant termination.

Under proposed new section 27BB(8) of the Employment Rights Act 1996—as referred to in the amendment—it is “reasonable” for an employer to enter into a limited-term contract with a worker if the worker is needed only to perform a specific task and the contract will end when it is performed; if the worker is needed only until some event occurs and the contract will then end; or if the worker is needed only for some other temporary need to be specified in regulations.

To be clear, whether it is “reasonable” for the employer to enter into a limited-term contract during the relevant periods affects only whether the right to guaranteed hours applies. If such a contract is not “reasonable”, it is still a lawful contract and may, of course, be an acceptable means of conducting business. As such, the presumption introduced by the amendment would apply only to determine whether there was a relevant termination of a limited-term contract, where a worker is engaged on a series of limited-term contracts doing the same or similar work. The presumption will not prevent an employer from engaging a worker on a series of fixed-term contracts, but it will act as an anti-avoidance measure to ensure that an employer cannot get around its duty to offer guaranteed hours by engaging the worker on a series of limited-term contracts even though they are actually doing the same work.

[Greg Smith]

Amendment 12 states that it is to be presumed by tribunals

“that it was not reasonable for the worker’s contract to have been entered into as a limited-term contract”

if the work done

“was of the same or a similar nature”

as the work undertaken by other employees, with the following conditions:

“(i) where the period in question is the relevant reference period, during that period;

(ii) where the period in question is the offer period, during that period or the relevant reference period;

(iii) where the period in question is the response period, during that period, the relevant reference period or the offer period.”

I have stressed the wording of the amendment because I would be grateful if the Minister could clarify what protection the clause is designed to give employees. The vast majority of businesses reading that could easily be forgiven for getting slightly confused. Why is that wording necessary, particularly on this measure, to create the protections that I think I understand the Government want to achieve? The amendment might result in confusion from most businesses.

[Alex McIntyre (Gloucester) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I am grateful to the Minister for introducing this amendment. It makes a lot of sense to make sure that we avoid the opportunity for unscrupulous employers to try to get around the legislation by entering into a series of short-term/fixed-term contracts so that they do not have to make anybody an offer.

We spoke at length this morning about making sure that responsible employers are encouraged, but ensuring that the loopholes are closed is equally important. Although Government Members are seeking to comment on the number of amendments, this is an example where the amendments are excellent and very well thought through. It makes an awful lot of sense to take into account the responses from experts and the consultation responses that the Department is receiving to make sure that the legislation works not only for businesses, but for employers. The amendment is very sensible, and I encourage everyone to vote in favour of it.

--- Later in debate ---

[Justin Madders]

This group of amendments is not quite as daunting as it sounds, because they all deal with the same point, which is the extension of time limits for making claims.

New schedule 2 amends time limits for making claims in employment tribunals from three months to six months. In recent years, as we know, demand has increased sharply. Increasing the time limit from three to six months will help to reduce pressure on the employment tribunal system, allowing parties to try to resolve their differences before resorting to formal litigation. The amendments apply to time limits for the majority of employment tribunal claims, including claims under the Employment Rights Act 1996, the Trade Union and Labour Relations (Consolidation) Act 1992 and the Equality Act 2010. If Members are interested, the full list of claims is set out in the new schedule.

Government amendments 16 to 18, 22, 28, 29, 33 to 36 and 83 ensure that the change is reflected for cases relating to rights that will be introduced by the Bill. Amendments 16 to 18 and 22 will increase the time limit for taking a claim to an employment tribunal that relates to the right to guaranteed hours from three months to six months. Amendments 28 and 29 will increase the time limit for taking a claim that relates to the right to reasonable notice of shifts from three months to six months. Amendments 33 to 36 will increase the time limit for taking a claim that relates to the right to payment for a cancelled, moved or curtailed shift from three months to six months. Amendment 83 will increase the time limit for taking a claim that relates to whether a worker, or a former worker, believes they have been subject to a detriment by an employer on grounds of industrial action.

Finally, Government amendment 21 is a small technical amendment, which will correct an incorrect section reference. The words “this section” currently refer to section 27BG, which relates to time limits for bringing a complaint, but they should—as I am sure everyone noticed—refer to section 27BF, the correct section under which a complaint may be brought to an employment tribunal.

On a more general note, Members may be aware that a number of years ago, the Law Commission recommended that the time limit for bringing employment tribunal claims should be increased from three months to six months. This set of amendments simply seeks to implement that recommendation.

[Greg Smith]

Quite a list of amendments and edits to the 100-day-old Bill.

I will start where the Minister left off. The amendments extend the time for employees to bring a case to the employment tribunal from three to six months if they believe their employer has breached the duties imposed by the Bill. That includes the provisions around zero-hours contracts and the right to reasonable notice. In that light, a reasonable question would be: why were the provisions not included in the Bill on introduction? What changed? Was that an oversight, or something never originally intended to be included in the Bill? What is the rationale? Furthermore, what is the rationale for increasing the period from three to six months? That is not a modest change—not a matter of a couple of days, a fortnight or something that most people might deem reasonable; that is a substantial shift. It is only right and proper that the Minister, when he responds, gives a full explanation for such a huge change from the original provisions in the Bill.

Data from His Majesty’s Courts and Tribunals Service shows the backlog in employment tribunals, with outstanding cases increasing 18% on last year. To add in additional burdens will add to the overall burden on the service, so as part of the consideration of the Bill and of the amendments it is crucial to understand what the Government will do not just to clear that backlog, but to create the capacity in the service to deal with the increase in demand that the Bill will undoubtedly bring about. I shall be grateful if the Minister will comment on his discussions with the Ministry of Justice to deliver on that.

Businesses, especially small and medium-sized enterprises, rely on the tribunals service being able to process claims quickly so, if the Government are to bring about such a huge and significant change to demand on the service, they should put in place the relevant steps. Have the Government undertaken any assessment of the impact that such an extension will have on employment tribunals, or the likely number of claims? It would help to know what, under the amendments, the Government’s assumptions are—will the level of increase that the Opposition fear come about?

Is there a model—I fully accept that such models are rarely 100% accurate, but they give the country and the service planners an important ballpark figure to be working around, going into the future—and, off the back of that, what is the impact on businesses, particularly small and medium-sized enterprises? If there is no such modelling—if there is no ballpark figure that the Government are working to—why not?

My final question on this group of amendments is: why does the Minister believe that it is proportionate or sensible to double the window in which an employee can bring a claim? Surely the three-month window is sufficient. As I said, the Opposition would like to understand why that doubling is so necessary.

[Alex McIntyre]

Apologies, Mr Stringer, if I inadvertently used “you” in my previous intervention. That was a mistake; I apologise.

I am grateful to the Minister for tabling these amendments. This is an important set of suggestions to extend time limits for bringing lots of tribunal claims. In my previous professional experience, the change will benefit businesses up and down the country, because one of the biggest issues for anyone involved in advising employers on employment law is the rush to bring employment tribunal proceedings, owing to the three-month time limit. It often stops negotiations from progressing fully, preventing an out-of-court agreement being reached at an early stage. In a commercial setting, most businesses are given six years to bring claims under contract against other businesses. It is only really in employment law that we have such a narrow window for people to bring their claims.

I am interested in the shadow Minister’s comments on employment tribunals—they are broken, but the responsibility for breaking the employment tribunals sits firmly on Opposition Members. We had years of under-investment in our courts and tribunals, and we have really long backlogs. The issue there for employers is that, given the actions of the previous Government, they are spending far too much money on people like me, as such proceedings take a significant amount of time.

[Greg Smith]

I understand why, in our combative political system, the hon. Gentleman wants to bring up the previous Government’s record. I gently suggest that the covid pandemic had a big impact on all court backlogs, be it tribunals or otherwise, and I ask him to reflect on the fact that the Bill will add to the pressure on the tribunal service. How much does he think it will add? Given that the Labour party is in government and in charge, rather than just pointing the finger at the previous Government, can he tell us what will materially happen to increase capacity in the tribunal service?

[Alex McIntyre]

The Committee received a submission from Lewis Silkin, a leading legal expert in the field of employment law. It says that some of the Government’s proposals will lead to a reduction in claims, and certainly in complex claims such as those that many employees with less than two years’ service may make under the Equality Act 2010 because they do not qualify for unfair dismissal rights.

The tribunal deals with unfair dismissal claims very quickly. Such claims tend to receive one, two or three days of consideration by a tribunal, at the most, whereas Equality Act claims are often listed for longer than a week. Giving people unfair dismissal rights from day one will reduce the number of people who have to bring Equality Act or whistleblowing claims to try to fit their circumstances, and that will mean a reduction in the number of tribunal sitting days.

I will not step on the Minister’s toes when it comes to the Department’s modelling for tribunals, but it is important to remember that as a result of the measure, more people will be able to negotiate and negotiations will be more sensible. Let us think about the anatomy of an employment tribunal claim. Day one starts when something happens to an individual. In the case of being sacked or being discriminated against, that thing is quite traumatic, so in the first week or so, employees are not generally thinking about their legal options. That is one week gone already. Then people have to look at getting legal advice, contact their trade union and look at the options available, all of which take time. By the time they are in a position to think, “Perhaps I will negotiate with the employer,” they are already two months down the line.

If an employee rushes through an employment tribunal claim, the practical implications are that the claim is really complex, the employee does not quite understand their legal claims and an awful lot of tribunal time and business time is spent on trying to clarify things. If we give employees longer, we will find that more claims are sensibly put. Employees will have obtained legal advice or sought support from their trade unions, and they will have had time to negotiate with employers about potential out-of-court settlements.

This is important and, most significantly, it is about access to justice: many people who are timed out of bringing a claim did not even realise that they had one in the first place. Not everyone has immediate access to the knowledge that they have rights at work and that employment tribunals exist, so it is important that we try to level the playing field to ensure that employees have time to bring claims in the best possible way. Not everyone is a lawyer. Individual employees, like many small businesses, do not have the benefit of being able to call up their local employment lawyer to get advice on potential claims. Preparing a claim takes time, and the measure means that employees will be able to make more sensible claims.

It is a very positive change, and I am glad that it is being made. The Law Commission recommended several years ago that the time limit should be extended from three to six months, so this is not an arbitrary time that has been plucked out of nowhere; it is based on Law Commission suggestions, as I understand it. I encourage all hon. Members to vote in favour of the measure.

--- Later in debate ---

The shadow Minister talked about the doubling of time limits. I do not think he actually said these words, but it was almost implied that that would lead to a doubling of claims.

[Greg Smith]

indicated dissent.

[Justin Madders]

He is shaking his head—that is good. I certainly do not envisage that to be the case, but we recognise there is a backlog in the employment tribunals. Like many public services, they are under pressure, and there is a plan to recruit more judges in the new year.

--- Later in debate ---

[Justin Madders]

A lot of the questions the hon. Member asked will be dealt with by the regulations and by the anti-detriment provisions of the Bill. If he would like to see specific provisions in the Bill, he should have tabled amendments, but I believe we will address a lot of the detail he raised in due course. We are clear that this has to be a freely agreed contract between both parties. The employer should make the offer and the employee should be able to agree, of their own free will, on whether they wish to accept it. We will look closely at the coercion issue, because that has been raised with us.

Government amendment 13 introduces new section 27BEA of the 1996 Act. It will introduce a duty on employers to take reasonable steps to make a potentially qualifying worker aware of their right to guaranteed hours should they meet the required conditions—that is, to draw workers’ attention to the new right and to the fact that they may be eligible for it.

New section 27BF provides for workers to bring an employment tribunal claim to enforce their right to guaranteed hours. A worker may make a complaint if no guaranteed hours offer is made to a qualifying worker; if an offer is made but does not comply with the requirements relating to a guaranteed hours offer, such as offering work for a number of hours that reflects the hours worked during the reference period, or the offer does not comply with the regulations relating to such requirements; if the offer includes a prohibited variation to a worker’s terms and conditions; and if the offer does not comply with the requirements on the use of limited-term contracts, the prohibition on varying other terms, or the applicable requirements where the employer offers less favourable terms.

To ensure that all rights are supported by appropriate protections, the Government amendments have added further grounds. Thus, a worker may make a complaint to an employment tribunal if the employer fails to provide a notice stating that they are exempt from the duty to make a guaranteed hours offer and which exemption applies, or fails to provide a notice stating that a guaranteed hours offer is treated as having been withdrawn further to an exemption applying or to a relevant termination; if the employer gives a notice to the worker stating that they are exempt from the duty to offer guaranteed hours when they should not have done so; if the employer gives the worker a notice relating to an exemption that does not refer to any exemption as set out in the regulations, or that relates to the wrong exemption; and if the employer fails to comply with the duties to provide workers with information about the right to guaranteed hours.

New section 27BG outlines the time limit during which a worker may take their complaint to tribunal. Government amendments have been tabled to allow workers to take cases within six months, as opposed to three months, which is to align the Bill’s provisions with the changes we have talked about already. We have also tabled amendments that are consequential on the new rights included in the Bill, and also on the new grounds to make a complaint to the employment tribunal. Those relate to the additional requirements to serve a notice under new section 27BD, and to the claims related to the information rights.

Finally, new section 27BH provides for the remedies to a well-founded complaint. It provides that tribunals must make a declaration if there has been a breach and may award compensation to be paid from the employer to the worker. In common with other existing employment rights, the compensation must not exceed a permitted maximum, which will be set out in regulations as a multiple of a number of weeks’ pay. I commend clause 1 to the Committee.

[Greg Smith]

I am grateful to the Minister for that comprehensive outline of clause 1 but, as I reflect on our debate over today’s two sittings on the amendments to clause 1—the Government amendments that now form part of clause 1 and the Opposition’s substantive amendments, which were not accepted, and our probing amendments, which did not produce the answers we were looking for—I remain concerned that, putting aside some of the noble intentions beneath the Bill, there is still the lack of clarity we have spoken about regarding so many areas of clause 1.

The Minister himself admitted earlier that some things are still to be consulted on and that others are yet to be brought forward through secondary legislation. I am afraid that just does not cut it for businesses up and down the country that are still struggling with the aftermath of covid, the invasion of Ukraine and so many other factors. They need certainty. They need to know, if the rules of the game are changing, exactly what they are changing to—not some ballpark or some in-principle movement towards, but precisely the rules that they are being asked to play by.

Businesses will, of course, comply with any legislation passed by this House and this Parliament, but this provision is an unreasonable ask of them, whether in respect of what would constitute a low-hours contract, fixed-term contracts for qualifying workers or agency workers, or the exact definition of the reference period. It is simply an unacceptable proposition to those who run businesses, particularly, as multiple parties have said today, small businesses, be they microbusinesses or medium-sized enterprises—I fully accept that we can debate the exact number of employees that constitutes a small or medium-sized enterprise.

I recognise many of the good points the Minister made in his speech, and there are many things that we in the Opposition can get behind—at least in principle, if not in the precise lettering of the detail—but the lack of clarity, the Henry VIII powers in some parts and the “still to consult” parts in others make it very difficult for the Opposition to support clause 1 as it currently stands.

As I said earlier, we want to be a constructive Opposition. We might not agree with the Government’s standpoint on many things, but it is important for the United Kingdom that they succeed in their endeavours and that they do not provide an environment in which there will be fewer jobs, not more, with businesses being more reticent to take on new members of staff. That goes particularly to the points around how people who are deserving of a second chance in life, no matter what has happened to them before, may not get that opportunity because it is too big a risk for small businesses that are struggling to get around all the new regulations, rules and laws.

I particularly highlight again the point about small businesses just not having the capacity to deal with new regulation. As has been said, they do not have HR departments or in-house legal services, and they cannot necessarily afford to hire them in if they are to continue producing their products or selling their services to the great British public, or wider than that. I urge the Minister to go back to the Department, focus on where the detail is lacking and put an offer to the House and the wider country. Our business community need not necessarily agree with it, but they should be comfortable that they can understand it and put in place the measures for their employees and businesses. To ensure their growth and success, they desperately require certainty.

[Laurence Turner]

I will not keep the Committee long. A lot has rightly been said about the need for certainty for business, but we should remember that the other side of the coin is the need for workers to have certainty. I was contacted recently by a constituent who works a zero-hours contract in the hospitality sector. He is unable to get a mortgage because the bank will not grant that facility to him due to the nature of his contract. At the level of the individual, this means economic activity and family planning being put on hold.

