Official Report: Minutes of Evidence

The Chairperson (Mr Brett): You are all very welcome back, colleagues. We are joined by Colin Jack, who is a regular attender at the Committee. His favourite activity on a Wednesday morning is to come here. I welcome Kellie Sprott. I apologise, sir, I should know your name, but I do not.

Mr Paul Lyons (Department for the Economy): I am Paul Lyons.

The Chairperson (Mr Brett): Perfect. You are very welcome as well. If you are content, Colin, I will hand over to you.

Mr Colin Jack (Department for the Economy): Thank you, Chair, for the opportunity to speak to the Committee today about the legislative consent motion (LCM) for the Westminster Employment Rights Bill. The Bill was introduced in the House of Commons on 10 October 2024, and it flows from the Labour Government's commitment to introduce legislation within 100 days of entering office. It aims to improve workplace conditions, extend employee protections, modernise employment laws, enhance existing provisions and introduce new rights.

Most of the provisions apply only to England, Scotland and Wales. As members will be aware from our previous briefings, employment law is devolved to here, but that applies only to the Northern Ireland Administration, not to the Scottish and Welsh Administrations. The Bill also includes some UK-wide provisions, which reflects the fact that some broader aspects of employment conditions are reserved, such as the national minimum wage. That is relevant to the provision that we are here to talk about, which is the establishment of a single, UK-wide enforcement body to be known as the Fair Work Agency (FWA). It will bring together a number of existing enforcement functions across a number of regimes.

Overall, the Bill is relatively large, and, given the wide-ranging extent of the proposed measures, significant work was required to obtain clarity on aspects that might require a legislative consent motion. The provisions relating to employment rights, which are transferred, cut across the Department for Communities, the Department of Agriculture, Environment and Rural Affairs, the Department of Finance and our Department for the Economy. A joint legislative consent motion is being brought forward to maintain parity with Great Britain on certain matters.

For the Department for Communities, there are measures relating to reforms to statutory sick pay and the transfer of statutory sick pay enforcement and dispute resolution powers from HMRC, where they currently sit, to the proposed Fair Work Agency.

For DAERA, there are proposals to abolish the Gangmasters and Labour Abuse Authority, with the transfer of those functions, where DAERA is already involved in the carrying out of those functions, to the Fair Work Agency. There are certain saving provisions involved there too.

For the Department of Finance, there are proposals in respect of bodies carrying out reserved functions in Northern Ireland and in relation to the protection of workers in outsourced contracts that are run by those bodies.

For us in the Department for the Economy, there are measures that would enable the Secretary of State, in the future, to increase the remit of the Fair Work Agency on a range of labour market and employment legislation, which may, by agreement, include devolved employment law, which is the responsibility of DFE. However, there are no immediate impacts for DFE when the Fair Work Agency is created, unlike for other Departments where the Fair Work Agency will have immediate powers that apply in Northern Ireland.

Given the significant reforms proposed to statutory sick pay, the Minister for Communities has agreed to lead on the legislative consent motion. That is appropriate, I think, given that there are no immediate impacts for DFE once the Bill completes its parliamentary passage.

The then Minister Murphy wrote to the Committee on 30 January to notify members of his intention that the provisions relevant to DFE would be included in the legislative consent motion. While those are not insignificant provisions, they create only the opportunity to allow for future additions to the remit of the Fair Work Agency. There are no current plans to make any changes that involve devolved employment law.

Minister Murphy had some concerns about the original wording of the Bill, in that it gave powers to the Secretary of State to make decisions involving devolved legislation without any requirement to gain consent from the devolved Administration. He wrote to the responsible Minister in the Department for Business and Trade (DBT), Justin Madders MP, on 7 January to express those concerns. In response, Minister Madders has agreed to amend the wording of the Bill to state that any future changes to the remit of the Fair Work Agency that would affect devolved employment law would require the consent of the relevant Northern Ireland Department or Departments to proceed. He reiterated that commitment directly to Minister Archibald earlier this week.

