MPs are urging the government to close ‘once and for all’ the loopholes that allow some companies to exploit work insecurity and undercut Britain’s outstanding employers.  

In its inquiry into the Employment Rights Bill, currently heading to report stage in its passage through Parliament, the Business and Trade Committee heard from business groups worried about the rising cost of doing business and firms citing a need for labour flexibility. But the Committee found evidence, across business sectors and types, of exploitation enabled by work insecurity.

Committee chair Liam Byrne said “Our committee has heard loud and clear that getting the right workers for the right roles is the number one challenge for British business trying to grow. It’s obvious we can’t fix that problem by letting rogue firms sidestep new rules and mistreat their workforce.

“We know that business is worried about the rising costs of employment but we also heard how Britain’s most outstanding employers are fantastic places to work with tried and tested ways to partner with their workforce. But we’ve also taken evidence about abuse of workers that has frankly horrified us.”

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Over the past two months, the committee has heard evidence from numerous witnesses including executives at McDonald’s, Evri, Amazon, Frasers Group and Shein.

It heard evidence from McDonald’s in January when reports of fresh claims of harassment and sexual misconduct emerged. More than 700 current and former junior employees are now taking legal action against the firm, accusing it of failing to protect them. It found that workers on zero-hours contracts are most likely to be aged 16-24, female and working part-time and in the accommodation and food sectors.

Evri put forward its “self-employed+” status but the committee heard evidence from scores of individual drivers accusing the courier of bad working practices that, like the McDonald’s allegations, are enabled by the lack of contract guarantees. The committee said Evri refused to recognise the significant and consistent allegations in evidence in Parliament.

Amazon was unable to tell the committee why its workforce went on strike, while Frasers Group’s Sports Direct confirmed over three quarters of the staff at its Shirebrook warehouse are agency workers, despite promising in 2016 to increase the proportion of staff on contracts.

The committee is also concerned about the risk that unscrupulous companies might side-step reforms to zero-hours contracts by using agency workers. Evidence from companies like Uniqlo, Lush and Gymshark raised questions about firms using a “multi-tiered system to drop down through the work benefits ranking” to engage self-employed workers with even fewer benefits and protections than agency work offers.

Byrne added: “We want ministers to make some strategic changes to the Employment Rights Bill to help make sure Britain’s best firms can no longer be undercut by rogue companies cutting corners and exploiting their workers.

“What is good for Britain’s workforce is good for Britain and good for British business. If we want Britain to become the fastest growing economy in the G7, then we need to help every firm rise to the level of the best of British. The Employment Rights Bill could help if ministers take action on our recommendations.”

Recommendations for the Employment Rights Bill

The Committee makes a series of five key recommendations to tighten up the Employment Rights Bill including the need to for ministers to:

• Be explicit in law about precise reforms to end exploitative zero-hours contracts.
• Accelerate, not slow down, reform of worker status and bogus self-employment.
• Set out a clear plans to adequately resource the Fair Work Agency must be appropriately resourced. New rights must also be explained to employers. The committee calls on Acas to lead an information campaign to do this.
• Modernise the ways unions are allowed to organise in the digital age to ensure appropriate rights of access for unions and equal time to present their case to workers.
• Review and update the Modern Slavery Act to make modern slavery statements mandatory, to introduce penalties and to “name and shame” for companies not disclosing action plans.

The committee also voiced concern about what is missing from the Bill. In a widely reported exchange in Parliament, Shein repeatedly failed to answer a question about the source of cotton in products shipped to the UK. In subsequent correspondence it was confirmed that – unlike the US – the UK does not require legal assurances on the geographic origin of products.

Likewise, the Financial Conduct Authority explained there is no requirement on investors interested in a listing on the London Stock Exchange to consider the risk of forced labour in a company’s supply chains – only to make their own assessment of how material that risk is.

The checks are so weak the committee said the UK is at “serious risk of becoming a dumping ground” if it does not align with tougher laws among UK allies, including blanket import bans from regions where forced labour prevails.

More workplace disputes

Ben Willmott, head of public policy at the CIPD, said: “We support the Business and Trade Committee’s recommendation for ministers to set out clear plans to ensure the proposed Fair Work Agency is adequately resourced, but this will not go far enough to ensure that employment rights are being upheld or to support employers in complying with new laws. The Fair Work Agency will be just one part of the enforcement system and Acas also needs more resources if it is to support employers, particularly smaller firms, with compliance.

“More thought needs to go into how the measures in the bill will be effectively implemented in workplaces to avoid leading to more workplace disputes and a sharp increase in employment tribunal claims. The government should prioritise the development of an implementation plan and support for employers to prepare for the new regulations. The law on its own won’t be enough to improve outcomes  – employer understanding and enforcement will be key.

“An effective labour market enforcement system would be a key foundation for another of the committee’s recommendations: an industrial relations strategy to support social partnership between employers, trade unions and sector bodies. This could be supported by the development of a new code of practice on collective employment relations.”

Take time to talk

Recruitment and Employment Confederation chief executive Neil Carberry said: “The committee’s report draws attention to the complexity and scale of this Bill. Businesses fear that the Bill will do more harm than good unless the asks made of employers are clear, practical and – as the committee rightly emphasises – properly enforced. If that means putting more detail into the Bill as the committee suggests, then a longer timeline is needed than the government currently intends. If the government plans to provide that clarity through regulations instead, then a proper partnership with employers and trade unions on fundamental details is necessary.

“What the trade unions negotiated with Labour before the election is one thing, but good employment relations rely on bringing employers and employees together – not pre-election deals that are short on detail and long on potential economic damage. Let’s take time to talk and get things right.”

He added: “The committee points to examples of perceived poor practice by employers and a number of other risks in this report – this is worthy of our time and attention. But we must also reflect on the vast majority of employers, who do things the right way. They are suffering with a range of rising business costs, including the national insurance changes brought in by the Budget. And they can only create jobs if their firms are sustainable.

“A flexible labour market is critical to this, with different forms of work a fundamental part of generating opportunity and growth – not a route to avoiding anything. These employers need Parliament’s support, not more challenges. We welcome the report’s acknowledgment of the fact that agency workers usually want the flexibility this way of working offers – that support should flow through to how the Bill and secondary legislation is designed.”

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