In parts of the economy, there are employment situations—we do not, of course, tar all employers with the same brush, but if there were no bad employers there would be no need for trade unions—in which people are turning up to work, sometimes in digital form, to find shifts being mediated through applications, not even through people. It is the 21st-century equivalent of a foreman standing at the factory gate and allocating shifts on an arbitrary basis. We have heard today about the potential, which is too often realised, for favouritism and abuse of that facility.

We have had good debate about a number of details regarding the changes in the Bill. The changes in clause 1 will be welcomed by people who work in the retail sector, including in my constituency, and in other sectors that have high rates of zero-hours contract working, including the care sector. I very much welcome the clause.

--- Later in debate ---

Shifts: rights to reasonable notice

[Greg Smith]

I beg to move amendment 145, in clause 2, page 13, line 25, leave out

“a specified amount of time”

and insert “48 hours”.

This amendment defines reasonable notice of a requestor requirement to work a shift as 48 hours.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 146, in clause 2, page 14, line 17, leave out

“a specified amount of time”

and insert “48 hours”.

This amendment defines reasonable notice for the cancellation of a shift as 48 hours.

Amendment 147, in clause 2, page 14, line 22, leave out

“a specified amount of time”

and insert “48 hours”.

This amendment defines reasonable notice for the cancellation of a shift as 48 hours.

Amendment 148, in clause 2, page 14, line 28, leave out

“a specified amount of time”

and insert “48 hours”.

This amendment defines reasonable notice for the cancellation of a shift as 48 hours.

[Greg Smith]

The amendments are intended to probe the Government’s thinking, as once again it is not clear to us in the Opposition whether they have done the necessary policy work to justify the approach taken in the Bill. The impact assessment clearly shows the administrative cost that the Bill will have in shift and workforce planning, with estimated costs of some staggering £320 million to business. I would like to ask the Minister what evidence there is for the late cancellation or alteration of shifts being a problem of such magnitude that it requires legislation. The Bill does not set out what would be a reasonable notice period for cancelling a shift, and the Government must be clear what they actually intend to do in that respect.

This is a serious point. The burdens that this provision would place on small business would undoubtedly be considerable. Some small businesses cannot always, in every circumstance, guarantee shifts; that is perfectly reasonable. For example, a small furniture-making business with two employees has issues with the supply chain. It cannot provide work until the materials have actually arrived, but the employer in those circumstances could have no idea how long it will take for those materials to materialise—perhaps they are specialist materials or something that has to come from abroad and is delayed in shipping channels. Attacks by Houthis on shipping have caused supply chain problems, for example. In those circumstances, those businesses find themselves in a very sticky place and it would be unreasonable to try to argue that they should absolutely guarantee those shifts to their workers.

[Alex McIntyre]

I understand the hon. Gentleman’s point about uncertainty in certain industries meaning that businesses may not be able to guarantee shifts.

I want to ask two questions. First, cannot certain industries take out insurance policies to account for some of those unforeseen circumstances, particularly when it comes to shipping? Secondly, what about the uncertainty for employees for whom losing a day’s work would mean a deduction of 20% on a five-day working week? If someone told the hon. Gentleman that his salary would be reduced by 20% next week, would he not find that difficult?

[Greg Smith]

I am grateful for the intervention. On the hon. Gentleman’s first point, yes, of course there are insurance policies that many businesses will take out. But the example I just gave is one I can see affecting many businesses in my own constituency; there is a strong furniture making heritage around Prince’s Risborough in Buckinghamshire. There are very small businesses that do an incredible job and make some fantastic furniture, but they are microbusinesses with only a couple of employees and they operate on tight margins. They would not necessarily be able to bake the additional cost of a very expensive insurance policy into their bottom line without significant pressure on their overall business.

I accept that I am not talking about every or possibly the majority of businesses; my point in the amendments is that some circumstances might need a more sympathetic ear. In such cases, it could be argued reasonably and sympathetically that businesses in such a sticky spot would be unable to meet the requirements that the Bill sets out. Supply chain problems are just one example.

I take on board the second point made by the hon. Member for Gloucester, although, as I said in one of the earlier debates, I was self-employed for 15 years before entering this place in 2019. Some clients varied every month their requirements of the services that I provided back then. It was frustrating: nobody wants to be in that position, but it is sometimes a business reality, particularly if the ultimate client is struggling for whatever reason—their supply chain or the fact that they are just not doing very well so they need to throttle service provision up and down. I know that my example is not the same as that of a direct employee, but sometimes business needs a sympathetic ear.

To come back to my earlier point, nobody wants people not to be in a secure employment environment. Sometimes, however, things happen in businesses. Businesses in the automotive sector have shed quite a lot of jobs in recent weeks—look at Stellantis and Ford. Sometimes these things happen. With greater flexibility, perhaps more jobs overall can be saved in the short, medium and long terms, rather than having in every circumstance rigid rules that do not allow businesses that flexibility. I suggest that most people would want jobs to be saved rather than lost through that level of rigidity.

I will continue with my questions to the Minister about these probing amendments. In the furniture company example that I gave, what notice would an employer have to give? What do the Government expect an employer in such circumstances to do? From the hefty number of amendments that the Government have tabled, it looks as though small businesses are going to have to pay those employees for hours not actually worked; and even this will be through no fault whatever of the actual business in question.

Given that the Regulatory Policy Committee has flagged the risk that employers, often in fluctuating demand sectors such as hospitality and retail, may respond by scheduling fewer shifts to avoid penalties for cancellations and the consequential lost output to the economy, I would be grateful for the Minister’s appraisal of whether the provisions on short notice cancellations will support or inhibit the Government’s aim of actually achieving economic growth.

[Justin Madders]

I am grateful for the shadow Minister’s amendment. If it is a probing amendment, he has asked a lot of reasonable questions. There are, of course, things that we will be hoping to address today and during the passage of the Bill—and, indeed, the subsequent regulations.

The first thing to say is that we do not believe that it is right at this stage to put the time into the Bill; we want to give ourselves flexibility to respond to how the issue works in practice and to changing circumstances by doing that in secondary legislation. However, the hon. Gentleman has asked a perfectly reasonable question: who are we trying to help? What is our purpose?

Our purpose is to try to help those people who simply do not have that security in their lives at the moment. Research from the Living Wage Foundation suggests that 25% of insecure workers have had their shifts cancelled unexpectedly, with 88% receiving less than full shift compensation. Many workers receive their shift schedules without reasonable notice, and that prevents them from being able to effectively plan their work, social lives and other responsibilities.

Living Wage Foundation data found that in quarter 2 of 2023, 78% of workers received less than two weeks’ advance notice of shifts, with 5% of workers receiving less than one week. That can disadvantage workers’ ability to effectively plan their future income, particularly when that relates to budgeting for regular outgoings when shifts are cancelled, moved or curtailed at short notice. The impact on workers can include an increased reliance on debt and an inability to forecast income or find substitute work, childcare expenses and, on some occasions, travel expenses. Such implications represent the sort of one-sided flexibility that we are trying to deal with.

Evidence suggests that the income insecurity premium could be worth as much as £160 million per year, but the issue is really going to be about that benefit targeting businesses in the right way. We believe that good management practice can deal with an awful lot of this without the need to resort to legislation.

--- Later in debate ---

[Justin Madders]

As the hon. Member will know, the total cost to businesses from the Bill, as set out in the impact assessment, is about 0.4% of total employer costs. We absolutely acknowledge that there are many good employers out there who do this already, and we hope that there are many employers who do not who will feel that it is a positive once the legislation comes in. We want to take them on that journey and inform them why this is a positive thing and a benefit for their workforce. Importantly, they will see that the playing field is levelled and hopefully be able to compete more ably with others who might in the past have undercut them. But part of that will be making sure that they have access to good advice, good support and a guiding hand to make sure that the clear policy outcomes we want to see from the Bill are actually delivered. On that note, Mr Stringer, I ask the shadow Minister to withdraw his amendment.

[Greg Smith]

I remain very concerned about some of the real-world applications. I accept that it will have a negative impact in a minority of cases. The purpose of our amendment, as I said, was to probe the Government, so I am happy to confirm that we will withdraw it.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Justin Madders]

I beg to move amendment 24, in clause 2, page 13, line 42, leave out

“from what time on which day”

and insert

“when the shift is to start and end”.

This amendment requires notice of a shift to include when the shift is to end (as well as how many hours are to be worked and from when).

[Justin Madders]

I am afraid we are back into some of the more technical minor amendments, on which I will not detain the Committee too long.

Amendment 24 will ensure that employers have to give reasonable notice of not only when a shift starts and how many hours it will be worked, but also when it will end. The Government’s intention is to avoid a scenario whereby a worker is notified of the start time and total duration of a shift, but does not receive reasonable notice of whether those hours will be in a single block, or whether there may be a large break.

The current drafting would allow an employer to specify that a worker is required to work, for example, for three hours from 9 am on Friday, without specifying whether the shift will be from 9 to 12, or from 9 to 10 and then again from 12 to 2. In either scenario, the notice would meet the requirements to be a notice of the shift. The amendment closes this potential loophole. Some of my own children have gone into work and then been told to go and have a two-hour lunch break—unpaid. We clearly want to avoid that through this amendment.

I turn briefly to Government amendments 25 to 27, which will ensure that workers are entitled to reasonable notice where an employer cuts working hours from the middle of a shift as well as from the start or end. The current drafting would arguably allow employers to reduce the number of working hours in the middle of a shift without giving reasonable notice. The amendments close that loophole, ensuring that workers have to be given reasonable notice if an employer decides to change the hours of a shift by reducing the hours in the middle.

[Greg Smith]

I will be brief in my response to these Government amendments, which make the requirement for the right to reasonable notice of cancellation or changing of shifts more onerous. I spoke to these principles during our debate on the previous set of amendments in my name, but I ask the Minister gently now, why were these provisions not included in the Bill on introduction? Was it an oversight? Will there be a repeat of the line, “It was the intention but we just didn’t do it”, or is it something else? I would be grateful for clarification.

As I argued during the debate on the previous set of amendments—this point is relevant to this set too—why are these amendments so necessary? Does the Minister really think it a proportionate burden to place on businesses, particularly in those cases where there will be fair and reasonable grounds for a business not needing to provide notice of a change in shift to an employee? What assessment have the Government made of the cost to businesses, given that they will now essentially have to pay for work not done, without recourse to force majeure provisions or whatever it might be—where it is genuinely not their fault that they cannot provide the work to their workers for whatever reasons? Force majeure is a well-established principle in all sorts of sectors across the world.

I urge the Minister to consider carefully how he can ensure that out-of-control eventualities are looked after in the Bill; otherwise I fear it will create a scenario where particularly the smallest businesses—those one, two or three-employee businesses—are placed in a very difficult financial position. I cannot believe that the Government believe that is the just and right thing to do, and that they could not come up with some other safeguards to protect those microbusinesses—those small enterprises—that might find themselves in a sticky spot.

[Anneliese Midgley (Knowsley) (Lab)]

I refer Members to my declaration of interests. I am also a member of Unite and the GMB. It was said in an evidence session last week that in hospitality—a sector that we are very focused on improving in the Bill—

“employers bring in too many workers for shifts and say: ‘Sorry, we do not need you any more. Go home.’ They then cancel a shift without any compensation for the workers for their travel time”. ––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 76-77, Q71.]

As many of my hon. Friends have said, while we are considering the burden on business, we must also consider the burden on workers. We are trying to level the playing field and make a more equal way, where workers are considered.

[Greg Smith]

I do understand the hon. Lady’s point. Nobody wants to see people turned away as they turn up for work, with their employer saying, “Sorry, no work today.” That is not a position that we want anybody else to find themselves in, but I am trying to make another point.

Let us take the hospitality sector as an example, which has had a pretty rough time since covid. It is one of the sectors—be it pubs, restaurants or attractions—that is struggling the most to recover from the pandemic. There are certainly times when I turn up to a pub in my constituency, perhaps on a Tuesday night, and it is completely empty and has no bookings. That is not necessarily the pub’s fault, but it will be a problem if there is an absolute requirement for the pub still to pay its full staff rota because it was full the previous Tuesday night and needed all those staff. I think this is one of those real-world examples where there has to be a little bit of flexibility; businesses have to be able to say, “Sorry, we’ve got no bookings tonight.” Worse than that, there might be the nightmare scenario that the beer delivery has not arrived and there is not actually any beer to sell.

[Michael Wheeler]

Does the shadow Minister accept that it is not the fault of the worker either? In fact, the employer has more control over the situation, on balance. On his example of planning out work, especially bookings, employers would know that there were no bookings further in advance than on the day—there are comparable examples across other industries—so giving notice of that on the day is completely and utterly unacceptable. The cost, in terms of proportion of income, is disproportionately borne by the worker, not the business, and these measures we are discussing are a proportionate way to rectify the situation.

[Greg Smith]

Fundamentally, I agree that it is not the worker’s fault either—I am absolutely at one with that. I made it very clear that I do not want to see anyone turn up for work only to be turned away and told, “Sorry, no work today.” That is not a great place for anyone to be. I absolutely understand and accept the hardship that that will place on someone who will perhaps not get that day’s wages, but I think there should be greater flexibility in circumstances where it is not the business’s fault either; those situations may be few and far between, but they will happen in hospitality, and they may happen in some manufacturing sectors where supply chain problems have occurred, as we discussed earlier.

If we force businesses into a place where they have to shell out significant amounts of money for no gain—as we discussed earlier, the workers are the ones who produce the services, goods, products or whatever it might be that enables the business to have the money in order to pay people in the first place—and we push them into a place where their low margin is eroded even further by paying for things that are completely outside their control, then those businesses may well go bust.

We are talking about the hospitality sector—and we are seeing pubs close virtually every week. That is a very sad state of affairs, particularly in rural communities, where the pub is often the beating heart of a village, or certainly the social hub. It is not just a place for a pint; pubs do a lot of social good as well. We are seeing pubs close far too frequently for all sorts of reasons, often because of the low margins and other factors that have come in—I will resist the temptation to go too hard on the Budget. There is a cumulative impact, and this measure could well be the straw that brings the whole house down. I want the Minister and Government Members to reflect on where we could bake in other forms of safeguard and flexibility, so that the Government do not put a number of businesses on to that sticky wicket.

[Anneliese Midgley]

Can I clarify whether the shadow Minister believes that workers should shoulder all the burden, and that businesses should bear no responsibility?

[Greg Smith]

No, I do not accept that. It is not helpful to see this as either/or. As I explained, there is a symbiotic relationship between businesses and their workers—their employees. Neither succeeds without the other. It is therefore not the case that I, in any way, shape or form, want to put all the burden on one or the other; what I am arguing for, and what I hope Members in all parts of the Committee can reflect on and appreciate, is some of those real-life, lived-experience and real-world examples, where things just do not go very well and people find themselves—

[Jon Pearce]

Will the hon. Gentleman give way?

[Greg Smith]

I am very happy to do so once I finish this train of thought—we are getting far more debate in Committee than we do in the main Chamber.

We have to find the balance, where we do not just point the finger at the business owner or the worker, but see them as a symbiotic being—because neither side can survive or thrive without the other.

[Jon Pearce]

I am grateful to the shadow Minister for giving way so often. I want to address a principle: the Working Time Regulations 1998 established that if an employee, or indeed an employer, wishes to take holiday, the statutory notice period will be twice as much as the holiday taken. That is the same principle in the Bill, in that it is perfectly reasonable for a worker who does not have guaranteed hours to be given notice when work is not available. That statutory principle has been in place since the last century, so this is not outwith what every worker should expect. It is perfectly reasonable that if a worker has been told that work is available, they should be given reasonable notice if it is not. The shadow Minister’s Government kept to that principle, and it is perfectly applicable to employees and workers in this situation as well.

[Greg Smith]

The hon. Gentleman is right about the principle of notice for holiday—that is quite clearcut. Holiday is pretty much always planned, although there are circumstances in which someone might need to take leave at very short notice—perhaps they have one of those dreaded phone calls that a relative is seriously ill, so they have to leave to be with them, or there might be some other pressing emergency. I think most employers will be flexible and compassionate about such emergency circumstances, ensuring that an employee can be with a relative who has been in an accident or is critically ill, for example.

