Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome Richard Jordan, who is head of income-based benefits in the Department for Communities; Dr Nichola Connery, who is head of equine identification policy branch in DAERA; Donna Kavanagh, who is director of policy, performance and assurance in Construction and Procurement Delivery (CPD) in DOF; and Kellie Sprott, who is head of the employment conditions and collective rights policy and legislation branch in the Department for the Economy.

Richard, will you make some opening remarks?

Mr Richard Jordan (Department for Communities): Thank you, Chair. Good morning. Thank you for the opportunity to attend the Committee today to speak to you about the legislative consent memorandum (LCM) for the Employment Rights Bill, which I will refer to as "the Bill" from this point on.

The Bill aims to improve workers' conditions, extend employee protections, modernise employment laws and enhance existing provisions. It also allows for the establishment of a single UK-wide enforcement body, which is to be known as the Fair Work Agency (FWA), that will bring together existing enforcement functions across a range of areas. The Bill is substantial. However, the LCM includes only a small number of the provisions that appear in the Bill. Those provisions fall under the remit of the Department for Communities, the Department of Agriculture, Environment and Rural Affairs, the Department for the Economy and the Department of Finance. I will provide opening comments, and then I and my colleagues from each of those Departments will answer any questions that you have.

The Chairperson (Mr Gildernew): Richard, can I ask you to move a wee bit closer to the microphone? It is a wee bit hard to pick you up.

Mr Jordan: The Bill was introduced in the House of Commons on 10 October 2024. Assembly Standing Order 42A requires that, within 10 working days of the relevant day for a Bill that contains provisions that deal with a devolved matter, the Minister responsible must lay a legislative consent memorandum before the Assembly. In this instance, it was not possible to adhere to that Standing Order, and I will briefly explain why that was the case.

The Bill is part of the Labour Party's commitment to introduce legislation within 100 days, and thus there was limited detailed information on the Bill until close to the time of its introduction. Given the wide-ranging nature of the Bill, significant work was required to obtain clarity on the aspects of the Bill that might require an LCM. The Department wrote to the Committee on 20 October to notify members of the proposed changes to statutory sick pay (SSP) and to outline that an LCM would be required in order to maintain parity. At that point, that was the only issue that engaged the LCM. However, other Departments identified cross-cutting issues, and those required further significant work to clarify them.

Minister Muir, Minister of Agriculture, Environment and Rural Affairs, wrote to Minister Lyons in November saying that he was minded to agree to the provisions of the Bill regarding the abolition of the Gangmasters and Labour Abuse Authority (GLAA) being extended to Northern Ireland. Minister Lyons assented to that. Minister Murphy, who was then Minister for the Economy, wrote to the Executive on 14 November to inform them that his Department was planning to bring forward a separate Northern Ireland employment rights Bill. However, Minister Murphy subsequently wrote to Minister Lyons in January this year saying that he was now minded to agree to the provisions of the Bill relating to enforcement of labour market legislation being extended to Northern Ireland. Subsequently, the then Minister of Finance, Minister Archibald, wrote to Minister Lyons saying that she was minded to agree to the provisions of the Bill relating to procurement being extended to Northern Ireland and requested that that form part of the LCM. There was a series of communications that delayed the bringing forward of the LCM.

The Minister for Employment Rights, Competition and Markets has asked the Minister for Communities and relevant other Ministers to agree that the relevant provisions of the Bill should extend to here and to bring forward an LCM. Our normal starting point would be to avoid using the LCM procedures. We are conscious of Committee members' views on the use of LCMs. However, given the circumstances, Minister Lyons, in tandem with the previously mentioned Ministers, has taken the view that, on balance, it seems sensible to progress an LCM. The Committee has been provided with a written briefing on the Bill, and, if members are content, I will now briefly go through the provisions of the Bill that would require an LCM.

I will start with statutory sick pay and the transfer of statutory sick pay enforcement to the proposed Fair Work Agency. Statutory sick pay is a transferred matter, and, while it is not a social security benefit, the arrangements for SSP fall under the scope of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 and are within the remit of DFC. SSP is the minimum that an employer must pay an eligible employee if they are unable to work due to illness or injury. To be eligible, an employee must have average weekly earnings at or above the lower earnings limit of £6,396, £123 a week or £6,300 a year. SSP is paid from the fourth day of absence. The standard rate of SSP is currently £116·75, and it can be paid for 28 weeks. It is useful to note that many employers have their own occupational or contractual sick pay scheme, which can be more generous than SSP.

