Clause 36 - Removal of exemption for small employers
Employment Bill
5:30 pm

Mr Charles Hendry (Wealden, Conservative)

I beg to move amendment No. 68, in page 39, line 31, leave out from 'procedures,' to end of line 32 and insert

'subsection (3) shall have effect so that the note need not comply with the specified provisions where the relevant number of employees was less than six'.

The amendment is straightforward. It is designed to take account of the pressures facing small businesses and reduce the impact of these measures on companies employing five people or fewer. At present, the position is that 20 people are enough to allow a company to be exempted. We have not pressed for that because our main concern is with the smallest companies, the micro-firms, which are most vulnerable to the bureaucracy entailed by the provisions.

The sort of companies that we are talking about, with five employees or fewer, find it most difficult to survive, even in good times. They face a welter of rules and regulations. We need to go back to how people start a business. They do so not because they want to be tax collectors for the Government or to fill in forms all day, but because they have an idea that they want to pursue. They may not have run a business before and it is quite a brave step. They are not ready for the volume of paperwork that comes their way.

The most difficult time for that new business, as I know from experience, is taking on the first employee. It represents a significant act of faith. That person's salary will probably not yet be covered and so one assumes that one can bring in enough new business to cover it, other costs and make a profit. A range of other factors also come into play. One may be paying national insurance contributions for the first time and filling in pay-as-you-earn returns. It may push the business above a value added tax threshold. There may be additional insurance implications and one is taking on responsibility for that person and possibly his family.

Perhaps all that is best illustrated by a couple of brief examples. A plumber who has worked on his own and takes on a mate will often not just have to go through the elements that I have described, but may have to buy a new van. He has his mind on a whole range of different things. He may have to train that person and will be distracted from the job in hand while he does so. He then must work that much harder to find new business to ensure that the business survives and prospers. He may have left school at 16 and not be

particularly well educated. The minefield of forms and requirements to fill in bits of paper will be alien to him. He is certainly not a lawyer and probably not even a great wordsmith. He is simply someone who wants to run his business as well as he can. Micro-businesses like that do not need an additional level of bureaucracy.

The second example is a small corner shop. The guy gets up at 4 am when the papers arrive and is still there late into the evening filling in his books. He will find that his whole life is taken over. When he takes on his first employee, he takes on those additional responsibilities and he does not want further legal requirements. There may also be language problems. While he may know how to run a business hugely successfully, English may not be his first language and he will be dealing with legislation. Although some small firms, particularly lawyers and accountants, may specialise in dealing with details, the overwhelming majority of companies that employ five people or fewer are not in that category. They are small businesses that are often struggling to survive. We should bear such people in mind and try to make their lives that much easier.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

There seems to be an inconsistency here. Last week, the Opposition argued rightly that it was important for things to be in writing for small businesses. We talked about the corner shop at length and the fact that if things were not in writing, it left scope for ambiguity and uncertainty about what was intended. Yet today, the hon. Gentleman seems to argue that those things should not be in writing. Is there not an inconsistency between the arguments last week and this week?

Mr Charles Hendry (Wealden, Conservative)

Not at all, last week we argued that the people who most need things in writing are small business people who are most vulnerable. Today we are saying that there is a category of companies that should be exempted completely.

Mr George Osborne (Tatton, Conservative)

We pointed out that the measures should not apply to businesses under the five-employee threshold. The Minister conceded that many micro-businesses, which he defined as businesses employing between one and four people,

''will not use written communication to any great extent. Indeed, some may have limited clerical facilities.''—[Official Report, Standing Committee F, 13 December 2001; c. 160.]

We accept that argument, which is why we want to exclude micro-businesses from the procedures.

Mr Charles Hendry (Wealden, Conservative)

I am grateful to my hon. Friend for that further clarification. I hope that the hon. Member for North Norfolk accepts that there is no inconsistency between the two positions.