Generally speaking, though, holiday is planned—just as, generally speaking, the availability of work is planned—but as with emergency situations when someone might need rapid time off, other emergency or out-of-control situations might affect a business. It would then put an intolerable pressure on that business suddenly to have to pay someone an amount of money that might be more than they would even have earned in that day—selling beer or cake in the hospitality sector, or producing a cabinet in furniture making, or whatever it might be.

I hope that the hon. Gentleman appreciates where I am coming from. We are not talking about the vast majority of cases or the bulk of the economy here; we are talking about the unexpected emergency scenarios that are out of anyone’s real ability to predict, which happen in the real world. I am therefore very concerned that the rigid provisions being proposed by the Government will put a number of businesses in a difficult place.

[Several hon. Members rose—]

[Greg Smith]

Oh, here we go. It is multiple choice.

[Alex McIntyre]

I want to drill down on an important point of principle that we should be considering. I do not want this to become a tale of woe from my previous career in hospitality, but I remember being docked three hours’ pay by my boss because there were no customers for those three hours, and there is a similar point of principle here. I understand that there will be times when a restaurant is empty, but someone turning up to work will expect to get paid for that shift. Then there is the cost to the employee of going to work. People might have to secure childcare—I have recently had to look at the cost of childcare and the astronomical prices that are being charged—or pay to travel into work, and they might have paid in advance and be unable to get a refund. Why does the shadow Minister believe that the burden on the employee is less important than the burden on the business?

[Greg Smith]

I can assure the hon. Gentleman that, with three children, I am acutely aware of the cost of childcare. The point I am making, to go back to the one I made earlier to his hon. Friends, is that this is not “all or nothing”. It is about recognising, to refer back to the answer I gave the hon. Member for High Peak, that at certain times, albeit not the majority of cases—in fact, far from the majority of cases—circumstances will arise that are beyond the business’s and the employee’s control, and they will push that business to the very edge. It is not a happy place or a good place to be, but there are some realities here that I think need much more careful reflection.

[Chris Law]

rose—

[Greg Smith]

Here we go.

[Chris Law]

I have been both an employer and an employee in a number of situations, including in retail and hospitality, which we have been hearing about. The hon. Member talks about emergencies, and I understand that emergencies can happen—I have been an employer when we had an emergency situation. What usually happens in those circumstances is that people find other things to do. There is always stuff to do in a business—stuff that might otherwise get put to one side—so there will be an opportunity for employees to work with employers in emergency circumstances.

What I do not understand is this. At what point, in the hon. Member’s mind, do employers notify employees? When do they say, “Look, there’s a situation—it’s an emergency. There is no chance at this time that I can help you come in. Would you consider not taking hours in this instance?” The hon. Member has talked about lived experience; I have spent many years in hospitality—I trained as a chef, and I know exactly what it is like working in restaurants and hotels. Lots of things happen, including empty restaurants, but there is also an onus on the employer to make sure that the restaurant has enough people in of an evening. If they are not there, it is not the employee’s fault; it is the responsibility of the business. If the business is on its knees, then frankly that is in no way the fault of employee—unless, of course, they are not turning up for work or something. In truth, is it not the case that a business in that position is just not viable?

[Greg Smith]

I am grateful to the hon. Gentleman for his intervention. He is right that there may well be something else that can be done—perhaps a stocktake, or making a start on refurbishing the place, or whatever it might be—but that will not be the case in every circumstance. I can only repeat the point that I am not making this argument in respect of the majority of cases, or those that might affect a business that is already in distress; I am making it in respect of those few occasions that might take a business to that point or much closer to it. I cannot imagine that anybody on this Committee, or indeed any Member of this House, would want to see that unintended consequence.

[Laurence Turner]

rose—

[Greg Smith]

I will take one more intervention.

[Laurence Turner]

I am grateful to the shadow Minister; I suspect he is setting some kind of record with the number of interventions he is taking. Earlier, he said that there may be alternative measures and protections to mitigate the problem that the Minister is seeking to address, whereby someone has been called to a shift but has arrived, incurring some cost, to be told that there is no work available. What alternative measures does the hon. Member have in mind?

[Greg Smith]

There are a number of options that could be looked at. The time set out in the regulations could be much more flexible. There could be safeguards for force majeure circumstances, which is common in a lot of contracts. There is no reason why that could not be in legislation. Or if the Government want to go down this path, albeit it is not something that Conservatives would propose, perhaps a more elegant way of going about it would be some sort of legislation on compulsory insurance against such eventualities that ensured that both sides were able to benefit—that the employee still got paid at least something, if not their full expected wage for the day, but the business was not directly out of pocket either. That would have to be tested in the insurance industry to see where premiums would come out, because they may well be unviable, but I gently suggest to the Government that it is a tyre worth kicking.

I conclude with a point I have made many times: this has to be about flexibility in real-world circumstances.

[Sarah Gibson]

The Minister made an extremely good point about the security that is required. It should not be an arbitrary 48 hours that is given. Specifying the time for each sector, presumably under guidance, would perhaps be the most appropriate thing.

I have talked many times to people in my constituency who work in the care sector and are employed to visit people in their own homes. They are given a start time for a shift and are quite often told that they will work a certain number of hours, but it is not clear until they turn up to the shift how much of a gap there will be between the times at which they are getting paid. That can leave them with shifts that last a considerable time but contain a gap of several hours, during which they might be miles from home and it might not be worthwhile going home for lunch, so they incur costs on their own time.

I welcome the attention to the lack of clarity about shift working specifically for home visits in the care industry. This is something that we need to look at. Perhaps there needs to be guidance on the time for each sector, because each sector has its own issues. That is certainly true when one looks at hospitality.

--- Later in debate ---

[Justin Madders]

I will not detain the Committee too long, because it feels like we have had the clause stand part debate already. I will briefly go through the provisions of clause 2, which creates the right to reasonable notice of shifts. As I set out when we discussed clause 1, we must tackle one-sided flexibility. Guaranteed hours is an important part of that, but we must also ensure that workers have reasonable notice of their shifts, so that they are enable to effectively plan their work and personal lives.

If someone’s shift is moved but their pay is less than the cost of the babysitter, that is obviously a negative. If someone is offered a last-minute shift but it is 60 minutes away by bus and they have no car, they should not be penalised or have a black mark put against them if they are not able to take it up. We can do better than this. We want to establish a more balanced partnership between workers and employers, and we hope to do that with clause 2. It will still allow employers to make changes to shifts, but it will also provide incentives for employers to meet the standard of the best employers, encouraging better planning and engagement with their workers. These provisions to introduce a right to reasonable notice of shifts and to changes in them are a small but important step towards making the lives of many shift workers and their families feel a little more secure.

Clause 2 creates several new sections in the Employment Rights Act 1996. New section 27BI outlines the duty that will be placed on employers to give reasonable notice of shifts. That duty will apply to workers on zero-hours contracts and arrangements, as well as workers on other contracts that will be specified in regulations but are likely to be low-hours contracts. New section 27BJ specifies that employers must also give reasonable notice of any moves or changes of shifts. New section 27BK notes that, as for other sections, agency workers are not covered by this measure—new section 27BV provides a delegated power to make corresponding or similar provision in relation to agency workers. In addition, section 27BK specifies that workers are not entitled to reasonable notice of shifts that they themselves suggested they work. For example, they would not be entitled to reasonable notice of overtime that they themselves had suggested. That right does, however, apply where the employer agrees to a suggested shift and then later changes or cancels the shift. Finally, the section contains a power to make regulations about how the notice should be given and when it is treated as being given.

New section 27BL explains that, where an employer is required to make a payment to a worker because the employer has cancelled, moved or curtailed a shift at short notice, the worker cannot get compensation for lack of reasonable notice for the same cancellation, movement or curtailment. New section 27BM enables workers to complain to employment tribunals that their employer has failed to comply with the duties to give reasonable notice. New section 27BN provides that tribunals must make a declaration where they find for a complainant and may award compensation they consider appropriate to compensate the worker for financial loss suffered as a result of the failure to give reasonable notice. This compensation will be capped in regulations and, in line with common law on recoverable damages, compensation will also take account of the duty on the claimant to mitigate their losses.

[Greg Smith]

I will not detain the Committee for much longer because, as the Minister said, it felt as though we had the debate on the whole clause during the debates on the amendments. I reiterate my concern about some of the provisions in the clause. Although I accept that the Minister said that, further on in the Bill, there is provision for force majeure measures to be introduced, there is a gaping hole for those emergency, unexpected, out-of-control circumstances, and this clause fails to fill it. However, we will almost certainly return to that on Report, so we will not press the clause to a Division.

Question put and agreed to.

Clause 2, as amended, accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Anna McMorrin.)

Employment Rights Bill (Fifth sitting)

Greg Smith Excerpts

Committee stage
Tuesday 3rd December 2024 Public Bill Committees

[The Chair]

Good morning, everyone. Will everyone please switch their electronic devices off or to silent mode?

We now begin line-by-line consideration of the Bill. The selection list for today’s sittings is available in the room and on the parliamentary website. It shows how the clauses, schedules and selected amendments have been grouped for debate. The purpose of grouping is to limit, in so far as is possible, the repetition of the same points in debate. The amendments appear in the amendment paper in the order in which they relate to the Bill.

A Member who has put their name to the lead amendment in a group is called first; in the case of a stand part debate, the Minister will be called first. Other Members are then free to indicate by bobbing that they wish to speak in the debate. At the end of a debate on a group of amendments, new clauses or new schedules, I shall again call the Member who moved the lead amendment or new clause. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or new clause, or to seek a decision. If any Member wishes to press any other amendments in a group to a vote—including grouped new clauses and new schedules—they will need to let me know. I shall use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following the debates on relevant amendments. I hope that explanation is helpful.

I remind Members about the rules on declarations of interests, as set out in the code of conduct. We will not go around the room now, but if you want to speak, you should declare your interest at that time.

Clause 1

Right to guaranteed hours

[Greg Smith (Mid Buckinghamshire) (Con)]

I beg to move amendment 137, in clause 1, page 2, line 6, at end insert—

“27ABA Reference to an employer

(1) For the purposes of Chapters 2 to 4 of this Part, references to an ‘employer’ do not apply to an employer defined as a small and medium sized enterprise under subsection (2).

(2) For the purposes of this section, a ‘small and medium sized enterprise’ means an organisation or person employing 500 or fewer employees.”

This amendment would exclude small and medium sized enterprises from the Bill’s provisions on zero hours contracts.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 138, in clause 7, page 24, line 33, leave out subsections (3) to (5) and insert—

“(3) In paragraph (b) of subsection (1), after ‘shall’, insert ‘, in the case of an employer with fewer than 500 employees,’

(3B) In subsection (1), after paragraph (b), insert—

‘(c) may, in the case of an employer with 500 or more employees, refuse the application only if—

(i) the employer considers that the application should be refused on a ground or grounds listed in subsection (1ZA), and

(ii) it is reasonable for the employer to refuse the application on that ground or those grounds.

(1ZA) The grounds mentioned in subsection (1)(b) are—

(a) the burden of additional costs;

(b) detrimental effect on ability to meet customer demand;

(c) inability to re-organise work among existing staff;

(d) inability to recruit additional staff;

(e) detrimental impact on quality;

(f) detrimental impact on performance;

(g) insufficiency of work during the periods the employee proposes to work;

(h) planned structural changes;

(i) any other grounds specified by the Secretary of State in regulations.’

(4) After subsection (1ZA) insert—

‘(1ZB) If an employer with 500 employees or more refuses an application under section 80F, the notification under subsection (1)(aa) must—

(a) state the ground or grounds for refusing the application, and

(b) explain why the employer considers that it is reasonable to refuse the application on that ground or those grounds.’

(5) After subsection (1D) insert—

(1E) The steps which an employer with 500 employees or more must take in order to comply with subsection (1)(aza) include, among others, any steps specified in regulations made by the Secretary of State.”

This amendment would exclude small and medium sized enterprises—here defined as employers with fewer than 500 employees—from the Bill’s provisions on flexible working requests.

Amendment 139, in clause 16, page 30, line 24, at end insert—

“(1D) For the purposes of subsection (1A), an ‘employer’ means an organisation or person employing 500 or more employees.”

This amendment would exclude employers with fewer than 500 employees from the Bill’s duty for employers to prevent harassment.

Amendment 141, in schedule 2, page 110, leave out paragraph 1 and insert—

“1 In section 108 of the Employment Rights Act, for subsection (1), substitute—

(1) In the case of an employer with 500 or more employees, section 94 does not apply to the dismissal of an employee unless the employee has been continuously employed for a period of not less than two years ending with the effective date of termination.”

This amendment would exclude employers with fewer than 500 employees from the removal of the qualifying period for the right not to be unfairly dismissed.

Amendment 142, in schedule 2, page 112, line 5, at end insert—

“(1A) Regulations under subsection (1) shall apply only to employers with 500 or more employees.”

This amendment would exclude employers with fewer than 500 employees from regulations relating to removing the qualifying period for the right not to be unfairly dismissed.

Amendment 140, in clause 22, page 33, line 44, at end insert—

“(aa) ‘employer’ means a person employing 500 or more employees.”

This amendment would exclude employers with fewer than 500 employees from the Bill’s provisions on dismissal for failing to agree a variation of contract.

[Greg Smith]

It is a pleasure to serve under your chairmanship, Ms Vaz, on this bright and breezy December morning. It will be the new year by the time we finish our consideration of the Bill—let us see whether we are all as fresh after Christmas as we are today.

I shall briefly talk through the Opposition’s rationale for each of the grouped amendments. The lead amendment, amendment 137, seeks to exclude small and medium-sized enterprises from the Bill’s provisions on zero-hours contracts. The amendment is part of a set of amendments in my name intended to ameliorate the burden of the Bill for small and medium-sized businesses, defined as those with 500 or fewer employees.

[The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)]

Will the shadow Minister give way?

[Greg Smith]

I know where the Minister is going.

[Justin Madders]

I refer to my registered interests and my trade union membership.

The shadow Minister might well have anticipated my question. Obviously, we acknowledge that the Bill is being brought through at good pace, which means that sometimes mistakes occur. I cannot help but notice that the amendment on today’s paper is slightly different from the one that appeared in previous weeks, which excluded businesses with 500 or more employees, rather than 500 or fewer. Will he clarify whether he is seeking to cosy up to big business or that was indeed an error?

[Greg Smith]

I am almost grateful for the Minister’s intervention. He was very perceptive to note the minor clerical error in the amendment that was previously submitted. That has now been corrected. Of course, the Conservative party stands with all business, but particularly with small and medium-sized enterprises, which, I can clarify for the record, we define as those with 500 or fewer employees.

The Regulatory Policy Committee has rated as red the identification of options and the choice of the policy in the Bill on zero-hours contracts and guaranteed hours. That means, in effect, that the Government have not justified the provisions in the Bill, the problem they are trying to solve, why they are needed or why they would work. The provisions on zero-hours contracts will create additional burdens on all businesses. The Opposition are particularly concerned about smaller businesses, which have less resource and resilience to cope with the measures: they do not have large HR or legal departments to help them navigate the additional requirements that will be placed on them. The Institute of Directors told us in its evidence that

“crafting the requirement for accessing guaranteed hours as something that employers need to be constantly calculating for all employees whenever they work beyond their fixed hours, and then making offers to people, some of whom would want to receive those offers and some of whom would not, seems to us the most administratively complex and costly way of delivering on the proposal.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 11, Q4.]

I am confident that the Minister will try to refute these points and somehow paint the amendment as creating a two-tier workforce, which it would not. I urge the Government to recognise the bureaucracy burden and risk that the zero-hours contract provisions will create for smaller businesses in particular. Providing for guaranteed offers of hours after 12 weeks would create a lot of additional administration for our small and medium-sized enterprises. I gently ask the Minister how credible he thinks it is that employees will reject offers made and that the process will have to start all over again.