Minister Murphy subsequently wrote to Minister Lyons on 15 January seeking his agreement to DFE's being part of the legislative consent motion being led by DFC, and Minister Lyons responded on 3 February agreeing to that.

I reiterate that there are no immediate plans to add to the remit of the Fair Work Agency as it relates to devolved employment law here, but the intention of our input to the LCM is to ensure that there is an option to do that, potentially at a future date, should a Minister feel that that would be appropriate. For example, there could be economies of scale in inspection and enforcement of certain aspects of employment law being carried out by a UK-wide body.

I mentioned the functions of the existing minimum wage inspectorate, which is part of HMRC. In future, that function, when it is part of the Fair Work Agency, could be expanded to include aspects of devolved employment law at the same time. For example, the payment of holiday pay could be inspected by the Fair Work Agency at the same time as it inspects compliance with the minimum wage payment. That is the type of issue on which, in future, we might want to recommend to a Minister that the Fair Work Agency could have a role here.

As DFC is the lead Department for the legislative consent motion, the Committee for Communities has an obligation to scrutinise it. As such, we expect to be called to give evidence to the Committee for Communities. That has been scheduled for 27 February.

Thank you for the opportunity to update the Committee, Chair. We are happy to take questions from you and other members.

The Chairperson (Mr Brett): Thank you very much indeed. First, on the wider context of the Bill that the Labour Government have introduced, does the Department see a clear overlap between what the UK Government propose and what is in the Minister's proposed 'good jobs' Bill?

Mr Jack: A number of similar issues are included in the UK Government's Employment Rights Bill. We consulted over the summer, from the beginning of July to 30 September, on our Minister's proposed employment rights Bill. Our consultation document covered issues such as zero-hours workers. The UK Government's Bill has specific proposals for a regime for zero-hours contracts, but that is not necessarily the regime that our Minister will wish to adopt. There is some overlap, but a lot of what is in our proposed Bill comprises measures that have already been legislated on in other jurisdictions, in Westminster and in the South. There is overlap, but the Bills are not exactly the same. We have not consulted on the full regime that is set out in the UK Government's Employment Rights Bill, and, in certain areas, we may not do so.

The Chairperson (Mr Brett): Fair enough. Which public bodies or organisations in Northern Ireland will be subject to the Fair Work Agency's work?

Mr Jack: The Fair Work Agency will have a right to inspect compliance with employment law and, initially, minimum wage payment by any employer. That will include the public sector, although one would hope that the public sector always pays minimum wage. There is an existing regime whereby HMRC has a name-and-shame policy for employers who do not comply. You hear it reported on local media when HMRC puts out a report that lists employers who have not been compliant. That regime is intended to continue under the new Fair Work Agency, but, in future, there will be the option for Ministers to add to the aspects of employment law that employers comply or do not comply with.

The Chairperson (Mr Brett): What will be the Fair Work Agency's relationship with the Labour Relations Agency (LRA) in Northern Ireland?

Mr Jack: The LRA's role is different. It promotes good practice in employment relations. It arbitrates, it gets involved in early conciliation of employment disputes, particularly those that are brought to a tribunal, and it gives people advice on the complaints process if they feel that their employment rights have not been respected. It also promotes good practice among employers on compliance with employment law. It is a different role. The Fair Work Agency will be more of a compliance and enforcement organisation.

The Chairperson (Mr Brett): The LRA does not have enforcement powers. Is that not correct?

Mr Jack: No, it does not. For most aspects of employment law, enforcement is done through tribunals.

The Chairperson (Mr Brett): Thank you. That is useful.

Ms McLaughlin: Chair, you have just asked the question that I was going to ask, which was about the Labour Relations Agency and the role of each organisation. We do not want to have conflicting roles or to potentially damage or diminish the Labour Relations Agency's role. Are you sure that the two are separate and distinct, Colin?