I hope that the Minister will consider the issue carefully. I know that he has an interest, as we do, in ensuring that the welter of bureaucracy that small businesses must deal with is alleviated. The Federation of Small Businesses told us that the measure may be the last straw for small businesses. They say that they are also concerned that overly prescriptive regulations soon become outdated and damage relationships in

small firms, where most proprietors do their utmost to help in times of emergency. They are profoundly concerned about the volume of legislation and regulations that already apply. I hope that the Minister will look favourably upon the amendment.

Mr Rob Marris (Wolverhampton South West, Labour)

I seek clarification. If I read the amendment correctly, it would set a trap for small employers. Let us take the example of the plumber who employs his mate. The mate is the only employee; therefore, because there are fewer than six employees, the plumber does not have to give his mate a note of the statutory minimum procedure under schedule 2, on which the Committee has agreed. They fall out, the mate goes to the citizens advice bureau and finds out about the minimum procedure, of which the plumber was not aware. The mate then wins an employment tribunal case under section 98A(1), as inserted by clause 34, because the plumber did not comply with the statutory minimum procedure in schedule 2.

The amendment would make the cure worse than the disease. When someone becomes an employer, whether a plumber or an accountant, they should get it right and learn good habits from day one. That way, they would not be subject to traps such as the one that the amendment would set.

Mr Mark Prisk (Hertford and Stortford, Conservative)

I apologise for not being with the Committee earlier this afternoon, Mr. Benton.

I support the amendment because I believe that it would restore the principle of exempting the smallest enterprises from the burden of prescriptive disciplinary procedures. That may relate to the argument of the hon. Member for Wolverhampton, South-West.

The Bill attempts to change existing procedure under the Employment Rights Act 1996. I do not think that anyone in the Committee doubts the need for good management practice, especially in personnel matters. As a former small business man, I know that an organisation is only as good as its staff. I understand that some firms merely pay lip service to treating their staff appropriately. However, in my experience, the vast majority of businesses, large and small, recognise that only good personnel management will enable them to prosper.

Is it right, therefore, to impose on small businesses a prescriptive solution for what may be a sensitive issue? I refer to an excellent submission on the Bill by the Industrial Society. It raised several questions about the balance between the efficacy of legislation and good management practice. It states:

''The best means of ensuring management improves its performance is to promote awareness of the cost benefits of good management and to provide guidance on good practice, especially among small employers. It is very relevant in considering the numbers of tribunal claims involving small firms to remember''—

my hon. Friend the Member for Wealden made this point earlier—

that many of them do not have expert employment relations or HR''—

human resources—

advice to hand. Consequently, they can react without knowledge or rashly. Saying that a procedure must be followed is of itself no guarantee of quality.''

That is an important point, because the quality of the measures that clause 36 would impose has been called into question. We have heard how the three-step procedure in some ways falls short of the existing ACAS code and might, in some ways, conflict with it. To reinforce my hon. Friend's point about the perception of the changes from the point of view of the small employer—whether a business or a charity—we should remember what would be involved.

First, the small employer would be asked to draft a new written statement for each member of staff. Then, not having expertise in the matters in question, he would be required to take legal advice to ensure that the statement that had been drafted complied with the Bill. The employer would then be required to establish whether he had been able to comply in every respect with the ACAS code or the three-step procedure. We debated earlier whether employers would have to bear in mind the nature of the ACAS code and not just the statutory procedures. There was some uncertainty on that point. The worry arises before all the procedures are required, and even before a case comes to fruition or a dispute takes place, when the three-step procedure comes into force.

For all the reasons that I have given, amendment No. 68 provides protection for the smallest of employers. The Federation of Small Businesses has, in recent correspondence, stated:

''The Federation of Small Businesses is concerned that the Bill proposes the end to exemptions for small businesses with one single stroke. Our view is that this will have a devastating effect on the ability of Small Businesses to create jobs.''