Amendment 138 is similar to amendment 137 in what it seeks to do, but excludes small and medium-sized enterprises—again, defined as those with fewer than 500 employees—from the Bill’s provisions on flexible working requests. The RPC has said that the Government have presented “little evidence” that employers are refusing requests for flexible working unreasonably. When I talk to businesses in my constituency, I do not come across any complaints that flexible working is being refused unreasonably; I find many businesses that have, certainly in the post-covid era, made huge offers to their employees of working from home, mixed hours and working around the school run, or whatever it might be. It does not seem to me to be a particular problem in most businesses that I speak to. I want to give the Minister the opportunity to present some of his evidence for the necessity of these provisions. What led to the decision that these flexible working clauses are needed? If they are not, I urge the Government to accept our amendment to exempt SMEs from them.

[Jon Pearce (High Peak) (Lab)]

The amendments may create a two-tier workforce, as the shadow Minister suggested. Does he know how many employees in the UK would not have the benefit of these rights if we made the amendments he is suggesting?

[Greg Smith]

I understand the point the hon. Gentleman is trying to make, but the Opposition’s concern is that the burdens that the Bill’s provisions—including this one—place on many businesses will actually result in fewer jobs in the overall labour market in the United Kingdom. I cannot for one second accept that anybody in this House wants there to be fewer jobs in the economy as a whole. If small businesses are placed under the burdens that are addressed by the amendments, and do not make additional hires or take the risk on individuals for jobs, we will be in a very bad place. If small businesses—the backbone of our economy—are not hiring, not growing and not going on to become medium-sized and large businesses, the people who pay for that are workers and people looking for a job or to progress their careers.

[Alex McIntyre (Gloucester) (Lab)]

I refer the Committee to my membership of GMB and Community, and to my former membership of the Employment Lawyers Association.

I am somewhat confused by the shadow Minister’s comments. On the one hand, he says that every business in his constituency offers flexible working already and therefore there is no requirement for this legislation; on the other hand, he says it is such a burden to businesses that it will stop them employing people. If everyone is doing it already and we are still employing people, what is the problem?

[Greg Smith]

I did not say that every business is offering flexible working. I said that, having visited businesses in my constituency, I am yet to find a problem around any business’s offering flexible working, or any employee or constituent with a complaint about an inability to get flexible working—quite the opposite, in fact.

If we consider the cumulative impact of all the measures in the Bill, they will certainly place a burden on business. The Opposition are trying to ensure that we take only those measures that will work—only those that will have a direct positive impact and will not be a burden on the HR department. Well, most small businesses do not have an HR department; often, it is the director or another member of the team who has to take on that additional job and understand the burden of regulation, on top of whatever their main contract has them doing. If we get rid of the measures that are simply not necessary, that will mean less of a burden on businesses, notwithstanding the point, which the hon. Member for Gloucester rightly highlighted, that the majority of businesses that I speak to do not have a problem offering flexible working—perhaps some businesses in other Members’ constituencies do.

The point of going through the Bill line by line in Committee is to metaphorically kick the tyres to ensure that its provisions are not a burden on business and will not have unintended consequences. As I said earlier, I cannot for one second believe that anybody in this House wants to see fewer jobs in the overall economy.

[Sarah Gibson (Chippenham) (LD)]

I draw the Committee’s attention to my declaration of interests. I have run a small business for the last 20 years. It would probably even be considered a microbusiness, because a lot of professional services are. In the south-west, acquiring and retaining professional staff is extremely difficult for small businesses—certainly, retaining them is. Does the shadow Minister not think that if we create a two-tier system, where someone working for a larger business has better rights than someone working for a small business, it will be even more difficult for small businesses to hire and retain staff?

[Greg Smith]

The point we have to look at, across the six amendments that we are considering in this group, is the reality of small and medium-sized businesses. I congratulate the hon. Lady on running her own business. I was self-employed for 15 years before I was a Member of this House, so I understand the challenges. Small and medium-sized businesses are the backbone of our economy but, by definition, because they are small or medium sized, they struggle—as she rightly says—not just to employ across the piece, but to obtain the legal advice, HR advice and professional services to help them navigate the panoply of regulations, rules and laws that this place has passed over the generations, as the current Government are seeking to do again through this Bill.

The way I look at politics, the best way to govern is to ensure as light a touch as possible on business and to limit the necessity of sourcing additional HR and professional services and so on that small businesses just cannot afford. If they are forced down the route of sourcing expensive professional services, that will have a knock-on effect on the real wages that they can pay to their staff and on the ultimate cost to the consumer of whatever service or product they are providing—that is a basic law of economics.

Although I would never advocate a two-tier approach in principle, there is a real difference between businesses in our economy that can simply have massive HR and legal services departments, without having to outsource them or bring them in at expensive rates, and businesses that cannot. If we accept that reality, perhaps we can look at the burden of additional regulations that might be necessary to help real people and real businesses to grow the economy, so that small businesses can become medium and then large businesses, and can be successful.

The Opposition tabled amendment 138 to exempt small businesses from the flexible working provisions. As I said, small businesses are being clobbered by the Government. Retail, hospitality and leisure relief has been cut, which has led to increased business rates bills, and employer national insurance contributions are going up, which Bloomberg economists estimate will cost 130,000 jobs. I cannot see the justification for putting those provisions in the Bill. We would be grateful if the Minister could provide a full and frank rationale for them—or, if not, support our amendment.

Amendment 139 would exclude businesses with fewer than 500 employees from the Bill’s duty on employers to prevent third-party—I stress third-party—harassment. Of course, harassment in any form is totally, deeply and completely unacceptable in our country, and I am in no way trying to say otherwise, but the RPC has said that the Government have not provided “sufficient evidence” of the prevalence of third-party harassment or its impact to justify the approach taken in the Bill. I genuinely believe that every hon. Member wants to ensure that nobody in this country is harassed in any way, but, through that lens, we need to understand the evidence for the necessity of this particular provision about third-party harassment.

[Alison Hume (Scarborough and Whitby) (Lab)]

I draw the Committee’s attention to my declaration of interests and my membership of the trade unions Unison and the Writers’ Guild of Great Britain.

I am pleased that the Bill will increase protection from sexual harassment, being one of those middle-class women of a certain age—the Government’s commitment to holding workplace offenders to account cannot come soon enough. Last week, we heard that there is strong evidence that the majority of sexual harassment in the workplace, particularly in retail and hospitality, comes from third parties—a client, customer or patient. Surely, the hon. Member would agree that it is essential that employers can take reasonable steps to prevent harassment by third parties, because the net effect on the victim is the same whether that behaviour comes from a direct co-employee or a third party.

[Greg Smith]

I am grateful to the hon. Lady, who makes an accurate and fair point. I repeat that harassment of any form, sexual or whatever, is deeply and totally unacceptable and wrong, and must be stamped out. The point that the Opposition are probing in amendment 139 is the proportionality of the impact on businesses—particularly small businesses—given the control that they have over third parties, and whether other laws that are already on the statute book should be used to fully ensure that anybody guilty of any form of harassment is brought to justice under the law. We are trying to understand how the particular measure in clause 1 would work, and its proportionality.

[Laurence Turner (Birmingham Northfield) (Lab)]

I again draw attention to my declarations in the Register of Members’ Financial Interests and my membership of the Unite and GMB trade unions.

Does the shadow Minister recognise that the prominent case of the Presidents Club harassment, which was exposed by the Financial Times some years ago, did apply to an employer that employed fewer than 500 people? That was specifically in respect of sexual harassment. The House has accepted the principle that measures should be put in place to prevent third-party sexual harassment; it did so last year, through the private Member’s Bill process—including for the SMEs that the shadow Minister refers to. The most famous case on third-party harassment was the Bernard Manning case in 1996, which covered racial harassment; and recent tribunal judgments, including in 2019, have exposed gaps in the law. So does the shadow Minister recognise that there are important proven cases of third-party harassment that go beyond the current legal framework, that would be remedied by the provisions in the Bill?

[Greg Smith]

I am grateful to the hon. Gentleman. I will not seek to mislead the Committee by saying that I am across the Presidents Club case, but I am aware of the Manning case. Undoubtedly there are holes in the law, because harassment does take place in workplaces and outside workplaces up and down the land. Conservative Members categorically want that stamped out and want those guilty of those offences to face justice. However, as we go through the Bill line by line, we need to ask ourselves, “Does this proposal work, or are there other laws—criminal laws if necessary—to ensure that the authorities have the absolute ability to bring such prosecutions and ensure that those guilty of these horrible crimes are brought to justice?”

Amendments 141 and 142 are part of the set of amendments around ensuring that SMEs are not given undue burdens. These are about excluding employers with fewer than 500 employees from the removal of the qualifying period for the right not to be unfairly dismissed. RPC, which has had a lot to say about the Bill, has said that the day one unfair dismissal rights are estimated to cost businesses around £43.2 million per year.

[Justin Madders]

The shadow Minister may be familiar with this line of questioning, because it is basically the same issue as earlier. I may have misinterpreted the way that amendment 141 interplays with the Employment Rights Act 1996, but the amendment refers to

“an employer with 500 or more employees,”

although the explanatory note then says 500 or fewer. Will the shadow Minister clarify what the intention is?

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[Greg Smith]

I am clear that it should be 500 or fewer. I will not pretend to guess how some of the misdrafting may have occurred; it happens to all parties when they are in government and in opposition. I can remember a couple of errors in Bill Committees when I was sat on the Back Benches on the opposite side from the then Opposition. I apologise to the Committee for any errors. For the clarity of the record, we mean 500 or fewer employees when we are defining an SME.

To be asked to give Government the power to make regulations with no idea what the regulations imposed on businesses will be, is clearly not a position we want to be in. The Government admit that the day one unfair dismissal rights could have negative impacts on employment and hiring, which could include incentivising employers to turn to temporary or fixed-term workers. The day one unfair dismissal rights could make it more difficult for those unemployed or economically inactive to access jobs, through overall negative impacts on employment and/or a strengthening of insider power. Alex Hall-Chen from the Institute of Directors warned the Committee that

“under the current system, employers are very likely to take a risk on hiring a borderline candidate who may not have quite the right experience or qualifications, but they will now be much less likely to take that risk because the cost of getting it wrong will be considerably higher.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 8, Q2.]

There are important questions about what that means for people on the fringes of the labour market, especially as they are precisely the people the Government say that they need to get back into work to meet their 80% employment rate target.

We should all reflect on this point from the evidence that we heard last week: very many people in our society deserve a second chance in life. They might have made mistakes before, or be on a path to rehabilitation from offending or something else—whatever it might be—and I would hate it if people who found themselves in that position were not able to get a second chance. Employers that are willing to give second or even third chances should have the best empowerment to do so, to get people who find themselves in that position into work and on to the path to a better life.

I fear that the unintended consequence of the legislation will be to shut many people who find themselves in that position out of the ability to get a job, to improve their lives and to get themselves on to a better path. SMEs will feel the burden of the new regulations particularly acutely without large HR and legal teams, as I have said.

[Mr Peter Bedford (Mid Leicestershire) (Con)]

The Bill as drafted seems to skew a competitive advantage in favour of large businesses. Earlier, my hon. Friend mentioned that small and medium-sized businesses are the key to economic growth in our country. These amendments will enable them to compete evenly because, as he says, they do not have large HR functions, or the support mechanisms that large businesses have. The amendments will redress the unfairness in the Bill.

[Greg Smith]

I am grateful to my hon. Friend for that input. He is absolutely right, and his argument hits the nail on the head. The point we are trying to get across through the amendments in my name and that of my hon. Friends in Committee is that small businesses sometimes just do not have the resource to go through the heavy, burdensome regulations that big businesses can navigate. Mega-businesses probably have more employees in their HR or legal department than most small businesses have altogether.

[Laurence Turner]

I am grateful to the shadow Minister for giving way; he has been generous with his time. On the point about perverse incentives, does he accept that if this group of amendments were in force, it would create a perverse incentive for the creation of umbrella companies and other forms of employment law evasion? If we are to enforce the provisions that we seek to pass in the Bill, instead of introducing a new dimension to employment law through the exemptions that he proposes, the only way to do that is to have a consistent approach across employers.

[Greg Smith]

I understand the hon. Gentleman’s point about umbrella companies. He almost tempts me to get on to one of my hobby horses, which is IR35, but that would be way out of scope, so I promise not to go there.

My principal point is that there are always unintended consequences. And yes, in some respects, while acknowledging the reality of the contribution that small businesses make to our economy and their ability to meet a heavy regulatory demand, there may have to be other steps around that to prevent the further perverse incentives that the hon. Gentleman mentions. But I come back to my central argument: if we clobber small businesses down, there will be fewer jobs, and small businesses will not be growing, which means that the whole UK economy is not growing. His Government purport to want to see the economy grow. The Budget flew in the face of that, but, if we take as read the desire of all Members to see a growing economy in the United Kingdom, we cannot have that without small business, medium-sized enterprises or, frankly, the self-employed.

Let us not forget that, as we came out of the 2008 crash and through the coalition years, a huge part of economic growth came from the growth of self-employment, which led to those self-employed registering as companies, growing and—many of them—being a huge success story. If the Bill has the unintended consequence of reducing the incentive for entrepreneurs to set up on their own, start a business and employ people, that is a very unhappy place to be.

[Michael Wheeler (Worsley and Eccles) (Lab)]

I refer the Committee to my declaration in the Register of Members’ Financial Interests and my trade union memberships. When the shadow Minister listed the groups upon whom growth depends, he seemed to miss a rather large group—the workers. Does he accept that the purpose of the Bill is to create good employment and valued workforces? As we heard in evidence, good employment and valued workforces lead to increased productivity. Opposition Members are often keen to refer to the cumulative burden. As we are now on their fourth or fifth amendment, all in the same vein—about excluding millions of workers in this country from the benefits of the Bill—does he accept that the cumulative effect is to create a set of wrecking amendments that will remove the benefits of this Bill from millions of people in this country?

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[Greg Smith]

The hon. Gentleman makes his point well, but I fundamentally disagree that these are in any way, shape or form wrecking amendments. Where we have common ground and where we do agree is that, of course, no business is anything without its employees—the people who actually do the work. However, where I think he and I may disagree, and I do not want to put words into his mouth, so I invite him to intervene on me again if I get this wrong, is about the person who has risked their capital—who has either borrowed money or risked money to have to start that business— who runs that business, who is the director of that business, being as much a working person as everybody else within it. Businesses only exist because of human beings—before our AI overlords come in and take over everything, way into the future. Of course, workers are at the hub of that, but the people who run the businesses are as much working people as everybody else.

To come back to the central point, there will be no workers, or fewer workers, if there are not people to actually employ them in the first place. If the Bill’s unintended consequences are that SMEs—and perhaps larger businesses, but to be frank, it is more likely to be SMEs—are disincentivised from taking people on, disincentivised from growing their workforce, I do not think anybody will be happy.

[Michael Wheeler]

The shadow Minister invited clarification and an intervention. I do not think that anyone is disputing some of what he says, though we will dispute much. In the context of the Bill, he talks much about, as he put it, the mounting burden, but with little evidence—though he seems to quite like evidence when referencing the RPC. Does he accept, though, that the fundamental principle of the Bill is a rebalancing within the economy between workers and their employers, that nothing in it goes beyond that, and that some rebalancing is actually needed within that relationship for growth across the whole economy?

[Greg Smith]

I understand the hon. Gentleman’s point. Of course, it is no surprise that a Labour Government would seek to bring in such a Bill. We knew it was coming; it was in their manifesto. We will come to the question of whether they really needed to rush this out in 100 days, given the number of Government amendments that we will consider later. It is, by definition, a rebalancing, and I hesitate to say this for perhaps the fourth, fifth or sixth time, but this process is about kicking the tyres.

I welcome our debate in Committee. The point of a Bill Committee is to go through provisions in far more detail than we can on Second Reading in the main Chamber, or even on Report or Third Reading further down the line. Even if Conservative Members would not have gone about making changes in this way, we need to be certain that the Government of the day succeed in their aims. The Labour party has a mandate to govern the country and we want to be a constructive Opposition. Although we might not agree with everything that the Government do—or maybe nothing that they do—it is in the country’s interest that they succeed. Therefore, kicking the tyres on the Bill and ensuring that unintended consequences are ironed out in Committee is a good debate to have and a fundamental purpose behind why we will all will spend our Tuesdays and Thursdays together through to the end of January.

