Relevant documents: 20th and 29th Reports from the Delegated Powers Committee and 7th Report from the Constitution Committee. Scottish and Northern Ireland legislative consent granted, Welsh legislative consent sought.
1: Clause 1, page 2, line 9, at beginning insert “If requested by an employee,”
Member’s explanatory statement
This amendment changes the provisions in the Bill from a requirement for an employer to offer guaranteed hours to a right to request guaranteed hours by an employee.
My Lords, I welcome the opportunity to open the debate on this group. I intend to be brief, as is appropriate on Report—I have said it, Minister, I cannot do any more. I begin by saying that there is clear cross-party agreement that exploitative zero-hours contracts must come to an end. Indeed, we on these Benches unequivocally believe in the need to address the problems of exploitative zero-hours contracts, which leave too many workers in precarious employment circumstances. That said, our amendment reflects that shared objective, while offering a more practical and balanced view.
The amendment would change the obligation under the legislation to offer guaranteed hours to a right to request them. Further, it maintains that when such a request is made, the employer must grant it. This would allow workers to acquire guaranteed hours if they wish, providing greater security and stability, while enabling them to make a personal choice. At the same time, it would reduce the administrative burden on employers, especially in sectors that rely on flexibility.
Although we recognise that some workers do not want precarious zero-hours contracts, this should not come at the expense of sectors where flexibility is essential and many workers are content with those arrangements. This would balance security for workers with necessary flexibility for employers in sectors that rely on flexibility. These include seasonal, tourism-related and agricultural workers, as well as hospitality, retail, theatre and other industries where work patterns are inherently dynamic and demands fluctuate. The amendment would ensure that the new provisions are adaptable enough to function effectively across all those employment settings.
In Committee, Members raised understandable concerns about what would happen if a request for guaranteed hours were simply denied. Let me be clear: under this amendment, if a worker makes a formal request, the employer must make a guaranteed hours offer. It would not be optional or discretionary; all workers who wanted greater certainty would be empowered to secure it. At the same time, the amendment avoids placing a universal obligation on all employers to offer guaranteed hours in every instance, which could place undue strain on sectors that rely on that flexible staffing model. In doing so, it would deliver a fair and workable solution that respects the rights of workers while acknowledging the operational needs of these industries.
I will make a brief comment on Amendment 1, which would replace a right to have guaranteed hours with a right to request. I very much fear that it undermines the purpose of the Bill, which is trying to deal with the problem of zero-hours contracts where employees do not have predictability over their hours.
I appreciate that the desire of the amendment is to reduce the burden on employers in working out what the guaranteed hours would be, only to find that an employee declines the offer. However, I do not think that that is likely to happen very often. Obviously, it is impossible to know what proportion of employees would turn down such an offer, but we do know from surveys—and most recently from a poll that the TUC did last year—that the majority of workers on zero-hours contracts consistently say that they would prefer to have guaranteed hours. It is therefore very unlikely that large numbers of them would turn down an offer once it has been made.
Perhaps more seriously, the amendment does not take account of the imbalance of power in workplaces and the characteristics of employees who are working on zero-hours contracts. The latest figures from the ONS tell us that zero-hours contract workers are much more likely to be young and to work in elementary occupations. They are much more likely to be working part-time and in low-paid sectors. These are the least empowered workers in the workforce; they are unlikely to understand their rights, even if the employer has complied with the requirement to find information. They are the least likely to be represented by a union and the least likely to know how to exercise their rights. The right to request guaranteed hours, in those circumstances, is not a real right at all.
How many of those workers, vulnerable as they are, might come under pressure not to press for guaranteed hours? The vast majority of employers do right by their employees, but many do not. The formulation of the amendment leaves open the path for some of the worst employers not to offer guaranteed hours to workers on zero-hours contracts. I do not think that the amendment does the intention to serve those workers any favours at all.
My Lords, I support all the amendments in this group, but especially Amendment 1. As we start Report, and the first of several groups focusing on zero-hours contracts—although I will speak only on this group—I want to emphasise why getting the wording and balance right in this part of the Bill is important for proportionality and to avoid unintended consequences.
Many of us were originally supportive of the Bill’s commitment to tackle the rise of zero-hours contracts, especially in retail and hospitality—and tackling the way in which they have been used exploitatively is certainly welcome. But in Committee the Government acknowledged that there needs to be the offer of some flexibility, which is what certain cohorts of workers want.