All members of the Committee would want to bear that in mind. I understand why people sometimes want to know why there is constant concern about how measures will affect small business. There is a danger that hon. Members who have not worked in a small business—a one or two-man operation—will ask, ''What is the problem? Why is it so difficult?''

First, it has been proved that new regulations place a disproportionate burden on the smallest firms, particularly with respect to staffing and payroll. As an example, the administrative costs of the working families tax credit fall on businesses, as we have heard. The firms that the amendment is intended to protect, which employ from one to five members of staff, face yearly costs of about £25 million to administer the working families tax credit. Yet nine out of 10 of those micro-businesses do not employ and have never employed anyone to whom the tax credit is relevant. That type of regulation has a disproportionate effect and the use of clause 36 to remove the exemption would lead to similar problems.

Secondly, as a simple matter of practicality, such regulation seems right and proper in a large organisation of perhaps 50 or 100 people, where there may be a gap between the employee and the manager. One can understand the need for a clear procedure there to avoid confusion. However, in a place where up

to five people are employed, that seems an unnecessary intrusion. Also, there is a danger that the Government base their proposals on shaky foundations. I point to the recent survey by the Forum of Private Businesses, which states:

''Only 60 per cent. of small firms have a written statement of employment, so this is a shaky foundation on which to build formal dispute resolution procedures''.

The amendment is essential because the clause is bad for jobs. Sole traders need to be encouraged to employ more people. We must do whatever we can in politics and in government to ensure that hurdles to the creation of employment are reduced wherever possible. By not amending the clause and allowing the burden to fall again on micro-businesses, we will affect the most vulnerable on the labour market—those who are on its edge and might need a job the most.

Mr Rob Marris (Wolverhampton South West, Labour)

I confess that I am unclear as to whether the hon. Gentleman is arguing that the schedule 2 minimum procedure should not apply to micro-businesses, as he termed them, or whether it should apply, but that those with fewer than six employees should not tell the employees that it did so. Could he clarify his argument?

Mr Mark Prisk (Hertford and Stortford, Conservative)

The amendment is clear to me, although I do not have the legal training that the hon. Member for Wolverhampton, South-West enjoys. It would exempt organisations that employ fewer than six people, so it does not have the dangers that the hon. Gentleman seems to expect.

The 900,000 micro-businesses to which the Minister has referred several times would find the burden onerous and disproportionate. It would be bad for those that they might employ or want to employ. For both those reasons, I strongly support the amendment.

Mr Mark Simmonds (Boston and Skegness, Conservative)

I apologise to the Committee for my voice, which seems to be deteriorating rapidly this morning. I will make it last as long as I can. In the excitement of making interventions on the first Standing Committee on which I have served, I forgot to declare the fact that I am an employer. I hope that the Committee will accept my apologies.

I have consulted widely with small and micro-businesses inside and outside my constituency. I am sure that many other hon. Members visit small businesses and find that a consistent golden thread runs through the points made by all small business men. They all ask us to remove existing regulations and not to apply further ones to their businesses. No one has said, ''Please, Mr. Simmonds, go and talk to that nice Mr. Johnson and get him to increase the employment legislation on my small business. Get him to make more regulation to create an even more inflexible labour market.''

As my hon. Friend the Member for Wealden said, many small businesses struggle to survive even in what is now a generally healthy economic climate. The great thing about small businesses is that they grow into medium-sized businesses and large businesses, thereby

creating employment, moving from one status to another and generating wealth to be distributed among their employees.

Even before the Bill has been enacted, many small business men are reluctant to take on additional staff. Existing legislation makes them nervous that if a member of staff proves inappropriate for the business and does not behave properly in some way, they cannot get rid of him quickly enough. One of the benefits of small businesses is that they are quick on their feet and can react to economic and social circumstances at any time. That will change.

Government policy and legislation has some serious contradictions. Under stakeholder pension legislation, companies with fewer than five employees rightly did not have to implement stakeholder pensions. Some small companies and micro-businesses in the economy deliberately keep the number of employees below that level so that they do not have to implement them. Ladies returning from maternity leave are not affected by the same regulations in companies with fewer than five employees. The amendment is consistent with some existing Government legislation.