[Nick Timothy (West Suffolk) (Con)]

On the cumulative effect of the pressures that are building on business, during our evidence sessions last week with various witnesses, the compelling point was made that we should not look at the Bill in isolation. The impact assessment states that the costs are a minimum £5 billion a year for business. Some witnesses thought that that was actually an underestimate, and that the true figure will be higher and will grow when more details emerge as we go through this process. We should also look at the Bill alongside decisions such as the equalisation of the national living wage for young people, the increase in employer’s national insurance contributions and other business taxes that were in the Budget. I thought my hon. Friend might want to say something about the cumulative effects of all those decisions.

[Greg Smith]

My hon. Friend is right. The cumulative impact of other measures should be considered in the round. I might gently push back by saying that some of those matters are perhaps not fully in scope of the amendments that we are discussing. However, he is absolutely right that the Bill has to be considered in the light of other factors relating to other decisions in Government, be that fiscal events or other legislation. That goes to the nub of this set of amendments. This is about whether some of the measures are proportionate given the Government’s original intent in the Bill, and whether some of the original intent in the Bill, from which these amendments seek to exclude SMEs, will be the metaphorical straw that breaks the camel’s back.

Amendment 140 excludes employers with fewer than 500 employees from the Bill’s provisions on dismissal for failing to agree a variation of contact—this is also part of our set of amendments. We have questions about the wisdom of clause 22, or at least we seek reassurance from the Minister that it will not prevent employers from improving working conditions or working practices. I would like to remove yet another burden on small and medium-sized business unless and until the Government can prove that that measure is needed and proportionate, and that, critically, the benefits will outweigh the costs.

[Alex McIntyre]

My experience in business goes way back. My parents ran a small business and, although I would not say I was a worker at it, I helped out from the age of nine. I got my first job at a small business when I was 12, and I worked in the hospitality trade throughout my school and university years, all at small and medium-sized enterprises. I spoke last week about the fact that I was on a zero-hours contract for the most part while I was there. I then became an employment lawyer advising businesses, from start-ups to FTSE 100 companies and global conglomerates. So I have some experience in these matters, and I am very grateful to be on the Committee.

Let me go back to my experience on a zero-hours contract. We are talking about amendments that would take out SMEs from many of these provisions, and I want to draw on two of my experiences and say why I think this issue is important. I mentioned the first last week: when I was on a zero-hours contract at the hotel that I worked at in my later teens, everybody in that business was on a zero-hours contract. As a 15-year-old, I was quite happy to be on a zero-hours contract. I had to balance it with playing rugby and my studies, but in the summer I could flex up and work longer hours. However, for many of my colleagues, that was their full-time job; it was the job that paid their rent or mortgage—if they had been lucky enough to buy a house—looked after their kids and provided the heating each winter. But when it came to it, it was open to abuse, and the manager I had would vary hours based not on demand, but on whether she liked the individual or not.

I remember vividly that one week a colleague refused—quite rightly, I would say—to take the manager’s personal shopping up to her fourth-floor flat, because he was really busy behind the bar; he was the only barman on shift. He usually worked between 50 and 60 hours a week; for the next month, he was given five hours a week. He had two children, and rent to pay. I just do not agree with the amendment suggesting that that is fine and that that abuse of someone’s rights could continue indefinitely.

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[Greg Smith]

I think that we have had a good—possibly lengthy for a Bill Committee—debate on this group of six amendments. My fundamental concern and argument is around the cumulative impact and the risk of the unintended consequence—I do not think we have got the reassurance we require on that—that these measures could actually dissuade SMEs. I accept that we can debate how to precisely define SMEs, from the Liberal Democrats’ quite low-ball position of around 20, to the 249 mark, or to the 500 mark in our own amendments but, if the net result—the unintended consequence—is fewer jobs overall in the economy, nobody wins.

I certainly want to reassure the Committee, on the point about third-party harassment, that the Opposition absolutely want all forms of harassment stamped out, for sure. I thank the hon. Member for Gloucester for sharing his personal story with the Committee; clearly what happened to him was wholly unacceptable, and I am very sorry that he had to endure it, as many other people do around the country. The question that we are posing is whether this the right law to do it, or are there other laws required to be as firm as humanly possible to stamp down on those unacceptable behaviours? Our point stands—that concern stands—that this measure could, in the words of the hon. Member for Birmingham Northfield, actually create a “perverse incentive” for employers not to give people that chance in life, not to grow their workforce, and not to take that risk or that gamble that, in turn, would grow the economy, which I think we all want them to do.

As we are mindful of the need to probe this measure a little bit further and to get some of those definitions right, we reserve the right to revisit this on Report but, for the time being, we will not be pushing any of those six amendments to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Greg Smith]

I beg to move amendment 149, in clause 1, page 2, line 29, leave out

“a number of hours (‘the minimum number of hours’) not exceeding a specified number of hours”

and insert

“two hours or fewer per week (‘the minimum number of hours’)”.

This amendment defines the number of hours that would constitute a “low hours” contract.

Hopefully we can have a little bit more speed with this debate. In amendment 149, we seek to define a low-hours contract to mean that fewer than two hours’ work is made available during the week. I want to be clear with the Committee that this is a probing amendment, because we are not saying that two hours should constitute a low-hours contract. The Opposition want to know how the Government would define a low-hours contract. The probing amendment will hopefully enable us to understand the Government’s intent fully.

The Government have sadly failed both to consult widely with business and to conduct proper policy development work, and they have thereby introduced a Bill without giving Members across the House a clue as to the actual objective of the definition of a low-hours contract. This is a simple and straightforward probing amendment. I would be grateful to the Minister for some clarity on the Government’s definition of a low-hours contract and on what that definition will be used for.

[Michael Wheeler]

I appreciate that the shadow Minister has said that it is a probing amendment. I wish it was not quite so ridiculous, in all honesty—it is an utter low ball—but I will speak to it and to the clause it seeks to amend.

[Greg Smith]

I know the hon. Gentleman is new to the House, but sometimes one has to be a bit ridiculous to prove a point and to get answers. Does he agree?

[Michael Wheeler]

Well, I agree on my newness, and maybe as I gain more experience, I will encounter more ridiculousness in this place than I already have—in fact, I am sure I will. I wish to speak to the amendment, despite its probing nature. In my view, and I hope the Minister would agree, the clause is designed to promote stability and financial security for those who currently lack it because of the number of hours that are baked into their contracts. To set the bar as low as two hours would run counter to that purpose.

The measure has been widely trailed and debated in the run-up to the election and in this Committee. I highlight a few things that I hope the Minister will speak to with a view to that purpose. I hope that we would all agree that tackling the insecurity that millions of people in our economy face is a worthy aim, and that that is not limited just to those on zero-hours contracts but includes those on low-hours contracts who regularly work more than their set hours.

I spoke of a rebalancing earlier, and that is about fairness and the quality of employment. As part of that, it is only right that, where need is demonstrated, employees are offered—not given; there is still an element of choice—the opportunity to have those hours baked into their contracts, as is set out in the Bill. That would improve their financial security, their work-life balance, the predictability of their hours, and their ability to live their lives, to which their income is incredibly important.

I am looking forward to hearing the Minister roundly reject this amendment, but I also want him to address some other parts of the clause, specifically the inverse of the amendment, the phrase,

“not exceeding a specified number of hours”.

I hope we would want to see this measure apply to as many workers—

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[Justin Madders]

I am grateful to the shadow Minister for clarifying that this is a probing amendment, and possibly also that it is a ridiculous amendment, although I am not sure that that is the best way to persuade us to accept it. He will not be surprised to hear that we will not accept it.

An important point has been raised, and my hon. Friend the Member for Worsley and Eccles has asked a number of questions about what the amendment is trying to achieve. As I understand it, the amendment would mean that only workers on zero-hours contracts or arrangements, and those with two hours or fewer guaranteed per week, would be covered by the regulations. It would also remove the power to make regulations setting the maximum number of hours for those low-hours contracts to be in scope of the provisions.

The low-hours concept will be crucial in determining how many workers end up in scope of the right to guaranteed hours. That is partly intended as an anti-avoidance measure, to prevent employers from avoiding the duty to offer guaranteed hours by moving a worker on to a contract guaranteeing a very small number of hours. I think we can all see that, if the shadow Minister’s amendment were accepted, we would soon be talking in the lexicon about two-hours contracts, rather than zero-hours contract, and that would not deal with the questions of stability and security that we are trying to address.

We will consult on what we mean by low hours. We think it is very important to get this point absolutely right, and we understand that pitching it at a level that works for both the business and the worker will be absolutely critical. We are committed to working in partnership.

We are looking to clarify the provision in regulations. We understand that there are arguments about the detail being in the Bill, but the counter-argument is that putting the details in regulations gives us more flexibility to review the provisions as we move along. It is fair to say that we do not expect the number to end up being two hours. I do not think there has been any evidence put forward for that.

[Greg Smith]

As I said to the hon. Member for Worsley and Eccles, sometimes something a little obscure is needed in order to get noticed and to get an answer.

There is a serious question on what constitutes a low-hours contract. The Minister has just said he will consult, but presumably he will consult on a range—the consultation document will not be a blank piece of paper inviting people to say exactly what they think. What is the range in which the Government believe a low-hours contract should be defined, which will be within that consultation he has promised?

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[Justin Madders]

The hon. Gentleman asked so many questions that I did not have a chance to make a note of them. A lot of the issues he raised will be dealt with by amendments that we will debate today or later in the Bill’s passage, but I take his points. We are trying to legislate in a way that prevents unintended consequences and loopholes. I would say to the shadow Minister, “Watch this space,” and encourage him to take part in the consultation, but we cannot accept his amendment.

[Greg Smith]

It is no surprise that the Government are unwilling to accept the amendment; it is a probing amendment, so we would probably have been quite upset if they had. The fundamental point I still want to get at, while making clear the probing nature of the amendment and that we will withdraw it, is that while I am half reassured by the consultation, it is critical that there is clarity and definition for businesses out there that want to understand what is coming down the line in this piece of legislation. Everyone knows the parliamentary arithmetic at the moment; this will become law at some point during this Session.

While it is never an ideal scenario to legislate first and consult second—it is far better to do it the other way round—we need greater clarity, as soon as is humanly possible, on how the Government intend to define low-hours contracts as they go to consultation. I cannot accept that there will not be some floor and ceiling within the range that the Government seek to consult on, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Greg Smith]

I beg to move amendment 152, in clause 1, page 3, line 2, after “not” insert

“on a fixed-term contract or”.

This amendment will exempt a worker on fixed-term contracts from being categorised as a “qualifying worker”.

This too will hopefully be a relatively straightforward debate. The amendment seeks to exempt workers on fixed-term contracts from being categorised as qualifying workers. This is a probing amendment in my name, on behalf of the official Opposition. We would like to understand why it is proportionate, particularly for small and medium-sized enterprises, for the provisions on guaranteed hours to apply to workers on fixed-term contracts, given that we still do not know the length of the reference period. Is it proportionate for a business to have to make an offer of guaranteed hours to a worker whose contract will in any event come to an end just after the reference period? In last week’s evidence sessions, some witnesses talked about workers who are perhaps on a very specific construction project with a definite end point—when the railway station is built, there is nothing left to build on that project—so it is not possible to escape the fixed-term nature of some contracts. Without knowing the length of the Government’s proposed reference period, it is impossible to make a judgment on the effect of extending guaranteed hours to workers on those fixed-term contracts. I should be grateful if the Minister would provide clarity on that, so that this probing amendment can be put to bed, or further questions can be asked down the road.

[Justin Madders]

The shadow Minister will not be surprised to hear that we will resist the amendment. First, it is important to note that the Bill does not ban the use of fixed-term contracts, or seek to force employers to make workers on fixed-term contracts permanent. That is not our intention. We recognise that in some cases, a fixed-term contract will be the most appropriate one for both worker and employer. For example, under the Bill’s provisions, it would be reasonable to enter into a limited-term contract where the contract is entered into for the worker to perform a specific task, and the contract will end once that task is completed. Many fixed-term contracts also already have clearly stated guaranteed hours within them.

However, where a fixed-term contract is used, we think it is important that within that fixed-term period, workers have the same right to guaranteed hours as those on permanent contracts. For eligible workers, if the fixed-term contract does not guarantee more hours than what are considered to be low hours as set out in the regulations—which we will come to in due course—and is longer than the anticipated reference period of 12 weeks, which we will continue to work on, then employers will be required to offer a guaranteed-hours contract for the remainder of the contract, reflecting the hours worked regularly over the reference period. The amendment would create a serious loophole in the legislation, allowing employers to use fixed-term contracts to evade the purposes of the legislation entirely. There would be no mechanism to prevent the use of a fixed-term contract for 12 weeks or longer, so eligible workers would not have certainty of their hours. We would open up a serious loophole, which I am afraid unscrupulous employers would exploit. I therefore ask the hon. Member to withdraw the amendment.

[Greg Smith]

I accept the points made by the Minister, but I still think there is a relative concern. We in no way, shape or form want to create loopholes—certainly not for any unscrupulous employer, and I want that to be very clear and on the record—but we do totally accept that there are some very legitimate fixed-term contracts out there, such as certain construction projects.

[Justin Madders]

indicated assent.

[Greg Smith]

I hope, from the nodding coming from the Government Front Bench, that Ministers agree with this. We will withdraw the amendment, but this point needs considerably more debate as the Bill progresses to ensure that while no loopholes for the unscrupulous are created, and that protections are there for employers around fixed-term contracts.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Greg Smith]

I beg to move amendment 151, in clause 1, page 3, line 2, after “worker” leave out

“(but see section 27BV for power to make provision about agency workers)”.

This amendment is consequential on the amendment that removes the ability of the Secretary of State to make regulations to make provision for agency workers to have similar provision to the right to guaranteed hours.

[The Chair]

With this it will be convenient to discuss amendment 150, in clause 4, page 23, line 24, leave out “2,”.

This amendment removes the ability of the Secretary of State to make regulations to make provision for agency workers to have similar provision to the right to guaranteed hours.

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[Greg Smith]

There are just a couple more Opposition amendments to go before we get to some Government ones. Amendments 150 and 151 propose to exclude agency workers from the provisions on the right to guaranteed hours. The provisions in the Bill relating to agency workers are another example of the Government’s not having done proper policy work before introducing the Bill. I fully understand their desire to get it out within 100 days, but sometimes, if a Government have a mandate for five years, 100 days can seem quite quick.

The Bill specifies that the right to guaranteed hours with reasonable notice of the cancellation of a shift does not apply to agency workers, but it includes a Henry VIII power to extend those provisions to agency workers at a later date. I therefore ask the Minister the following questions. Why is it not straightforwardly on the face of the Bill that those provisions apply to agency workers? Why the Henry VIII power? What is the policy decision? In the Government’s mind, are agency workers included in the principle, as well as the letter, of this legislation? We have concerns about these provisions, which could be extended to agency workers. How would the employment relationship then work? Who would dictate the hours? If it is the end user rather than the agency, surely they become the employer? It all becomes rather confusing.

Is this measure an attempt to ban agency working by the back door? I think everyone would accept that agency workers are sometimes some of the biggest heroes in our economy, as they fill gaps when full-time workers on contracts are unable to get to work that day, for whatever reason—be it sickness or anything else—particularly in key professions such as nursing, healthcare and teaching.

Until the Government can explain their intention, the Opposition do not believe it is responsible for the House to give them the powers to entirely change at a later date the policy position set out on the face of the Bill. We need clarity right now, so that this Committee, and the whole House later in the Bill’s progress, can come to a proper, informed decision.

[Justin Madders]

I am grateful to the shadow Minister for tabling these amendments. He will again be unsurprised to learn that we will not be accepting them.

The Bill fulfils our pledge to end exploitative zero-hours contracts. We are introducing a right to guaranteed hours to eligible workers on zero and low-hours contracts, to give them the greater security and stability that all workers deserve. Although workers may choose agency work because they value flexibility, they can also experience the one-sided flexibility and insecurity that we have talked about already. If we do not include a power to include agency workers, there is a risk that employers wishing to evade the Bill will simply shift their workforce on to agency work to avoid giving them rights.