Clause 10 will remove the waiting period for SSP. As I said, employees must wait for three days before receiving SSP payments. By enabling SSP to start from the first day of sickness, the Bill ensures that employees are supported from the moment that they are unable to work, thus addressing gaps in financial support during short-term illness.

Clause 11 will remove the lower earnings limit so that all employees, regardless of their income, will be eligible for SSP. That will ensure that low-income workers, who are often most vulnerable to financial hardship, are not left without support when they need it most. To ensure fairness, SSP payments will be set at either the lower flat weekly rate of £116·75 or at a percentage of the employee's weekly wages. That means that the majority of people who get SSP will continue to get the flat rate. However, for those who already earn less than the flat rate, the percentage-based option ensures that no one receives more in SSP than they would earn through wages. The percentage figure will be confirmed in the Bill, and it will be amendable by regulations in the same way as is possible for the flat weekly rate of SSP.

Currently, HMRC carries out SSP enforcement and dispute resolution on a UK-wide basis. The Bill proposes to transfer SSP enforcement and dispute resolution to the new Fair Work Agency. In Northern Ireland, that change would ensure that local workers could benefit from the same level of enforcement and support as workers in Great Britain, with DFC retaining overarching SSP policy responsibility and maintaining an advisory role to support the new FWA. The proposed SSP reforms will ensure that employees are supported from the moment that they are unable to work, thus addressing gaps in financial support and reducing financial hardship for employees. They will also ensure that low-income workers, who are often the most vulnerable to financial hardship during illness, are not left without support when they need it most.

There will be an increase in costs for some employers in Northern Ireland, particularly those who previously made SSP payments from the fourth day of sickness or excluded low-earning employees. While those costs represent a financial adjustment, they are, arguably, mitigated to some degree by the broader benefits of supporting employee welfare, particularly those who are on lower incomes, and reducing workforce disruption and impacts on productivity caused by sick workers attending work and passing on illness to others.

I turn now to the DAERA provisions. The proposed measures that fall to DAERA are the abolition of the Gangmasters and Labour Abuse Authority, with its functions being transferred to the Fair Work Agency and certain saving provisions. The Gangmasters and Labour Abuse Authority is a non-departmental public body (NDPB) that is sponsored by the Home Office and operates UK-wide under the Gangmasters (Licensing) Act 2004. It tackles worker exploitation, tax evasion and health and safety negligence. In Northern Ireland, its operations are funded and managed through DAERA. The GLAA employs two Northern Ireland-based enforcement officers. Clause 118 amends the 2004 Act for the purposes of abolishing the GLAA and transferring its functions to the new Fair Work Agency. It is understood that the functions that the GLAA carries out in Northern Ireland will not change.

Schedule 9 sets out the transitional and saving provision relating to Part 5 of the Bill. It provides that any of the amendments to the National Minimum Wage Act 1998 that are made in paragraphs 17 to 28 of schedule 8 do not affect any provisions of the Act relating to the operation of the Agricultural Wages (Regulation) (Northern Ireland) Order 1997. That is a simple saving provision that ensures that the Agricultural Wages (Regulation) (Northern Ireland) Order 1977 remains operable. It also maintains the Agricultural Wages Board. The Agricultural Wages Board is a statutory body that meets three times a year to determine the minimum gross rates payable to agricultural workers and to set some conditions for holiday and sick pay entitlement.

The proposed measures that fall to the Department for the Economy relate to the protection of workers. They will enable the Secretary of State, with the consent of relevant Northern Ireland Departments, to increase the Fair Work Agency's remit on a range of labour market and employment legislation. Schedule 5 to the Bill lists the legislation that is subject to enforcement by the proposed Fair Work Agency under Part 5. Paragraph 27 of schedule 5 gives powers enabling the Secretary of State to increase the remit of the FWA on a range of labour market and employment legislation by adding to the list of relevant labour market legislation in Part 1 of schedule 5. It has been agreed with the Department for Business and Trade (DBT) that the text will be amended to state that any such changes that include Northern Ireland devolved legislation will require the consent of the relevant Northern Ireland Department or Departments.