The Federation of Small Businesses has said that small businesses cannot take any more regulation without their ability to hold on to jobs, or to create new ones, being compromised. To my mind, that is the crux of the clause. It negates the ability to create new and additional jobs.

Mr Rob Marris (Wolverhampton South West, Labour)

Perhaps the hon. Gentleman could rest his voice a little. I pose the question that I asked the hon. Member for Hertford and Stortford. Is he making a speech about clause 30, which he should have done when we debated that clause, the first part of which states that every contract of employment shall have the statutory minimum procedure from schedule 2? On the other hand, is he saying that the schedule 2 procedure should apply to all employers, regardless of how many employees they have, but that employers should not tell their employees about the application of that schedule 2 minimum procedure if they employ fewer than six people?

Mr Mark Simmonds (Boston and Skegness, Conservative)

I refer the hon. Gentleman to the answer given by my hon. Friend the Member for Hertford and Stortford. Businesses with fewer than five employees should be exempt from the raft of regulations in the Bill. I am not advocating a pick-and-choose situation. In a very small business, a small number of people work closely together—more closely than those in a medium-sized or large business. The additional procedures may create an atmosphere of animosity and tension that does not exist at present, which cannot be constructive if we aim to allow successful small businesses to fructify.

I have some questions for the Minister. First, how will a small business deal with a persistent applicant, given the bureaucracy and work load that will be placed on the employer?

Secondly, what impact will the clause have on temporary workers, especially those on fixed contracts—bearing in mind clause 45, which we have yet to debate? In my constituency, around Boston,

many jobs are tangentially or directly involved with agriculture and are on either fixed contracts or a less permanent basis. In Skegness, a large number of employees work in tourism. I am concerned that, to avoid being caught by the provisions in clause 45, employers will avoid giving fixed contracts, and people will be employed on a daily rather than a longer-term basis. We will return to the situation of 100 years ago on the docks in London: people will turn up to find work on a daily basis because the small employer will not be prepared to employ them on a longer-term basis.

Thirdly, how will the collective dispute that circumvents procedures in clause 29 operate in practice in a small business? Will two employees with the same disgruntlement become a collective? Is there a de minimis number that needs to apply?

From my understanding of earlier debates, it seems that for small businesses caught by clause 34, after a minimal procedural fault by an employer, not only does dismissal become automatically unfair but the fines are increased. That may have a dramatic, if not fatal impact on the future of the small business.

Mr Joe Benton (Bootle, Labour)

Order. May I point out to the hon. Gentleman that he has gone a little wide of the amendment?

Mr Mark Simmonds (Boston and Skegness, Conservative)

Thank you for your guidance, Mr. Benton. My final suggestion is that the small code for small businesses should exist on a voluntary and informal basis, because small businesses must retain their flexibility to enable them to react to circumstances.

Mr Tony Lloyd (Manchester Central, Labour)

I cannot resist intervening—my hon. Friend the Member for Dudley, South (Mr. Pearson) will probably devastated by this, but I am astonished. We had a wonderful piece of nagging from the hon. Member for Runnymede and Weybridge, who spoke of this carefully crafted Bill that we all grudgingly accept is just about right. However, Opposition Members are now trying to unpick the whole thing by introducing one, narrow amendment, in order to do away with almost all industrial relations applying to firms employing fewer than five people.

I hope that my hon. Friend the Minister will resist this very silly amendment. To talk about this being part of the inflexibility that so ties up small firms as to prevent their growth is nonsense. It is narrow in scope; it is about the need to inform employees of their rights—it is about information. It is interesting that nobody has picked up the valid point made a number of times by my hon. Friend the Member for Wolverhampton, South-West that it is not about exempting such people from the provisions of the Bill as a whole, it is solely about publicising it. In fairness, the hon. Member for Wealden seems to know that. I am not sure that his colleagues do.