--- Later in debate ---

[Justin Madders]

I am grateful to my hon. Friend for his intervention. Much employment law, particularly in relation to agency workers, is dealt with by regulations; that is appropriate because of the detail required. It is not a break with the past, albeit I accept the criticisms that we may be seen to be taking part for ourselves; I think it is entirely consistent with the way this has operated previously. It is something that we shall now consider in terms of the responses to the consultation. For those reasons, I think the hon. Member for Mid Buckinghamshire should withdraw his amendment.

[Greg Smith]

I accept many of the Minister’s points about the consultation, but as my hon. Friend the Member for Bridgwater has made clear, there is a Henry VIII power here. When legislation as wide as this is proposed, it is a big problem to have such a lack of clarity about where it will lead for agency workers, who are such a critical part of our economy and our workforce across many sectors. Given the Henry VIII element, we seek a Division.

Question put, That the amendment be made.

Division 1

Question accordingly negatived.

Ayes: 4

Noes: 14

[Greg Smith]

I beg to move amendment 143, in clause 1, page 3, line 17, leave out “with the specified day” and insert

“18 months after the day on which the period began”.

This amendment defines each initial reference period as being 18 months long.

[The Chair]

With this it will be convenient to discuss amendment 144, in clause 1, page 3, line 19, leave out “with the specified days” and insert

“18 months after the day on which the period began”.

This amendment defines each subsequent reference period as being 18 months long.

[Greg Smith]

This is the last group of Opposition amendments for a little while. Amendments 143 and 144 would specify the length of the reference period as 18 months. The RPC, which was widely referenced in the first set of amendments, has said that the Government have not justified why they are pursuing—

[Michael Wheeler]

Will the hon. Member give way?

[Greg Smith]

That was quick, but go on.

[Michael Wheeler]

It is a quick intervention: I am just wondering whether the amendment’s reference to 18 months is another example of the ridiculousness that we were talking about.

[Greg Smith]

It is certainly probing. Like earlier amendments, it is intended to spark debate so that we can understand where the Government sit on the issue, what is coming down the line and what businesses can expect in the real world once the Bill receives Royal Assent at some point next year.

The last Conservative Government removed exclusivity clauses in zero-hours contracts, tackling those contracts that were potentially exploitative. The clause that the amendment seeks to amend is based on the flawed assumption that employers will exploit their employees and that all the power in the relationship lies with the employer. There is no doubt that some do, but the Opposition do not hold the presumption that all will. Those that do should be challenged, but the vast majority do not seek to exploit their employees.

The London School of Economics has found that zero-hours contract jobs have 25% more applicants than permanent positions in the same role. That flexibility is clearly sought after by employees. The author of the study said:

“Policymakers should be cautious with how heavily the use of zero-hours contracts is regulated.”

The RPC has asked the Government to clarify the likelihood that the Bill’s provisions on zero-hours contracts will increase unemployment and worklessness, and how far that risk is mitigated by zero-hours contracts remaining potentially available. I would be grateful if the Minister clarified the extent to which they will remain available. What is his view on the impact that the policy will have on workers who might like to work fewer than the guaranteed number of hours a day? Some people may desire that.

We believe the legislation should include the exact length of the reference period. I accept Government Members’ point about the 18-month figure, but as I said to the hon. Member for Worsley and Eccles, it is about triggering a debate, kicking the tyres and getting to a reasonable but considered position on what the reference period should be. The Opposition’s point is that we should know what it is. It is not just politicians in this House and the other place who need to know, but the real businesses, entrepreneurs and drivers of our economy who employ real people. They need to understand what the legislation is going to specify and what the rules are by which they are going to have to play the game.

[Laurence Turner]

The Workers (Predictable Terms and Conditions) Act 2023 sets the reference period at 12 weeks. The hon. Gentleman says that 18 months is probably an artificially high number. Does he think that the 12-week reference period, which the previous Government supported just 12 months ago, is in about the right place?

[Greg Smith]

The hon. Gentleman is absolutely right that the previous Government set the reference period at 12 weeks. What we do not have clarity on is whether the Bill will change that. Will the new Government shorten it or lengthen it? It is about clarity. This is a rushed Bill, published in 100 days. We do not have the answers or the hard data that we need for debate and that individual Members need so that they can go to businesses in their constituency and take a view before they vote on Report or on Third Reading.

We heard from several witnesses that the length of the reference period needs to account for seasonal work. UKHospitality has put 26 weeks forward as a sensible length. That is not necessarily the Opposition’s position, but we would be foolish to ignore the evidence that the hospitality sector presented to us last week.

The amendment is intended to test what the Minister is planning and—ever the most critical question in politics—why. How will we ensure that the length will not be overly burdensome and that it will take account of the different needs of so many sectors?

[Sarah Gibson]

Like previous amendments, the amendment highlights a serious concern among quite a lot of local businesses to which I have spoken, especially SMEs, which is that a considerable amount of detail has not been included in the Bill and is being left to secondary legislation. Although consultation is highly welcome, it needs to happen as fast as possible, because the interim period between seeing the Bill and getting the detail is causing a huge amount of stress and uncertainty for businesses working in ever more complicated conditions.

--- Later in debate ---

[Greg Smith]

Of course it is on the absurd end of the spectrum, but as I said to the hon. Member for Worsley and Eccles, that is to highlight the issue. Sometimes, when we have a total lack of clarity and of the information that real businesses need, as the hon. Member for Chippenham highlighted, we throw in a stone to try to get a proper answer. That is what the Opposition seek, and I will be incredibly grateful if the Minister now tells us what he wants the reference period to be.

[Justin Madders]

I am grateful to the shadow Minister for intervening, but there is not a total lack of clarity. We have been clear all along, including when we were in opposition, that the reference period should be 12 weeks. However, we want to continue dialogue with businesses to ensure that we get the right answer to the question of how long the reference period should be for guaranteed hours. As we heard, it is an established period that has been used in the previous Government’s legislation, in the workers’ predictable terms and conditions provisions and under the Agency Workers Regulations 2010. It is an established principle in law that 12 weeks is about right for a reference period. Nevertheless, we will continue to consult and engage with businesses, trade unions and all employers’ organisations about whether it is right.

At the moment, our considered view is that 12 weeks is the right period; we certainly do not believe that 18 months is. [Interruption.] I think the shadow Minister is nodding. We do not think that 18 months is a realistic proposition. I understand the point about seasonal work, but 18 months would take us through half a dozen seasons. He will probably accept that that would not necessarily work.

As for why this measure is needed, the shadow Minister said that the Opposition do not presume that all employers set out to exploit their workforce. I make it clear that the Government do not presume that either; we believe that good businesses are good for their workers and good for the wider economy. We heard plenty of witnesses give evidence last week about the good industrial relations that they practise and the benefits for their workers. The point of the Bill, however, is that we know that not everyone is a good employer. We need to weed out bad practice, because we believe that all workers deserve the same protections in the economy.

The shadow Minister asked whether zero-hours contracts will still be available for those who might not want to work guaranteed hours. He will be aware that the legislation does not compel an individual to accept an offer of guaranteed hours; it has been set up in that way for the individual. There are examples of people—possibly including my hon. Friend the Member for Gloucester in his earlier years—whom zero-hours contracts suit better. If that is what he genuinely wants to continue working on, he is entitled to do so.

The hon. Member for Chippenham asked about the speed at which we are operating. I think she wants us to go faster, so she might need a word with the shadow Minister, who wants us to go a little slower. We are clear that we will take our time before we introduce a lot of the provisions, because we want to get the detail right and we want to engage with businesses. An awful lot of the press coverage is understandably raising anxiety levels, but a lot of it is based on speculation rather than on the law, because the law has not yet been set: the Bill has not been passed, and the regulations and the codes of practice that will follow have not been produced. It is important that we take our time, because we want to work with businesses as we produce information going forward.

The hon. Member for Bridgwater made a point about seasonal work that we heard on various occasions during our evidence sessions, but I think my hon. Friend the Member for Gloucester has answered it: if an employer knows that they will be busy for particular parts of the year, a fixed-term contract is the answer.

On the question of business experience, I can claim to have set up my own business when I was 17—I am not saying that it was a FTSE 100-listed effort or anything—and before I was elected I worked in the private sector for 20 years.

We do not think that the shadow Minister’s amendment would deliver the policy outcome that we seek. I suspect he recognises that, too, so I invite him to withdraw it.

[Greg Smith]

Of course we will withdraw the amendment, but the critical question is why the Minister has referred to 12 weeks, but it is not in the legislation. As he considers tabling amendments of his own in Committee or on Report, I urge him to lock that in, so that certainty for business is on the face of the Bill, rather than things being left open.

[Justin Madders]

If we put 12 weeks on the face of the Bill, would the Opposition support it?

[Greg Smith]

Our own legislation last year cited 12 weeks. There is clearly a lot in the Bill that we oppose because we just do not think it works in the interests of British business or workers, but 12 weeks would at least give us some certainty that would be consistent with the previous Government. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Anna McMorrin.)

Employment Rights Bill (Fourth sitting)

Greg Smith Excerpts

Thursday 28th November 2024 Public Bill Committees

[The Chair]

Welcome back. Will the witnesses introduce themselves, please?

Mike Clancy: I am Mike Clancy, general secretary of the Prospect trade union.

Andy Prendergast: I am Andy Prendergast, GMB union national secretary for the private sector.

[Greg Smith (Mid Buckinghamshire) (Con)]

Q127 Good afternoon, gentlemen. I will put the same question to you as I put to the other trade union representatives we have heard from so far. The Bill is wide-reaching. Some people from other trade unions have even suggested that it would re-unionise the economy, to use words we heard on Tuesday. Do you share that assessment, and do you feel—because this is an important test—that your unions believe the Bill goes far enough?

Mike Clancy: The primary purpose of the Bill is to reset employment relations, and trade unions are an important part of that. I have the privilege of sitting on the ACAS council, which is a tripartite body responsible for overseeing good employment relations and good practice. That demonstrates that unions, employers and independents can work together successfully. I see that as the primary purpose.

The reality is that in so many jurisdictions that have positive employment relations and that are addressing their productivity challenge, unions play a very important role. An objective to have the right level of trade union membership in the economy, so that working people have a voice, is at the heart of the Bill. Previous Administrations have restricted the ability of working people to have a voice. So there is a real opportunity to, first, improve employee relations; secondly, ensure that working people generally have a voice; and thirdly, ensure that unions are part of the fabric of the economy in a way that addresses the challenges ahead. I would say that the Bill can deliver all those objectives.

[Greg Smith]

Q So you do not think that there is any part of the Bill that is deficient, and that your union would rather see strengthened or modified in any way.

Mike Clancy: The key thing we would like to see is that access to workplaces is not confined to physical premises, but is also digital. That applies where union recognition already exists. We need to ensure that we can address the workplaces of today and tomorrow, not just those of the past. Physical access is important, but many workplaces have remote, hybrid, virtual working arrangements, so we would want the Bill to be amended to ensure that digital access, in a way that is compliant with data protection, is addressed.

[Greg Smith]

Q What does that look like?

Mike Clancy: It probably looks like ensuring that the best practice from employers now—who allow us access to their intranet and to electronic and digital means, in terms of their staff—becomes the norm, and that it complies with data protection. That happens in workplaces up and down the country now, but some employers see the law in a different way.

An important thing to get across is that if you start to talk to an employer about organising their workplace, the best way to do it is by consensus. That means understanding the employer—understanding the nature of their product and what their concerns may be—as well as making sure that their workforce’s aspirations, if they want a collective voice, are delivered in a way that works successfully for all parties. The access conservation needs to reflect the nature of the workplace as it is now, not just as it has been. It should not be confined to physical premises.

Andy Prendergast: From our point of view, this is very much a 21st century Bill for a 21st century economy. It is not about looking back; it is about trying to make sure that what we have is fit for purpose, moving forward. Unionisation rates are around 20% at the moment. If we look at a graph of unionisation and also at a graph of rising inequality and the fall in productivity, we will see that they are almost perfect correlations. We believe that collective bargaining is a way of improving things. That has been identified by organisations as diverse as the World Economic Forum and the Church of England. If the Bill ends up with higher levels of unionisation, which leaves lower levels of inequality, we believe that that will be a good thing.

On where the Bill is lacking, I think, like Mike, that we need to make sure that there is a digital aspect of access. Many of our members working for gig economy platforms in parts of the new economy do not have the old workplace that we traditionally know. It is not a factory and not necessarily an office. So we have to talk about how rights can be accessed by people who work remotely, who work from home, or who simply do not have a workplace.

There is one area where the Bill could be strengthened. We welcome the improvements in statutory sick pay, but we do not believe that they go far enough. We did a survey today of care workers at HC-One that shows that over one third cannot afford to take sick leave. We saw during the pandemic that having people go to work when ill, potentially spreading diseases, is bad for everyone. We think something could be done on that later that would ultimately help workers and help the economy generally.

[Greg Smith]

Q You mentioned the 20% unionisation rate. Do you have a target that you want to see?

Andy Prendergast: They key thing for us is that everyone who ultimately wants to join a trade union has the option to do so. It is important that people are aware of their rights, aware that they can join trade unions, and aware that they have a right to, for example, SSP on day one, statutory holidays and the minimum wage. Rights that people do not know about and that cannot be enforced are ultimately no use. This is shamelessly partisan, but I would like to see union rates being far higher, and I think that the economy as a whole would benefit from that.

[The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)]

Q It is a pleasure to see you in the Chair this afternoon, Sir Christopher. Good afternoon, gentlemen. Generally speaking, do you think that the Bill will improve working conditions, particularly for those in low-paid and insecure work?

Andy Prendergast: I think the Bill is a major step in the right direction. One of the big problems that we have seen, certainly over the last 30 to 40 years, is the huge increase in insecurity in the workforce. That tends to have a massive impact on the individual concerned and their ability to fully partake in the economy, and to make long-term commitments through mortgages and loans—the kind of stuff that drives the economy. Ultimately, we have seen that as they have lost their guaranteed hours—in zero-hours jobs, for example—and there has been the removal of their employment rights, those people are less able to exercise those rights. So we see the Bill as a major way of moving industrial relations forward.

We would also point to the work around the pandemic. In the last 14 years, we were very much locked out of Government in most areas, yet when the pandemic came around, there was a fantastic bit of work between the CBI, the TUC and the Government, with Rishi Sunak standing on the steps of No. 10 talking about the fantastic work that led to the furlough scheme, which saved millions of jobs and millions of people from poverty. What surprised us is that that great work was then stopped virtually as quickly as it happened. If we look at other G7 countries, a tripartite system is what drives higher levels of productivity, lower levels of inequality, and ultimately, higher levels of investment and economic outcomes. We think that the Bill is a long overdue step in the right direction of moving some power back towards workers and away from businesses, too many of which exist for exploitation.

Mike Clancy: I echo those comments. If we look at the responses from the business community, yes, there is going to be some anxiety about the detail and how it will work—again, I reference my experience not just in ACAS, but from working with employers more generally—but we find ways to do this and operate in practice successfully. Good employers have nothing to fear in the Bill. That is not just good employers that are larger, and we think that with the right degree of consultation, which the Government have committed to, we will be able to address those areas where there are a few wrinkles and things to ensure work in practice.

We have to reflect on what the alternative was. The deregulatory, more de minimis approach to employment regulation applied previously, and if that trajectory had continued, we would not have addressed the issues of precarious work and productivity, and we would not have been able to do that in a way that looks at the workforce of the 21st century, as opposed to looking backwards.

There is a lot in the Bill, but that is not surprising. There will probably be a long period of adjustment. With the right consultation, I think we will get to a position where we look back at this as a milestone in changing how we do things, a paradigm shift in relations. I think that it will drive better engagement not just for unionised workforces, but for workforces more generally, because that is where employers will see that they can answer the challenges on the next generation of technology insertion and organisational design, and make sure that they can get the talent that they need.

--- Later in debate ---

[The Chair]

I do not know what the collective noun for professors is—a proliferation, perhaps. Anyway, could you please introduce yourselves briefly?

Professor Bogg: I am Professor Alan Bogg, and I am a professor at the University of Bristol and a barrister at Old Square Chambers.

Professor Deakin: I am Simon Deakin, and I am a law professor at the University of Cambridge.

Professor Simms: I am Melanie Simms, and I am professor of work and employment at the University of Glasgow.