On Amendment 1, the TUC briefing on the Bill complains that the vast majority who ask for guaranteed hours are turned down. Surely the point of Amendment 1 is the requirement that they will not be turned down. What is actually happening here is that there is a shift to a right to request guaranteed hours on to the employee, which I would have thought reassures the TUC. It empowers the employee but avoids an overrigid imposition of the Bill’s requirements on businesses, regardless of the situation. These sorts of details matter, now that we are finalising what will be in the Bill. I am not sure how helpful it is that, for example, some in trade union and government circles have briefed recently that getting into the details amounts to being, to quote the Deputy Prime Minister,
“on the side of bad bosses, zero-hours contracts and fire-and-rehire”.
We are here to make law, not to make headlines, and law means accepting that the devil is indeed in the detail. The Government know that there are lots of worries about unresolved aspects of the Bill. Indeed, Jonathan Reynolds, the Business Secretary, quoted in the FT recently, assures us that he is “absolutely certain” of addressing businesses’ concerns over the statutory probation period. Pertinent to this group of amendments, he says there is “more than enough room” to reach an agreement on guaranteed hours. He says:
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Finally, the noble Baroness, Lady Carberry of Muswell Hill, asked us to consider the balance of power. She says that young workers are least likely to understand their rights or be able to exert them. She has not met any of the young people I know—in fact, Omar is sitting below Bar there, before he goes on his shift in hospitality. I can assure her that he is more than capable of asserting and understanding his rights. The danger is that we patronise and impose on those young workers, on the basis that they will not be able to cope. That is paternalism and underestimates the young. This would give rights to young workers and would not disrupt an industry on which many of them are dependent, which is exactly the kind of proportionality that I hope the Government would welcome.
My Lords, this first group of amendments, in the names of the noble Lord, Lord Goddard of Stockport, and my noble friends Lord Sharpe of Epsom and Lord Hunt of Wirral, is significant and I am pleased to support it. I declare my interest as an employee of Marsh Ltd, a large insurance broker. Noble Lords might think that this will therefore not have much effect on me. They would be right, but I have other views.
Many individuals, for a wide variety of reasons, do not wish to have a permanent contract with guaranteed hours. While the Government might like to think that everyone wants guaranteed work, that is simply not the case. Flexibility for employees who desire zero-hours contracts is surely what everybody wants. In my experience, happy employees inevitably are more productive than those who are not. This goes directly to the heart of what the Government are trying to achieve—growth.
At the same time, many others would welcome the certainty and stability of fixed-hours contracts. It is essential, therefore, that we provide clarity in this legislation where ambiguity might otherwise lead to dispute or, worse still, legal action. That is why I welcome Amendment 2, which introduces a clear definition of a threshold below which it is not reasonable for an employee to request a guaranteed-hours contract. Setting this threshold at eight hours a week—essentially a day’s work—offers helpful clarity. It strikes a sensible balance between flexibility and fairness.
On Amendments 3 to 5, there also needs to be fairness in any arrangement, otherwise it will not stand the test of time. Therefore, it is entirely reasonable to allow a reference period during which both parties can assess the suitability of the arrangement before any request for a fixed-hours contract is made. This period of mutual assessment is not only practical but necessary. Mistakes can be made on both sides, and both employer and employee should have the opportunity to part ways without undue burden if the relationship is not the right fit. The 26-week period proposed in these amendments is an appropriate length of time for such assessments to take place.
My Lords, in this group I have Amendments 9 and 22, both of which seek to amend government amendments in identical ways. I shall speak to Amendment 9, which seeks to amend government Amendment 8, but my remarks apply equally to Amendment 22, which seeks to amend government Amendment 21. Before doing so, I offer my support to the other non-government amendments in this group; other noble Lords have already spoken well in favour of them.
My Amendment 9 is based on the premise that the Government should be trying to balance employee rights with the need of businesses to be successful and to grow. The Government want to end what they call “one-sided flexibility” but that would not be a good thing if the outcome was to destroy the labour market flexibility which is the hallmark of the UK’s international competitiveness and has been a major contributor to the country’s overall economic resilience.
Government Amendment 8 amends the provisions of Clause 1 which would have allowed the Secretary of State to create exemptions from the duty to offer guaranteed hours on a very broad basis. That power was a glimmer of light in a part of the Bill that was otherwise quite dark, especially for those employers whose businesses could be harmed by the new duty. It is clear that the Government wanted to use that new power very sparingly but it was drafted in a broad way and would therefore have offered the Government an elegant solution if they discovered that certain types of businesses simply could not stay in business if the duty applied to them.
Unfortunately, the Delegated Powers and Regulatory Reform Committee of your Lordships’ House, for which I generally have a high degree of respect, declared that this power was “inappropriately broad”. I suspect that if the DPRRC had attended some of the debates on the Bill earlier in its passage, it would not have been quite so quick to damn this power. Even more unfortunately, the Government have chosen to respond to the DPRRC’s recommendation by making the power virtually useless.
