Employment Rights Bill

Sarah Olney Excerpts

Monday 8th December 2025 Commons Chamber

[Madam Deputy Speaker]

I call the Liberal Democrat spokesperson.

[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to follow the right hon. Member for Ashton-under-Lyne (Angela Rayner).

As this Bill has progressed through Parliament, the Liberal Democrats have welcomed many of the principles underpinning it, and we are keen to see it progress. We welcome the fact that the Bill increases support for carers, boosts statutory sick pay and gives workers on zero-hours contracts more certainty. There is a lot in the Bill that we support in principle and that moves us in the right direction. However, we are also clear that the changes must happen in a fair and practical way that truly benefits workers, small businesses and our economy as a whole. That is very much how we are approaching the amendments in today’s debate.

First and foremost, we are glad to see that the Government have finally agreed to set the qualifying period for unfair dismissal claims at six months. That is a fair and sensible shift that will equally benefit workers and business. Employers have finally been given the necessary clarity to make hiring decisions with confidence, and we have avoided the danger of unnecessarily slowing down the labour market even further, which would have deprived so many people of vital employment opportunities. We are proud that Liberal Democrats in the House of Lords were instrumental in securing that crucial improvement to the Bill.

However, it is disappointing that the Government have effectively hijacked that breakthrough to abolish the cap on compensation for unfair dismissal at the last minute. The Minister will be well aware that abolishing the cap was not agreed in recent negotiations between employer groups, trade unions and the Government. Most businesses would have been happy for the cap to have been increased, but completely scrapping it, without any consultation or negotiation, has understandably left employers feeling deeply worried and facing yet another nasty surprise. There is real worry among businesses that doing away with the cap, which currently stands at £118,000, risks undoing much of the progress achieved by the six-month compromise, creating open-ended liabilities and encouraging litigious behaviour. I expect the Minister would agree that no one wants to see failed water company bosses jamming up the already-strained tribunal system, seeking eye-watering payouts.

More broadly, one has to reflect on how the Government’s approach to this last-minute change affects the relationship between Government, businesses and workers. Does the Minister not understand that springing the change on us at the 11th hour undermines business confidence and unnecessarily strains labour relations? The Liberal Democrats had hoped that today we could support the Government in setting the qualifying period at six months, but in the light of this abrupt change, it simply is not possible to support the motion in its current form. At the very least, will the Minister listen to concerned businesses and commit to setting a new, higher cap through secondary legislation following consultation with all relevant stakeholders?

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

I am perplexed and confused by what I am hearing. Does the hon. Member appreciate that by moving the goalposts once again, and delaying this crucial Bill once again, she is leaving an open goal for unscrupulous employers?

[Sarah Olney]

Nobody is keener to see the Bill pass than the Liberal Democrats, and we have repeatedly worked with the Government to try to express our concerns. We would support the motion were it not for the lifting of the compensation cap being snuck in at the last minute. This last-minute change has not been part of any conversation that we have had with Ministers in the other place. That is why we will abstain on the motion.

[Antonia Bance (Tipton and Wednesbury) (Lab)]

The hon. Member seems to be under the misapprehension that the lifting of the cap was not agreed as part of the negotiation on the compromise. It was. Perhaps she would like to revise her remarks.

[Sarah Olney]

I will not revise my remarks. We have been speaking to many business groups that were in the room with the Minister, and they have told us that it was not part of the agreement. That is why the fact that it is in this motion has taken everyone by surprise, and why we will not be supporting it today.

[Laurence Turner (Birmingham Northfield) (Lab)]

The hon. Lady just said that she has been informed by business groups that were in the negotiations that this measure was not agreed. Will she name them?

--- Later in debate ---

[Sarah Olney]

I will not name them, but the Minister will know who was in the room with her. That is what they have told us, and that is what I am reflecting in my comments today.

[Dr Luke Evans (Hinckley and Bosworth) (Con)]

Does the hon. Lady agree that it would have been helpful if an impact assessment had been carried out, so that everyone could see exactly what the impact of removing the cap would be?

[Sarah Olney]

I would agree, but my point is that this last-minute change has been sprung on us and the business groups that engaged in good faith with the Government on these measures. This is a last-minute change that we and the business groups were not expecting, and that is why we will not be supporting it.

[Kate Dearden]

With respect, I was in the room as part of the negotiations with business representatives and trade unions, and I thank them again for the constructive dialogue and leadership that they showed throughout the numerous days of conversation. I can confirm that the compensation cap was discussed and agreed in the room, so I ask the Liberal Democrat spokesperson to reflect on her comments. I was in the room; with due respect, she was not. That is a true reflection of what was discussed and agreed.

[Sarah Olney]

I take the Minister’s comments. What I would say is that we were not expecting to see this measure in the motion, and that is why we will not support it.