[Greg Smith]

Q Good afternoon to the witnesses. You are professors of law, but we have heard from other witnesses that the Bill has a lot of holes in it and is very reliant on secondary legislation further down the track. Given that it is such a reforming piece of proposed legislation, do you believe it to be a good proposal, in terms not of its content but of the way you should go about making law?

Professor Deakin: I would not say that it has holes in it. It is perfectly normal to legislate in this way and defer complex matters to regulations. As a potential Act of Parliament, it is no more or less complex than similar Acts that we have had in the past. Labour law has always been complex and very granular. There are many provisions in the Act that will take effect without the need for further delegated legislation, and there are quite detailed schedules. I do not have a problem with the way it has been drafted, but there are issues with its scope and coverage, which we might go on to discuss.

Professor Bogg: It is a very ambitious piece of legislation, and it was delivered at lightning speed—in 100 days—which is an important part of the context. The collective labour law dimension of what is in the Bill is actually very simple. Much of it is in the form of repeal, and there are some proposals for tweaks to the existing structure. In terms of the collective dimension, I do not think the Bill has holes in it. It gives a tolerably clear indication of what the relevant provisions will look like and what needs to be done.

In terms of the individual provisions, it is fair to say that there is detail that needs to be worked out on day one dismissal protections and on guaranteed hours, but those are very complex issues and I do not think there is anything unusual about that. It is the beginning of a conversation, not the end of the conversation, and that is why we are here today.

Professor Simms: I am not actually a professor of law; I am a professor of work and employment, and general employment relations. I am always interested in the system as a whole, and how law and the implementation of all kinds of other pressures collectively shape employment relationships.

I agree with my two colleagues that the Bill is a very useful starting point. Law can only ever go so far in determining the rules of the employment relationship. It will always rest on wider social systems, economic systems and so on.

[Greg Smith]

Q I am sure you will have seen that the Regulatory Policy Committee has been quite damning of the impact assessments done on the Bill. You said that it has been delivered at lightning speed, so perhaps we should not be surprised that the impact assessments do not necessarily add up. How concerned are you on a point of law, or indeed a point of employment law, that legislation is coming through for which the impact assessments have been branded by a very well-respected independent body as “not fit for purpose”?

Professor Deakin: The RPC said that about some of the impact assessments—it raised a red flag over some of them. They are concerned not so much with the legal drafting as with the economic effects of the law. The impact assessments are engaging in a cost-benefit analysis, which is attempting to put some numbers on the impact the law might have on the economy in terms of cost to employers and knock-on employment effects. Actually, they have quite a strict protocol to deal with. What counts as a cost is set out in some detail in protocols that we could discuss. For example, the cost to private parties—to employers—counts as a cost even if that is simply redistributing to households and to workers. From an economic point of view, we would be interested not so much in the private cost, but in the impact on the economy as a whole. Do these laws interfere with the way markets work? Are they going to lead to unacceptable costs, or will they produce countervailing benefits?

As a scholar interested in the economics of law, and having researched the impact of labour law, I was surprised by some comments in the RPC documentation. I was very surprised to read the RPC suggest that there may not be inequality of bargaining power in certain sectors, such as the public sector or transport, where there are very large employers, some of which are effectively monopolies. There will probably always be some inequality of bargaining power between individual workers and even smaller employers, but we have trade unions and collective bargaining because there is that inequality of bargaining power. The part of the Bill that addresses the ability of unions to organise, and to organise industrial action, in sectors where there are very powerful employers does seem to me to address a fundamental issue of inequality of bargaining power.

Elsewhere, the RPC asks for more evidence about asymmetric information and productivity. I thought the impact assessments were actually very good, in citing secondary sources on those very issues, and also balanced. They cited—I should declare an interest—work I wrote, but they also cited other work. You will see scholars cited in the impact assessments who have a less positive view than I do about the economic effects of labour laws. There are no citations at all in the RPC documentation. Now, that may be because that is not the job of the RPC. Fair enough, but I should have thought that the RPC request for more information and clarification from the Department for Business and Trade could quite straightforwardly be met.

Professor Bogg: I support much of what Simon said. Focusing on the collective reforms, there has been scaremongering about re-unionisation of the economy and how radical this all is. You would think that we were going back to 1965 in terms of the reform of the strike laws, when actually we are probably going back to 2015 with a few tweaks. The minimum service levels framework is being repealed, but as far as I am aware it was never used. There was a prospect of its use once, but it was so inflammatory that the employer in the ASLEF dispute stepped back from using it. The Trade Union Act 2016 ballot thresholds will be repealed. In that context, and with a few proposed adjustments to strike law, this is not very radical. It takes the UK from a hyper-restrictive framework in comparative terms, to a restrictive framework in comparative terms. In terms of the overall international context, even if all of this makes its way on to the statute book, the UK will still have one of the most restrictive strike laws in Europe.

Professor Simms: I could not agree more. It sets out an agenda that would be regarded as incredibly restrictive in many comparator countries. I think it is better than what we have at the moment, which is such a restrictive context particularly for trade unions and strike action. Concerns have been raised by the International Labour Organisation about the UK’s restriction on strike activity. In my judgment this, as drafted, does not take us fully into compliance even with some of the concerns expressed by the ILO—it is still incredibly restrictive.

[Greg Smith]

Q My final question is off the back of that. On Tuesday, Mick Lynch—let us name him—told us that the Bill will lead to the re-unionisation of the economy. Is he getting overexcited?

Professor Simms: We have to be realistic about the resource capacity of our trade union movement at the moment. There are certainly things in the Bill that will make life simpler for trade unions—not necessarily easier, but it will require less resource to, for example, organise for a ballot, or to organise a re-balloting during a period of industrial action. At best case, that frees up some capacity to get on with the nitty-gritty of representing workers in the workplace and solving workplace problems. I cannot prove that that is going to happen, obviously, but that is certainly more than possible. But will it free up sufficient capacity to try and organise in the breadth of the retail sector, for example—lots of small employers? Personally, I think that is unlikely. I do not think that the UK trade union movement has that resource capacity at the moment.

Professor Deakin: Historically, what drives unionisation and strike levels is the economy. High inflation drives strike action and tends to drive union membership. Union membership, union activity and strike activity are highly sensitive to the wider economic context, which at the moment probably does not favour a massive increase in union membership. I would be very surprised if this particular measure moves the dial much on membership, and I do not think it will move the dial much on industrial action either.

What could happen, especially with the arrangements for sectoral pay bargaining, is that many workers, whether or not they are in a trade union, would benefit from sector-wide collective norms. That would be the case where the arrangements come in for two sectors that are mentioned in the Bill, and hopefully that is just the start. Other European countries and many countries outside Europe have sectoral collective agreements that, in effect, set a floor for an industry or sector. I am not sure whether you would call that re-unionisation, but I think the coverage of collective agreements is perhaps more important than simple membership, although unions depend on membership for their finances. The economic effects will turn very much on coverage.

Professor Bogg: As I said, the reforms to strike law are fairly modest, and I think that is true of collective bargaining laws. There are two incremental nudges towards sectoral institutions in two sectors, and there are some very modest tweaks proposed to the statutory union recognition procedure—lowering the preliminary membership threshold, potentially, and removing the majority support likely threshold—but it is difficult to see. I do not know what re-unionisation means, I must confess, but I will be very surprised if you see a radical upsurge in union recognition as a result of these very sensible but cautious changes in the legislation.

[Justin Madders]

Q Just to aid the witnesses, it was the shadow Minister who used the term “re-unionisation” in the evidence session on Tuesday, rather than one of the witnesses. That may be why it is not something that is particularly resonating with you.

I want to ask you in particular, Professor Deakin, about the impact of the regulations on increased productivity and innovation—the general economic benefits. Do you think that that will have a positive impact on such issues?

Professor Deakin: I think so. The evidence internationally is that there is a strong correlation between stronger labour protection and both productivity and innovation. I think that sentiment in the research community has shifted very much in the past 20 years. That is partly because we have better data and probably better methods. Certainly, a generation ago, the World Bank was quite hostile to the idea of labour law and said that labour laws, in aiming to help workers, might harm them. That, however, is no longer the World Bank’s position. The World Bank has said that there can be too little labour law in an economy—too little protection for innovation and productivity.

Of course, productivity has many causes, and the way we regulate labour is only one issue. If we are talking about labour law, though, these reforms are essential to help improve the productivity position. Will this law on its own lead to an improvement in UK productivity? Not necessarily, because that depends upon how we regulate other areas of the economy, and that is affected very much by the way corporate governance works and also by training and other aspects that are not all covered by the Bill. But is this Bill essential in the area of labour law for improving economic performance? Absolutely. Does it go in the right direction? Yes, it does.

The research we have done in Cambridge, which I mentioned in my written evidence, shows that, on average, strengthening employment laws in this country in the last 50 years has had pro-employment effects, for various reasons. That is, as I said in my notes, not a predication or a forecast, but historically in this country, stronger labour laws are not associated with unemployment.

Professor Simms: Could I chip in as well and emphasise the point that Simon has just made about skills and training? Skills and training of managers—the professionalisation of managers—and of our workforce are really crucial ways of shaping productivity and innovation. They intersect very strongly with some of the issues in the Bill.

In general, the push to professionalise management of work—the managerial decisions—is a really important part of that more complex story that Simon has just spoken to. The signals through the law, but also through other areas of policy, to managers, organisations and employers about the professionalisation of their management are a really important thing that the state can do to support that general up-tick in productivity and innovation in general.

--- Later in debate ---

[The Chair]

Good afternoon. Thank you very much for coming along. Would each of you introduce yourself, please?

Luke Johnson: My name is Luke Johnson. I have been an entrepreneur and investor for the best part of 40 years, and I am currently the co-owner and the director of various businesses employing roughly 10,000 people.

Michael Lorimer: I am Michael Lorimer; I am the chief executive of the DCS Group. We employ about 600 people. We are in the fast-moving consumer goods sector, and we have the world’s biggest non-food clients. When you buy shampoo, shower gel or Fairy liquid from a convenience store or a discount retailer, we have probably distributed it and indeed made some of it, because we have a manufacturing division as well. That is quite unusual, I think—for a distribution business to actually invent a manufacturing business—in the last 10 years. We are based in Oxfordshire and Redditch, in Worcestershire.

[Greg Smith]

Q Good afternoon, gentlemen. This is a far-reaching Bill. We have heard from the Government and from other witnesses that there is potentially a £5 billion cost to the economy associated with it. Others have suggested that that might even be a small c conservative estimate. From the perspective of your business interests, what is the likely impact of this Bill on the bottom line economically, as well as to overall job numbers in the economy?

Luke Johnson: I think you need to put it in context. From my various decades of creating businesses and jobs, I would say that we now have among the highest ever levels of tax burden and of overall regulation and legislation, and that this is a high-cost country. Job vacancies have been falling for at least 15 months. Unemployment is going up. Interest rates are massively higher than they used to be. Insolvency specialists tell me that they are rubbing their hands because they think that next year will be very busy. I would say that even if we do not suffer a technical recession next year, it is odds-on that there will be a serious slowdown. I am at the cutting edge of businesses, and, in some cases, some of my companies might not survive next year. I do not know how many Committee members have ever been involved in starting and growing a company and keeping it from failing, but it is not much fun.

The idea that now is a good moment for small and medium-sized businesses—which, let’s face it, are the future; they are the ones that disproportionately innovate and, actually, disproportionately create most of the jobs. They are the ones that are the next big businesses; every business started as a small business once. On the idea that companies that can barely afford any form of HR could stomach a big new Bill of 150 pages and 28 measures, they will not even have time to read it. The idea that they can adopt something like this when they are facing quite possibly—we have to remember that they have the hangover of two years when so many of them were shut. They have legacy debts and energy prices. Electricity prices in this country are the highest of any developed nation. Try manufacturing things here now. The timing of this is beyond belief, and that needs to be put into context. Whether £5 billion is the real cost or not, it is death by 1,000 cuts because you never know until you get a big tribunal what the real cost is, for example.

Michael Lorimer: I agree. Obviously, a Bill like this does not exist in splendid isolation if you are running a business. Luke has identified the increased costs of doing business, which are severe and impact small to medium-sized enterprises most, which, as you will be aware, represent 80% of the employment in this country. There was the news yesterday about the White Paper, “Get Britain Working”, and as a top line, I am very supportive of that. I think that is absolutely brilliant. Getting 2.8 million people back into work is something I am very passionate about. In Banbury, we are beside an area of deprivation, with a lot of people on benefits, and a lot of young people who are feeling quite depressed about life. We would love to be offering those people jobs—I cannot emphasise that enough. For six months of the year we have temporary staff coming in, and we are very glad they come—they come from different countries, work very hard and do great work for us.

My concern, without being able to give you a number on it, is that for some of the riskier hires that might come from the areas around where our business is based—in other words, people not in education, employment or training, kids who have not worked before, or people who have been unemployed for a long time; you hear on the radio every day that people in their 50s cannot get a job—businesses will be very slow to take a risk because of the day one legislation that is coming down the track. We have an HR department, so we can deal with this to some extent, but as you slide down the road and find businesses that employ maybe less than 20 or 10 people, there will be deep concerns and perceptions that this is just too expensive and scary.

I was hugely encouraged by the White Paper—I think the top-line aspirations are absolutely the right ones. It is the same direction of travel, towards 2 million jobs, that the Jobs Foundation have published a report on this week, and that the Centre for Social Justice are focused on. I would exhort all of you politicians, regardless of your colour, to get behind the concept of getting Britain working. But my fear is that this torpedoes a lot of those plans—genuinely, that is my fear.

[Greg Smith]

Q I certainly recognise the picture you paint of Banbury; it is very close to my constituency and I am sure you have people from Buckinghamshire on your payroll. What modelling and projections have you done—on the presumption that the Bill becomes law and obtains Royal Assent at some point next year—on employment numbers in your businesses?

Luke Johnson: We are still grappling with the fallout from the Budget. There are millions of pounds of additional tax that some of my companies will have to pay, and a 6.7% increase in the national living wage, when average inflation is 2% or 3%. As for the idea that many businesses have already given deep thought to this new piece of 150-page legislation—when we already have such things as the Employment Rights Act 1996, the Equality Act 2010, the Health and Safety at Work etc. Act 1974, and many other pieces of legislation—I dare say that large companies have given it some thought, but most of the businesses I am involved with are not so big. I think they will wait and see what the final result is before trying to measure whether it leaves the business smaller.

With any piece of legislation like this, we have to remember that it is not just the current jobs affected, but the unseen jobs and opportunities that were never created. I urge you to look at the fact that, for the first time in many years, the number of businesses being created in this country has been falling or stagnant for five years. That is more or less the first time in decades. If we lose the full employment we have enjoyed and the enterprise economy that we have managed to create—I believe it to be much more fragile than some might believe—it will be incredibly hard to get back. Jobs do not just fall from the sky. They appear because companies are created by risk takers, and they take a risk with every job they create. Jobs only exist because they are helping that business to progress, and 80% of jobs are nothing to do with the Government—they are private sector. If you crush the private sector, you crush jobs. All the research shows that the single most important ingredient for a happy society is jobs. Without jobs, you do not have civilisation.

Michael Lorimer: Our turnover is in the public domain, so I can share it with you. We will probably turn over about £370 million this year. We are in a high-turnover, very tight-margin business, so if we make £10 million net, that is about the height of it. It is very difficult to estimate the increased cost of national insurance contributions and the national living wage, because not all the details are yet clear, but we think it will be somewhere between £1.5 million and £1.8 million. That is quite a big chunk out of our net profit.

We do not have a huge problem with it. We are a company that believes strongly in creating prosperity. The national living wage is something that our hearts have no problem with, because we would like to see people getting paid correctly, but we have to mitigate that. That is something that we just have to get on with. Our company has grown successively every year since it started 30 years ago, in top line, bottom line and people numbers.

I need to stress this again to you: the passion that we have is growth and job creation. When we see people coming into the business, working their way through it, earning more money, developing their career and prospering, that is what brings us the greatest joy of all. My concern, which I have to repeat, is that businesses smaller than ours—following on from Luke’s point, we were a small business at one stage—are going to find it very hard to get on that growth trajectory.

[Justin Madders]

Q Good afternoon. A number of witnesses, including many from the business community, have welcomed the intention behind the Bill to increase workplace protections. Do you feel that the current employment law landscape is too favourable to employees, too difficult for employees or about right?

