My Lords, I will speak to Amendments 279ZZB and 305 to 309, which are in my name.
Turning first to Amendment 279ZZB, we firmly support the principle that workers must receive their full entitlement to holiday pay and that those rights must be enforceable. However, we believe that achieving that goal in practice, particularly under the new framework set out in the Bill, requires us to be clear-eyed about the real-world challenges that many businesses face. Holiday pay is one of the most complex areas of employment law and has only become more so following the changes introduced in January of this year.
While some employers regrettably seek to avoid their obligations and should rightly being sanctioned, the reality is that many more are simply trying to navigate a legal framework that is very confusing, technical and still evolving. For small and medium-sized enterprises in particular, compliance is not always a question of willingness but of capacity and clarity. That is why this amendment is both timely and proportionate: it asks only that the Secretary of State undertakes an impact assessment to consider how businesses—particularly SMEs—are coping with the new enforcement provisions. It would require an evaluation of the practical, administrative and financial implications of compliance and establish whether any barriers have emerged during implementation.
Crucially, this is not about weakening enforcement. In fact, it is quite the opposite: it is about ensuring that the fair work agency, which we hope will become a cornerstone of enforcement under this Bill, is properly resourced, modernised and equipped to support both workers and employers in meeting their obligations.
Turning to Amendment 305, this Government have managed to get unemployment to hit its highest since the pandemic—4.6%, according to the most recent ONS figures. This is not a figure that we can shrug off because, of course, behind it are real lives, real households and real businesses that are facing uncertainty. At the same time, the business environment is under considerable strain. Recent changes to national insurance contributions have forced employers to make extremely difficult decisions. The employer rate has risen from 13.8% to 15% and the threshold has been lowered, placing even greater pressure on payrolls.
Research from S&W has shown that around a third of UK business owners are still planning further job cuts as a direct result of these changes. Many have already begun reducing headcount. Others are cutting hours, freezing pay or raising prices—moves that will impact both employees and consumers. So, the question that has to be asked is: how will this legislation affect employment in that context? I should also have mentioned, of course, that May showed a very significant drop in payroll numbers.
It is easy to sit in Westminster and write these rules. It is much harder to understand how the rules will play out in towns and factories, in small businesses, in hospitality, in logistics, and across the many sectors that make up our labour market. That is why this amendment is vital.
I turn to Amendment 307. The British Retail Consortium has warned of a potential “high-street bloodbath”, with one in 10 retail jobs at risk over the next three years, if the Bill’s measures are implemented without careful consideration. Retailers are already grappling with rising costs and squeezed margins, and these additional employment burdens could accelerate job losses in an industry that is vital to our economy. I believe that 180,000 jobs—I forget the precise number—are at risk through to 2028, according to the BRC.
Similarly, the Institute of Directors has published stark findings showing that nearly three-quarters of its members—72%—believe that this legislation will dampen economic growth. Some 49% of business leaders say they plan to reduce hiring; 36% of them intend to outsource more roles; and 52%, more than half, anticipate investing further in automation as a response. These figures paint a clear picture: employers are preparing to scale back on job creation and are likely to replace human roles with technology, in response to rising costs and compliance demands.
The Federation of Small Businesses echoes these concerns. SMEs are the backbone of the UK economy, yet many are telling us that the cumulative impact of new regulations, increased national insurance contributions and rising wage floors are forcing them to reconsider recruitment plans or even reduce existing staff. The FSB has called for a more balanced approach that safeguards workers’ rights without stifling the very businesses that create these jobs, and the growth. Can the Minister name a single business that expects to increase hiring because of the measures in the Bill?
On Amendment 306, what of our youth? At a time when the Government should be prioritising opportunities for young people entering the workforce, the figures are concerning. Between January and March 2025, an estimated 354,000 young people aged 16 to 24 were not in education, employment or training; that is up by 21,000 compared with the same period last year. The Government will no doubt argue that the provisions in this Bill, such as the right to guaranteed hours and changes to statutory sick pay, are designed to protect vulnerable workers, many of whom are young and may be on the margins of employment. However, the reality is more complex. Although well intentioned, these changes will make it more costly and complicated for employers to hire young people, who often lack the experience and are seeking flexible or part-time work to get started in their careers. The burden of additional costs and rigidities can discourage employers from offering entry-level roles or apprenticeships—exactly the opportunities that young people desperately need to develop skills and build work histories.
On Amendments 308 and 309, let me turn to a specific sector in the UK: manufacturing. In the north-west, manufacturing is not only a significant contributor to the regional economy but a vital source of skilled employment and innovation. Many manufacturers there are actively seeking to invest in advanced technologies, including artificial intelligence and automation, to improve productivity and to remain competitive on the global stage. However, these ambitions risk being undermined by the additional costs and compliance burdens imposed by this Bill. Manufacturers are already grappling with the challenges of global tariffs, supply chain disruptions and inflationary pressures; adding further regulatory and financial strain threatens to hollow out this critical sector.
If the increased labour market enforcement and associated costs become too great, there is a real risk that manufacturers will reduce investment, scale back hiring or even relocate operations. The knock-on effects on local economies, particularly in regions depending on manufacturing, would be severe, affecting jobs, skills development and regional growth. While the objectives of the Bill—to protect workers’ rights and promote fair employment practices—are indeed laudable, we must ensure that they do not come at the expense of vital industries and communities. I beg to move.