Mr Jack: Yes. There is an analogy with the Workplace Relations Commission in the South. It has a labour inspection function whereby it can go into an organisation and inspect a wide range of aspects of compliance with employment law. It undertakes the function in the South that is equivalent to HMRC's current function here relating to minimum wage compliance. It also has powers to inspect any aspect of employment law compliance that it is asked to inspect. My understanding is that the Workplace Relations Commission's inspection function model influenced the UK Government in developing their policy in this area. In fact, that policy development was going on under the previous Government as well. It is a long-term objective, as I understand it, of the UK Government to widen the provision of labour inspection to align it more closely with what happens internationally. In the UK, up to now, it has been limited to minimum wage compliance.

Ms McLaughlin: My second question is on a wider issue. The last time that you were before the Committee, Colin, we talked about the 'good jobs' Bill. Is your Department engaging in enough detail, in a wider, comprehensive fashion, with this new Bill to ensure that we do not fall behind GB if relevant advances are made in workers' rights?

Mr Jack: As I mentioned, regimes for some issues that we consulted on over the summer and that are set out in the UK Government's Bill will apply in England, Scotland and Wales. Our Minister will take a decision on the way forward on the basis of the issues that we consulted on. It is possible that, in some areas, that could look similar to the UK Government's model, and, in others, it may not, but it will be based on reflecting on the views expressed by businesses, trade unions and employee and employer representatives in the consultation exercise here.

There may be some issues in the new GB Employment Rights Bill that we did not consult on and that we will not have the capacity in the current mandate to legislate on. Those will probably need to await a further employment Bill in the next mandate.

Ms McLaughlin: Are you saying that GB may be moving forward faster than we are, so there is the potential of our falling behind on workers' rights?

Mr Jack: No. GB may be legislating on some issues that we will not be able to legislate on in the current mandate, but there are also quite a number of aspects of the GB Employment Rights Bill that, I suppose, restore the position of employment law in GB to make it more in line with here. Changes were made to employment law by the previous UK Government that were not made here, especially in relation to trade unions, whose rights were reduced. The Bill, in fact, brings the position in GB more closely back into line with the position that has remained the case here all along.

Ms McLaughlin: Thank you very much.

Mr Honeyford: We have covered quite a bit of what I was going to ask. Who does that work here now?

Mr Jack: The minimum wage inspection work is done by HMRC. The functions that DAERA carries out on behalf of the Gangmasters and Labour Abuse Authority will continue but will become part of the new Fair Work Agency. Currently, statutory sick pay provisions are inspected by HMRC, so that inspection will be part of the Fair Work Agency. [Inaudible.]

Ms Kellie Sprott (Department for the Economy): Yes.

Mr Jack: There are other areas that a Minister might ask the Fair Work Agency to look at in the future. Holiday pay might be such an area, but no inspection function for that exists at the moment. That would be something new. I suppose that the Bill's provisions would allow a future Minister to agree that with the UK Government.

Mr Honeyford: You mentioned the impact on DAERA, and I get that. Is it that you are simply moving people who work in a DAERA office to a different role?

Mr Jack: I do not work for DAERA and am not very closely familiar with how it works, but my understanding is that there are officials who are employed by DAERA who are effectively seconded to work for the Gangmasters and Labour Abuse Authority at the moment and will simply transfer to work on behalf of the Fair Work Agency.

Mr Honeyford: Is it the same with HMRC?

Mr Jack: Those are HMRC staff currently, and my assumption is that they will become Fair Work Agency staff.

Mr Honeyford: There is no issue with duplication with the Labour Relations Agency?

Mr Jack: No, there are no functions transferring from the Labour Relations Agency.

Mr Honeyford: Cheers. Thank you.

Ms Sheerin: Thanks to you all for coming in this morning. I want to ask for a wee bit more detail on the remit of the LCM. You touched on the fact that the Minister has sought assurance that nothing can be implemented in the North without our agreement here. Will you elaborate on that? I know that this is an ongoing concern with LCMs. The 'good jobs' Bill has been a priority for the previous and current Ministers, and the missing piece is that workers, an awful lot the time, are not aware of their rights, and the only way that people seek their rights is through individual cases. We saw that very clearly throughout COVID and even a few weeks ago, during the storm, where people were just not sure whether what their employer was telling them was correct or legal. Any progress on increasing people's awareness of their rights in the workplace can only be a positive thing. There is just that wee concern about the overlap or where their jurisdiction ends.

