Employment Rights Bill

Lord Vaux of Harrowden Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I accept that the intentions behind this Bill are well meant, but I am concerned about the unintended consequences. There are some positives—the rules on fire and rehire, and bereavement leave, are just two examples—but overall I am afraid I have to conclude that the Bill will damage growth and, most importantly, the employment opportunities of the most vulnerable people. Others have mentioned omissions from the Bill. I am supportive of the comments that have been made on NDAs and on whistleblowing, and I look forward to seeing what comes up on those.

The impact assessment says that the Bill will impose costs of around £5 billion on business. Worse, it confirms that those costs

“will be proportionately higher for small and micro businesses”.

That goes directly against the Government’s drive for growth. Noble Lords need not take my word for it. The OBR said yesterday that changes would

“likely have material and probably net negative economic impacts on employment, prices and productivity”.

There is already evidence that small businesses are reducing hiring, so I hope the Government will be willing to consider constructive ways to reduce the burdens on SMEs.

Speaking of the impact assessment, the bar is not high, but this is one of the worst I have ever read. The Regulatory Policy Committee rated it not fit for purpose, stating:

“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis to understand the overall impact on employment, wages and output, and particularly the pass-through of employer costs to employees”.


It beggars belief that any Government would propose changes of this importance without carrying out such an analysis.

That problem is made worse because this is, in effect, yet another skeleton Bill, with much of the important detail to be added later by regulation. I counted 173 regulatory powers—I am glad that the noble Lord, Lord Hunt, came up with the same number—including 11 Henry VIII powers. That restricts proper analysis and scrutiny. At the very least, can the Minister confirm that all material regulations will be provided in draft before we reach Report, to allow at least some scrutiny of those important rules? It is not acceptable to continue having these endless skeleton Bills. We are seeing more and more of them.

Given the time limit, I will raise just two detailed issues. First, I agree that zero-hours contracts can be exploitative and that some tightening is required, but they can work well for people such as students, as we have heard, and we should try to retain some level of flexibility for them. More importantly, the new rules are likely to drive perverse behaviour. Basing future guaranteed hours on the previous 12 weeks is burdensome on businesses, but it may also mean that people will not be given extra shifts during those busy times. The unintended impact of the Bill might be that people get less work, not more.

Secondly, there is the introduction of day-one unfair dismissal rights. This will directly reduce opportunities for vulnerable people. That is not just my opinion, it is the Government’s opinion too. The impact assessment says:

“There is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections”—


I stress this last part—

“particularly for those that are seen as riskier hires”.

I am sure we all support the Government’s intention to get people off sickness benefits and into work. But, to achieve that, we need employers willing to employ them. Is this really the moment to introduce rules that will, by the Government’s own admission, make that less likely? Is there any real evidence that the two-year qualifying period is being abused? In my experience, the opposite is true. The qualifying period allows employers to give people with little experience or poor employment records the benefit of the doubt when hiring them in the first place and at the end of any initial probation period. Can the Minister please provide evidence that the two-year qualifying period is in fact a real problem? The only winners here will be employment lawyers, and the losers will be the very people the Government say they want to help.

We have heard lots of comments about this being a Bill for the workers. What it definitely is not is a Bill for those who want to work.