The proposed measures that fall to the Department of Finance relate to an amendment of the Procurement Act 2023 in respect of bodies that carry out reserved functions in Northern Ireland on the protection of workers in outsourced contracts that those bodies run. Clause 27 would amend the Procurement Act 2023 by allowing a UK Minister to produce and publish a code of practice for the protection of workers in outsourcing arrangements by public bodies to ensure that workers are treated no less favourably than workers of the contracting authority. In Northern Ireland, it is proposed that that will apply where reserved bodies are operating in Northern Ireland, where there is a joint procurement between a transferred Northern Ireland body and a UK reserved body or when a transferred Northern Ireland body uses a framework set up by a reserved body or uses a reserved central procurement authority. Clause 27 will not apply to transferred Northern Ireland public bodies.

Aligning with the Bill through an LCM would ensure that employees here receive the same enhanced SSP entitlements as their counterparts in Britain. That uniformity prevents inequalities in workers' protections and minimises administrative burdens for employers operating across the UK. DAERA is content that incorporating the proposed abolition of the GLAA and the establishment of the FWA avoids the need for a separate enforcement body in Northern Ireland, which would require significant time and resources to establish.

The Department for the Economy is content that the Bill will be amended to ensure that the powers enabling the Secretary of State to increase the remit of the FWA by adding to the list of relevant labour market legislation will rely on the consent of the relevant Northern Ireland Department where those powers relate to Northern Ireland legislation.

The Department of Finance is content that the proposed measures on the protection of workers' outsourcing arrangements by reserved public bodies in Northern Ireland be in the LCM. The proposals are not expected to have any direct financial implications for the Northern Ireland block grant. A UK-level consolidation of functions under the FWA is expected to generate efficiencies, although specific savings have not yet been quantified. Equality screening of the abolition of the GLAA and the reform of SSP has been carried out and concluded that no significant impacts on equality of opportunity were anticipated.

Should the FWA plan to extend its remit to include devolved employment legislation, the Department for the Economy will consider the appropriate human rights and equality screening requirements at that time. The proposed amendments to the Procurement Act 2023 on public-sector outsourcing and the protection of workers do not apply to Northern Ireland public bodies. Therefore, the Department of Finance has not carried out equality screening.

Time is critical, as an LCM would have to be agreed by the Assembly before the final amending stages in the House of Lords, which are expected to be in early May. Given the process set out in Standing Order 42A, the timetable is challenging. At their meeting on 20 February, the Executive gave their agreement to take forward the necessary LCM as a matter of urgency.

We are happy to answer any questions that the Committee might have.

The Chairperson (Mr Gildernew): Thank you for that, Richard. I have a general comment. The process of LCMs can be of concern to Committees generally. Given that the LCM is so complex and impinges on a range of Departments, that is particularly true. It is unfortunate that the time pressures are such with this, but I say that by way of a comment rather than asking a question at this point.

My first question is maybe for Kellie. How will the approval process work in practice and what safeguards will be in place to ensure that the devolved employment laws that we have here are not altered without full Executive agreement? Richard touched on that, but you could just expand on it.

Ms Kellie Sprott (Department for the Economy): There will be no immediate impact on devolved employment law with the creation of the Fair Work Agency. By seeking the amendment to the Bill, we have future-proofed Northern Ireland's option to become involved with the Fair Work Agency's work should the relevant Minister deem that appropriate at that time.

We have been working closely with DBT colleagues and the Office of the Parliamentary Counsel on an amendment to the Bill that will be a consent mechanism. That mechanism will ensure that, if a future Secretary of State wants to increase the Fair Work Agency's remit so that it falls across devolved powers, the Secretary of State must seek the full consent of the relevant Northern Ireland Department, which is how it is written in the Bill, and they will not be able to proceed without it.

The Chairperson (Mr Gildernew): You are seeking that amendment.