Mr Jack: Kellie, do you want to take that one?

Ms Sprott: Yes. The LCM in itself is not related to how someone can assert their rights.

Ms Sheerin: I know.

Ms Sprott: Would you like me to answer a little bit more about the LCM?

Ms Sheerin: Yes, please.

Ms Sprott: With the LCM, we in DFE are trying to protect a future Minister's right to be included in the work of the Fair Work Agency, should they deem that appropriate at the time. Nothing will happen upon creation of the Fair Work Agency for DFE. Nothing will change. Everything will be the same.

With regard to the changing of the text of the Bill that allowed our Minister to agree to be part of the LCM, we are working with officials in the Department for Business and Trade on that at the moment, and it is with the Office of the Parliamentary Counsel. We have been given assurances about the text that will be put in there, and it will include a full consent mechanism so that, in the future, if the Secretary of State wants to widen the remit of the Fair Work Agency across employment law, in order to do so and include Northern Ireland, it would have to have the full consent of the appropriate Northern Ireland Minister at that time. That could not proceed and include Northern Ireland without our consent. That is the change that we are seeking to make through the LCM.

Mr Jack: In the original version of the text, a Secretary of State in Whitehall could have made a change to the aspects of devolved employment legislation that the Fair Work Agency could inspect without consulting the Minister here. The change that is to be made in response to the Minister's intervention is that the Secretary of State in Whitehall cannot add to, vary or take away from the functions that the Fair Work Agency would carry out in respect of devolved employment law here.

Ms Sheerin: Are you confident that that will happen?

Mr Jack: Yes. We have definitely had a clear assurance from the Minister in DBT.

Ms Sprott: As the Bill progresses in GB, once it gets through certain stages, you will see that amendment be placed in the text of the Bill. It just has to go through the formal process to get to that stage.

On your other point about people knowing about their rights and being able to assert them, it is a good point with regard to the questions about the role of the Labour Relations Agency. That is really where the Labour Relations Agency steps in. It is there to promulgate, promote and make employers and employees alike aware of their rights, and that is part of its role in working with the Department. That is a very different role from the enforcement of the rights with employers. That is where the LRA will come in.

Ms Sheerin: It struck me that in the premise of the 'good jobs' Bill and what it sets out to do and the LCM that we are discussing, both, ultimately, have the objective of people being able to exercise their rights. I signpost people to the LRA, but the vast majority of people who come to me with an issue in the workplace are not aware of that body and have no —

Ms Sprott: Agreed.

Ms Sheerin: — understanding of how to utilise it. Any conversation that we have around workers' rights will lead to an increase in people understanding what their rights are and how to enforce them, should they need to.

Mr Jack: It is likely to continue to be the first port of call to refer people to the LRA. They will then be aware of where the Fair Work Agency has a role if they need to refer them on further to them. The simplest thing, if anyone has an employment rights issue, is to suggest that they contact the LRA in the first instance. They are very well versed in the full employment relations system.

Ms Sheerin: Thank you.

Mr Middleton: Thanks for the briefing this morning. I have two questions. First, could you talk through, just to be clear, the timescales for the Westminster Bill. The Communities Committee has indicated that its scrutiny of the LCM will take place, and then it is likely to be debated in the Chamber sometime in March or April. How does that line up — I want you to remind me, in terms of the 'good news' Bill — with where the Minister is on that?

Mr Buckley: The 'good news' Bill?

Some Members: Good news? [Laughter.]

Mr Middleton: I literally just said to Jonny, "I nearly called it the 'good news' Bill", and I just did. Let me rephrase that, because it is not good news for many businesses: the 'good jobs' Bill. When will that be brought forward? In consideration of the fact that many businesses are rightly concerned about the 'good jobs' Bill, in your opinion, how have they been consulted in relation to the Westminster Bill?