Turning to zero-hours contracts, Liberal Democrats strongly believe in giving all workers security over their working patterns, and we are deeply concerned that too many struggle with unstable incomes, job insecurity and difficulties in planning for the future. However, we have repeatedly reminded the Government that adaptability in shift patterns is often hugely valuable, for example to those balancing caring responsibilities or their studies alongside work. It is therefore important to strike a balance that ensures workers can have both security and flexibility.

Since the Bill’s introduction, many small businesses have highlighted that having to offer employees fixed-hours contracts on a rolling basis could impose significant costs and administrative burdens on their limited resources, compounding other challenges, such as the increase in employer national insurance contributions, charging national insurance on salary sacrifice schemes and the fallout from the previous Government’s damaging Brexit deal. While we advocated for what we think would have been a fairer and less onerous system based on giving workers a right to request fixed hours, the Liberal Democrats are pleased that the Government have at least moved in the right direction through amendment (b). Requiring the Secretary of State to consult businesses and relevant stakeholders on the length of the initial guaranteed hours reference period will at least give affected businesses and workers a stronger voice in designing the new system.

[Mr Rand]

The hon. Member has talked about the potential for an added burden on employers by scrapping exploitative zero-hours contracts, which Liberal Democrat peers in the other place also made reference to in debates there. Will she reflect on the huge burden on workers from exploitative zero-hours contracts and the financial uncertainty and insecurity that such contracts bring to their lives, including the lives of some of her constituents?

[Sarah Olney]

I agree with the hon. Gentleman, but that is why we need the balance. We need to ensure that workers have the right to request a permanent contract if that is what works for them, but it may be onerous for businesses to have to track hours over a period of time, when the employee themselves may value the opportunity that the zero-hours contract offers. That is precisely what we would tackle with this amendment.

[Andrew Pakes (Peterborough) (Lab)]

I represent a seat with one of the highest levels of zero-hours contracts and insecure work in the country. I am not sure how that compares to the hon. Member’s constituency, but if someone in my constituency requested a full-time contract, but that was turned down because they have only a right to request, how would that deliver them justice?

[Sarah Olney]

We are trying to create a balance, managing the burdens on employers in creating jobs. We have to ensure there is employment in the first place before we can ensure people’s rights. I entirely accept the point that the hon. Gentleman is making, but placing these burdens on employers to track the hours that numerous employees are working will add to the costs that employers incur in taking people on. That is precisely the sort of thing that discourages employers from creating jobs.

[Chris Bloore (Redditch) (Lab)]

Will the hon. Lady give way?

[Sarah Olney]

indicated assent.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. I assume the intervention will be short. We have we only got 30 minutes left in the debate, so I assume that Ms Olney is coming to a conclusion soon.

[Chris Bloore]

I thank the hon. Member for Richmond Park (Sarah Olney) for letting me intervene. She must realise that it is macroeconomic conditions, not improving employment rights, that affect a company. What is certain is that when people have zero-hours contracts, they cannot pay their mortgages when downturns and recessions happen, because they cannot get in the money that they need. She talks about the burdens on businesses, but what about the people who cannot even pay their basic bills because of the exploitative contracts they are on?

[Sarah Olney]

The goal of the Employment Rights Bill should be to strengthen the economy for all so that we can get better employment conditions for everybody. I strongly believe that we need to strike the right balance so that we can support the economy as a whole.

[Michael Wheeler]

Will the hon. Lady give way?

[Sarah Olney]

I will make some progress, bearing in mind what Madam Deputy Speaker just said.

Zero-hours workers and businesses need far more clarity. Can the Minister at least clarify on the Floor of the House what the Government’s intended duration is for subsequent reference periods? I hope that after scrapping compensation caps, the Government will be a bit more transparent with stakeholders when it comes to flexible work.

One amendment that I am happy to welcome is on seasonal work. Many businesses, such as in the farming and agricultural sector, depend on recruiting the right people at the right time. Any obstacles to hiring seasonal workers can have a significant impact, exacerbating the long list of challenges they already face. Hospitality firms such as pubs, cafes and restaurants also often rely on seasonal workers and are particularly vulnerable to any regulatory changes that make it harder or more expensive to access the talent they need. All those employed as seasonal workers, whether in farming, hospitality or elsewhere, deserve reassurance that their work will not dry up. Last time the Bill was debated in the Commons, I spoke in favour of measures that would improve the clarity of the legislation on seasonal work, and I am glad that the Government have made progress. We are glad to support Lords amendment 48B, which would ensure that businesses relying on seasonal work and bodies representing seasonal workers will be properly consulted when secondary legislation is drawn up.

Businesses across the country, especially our SMEs, are struggling with unprecedentedly high costs, such as the Government’s unfair national insurance rise, sky-high energy bills and a broken business rates system. Struggling businesses means fewer jobs and lower pay, so it is clear that we must look for ways to support local businesses and all who rely on them.

[Several hon. Members rose—]