On Thursday 5th of June, it was the 7th Committee Stage Sitting of the Employment Rights Bill in the House of Lords. The Bill’s progress through the Upper House is sluggish with debates lasting late into the evenings. Thorough scrutiny is welcome and much needed, but I am concerned that the debate is beginning to tire, as some of the comments appear to be perhaps a bit confused.
At the start of the sitting, the debate resumed at Clause 34 with Amendment 146 tabled by Lord Holmes of Richmond. Clause 34 is a new addition by the Government that was tabled and passed in the Commons, it seeks to extend the definition of “Employment Business” to encompass a wider range of activities, including those of Umbrella Companies. This would therefore bring Brollies into the scope of the new Fair Work Agency – something FCSA and its members have long called for and entirely support.
Lord Holmes’s Amendment 146 sought to require “employment businesses participating in employment arrangements to be subject to a licensing authority nominated by the Secretary of State.” In plain English, that means that all Umbrella Companies would have to be supervised and accredited by an organisation recognised by Government. Lord Holmes highlighted that this would bring “clarity, consistency and fairness” and be consistent with how other sectors of the economy are most effectively regulated – a sound and simple case, well made.
Baroness Coffey (former Deputy PM and Health Secretary) then rose to say she was “quite concerned… about the number of government bodies that keep being created… we already have considerable regulation…” In general, I would agree with these comments, but they do not fit this particular context as that is not what the amendment does. No new bodies need to be “created”, because industry funded bodies, such as FCSA already exist. The wording was chosen carefully to include the word “nominated”.
Amendment 146 would therefore force an industry led and standards-based approach to regulation. And therefore, be the most agile and business friendly solution Government could possibly pursue. Baroness Coffey’s instinct that more bureaucracy is not the answer was of course correct, and we hope to work with her to that end.
Lord Hunt (one of John Major’s former Ministers) followed. Initially it sounded like he agreed with the amendment but seemed to have been swayed by the former Deputy Prime Minister’s misunderstanding. He argued that better enforcement was what is needed – we entirely agree with him. This is what FCSA do on a daily basis in our segment of the market. But what about the firms that are not covered by representative and accreditation bodies? Unfortunately, they have no meaningful enforcement.
The former Cabinet Minister continued; “Licensing does mean added costs… paperwork”. To be fair, if something new was being established, he would be absolutely right, but in this context it doesn’t. Compliance is complex and resource intensive – our members already bear these costs. What Lord Hunt has perhaps misunderstood is that the amendment creates no new rules or requirements; it merely levels the playing field to ensure that all firms are held to the same standards – currently they are not.
With regard to his suggestion, it will “push some providers underground”, I am afraid to say that that is where they already are. And in the absence of Amendment 146, that is where they are likely to remain – at great cost to the taxpayer. We need to address that.
Lord Hunt does later raise valid points in relation to “regulatory duplication or conflict”, this is certainly something to be mindful of when drafting secondary legislation. I also take his points in relation to the absence of mechanisms to hold a licensing body to account, but as Lord Holmes highlighted this is done in other sectors of the economy, and such mechanisms can and should be put in place. With regards to consultation, the former Minister is probably unaware that Lord Holmes has worked with us in industry to develop Amendment 146, so I hope that concern can be easily addressed.
Lord Katz, the Minister then gave the Government response. He thanked Lord Holmes for his amendment and recognised the problem he is trying to solve. He went on to explain how the new ‘Fair Work Agency’ (FWA) would become the regulator for Umbrella Companies and that regulations will be introduced. I’m not sure how the Government intends to do that “without introducing a new regime that would add complexity for business”? Surely, if there is a model that already works for part of the market, it would be better to scale it up to apply to the rest of the market?
The Minister concluded by inviting Lord Holmes to withdraw the amendment. Lord Holmes obliged – this was a wise move as it is better to correct misunderstandings before putting an amendment to a vote. This is not the end for the licensing proposal.
Lord Holmes said: “My amendment sought to be short and to the point. That point, there is an obvious and unnecessary unfairness in the current arrangements, this simple change would correct it. I will be having discussions before Report and look to bring something back for debate and possible vote at that stage.”
In relation to the Government position, I do not believe that they intend for the FWA to assume the responsibilities of FCSA – nor should it, many of us who want to see FWA succeed already have concerns around resourcing for the new body. Which begs the question, how does the Government intend to level the playing field when it comes to enforcement?
I am sure the Government will produce a clear and robust set of regulations, but I am concerned that those intent on flouting the rules will continue to be able to do so. Without a means of ensuring standards are being met, any new regulation will be ineffective – the compliant part of the market is not the problem here.
We remind Government of their manifesto commitment to “partner with industry to drive economic growth and build a resilient economy” – FCSA is a willing partner with shared aims. We represent by far the largest segment of the compliant umbrella market and offer Government our well-developed codes of conduct.
Lord Holmes’s call for “clarity, consistency and fairness” remains unanswered.