Mr Jack: The Westminster Government have taken a particular approach to this Bill. They made a commitment to introduce the Bill to Parliament in their first 100 days. They do not have a consultation requirement as we have in relation to any change in policy, so they have, in a sense, introduced the Bill, and then they will consult afterwards. It will take time to introduce a lot of the provisions in the Bill. That will be done through secondary legislation following the consultation exercises that they will carry out. For example, if you read the Part of the Bill that deals with zero-hours contracts, there are an awful lot of time periods and so on that are not defined. Those will be consulted on in subsequent exercises, so it can be quite difficult to read the Bill and understand exactly what it is planning to bring in.

Our process is that we run the consultation exercise on the issues. Then, the Minister will take the policy decisions and get agreement from the Executive on the drafting of the Bill. She is required to follow that process. Then, the Office of the Legislative Counsel is asked to draft the Bill, which will take several months. Our intention is to introduce the Bill to the Assembly in January 2026.

Mr Middleton: The difference being that the difficulty with the 'good news' — the 'good jobs' — Bill —. I have to get that out of my head now. [Laughter.]

My son goes to the Good News Club. It is slightly different, is it not?

One of the frustrations from the business community with the 'good jobs' Bill was that there was a lack of proposals in that. Obviously, that was the consultation, but they felt that there was no proposal. It seems to be the opposite case with the Westminster Bill, where the proposals are there but the consultation comes afterwards. It is one that we need to keep an eye on. Thanks for that.

Mr Jack: It will take quite a while for a lot of the provisions in the Westminster Bill to come into effect because of that consultation afterwards. It may be that the actual implementation timeline at the end of the process is not that different. It is just that the process to get there is different.

Ms D Armstrong: Good morning and thank you. It is good to see you both again. Welcome to the Committee. A lot of my questions have been answered, thank you. I am looking at a few details of the policy intent. Over time, the FWA will take on enforcement of a wider range of employment rights. Over what period of time? How is that vast remit that the FWA will take on being communicated to employers and employees? Will there be areas in which Northern Ireland continues to differ, ultimately, from GB in worker protections, and how will it differ?

Mr Jack: There is still a lot of detail to be worked out about the time frame for any functions to be added to the Fair Work Agency. The UK Government's intention is that, once it is created, it will then be asked to take on additional functions as Ministers feel is appropriate. Certainly, the one that there has already been a lot of discussion about is holiday pay enforcement and inspection. Even for that, I do not think that we have a timescale from the UK Government.

Ms Sprott: GB does not even have a timescale for it yet. They have been working at pace to fulfil a manifesto commitment to bring forward the Bill, which they have done. A lot of the thinking and working out of timescales will come afterwards, so they do not know at this stage.

Mr Jack: I suppose that, if it came to devolved areas of employment legislation's being added to the remit of the Fair Work Agency, we would expect to consult on that before it happened.

Ms D Armstrong: On a wider point: we are trying to encourage a growth agenda in the business sectors, in particular. In terms of encouraging leadership and employers, encouraging employment and encouraging people to create businesses, will there be training and education for future industry leaders on the obligations?

Mr Jack: Quite a lot of training is provided already on employment relations, HR management and so on. The various professions take changes to employment legislation on board in the training that they provide. There is a whole system, I suppose, of annual conferences and that kind of thing. They always focus on any changes that have been made during the year. I suppose that the training that is offered is updated in order to take account of any changes. That would happen routinely.

Ms D Armstrong: I am just thinking about the regulatory requirements in Northern Ireland and GB compared with other places where investors may choose to invest. Has that been considered as, perhaps, an impediment to investing here?

Mr Jack: I suppose that some work has been done. I think that, when I was in front of the Committee previously, I mentioned work that has been done by the Resolution Foundation that compared enforcement of employment rights and, indeed, what the employment rights were internationally. It showed that the UK, as a whole, is very much in line with, and perhaps, has a slighter lower level of employment rights than, most European countries, but a significantly higher level of employment rights than the USA. The function of workplace inspection — or labour inspection, as, I suppose, it would be referred to — would take place routinely in a number of other European countries but maybe less so in the US.