Ms Sprott: The amendment is drafted, but it will not be tabled until Report Stage starts, which is when the Government will propose their amendments. That is anticipated to happen in the week commencing 10 March.

The Chairperson (Mr Gildernew): Are you confident? Can you give some assurance to the Committee that the amendment will be accepted?

Ms Sprott: I can. I have seen the draft text of the amendment. We have checked it with colleagues in the Office of the Legislative Counsel (OLC) and the Departmental Solicitor's Office (DSO), and we and the Minister are content that the amendment will fulfil that need.

The Chairperson (Mr Gildernew): OK. Thank you.

The Bill proposes to abolish the Gangmasters and Labour Abuse Authority. Can you provide any assurance today that, as a result of that transition, there will be no weakening or dilution of the protection that the current level of labour market enforcement offers here, particularly in vulnerable sectors?

Dr Nichola Connery (Department of Agriculture, Environment and Rural Affairs): Absolutely. Some of the benefits that will be brought about will enhance those protection levels. The only difference that employees, employers and employee providers will notice is that, instead of having to maybe go to multiple places when they need help, there will be a single place to go. The abolition of the GLAA and the consolidation of some of the enforcement functions represent efficiencies coming from intelligence resources as well. We can absolutely guarantee that there will be no dilution, as you suggest, of the protection measures that the GLAA offers. Its good work will continue.

The timescale for the establishment of the Fair Work Agency is approximately 18 to 24 months. The Bill guarantees that the GLAA's good work will carry on under the Secretary of State until the Fair Work Agency can exercise its functions.

The Chairperson (Mr Gildernew): OK. Thank you.

I have a final brief question. Will there be any impact on the Health and Safety Executive (HSE) as a result of the LCM?

Dr Connery: None is anticipated. One of the main reasons why the Gangmasters and Labour Abuse Authority exists is to ensure that labour providers comply with all their statutory obligations, including, importantly, health and safety law. No impacts are anticipated there.

The Chairperson (Mr Gildernew): Thank you.

Mr Kingston: Will the FWA be established here? Is the LCM just enabling legislation, or does it mean that that will happen?

Mr Jordan: The Bill is enabling legislation that will set up the FWA. The FWA will be established, but, as Nichola said, it will take some time to come to fruition and become a functioning agency.

Mr Kingston: Is it likely to be established here?

Mr Jordan: It will be, because it is a UK-wide agency, but its remit here will be limited in the early days. The LCM focuses on the interaction between the FWA and the Northern Ireland devolved legislature, which is why the LCM is required.

Mr Kingston: Will it operate under a Westminster Department?

Mr Jordan: Yes.

Mr Kingston: OK. We will have to see how that works out in practice. Will it be a public-facing body and not just working in the background? Will people go to it? Normally, if people have an employment-related matter to be dealt with, I refer them to the Labour Relations Agency (LRA). How will the FWA compare to or contrast with the LRA?

Mr Jordan: The whole point of the FWA is to bring together disparate parts of employment law enforcement and regulation that are currently scattered across various arm's-length bodies into one recognisable body with its own branding. It will largely be a one-stop shop for employees and employers who check the law.

Mr Kingston: I should probably know this, but is the LRA a statutory or a voluntary body?

Ms Sprott: My Department looks after the LRA. It is an arm's-length body of the Department for the Economy. The role of the new Fair Work Agency will be different from that of the Labour Relations Agency. The Labour Relations Agency does not enforce; it promulgates good guidance, gives advice to employers and employees and effects conciliation both at an early stage and during the tribunal process. It will maintain its role and be different from the Fair Work Agency.

Mr Kingston: Will it have a distinct enough purpose?

Ms Sprott: Very much so. If I could just expand on that, I will give you a good example of how the Fair Work Agency will work in Northern Ireland even though it will be created by Westminster and will be a Whitehall body. On creation, it will enforce the national minimum wage. That will apply as it does now. The national minimum wage is a reserved matter. It is enforced equally across the United Kingdom. That will happen on day one. The enforcement officers who already do that work in Northern Ireland will continue to do it, but they will do it under the auspices of the Fair Work Agency. That is an example of how it will operate.

Mr Kingston: Will we see members of the public going to the FWA?