My Lords, Amendment 2 stands in my name. I declare my interest as a shareholder and the chief executive of Next plc, a job I have held for 24 years. I should add that Next employs nearly 50,000 people in the UK, of whom around 20,000 are part-time.
I hasten to add that the company I work for does not use, and never has used, zero-hours contracts. I am not in favour of them. As the noble Lord, Lord Barber, said at Second Reading, eliminating bad employment practices serves the interests of good employers. He was right. As I said in Committee, I support the Government’s aim of eliminating the unfair practices associated with zero-hours contracts. The problem with this section of the Bill is not the tight regulation of zero-hours contracts; nor is it the understandable intention to extend those protections to low-hours contracts, preventing employers from circumnavigating zero-hours provisions by offering token contracts. The problem is the failure to define what low-hours contracts are for the purposes of the Bill or give any hint as to what that limit might be.
Amendment 2 aims to address this problem by placing a reasonable cap on the discretion of the Secretary of State to define what low-hours contracts should be at eight hours a week. This is important because it materially changes the nature and scope of the Bill; if this number is set too high, the provision will profoundly change the working arrangements of 8.5 million part-time workers in the UK.
I can assume only, having read through the provisions of the Bill, that the Government have not really understood the near impossibility of managing the process they are proposing if it extends to millions of people. Employers will have to track their low-hours employees’ extra hours every day of the year, and at the end of every employee’s individual reference period, businesses must offer those employees a new permanent contract. These hours will have to be offered in a compliant way, with no hint as to how you comply with the Bill itself. They will have to be offered the hours regardless of whether those hours are actually needed.
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If it is not clear who will benefit, it is very clear who will suffer. It will be those who choose part-time contracts, such as parents with childcare responsibilities, students balancing their studies with earning and often taking their first step into employment, carers for elderly relatives or those seeking a transition into retirement—those for whom a fixed income provides a meaningful supplement for their household or student income, but who also value the opportunity to earn extra income as and when it suits them.
In terms of where that limit might be set, I heard the Minister in Committee when she said she thought four hours was not enough. Amendment 2 therefore proposes eight hours as a ceiling for low-hours contracts. I believe that eight hours is the right number for two reasons. First, as an annual cost of over £5,000, it is more than enough to deter employers from using these contracts as zero-hours contracts by proxy and disguising a zero-hours contract. To that extent, it achieves the ostensible purpose of this section of the Bill. Secondly, at £5,000 a year, it is enough to represent a meaningful and valuable source of income as a household supplement to those who cannot or do not wish to commit to more hours of work in the working week. It is a real asset for people, particularly students and parents with school-age children.
Even at eight hours, a very large number of people would be affected. From the information available to me, I estimate that between 20% and 25% of the UK’s part-time workers would be affected by this measure. To push that number higher would be to take a wrecking ball to the part-time working practices of millions of people in shops, restaurants, care homes, pubs and many other consumer-facing businesses which, by their nature, have peaks and troughs in demand.
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We also recognise the Government’s amendments since Committee. In particular, we welcome the steps taken to clarify how new obligations will apply to agency workers once the legislation is enforced. These changes will help, and the framework is clear, consistent and better understood by all those affected.
That said, the Government are asking industry and business, whose support is vital for this, to prepare ultimately to comply with this provision and with the wider Act without providing any critical detail, such as reference periods for guaranteed hours and other key elements. This lack of clarity, which seems to run throughout the Bill, makes it challenging for employers and workers to understand their rights and obligations. Hindering effective implementation and planning is not acceptable. Such clarification, particularly for reference periods for guaranteed hours, is critical if the industry is expected to prepare. We on these Benches have consistently raised concerns throughout the Bill about the uncertainty caused by leaving key details, such as qualifying periods for guaranteed hours, to be declared by some later regulation. Although we agree that some flexibility is needed, it is a question of how it is implemented. We believe that clearer rules in the Bill itself will help both workers and employers to better prepare for the challenge.
Finally, as I stated at the beginning, we fully recognise the damage that exploitative zero-hours contracts can cause. However, addressing this issue must not come at the expense of sectors where flexibility is essential and many workers are content with arrangements. Our amendment seeks a fair balance, protecting workers from exploitation while preserving the flexibility that is crucial for many industries to function. I look forward to the Minister’s response and I beg to move.
“I have to have the bill passed first before we go into the implementation”,
but I suggest that is the wrong way around. If there is more than enough room to reach agreement on things such as guaranteed hours, let us put this in the Bill.