Mr Buckley: I do not believe that Northern Ireland or the UK has poor workers' rights. Where there are bad actors, as there are in every society, it is important that we root them out. Officials will know that I have put my concerns on record, as have business representatives and other Committee members, about some of the impacts that the Minister's 'good jobs' Bill will have on industry here in Northern Ireland and, particularly, as Diana mentioned, on the growth agenda.

On the specifics of the LCM and the particulars that apply to the Department for the Economy, they relate purely to the UK-wide Fair Work Agency. Is that correct?

Mr Jack: Yes.

Mr Buckley: Therefore, in a sense, the only real issue for us at this stage, whether or not we want to take into consideration the overall Employment Rights Bill and what will be cross-applicable with the Minister's 'good jobs' Bill — that is a debate for another day — is the minimum wage. We are studying how HMRC currently enforces that, and that will now change. Obviously, HMRC has a wealth of institutional knowledge on that and access to live, real-time data. How will that change with the establishment of the Fair Work Agency? Are you confident that it will be able to track, monitor and report in the same way that HMRC does, which is the gold standard? That concerns me. How do we ensure that there is proper reporting?

Mr Jack: That aspect of what happens is not devolved. HMRC does that currently, and the UK Government have decided to move that function into this new Fair Work Agency. I would expect, although I cannot say definitively, that the staff who carry out that work will transfer into the new organisation and the way that they carry out that work will be broadly the same. There are other functions, such as the Employment Agency Standards Inspectorate, that operate in GB. We have our own Employment Agency Inspectorate within the Department, and that is not affected by this proposal unless a Minister decides in the future that it should maybe become part of the Fair Work Agency.

Mr Buckley: Colin, I am trying to say that, at present, if there was a suspected misdemeanour of an employer about minimum wage, the appropriate way to investigate that is obviously through payroll. I am trying to understand whether the Fair Work Agency will have access to payroll live, real-time data in the same way that HMRC does.

Ms Sprott: I understand that it will. This is being taken forward by DBT, but it has not ironed out all the details for the creation of the Fair Work Agency yet. My understanding is that, upon creation, all the enforcement that it is bringing in, which includes national minimum wage, statutory sick pay and the regulation of gangmasters, will not change. The name that it is under will change but how it is done will not change. That is my understanding.

Mr Buckley: That clarifies that with regard to this LCM, leaving aside my wider concerns about an overarching 'good jobs' Bill and its impact on industry and also on productivity. Thank you.

The Chairperson (Mr Brett): No other members have indicated. I just want to seek one final piece of clarity. Colin, you said that the change that the Minister was seeking was that it required ministerial approval.

Mr Jack: Yes.

The Chairperson (Mr Brett): Are you sure that the word is "ministerial" and not "departmental"?

Mr Jack: It is departmental.

Ms Sprott: Yes, it is departmental.

The Chairperson (Mr Brett): That is different from any other changes being sought by Scottish or Welsh counterparts. They are looking for the word "ministerial".

Mr Jack: In Scotland and Wales, these issues are not devolved so the issue does not arise. It is a specific issue in Northern Ireland.

The Chairperson (Mr Brett): So, the word is "department" and not "Minister"?

Ms Sprott: Yes. "Department" or "Departments".

The Chairperson (Mr Brett): Perfect, and that was because the Minister had concerns that legislation might impact upon the devolved competency of the Northern Ireland Assembly.

Mr Jack: Yes, that a Whitehall Secretary of State would have had the power to make changes that affected the devolved legislation without consulting with the devolved Administration.

The Chairperson (Mr Brett): I made the point at a previous Committee meeting that the same Minister does not seem to have the same concern about EU law impacting without any consent of the Northern Ireland Assembly, but that is a party political point and not one for you to respond to. Thank you very much indeed, as always, for your representations.