Michael Lorimer: From my perspective, there is a pretty good balance between employer and employee at the minute. I am sure you could unpick that, and there could be cases for either side, but as somebody who runs a business in, quote unquote, a “fast-moving environment”—in fact, Luke Johnson’s business is much faster-moving even than ours—where you are focusing on driving your business and trying to get results, I think that there is actually a good balance. I am not particularly in favour of tinkering too much with it. That is my personal view.

Luke Johnson: I would slightly differ, in that I think some areas are increasingly onerous for employers. Increasingly, when I talk to entrepreneurs, they are looking to outsource, offshore or automate rather than employ people. Not all of that is legislation and regulation; post furlough and lockdowns, there is a vast amount of talk among employers and owners of businesses about workforce motivation. That goes back to a point that Michael made earlier about the number of people not in work who are of working age and able-bodied. I think this is an issue for society as a whole, and I think a happy society is one in which people are productively occupied.

I am surprised that you say that many employers want greater protections for their staff. They are very entitled to give them to them if they want. They do not need to rely on the Government for that; they can just give them better contracts if they want.

There are a number of concerning aspects to the Bill, which could be counterproductive if the objective is higher living standards. As I understand it, this Government’s priority is wealth creation, prosperity and jobs. Ultimately, although I do not believe that this legislation will be devastating to employers, I think it will be damaging for job creation and therefore counterproductive to wealth creation and to achieving higher standards of living.

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[The Chair]

Sorry; I think that is enough. Perhaps if you have more to say, you will be able to bring it out in answer to questions.

[Greg Smith]

Q I have a straightforward question that will probably provoke some debate. Impact assessments of any bit of legislation are clearly hugely important to the Equality and Human Rights Commission. Who is right—the Government or the Regulatory Policy Committee—in their condemnation of the impact assessments?

John Kirkpatrick: I am not sure you would necessarily expect me to answer that question directly, Mr Smith. Nevertheless, I will say that yes, you are quite right: impact assessments are very important to us.

Let me say a bit more about that in the context of the Bill. As an example, I will take some of the provisions designed to improve opportunity and to regulate particular forms of contract. We know from our work that women and disabled people have lower rates of employment than men and able-bodied people, and we know that younger workers are more likely to be in zero-hours contracts than workers of other ages, and so on and so forth. The measures in the Bill that are designed to protect the interests of those people with protected characteristics may well be beneficial to them, but not if the result is that those jobs then vanish rather than improve.

What I would put back to the Committee, and potentially to the Government, is the real importance of assessing up front the likely implications of the measures that Parliament wants to put in place. If it does enact the measures, subsequently reviewing and monitoring them to know what impact they have actually had would be really important. I should probably put in my advertisement, at the end of that comment, that it seems to us that only if they do that will the Government be fulfilling their obligations, under the public sector equality duty, to assess the impact of the things they want to do on those in whose interests they seek to act.

Margaret Beels: I would address the question in a similar way, in the sense that when we look at the labour market, we see the job situation being very flexible, but one person’s flexibility can be another person’s precariousness. We are about to publish some research—in fact, we will publish it tomorrow—that is based on a survey of workers, which demonstrates that about 10% of workers are in precarious work and about 8% of workers get stuck in precarious work. That is the matter that needs to be addressed.

[Greg Smith]

Q I appreciate that, from the perspective of the Department of Business and Trade, there might be a more clearcut answer, but from your perspective, Mr Kirkpatrick, given your answer earlier, do you think there is a high risk that the measures in the Bill could reduce the number of jobs in the UK economy?

John Kirkpatrick: The answer is that it is hard to tell. You have already heard evidence on that—I heard some of the evidence this afternoon and you have heard other evidence in other sessions—from others who are arguably better qualified to answer the question than I am. As I say, I encourage you as a Committee to encourage the Government to ensure that it thinks that point through carefully, as you consider the Bill, and to bear that advice in mind as you scrutinise it.

Margaret Beels: My office has not done that analysis and I would be guessing if I answered the question.

[Justin Madders]

Q May I ask you, Margaret, for your views on how the fair work agency might help in the enforcement landscape?

Margaret Beels: I took on this role in the expectation that there was going to be a single enforcement body, which the previous Government had referred to but did not bring about. I was strongly supportive of the creation of a single body and accordingly I am supportive of the creation of the fair work agency.

From my perspective, which involves looking at what has worked under the existing arrangements and what could work better, I went back and looked at the recommendations in the strategy that I most recently published, on 11 November, and it had 12 recommendations. I looked at them and considered how things are working out now under three bodies with different governance, different plans and different ways of doing things, and whether I think that under a fair work agency regime those things would be done better. A fairly quick assessment is that half of them would definitely be done better; the other things would probably be done much the same. The ones that relate to having a better joined-up approach, to greater efficiency and to better sharing of information among bodies are the things that I think the fair work agency will do a lot better.

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[The Chair]

Dr Stephenson, would you please introduce yourself briefly?

Dr Stephenson: Thank you very much for inviting me here this afternoon. My name is Mary-Ann Stephenson. I am the director of the UK Women’s Budget Group, which is a feminist economics think-tank that works to analyse the impact of economic policy on women and men, and on different groups of women and men.

[Greg Smith]

Q Good afternoon, doctor. Given the work you do, which you have just described, what is your assessment of what the Bill will do for women and men in the workplace?

Dr Stephenson: We think this Bill marks an important step in the right direction in improving the rights of women in the workplace. We particularly welcome the provisions on zero-hours contracts, which will benefit over half a million women. We also welcome the changes to statutory sick pay; 73% of those who currently do not qualify for sick pay because they earn too little are women.

We welcome the fair pay agreement in social care—I know that the previous speakers talked about social care, and it would be good to talk a bit more about that. Obviously, women are the majority of workers in the social care sector, but they are also the majority of those needing care. Improving pay and conditions for social care workers will also have a beneficial impact on the recipients of care, because it will reduce turnover in the sector, which is a really big problem at the moment. There would also be a knock-on impact on unpaid carers, the majority of whom are also women—care is very much a female-dominated sector.

We welcome the improved day one rights to paternity and parental leave. These are often seen as particularly beneficial to fathers and partners, but we believe that women will also benefit from them. Women’s unpaid work is at the heart of their economic inequality; women do 50% more unpaid work than men. The time when a child is born is often the point at which the distribution of unpaid work gets fixed. Most parents go into parenthood thinking that they want to have a more egalitarian sharing of care than maybe their parents did when they were growing up. But as one person described it to me, “You wake up one day, and you suddenly find yourself back in the 1950s,” because of the very limited rights that fathers and second parents have. So we think that this policy will benefit women as well.

We welcome the greater protection against pregnancy and maternity discrimination. We know that you heard earlier this week from the Fawcett Society and Pregnant Then Screwed about flexible working and sexual harassment, and we very much support their positions.

There are some areas where we would like the Bill to go further. On statutory sick pay, for example, we think that the Government needs to increase the rate. The low rate at the moment means that even those who are entitled to it often continue to go to work when they are ill, which is not only bad for them, but bad for public health—

[Greg Smith]

Q I hesitate to interrupt you, but can you give us an indication of where you think statutory sick pay should sit? What should its value be?

Dr Stephenson: At least at the level of maternity pay, for example. We are one of only four countries in Europe that does not extend some right to sick pay to self-employed people, so we think we should do that.

We were disappointed that the Government went back on their original proposals that people who were previously on zero-hours contracts who had shifts cancelled at the last minute should be reimbursed for those shifts. That is a particular problem for women, who often have to arrange childcare if they are in paid work, so having a shift cancelled means not just the loss of the pay, but paying out for childcare.

We think that this is a missed opportunity to improve rights to maternity pay—we know that that is under review—but particularly to deal with the discrepancy between statutory maternity pay and maternity allowance for people claiming universal credit. At the moment, statutory sick pay counts as pay for the purposes of universal credit, but maternity allowance counts as a benefit, so you lose universal credit pound for pound. If you are not entitled to statutory maternity pay and must go on maternity allowance, you are basically losing whatever money you get off universal credit. We are also supportive of the call from the Fawcett Society and Pregnant Then Screwed for a duty to advertise jobs as flexible.

We think that underpinning all this is the problem with our civil legal system; having improved rights at work is only as important as your ability to exercise those rights. Since the reduction to civil legal aid under the Legal Aid, Sentencing and Punishment of Offenders Act 2012, the only area of employment law that is covered by legal aid is discrimination law. Many people do not even know that they have a discrimination case until they see a lawyer in the first place, so if this Bill is to have the effect that the Government want, they need to look at provisions around civil legal aid.

[Greg Smith]

Q That is a hugely comprehensive answer, and I am very grateful for it. One bit of evidence we heard from other witnesses earlier in the week, which I do not think you covered in your list, was a disappointment that there has not been an extension to bereavement leave in the horrible, sad circumstances of a pregnancy loss. Is that also on your list of things that you would like to see?

Dr Stephenson: Yes, that is something that we have also called for. This is where a woman loses a pregnancy before the point at which it counts as a stillbirth. Late pregnancy loss can be extremely traumatic and have health implications for women as well as psychological implications, and we think that the right to paid leave in those circumstances is really important.

[Greg Smith]

That is very helpful. Thank you.

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[The Chair]

We now come to the finale—the Minister. Can you briefly introduce yourself for the record, please?

Justin Madders: Good afternoon. My name is Justin Madders. I am the Minister for Employment Rights, Competition and Markets. I also state for the record that I am a member of the GMB and Unite trade unions.

[Greg Smith]

Q I am slightly bemused by having a member of the Committee also answering questions. Many of the things that I and my colleagues from the official Opposition will be asking you will come in the line-by-line sessions in the coming weeks, but may I briefly ask you about the Regulatory Policy Committee? I fully appreciate that you are going to want to stand by your Bill and defend it rigorously, and fundamentally I am not going to criticise you for that, because that is your job. However, it is pretty unusual in the legislation of this Government and previous Governments of all political persuasions—I accept that we are still in early days—to have a body such as the RPC so comprehensively say that the impact assessments are not fit for purpose. Do you accept any of its criticisms, and what are you and the Department doing to answer those criticisms?

Justin Madders: Thank you for the question. I think the first thing to say is that it is not that unusual. In the last three years, there have been 10 red-rated Bills. Obviously, as the shadow Minister, you will be aware that it was your Government that introduced those. I think there is a challenge here that that all newly elected Governments face: obviously, we have a clear manifesto commitment to deliver on our agenda to make work pay and a clear manifesto commitment to introduce the legislation within 100 days of taking office. That means that, by definition, there is not the time and scope for the normal dialogue and informal conversations that you would get between the Department and the RPC before the final impact assessment is published. I think there is a fundamental challenge there.

As you would expect, we undertook quite a lot work in opposition to develop our policies, but because that is not part of the formal process, we were not able to take that into account. The alternative was for us to wait six or 12 months before we got that impact assessment into a position where the RPC was happy with it, and I do not think the public would really forgive us for having that hiatus between taking office and legislating.

It is also worth saying that, if you look at the individual assessments, two thirds of them have been greenlit, so they are getting approval from the RPC. We acknowledge that there is more work to do on some of them, and we will continue to work with the RPC. I also have a little sympathy with some of the difficulties that the RPC had in coming to its conclusions.

A good example of that is the repeal of the Strikes (Minimum Service Levels) Act 2023, which the RPC has noted was red-rated when it was introduced as a Bill anyway. As that Act was poorly evidence-based in the first place, and has never actually been used since it came into force, it was very difficult for the RPC to have any real evidence on what the impact of a repeal would be. Our critique would be that the reason for that is because it was unworkable anyway, but I understand in the circumstances why the RPC would have some difficulty making a judgment on that.

On some of the other measures where it said that there was no evidence base, such as some of the equalities measures, we heard some pretty clear evidence both today and on Tuesday—for example, from the Fawcett Society and Pregnant Then Screwed—about some of the real impacts on individuals of the policies in the Bill. I would also say that I do not think there was any real evidence that there is not a need for this legislation. The general thrust from most witnesses was that this Bill would deal with some of the challenges in the labour market. Although not every witness said that, that was generally the case. Of course, as we move forward and get more evidence, we will happily work with the RPC to try to improve those reds to greens.

[Greg Smith]

Q Thank you for that answer; we will explore that more in coming weeks. I accept the political narrative of doing something in 100 days. That is well-established for Governments around the world, and Conservative Governments in the past may well have been guilty of it too. However, this is a big, reforming piece of legislation—I might not agree with all of it, but I accept that it is a big, reforming piece of legislation, on which we have heard a lot of evidence. It is obvious to anyone who reads the Bill that it has an extraordinary requirement for secondary legislation down the line. Beyond the political optics, was there any reason to get it published in 100 days, given that you have a mandate of five years through to August 2029?

Justin Madders: I think it is important that we stick to our promises, and this measure was very popular with the public during the election. I think they wanted to see action quickly. We have had 14 years of atrophy and decline in the labour market—you are obviously not going to agree with that comment, but that would be our analysis—so the need to act quickly was there. A lot of these provisions will not actually become law for a number of months, if not years—in particular unfair dismissal, which we are saying will come in in autumn 2026 at the earliest. There is an awful lot more time to continue to engage and consult, and we intend to do that. Of course, because of the very detailed nature of employment law, a lot of it is developed in secondary legislation and also codes of practice. That is the completely normal practice, and that is why a lot of it is framed in this way.

[Greg Smith]

Q I have two more points, if I may. First, clearly, some of the most striking evidence we heard that did not agree with much of the Bill was from Luke Johnson and Michael Lorimer earlier. Do you feel that the Government have engaged those who run businesses and employ people in the private sector, as opposed to representative bodies of businesses, enough in the research and drafting of the Bill?

Justin Madders: Yes, I do. I have to say, I did not agree with much of their evidence. I think it would be fair to say that they are outliers in what we heard while we engaged with businesses. Most businesses understood the importance of engaging and of enhancing workplace rights, and see the benefits of it. I can provide you with a list of all the organisations we have engaged with. It is certainly over 140 organisations. The majority of those are employers or employer organisations, so I think we have been pretty comprehensive. We are continuing that next week and will continue to do it for the rest of the Bill’s passage.

[Greg Smith]

Q I hope my last point might be more consensual as we move forward. I was very sympathetic to one of the sides of this coin before the Committee started, and the evidence today has given me food for thought on the other one. The first part is bereavement leave in the event of pregnancy loss, which is a position I have a lot of sympathy for. The other is the differential we heard about from Dr Stephenson around maternity pay versus maternity allowance and how that intersects with universal credit. I thought that was a powerfully made point. I am not expecting a cast-iron answer now, but are the Government willing to consider changing the Bill to incorporate those two asks?

Justin Madders: I have sympathy with what was said there. The first thing to say is that the rates for maternity leave and allowance are set by the Department for Work and Pensions. I probably cannot say much more than that at this stage, although I have had some initial discussions with that Department about what we can do to reform this area, because we recognise that it is quite an outdated system.

[Greg Smith]

And on bereavement leave?

Justin Madders: Again, that is something I am sympathetic to. I understand that the Women and Equalities Committee is undertaking an inquiry on that at the moment, and we are going to see what it says.

[Sarah Gibson]

Q I have three short points to make. I am assuming that you are quite concerned that we have heard various sides talk about the fact that the Bill will not encourage employers to take on new staff. That goes strongly against what you are hoping to do in terms of getting Britain working again, which is something to be applauded. I am particularly concerned about how small businesses will cope with the changes on probation periods, and I wonder whether you will be prepared to consider changes to those periods.

Justin Madders: There were two questions there. On probationary periods, there will be more work done on that. The evidence that I picked up is that most employers feel that six months is about the right period. The reason why we have expressed a preference for nine months, which we are obviously engaging on anyway, is that we recognise that there will be occasions when people might be on the cusp of being hired or fired at that point and the employer just wants a little bit more time to work with them. We think that is a reasonable point, and we have responded to employers’ concerns on that.

As we move forward with this legislation, we will certainly be looking to ensure that all businesses, particularly small businesses, have readily available and easily understandable resources so that they know what they need to do. We do not want to pass a lot of laws that allow employers to fall into traps. We want them to comply with best practice, which is what we are trying to set out in this Bill.