In other words, in trying to pin down how a new right to guaranteed hours should be framed in regulations, these amendments bring clarity. They are meant to help the Government. I am worried that too many important details are being kicked down the road, hence avoiding democratic debate and scrutiny and creating a real mood of uncertainty among employers. We have had warnings from business about the Bill harming an already fragile economy and so on, but these kinds of concerns are trickling down to workers too.
I work with a lot of young people at the Academy of Ideas, and the initial warm enthusiasm for the Bill has gone rather cold. I have been talking to one young man who wrote a missive for us on hospitality and how much it has done for him. Omar is concerned that what he thought was going to be in his interests might turn out not to be. He says: “Hospitality is an industry that has been flexible enough to rely on youth employment and allowed many of us a way into work. It has taught me many useful lessons, and has built my confidence as a person. Now I fear that the legislation will reduce the opportunities and misses the mark”. On this amendment, he just wants the right to be able to ask for hours, but he does not want anything that disrupts the flexibility of hospitality in doing so. That echoes the balanced way in which the noble Lord, Lord Goddard of Stockport, moved the first amendment in this group.
As mentioned before, unhappy or mismatched employment arrangements serve no one. They can harm the individual’s well-being and morale and, in time, may undermine the company’s productivity, particularly for smaller businesses, where every member of staff has a significant impact—the smaller the company, the bigger the impact. We must remember, as we were reminded in Committee, that small businesses make up the majority of the companies in this country, unlike those I work for. For these reasons, I support the inclusion of a minimum number of hours’ work per week for a clearly defined reference period before the employee may request a guaranteed contract. I believe these amendments strike a fair and practical balance that will benefit both employers and employees.
My little glimmer of light has been virtually extinguished by the Government’s Amendment 8. This now requires that when the Government try to use the regulations to create exemptions, they have to take account of two things. The first is the benefits of workers receiving a guaranteed-hours offer. I would have absolutely no problem with that if it were balanced by an equivalent need to avoid having adverse effects on employers, but Amendment 8 goes further and says that the needs of the employers concerned can be taken account of only if they are dealing with “exceptional circumstances”. I do not know what “exceptional circumstances” means but it is probably something like a pandemic; it would not deal with those businesses which face fluctuating demand patterns as part of their natural business model. Unpredictable work demands are therefore difficult to see as exceptional circumstances.
When we debated this clause in Committee, my noble friend Lady Verma, who is not in her place, talked about the need for employers providing domiciliary or home care to be responsive to the actual fact pattern of demand for care. I suspect that would not count as exceptional, even though it is an intrinsic part of the business model of those who provide home care; nor would it, I suspect, apply to any of those businesses that are affected in any way by seasonal demand patterns, as has already been mentioned. Therefore, the ordinary everyday needs of businesses will be ignored if Amendment 8 is accepted without amendment. In practical terms, all the Secretary of State can take account of is the benefits to workers of receiving a guaranteed-hours offer.
Therefore, my Amendment 9 removes the constraint of needing to satisfy the exceptional circumstances limb; the Secretary of State would simply be having regard to, on the one hand, the benefits for employees and, on the other, the adverse effects on employers. I hope in that way a proper balance would be achieved in the Bill and that the Government will be prepared to rethink their Amendments 8 and 21.
This process creates two problems. The first is the problem of complexity of implementation, and the second is that businesses, if they comply with the Bill, risk being chronically overstaffed. To start with complexity, I estimate that in the company I work for, it will take us at least a year and several million pounds of systems development to develop a system to adequately cope with the implementation of the Bill. I work for a company that has more than 1,600 systems and software professionals. Small businesses will find this process almost impossible to manage. I would be very grateful if the Minister could share any details as to the cost and scope of work that will be required to be undertaken by councils, hospital trusts and other public sector employers for the purposes of developing these systems.
The second problem is that, even if an employer successfully implements a system, they will have to offer contracts regardless of whether there is any work for those people going forward. Your Lordships will not be surprised to hear that restaurants, shops and pubs simply cannot afford to have the same number of people working in their establishments in February as they have in December. Nor can we take the risk that the extra hours required to cover many different seasonal peaks and sale events become permanent costs for the rest of the year.
The complexity of implementation, along with the risk that businesses leave themselves overstaffed, will mean only one thing, and it is very important that the Government understand this: businesses simply will not be able to offer additional hours to workers on low-hours contracts. Instead, they will be forced to employ temporary staff to cover those peaks, depriving loyal and skilled employees of income at times when they need it. Whose interest does this serve? Neither business nor employees, and certainly not a Government that I believe are genuinely interested in promoting growth.