Ms Sprott: They will certainly be able to phone it, yes, if they believe that they are not being paid the national minimum wage or if they have issues with something that is happening. They will certainly be able to phone the Fair Work Agency, which will be able to act on that.

Ms K Armstrong: It is nice to see somebody with the same spelling of "Kellie" as me. We are few and far between — special people.

Northern Ireland's employment rights are different due to the fact that we have our equality legislation and section 75. How will that be taken care of if Westminster is to lead the Fair Work Agency? You have said that the FWA will not extend its enforcement, so we expect that those who do that work here will continue, but, to be honest, Westminster does not get our equality legislation. It does not do equality impact assessments, which we are required to do. I am just a bit worried. Will there be a reduction in our equality standards here? Will that eventually happen? Westminster could make changes that may be outwith what Northern Ireland requires.

Ms Sprott: Certainly, there will be no impact on devolved employment law with the creation of the Fair Work Agency. We are not included. Through the LCM, we are protecting a decision down the line whereby we may decide that we want to become involved. We may want to do that for a raft of reasons. We have no indication from Whitehall about how it might want to extend the remit of the Fair Work Agency as it progresses, but we know that the powers in the Bill as it stands allow for that to happen.

We have been having discussions with our counterparts in the Department for Business and Trade. By seeking the amendment and the consent mechanism, we are protecting the devolved legislature here and ensuring that no decisions to expand can happen without the full consent of the relevant Minister or Ministers. As you can see, a lot of Departments are represented here. That is the reason for that. We would make those assessments at that time about equality and whether we want to be in. We would continue to protect ourselves.

Ms K Armstrong: Paragraph 70, which is on page 11 of your document, states:

Is that because the Procurement Act does not apply to Northern Ireland? It frustrates me that we do not have the same entitlements for those from whom we procure. I count them to be the people whom we contract or to whom we provide grant money to deliver services. Are we not included because Northern Ireland is not part of the Procurement Act, or has a different decision been taken on that?

Ms Donna Kavanagh (Department of Finance): Northern Ireland is part of the Procurement Act. That part just amends the Procurement Act for the protection of workers in relevant outsourced contracts, but it applies only to reserved bodies, not transferred bodies.

Ms K Armstrong: Right. Reserved bodies would include arm's-length bodies.

Ms Kavanagh: Yes.

Ms K Armstrong: We have heard recently about — not proscribed — prescribed bodies, which is another one.

Ms Kavanagh: The arm's-length bodies come under the Departments, which we transferred. Reserved bodies include NIO, the MOD and the Department for Environment, Food and Rural Affairs (DEFRA).The other legislation in the Procurement Act covers the transferred bodies.

Ms K Armstrong: It does not reach out to —.

Ms Kavanagh: This element, which is part of the Employment Rights Bill, does not apply to the transferred bodies.

Ms K Armstrong: Can we change that? Can we ask for that to be extended? We would like the same rights to apply to anyone whom we are using to deliver services.

Ms Kavanagh: You have GB legislation here, of course, that applies to outsourced contracts and transferring staff.

Ms K Armstrong: It does not, for instance, apply to minimum wage. The minimum wage is supposed to be in there, but the real living wage is not.

Ms Kavanagh: The real living wage is contained in the procurement guidance notes that CPD produces. We apply that guidance in our conditions of contract for CPD contracts.

Ms K Armstrong: But not to grants.

Ms Kavanagh: Grants are different from procurement. They do not come under procurement.

Ms K Armstrong: I always say that they are not different. OK. I am a little concerned about that we are not going to include, for instance, the community and voluntary sector that we look after here.

The Chairperson (Mr Gildernew): I thank all of you for coming along today and providing briefing and responses. Thank you and good luck.

Mr Kingston: Chair, why is there nobody from the Department for the Economy here?

The Committee Clerk: Sorry, it is a mistake on the nameplate. Kellie is from the Department for the Economy.

Mr Kingston: OK. I was just trying to understand. Thank you.

The Committee Clerk: We put "Department of Education" on by mistake.

The Chairperson (Mr Gildernew): She represented the Department for the Economy very well.

Mr Kingston: We are being very ecumenical today. [Laughter.]