Employment Rights Bill

Lord Leong Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, I am very grateful to the noble Baroness, Lady Kramer, for setting out the position so clearly, but I am particularly grateful to my noble friend Lady Noakes because, as a result of her moving the key Amendment 5, we have had a remarkably positive debate about what I believe is the lifeblood of the UK economy, namely the small and medium-sized business sector. The noble Lord, Lord Londesborough, of course, is a great authority on all this, and it was good to hear from the noble Lord, Lord de Clifford, as well.

When we reflect for a moment on the speeches that have been made in this debate—apart from that of the noble Baroness, Lady Kramer—we have not had any contributions from the Government Benches. But, as my noble friend Lord Leigh of Hurley pointed out, the most important contribution will be made by someone who really does understand. The noble Lord, Lord Leong, knows all about small businesses, and I am thrilled and delighted that he is summing up the debate because he understands what so many of my colleagues have tried to point out. The noble Baroness, Lady Neville-Rolfe, said that bureaucracy can get in the way of success. Look at the amount of rules and regulations and bureaucracy.

I agreed with all my noble friends, including my noble friend Lord Ashcombe when he pleaded for a sensible and measured response. We all want to see bereavement leave—all good employers allow for bereavement leave. We want to see rights established very clearly, but my noble friend Lady Verma pointed out that if we impose them on the small and medium-sized sector in the way that my noble friend Lady Noakes outlined, three, four or five employees will suddenly have to deal with all this legislation.

Let us remind ourselves of the importance of small businesses. As several of my colleagues pointed out, at the start of last year there were 5.45 million small businesses with up to 49 employees, making up a staggering 99.2% of the total business population in the UK. We are talking about a massive sector, and therefore we have to worry and concern ourselves about the effect of the Bill. As the Federation of Small Businesses put it, in its current form the Bill risks becoming nothing short of a disaster for small and micro-businesses.

The noble Baroness from the Liberal Democrat Benches spoke about a two-tier workforce system, which those Benches object to. But as my noble friend Lady Noakes pointed out, we do in fact have tiering alive and well throughout the UK economy. It is not trying to impose one size fits all; it is recognising that over 99% of businesses in this country are small and cannot possibly cope with the burden of this Bill.

It just so happens that I already have a quotation from the noble Lord, Lord Leong, which I readily move to. We have heard from the Government on multiple occasions that they are committed to supporting SMEs and ensuring that they are not burdened with excessive costs or red tape. The noble Lord, Lord Leong, made a very important point during the passage of the Product Regulation and Metrology Bill:

“we do not want to burden SMEs with additional regulatory or financial cost”.—[Official Report, 25/11/24; col. GC 138.]

What wise words: we would love to hear those words from him again tonight. He will realise that the reality of this Bill is starkly different. The only thing this Bill seems to do for SMEs is to burden them with additional regulatory and financial costs. It is incredibly difficult to reconcile the Government’s stated intentions with the actual impact this legislation will have on small and micro-businesses across the country.

I know that my noble friend Lord Sharpe of Epsom and I have Amendment 282 in this group, but I do not want to go into it. I was taking the old Companies Act definition, and I do not need to go into all the findings of the Bolton committee and all those who have sought to define this, because I think my noble friends have done a great deal to define small and medium-sized enterprises.

We just need to know what the Government intend to do to alleviate the burden on small and micro-businesses. The impact assessment has highlighted the significant challenges that these businesses will face in implementing these reforms, and at the moment there is no adequate plan to support them.

I would like to ask the Minister these questions. First, will he please outline what the three main expected benefits of this Bill will be for small and micro-businesses? Secondly, how will the Government support small businesses in complying with the provisions of this legislation? What kind of guidance, training and resources will be made available to ensure that these businesses can navigate the new regulations without inadvertently falling foul of the law? Finally, can the Minister provide an assessment of the risk of unintentional non-compliance by small businesses? What steps are the Government taking to mitigate this risk and ensure that these businesses are not unduly penalised as a result of a lack of guidance in the legislation?

The Government have not consulted the small and medium-sized sector. If they have, can we please have a great deal more detail on what their conclusions were? If they have not consulted, will they please do so now?

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, I thank all noble Lords who contributed to this group of amendments with such passion. The noble Baroness, Lady Noakes, together with the noble Lords, Lord Sharpe and Lord Hunt, tabled several amendments—Amendments 5, 124 and 282—that seek to remove micro-businesses and small and medium-sized businesses from the scope of large sections of the Bill.

--- Later in debate ---

[Lord Leigh of Hurley (Con)]

With respect, the statement that was issued on April Fools’ Day seems to be in support of the minimum wage, not of the specific clauses in the Bill.

[Lord Leong (Lab)]

I thank the noble Lord for that, but IKEA is pretty supportive of the overall intention of the Bill and of the national minimum wage, which is obviously outside the scope of the Bill, such as what we are doing on zero-hours contracts, other short-term contracts and all that. I will write to the noble Lord with further details on the various clauses that it supports.

Various noble Lords asked about the impact assessment. The benefits of the Bill that were published by the TUC show that even modest gains from reforms to workers’ rights will benefit the UK economy by some £13 billion. Opposing this, the impact assessment says that the costs to business would be some £5 billion or 0.4% of employment costs. The benefit is huge, and economists have done research on this.

I cannot agree more with the noble Lord, Lord Londesborough, who says that start-ups and scale-ups definitely generate employment. It is absolutely right that we have to support them and I strongly believe that the Bill does support them.

Various noble Lords mentioned day-one rights and difficulty in recruiting employees. Remember that, when you run a small business, yes, it is very competitive to employ your first employee: sometimes you have to compete with the big companies in matching salaries or even benefits. I believe passionately that the Bill puts SMEs on a level playing field with large companies, where they can offer the basic benefits in the Bill.

Sometimes we asked: why are we excluding SMEs because it is so difficult for employers to recruit, and why should employees in SMEs not get day-one rights? My answer is: why not? Why should they not get day-one rights? As I said, they are the people who work for the owners, for the owners to make the profit. Without them, the owners will not have a business, so it is very important that they are supported and I believe strongly that good businesses provide fantastic support to their employees.

[Lord Ashcombe (Con)]

My Lords, I am not sure that it is the difficulty in recruiting that is the real problem for small and micro businesses; I think it is the fear of recruiting. That is a really different point.

[Lord Leong (Lab)]

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

[Baroness Verma (Con)]

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

[Lord Leong (Lab)]

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

[Baroness Verma (Con)]

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

[Lord Leong (Lab)]

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

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