The hon. Member for Boston and Skegness (Mr. Simmonds) argued that there is disincentive to grow from five to six. The same would apply if we built in this cut-off. It is anti-competitive between the slightly larger firm and the small one. That is an inflexibility and an unfairness and we should not include it in

legislation. However, not all small firms are destined to become the great and the grand. The little corner shop will remain a little corner shop, and it is true that the majority of small businesses stay small, want to stay small and do not intend to grow beyond the small employment limits.

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Given that this is a probing amendment to address the impact of legislation not on small businesses but on micro-businesses, does the hon. Gentleman accept that the biggest hurdle to be cleared is that of going from zero to one employee? At that point, under what is proposed, the whole panoply of employment protection legislation and the requirement to follow procedures comes down on the new employer. I am sure that he will recognise that that is a very real and frightening barrier for a person who has been used to working alone, as a sole trader, to break through. That is the issue on which my hon. Friends and I are anxious to draw the Minister.

Mr Tony Lloyd (Manchester Central, Labour)

There is a general argument about the ''burden of regulation''. However, Conservative Members will probably not be surprised if I say that we hear that on every occasion, whether the legislation is good, bad or difficult. The plea is always that small businesses cannot take one more step. However, small businesses have responsibilities as well as rights. They have a responsibility to operate as part of society. They incur responsibilities by taking on the right to employ, because that right has duties attached. Within that, giving minimal information to employees is not such a terrible thing.

A number of businesses have fewer than five employees. They are not little micro-businesses, just out of the incubator. Some of them are well-established businesses of many years' standing. Some of them are very dynamic businesses that enjoy considerable turnovers and make extraordinary profits. The small business sector is often highly efficient in specialised areas. To say that in industries as diverse as print and information technology, firms will never grow and should be permanently exempt from the need to demonstrate their obligations to their employees is ridiculous.

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The hon. Gentleman makes a sensible point. Perhaps he should have tabled an amendment to amendment No. 68, proposing a different threshold. Is he suggesting that there is an argument for going easy on new employers who have, perhaps, one employee, for a period of time after they first become employers? I readily accept that there are some very small firms of highly remunerated professionals who are not in the unfortunate position of the window cleaner who has just managed to take on his first employee.

Mr Tony Lloyd (Manchester Central, Labour)

Opposition Members should remember that size is not everything. That is important in all aspects of life, but particularly in employment legislation. The amendment is the wrong way to

approach the issue and it is counter-productive because it fails to recognise that small firms have obligations, just as large firms do.

Mr Mark Prisk (Hertford and Stortford, Conservative)

I do not want to take the phrase ''size does not matter'' too far, but does the hon. Gentleman not recognise that it is important, wherever possible, to remove hurdles to small firms taking on their first members of staff? We should remember that small firms often deal with those who are struggling to find a job, particularly in the current jobs market. We want to probe the issue with the Minister so that the Government understand it. We may constantly talk about small businesses, but without constant pressure, their needs will sometimes be forgotten.

Mr Tony Lloyd (Manchester Central, Labour)

The educative process that the Opposition are going through is very instructive. Of course we should consider the arguments about how we help firms to make the transition and how we help growing businesses, but even new businesses must recognise their obligations, particularly to others who are vulnerable. The employee in a small business is as vulnerable as the employer. Theirs is a mutual relationship, and their rights and obligations are counterbalanced. It is therefore wrong to approach the issue on the basis of size.

It is important that information is available to the employee, and there are different ways to ensure that the small employer is aware of their obligations and to assist them in making information available to employees. If Opposition Members considered such approaches, I would support them, as I am sure the Government would.

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

At the risk of rerunning the entire Second Reading debate, may I ask whether the hon. Gentleman recognises that micro-businesses, which may be taking on their first employee, often face the unfortunate problem of competition with the informal sector? Their competitor is not a firm with five or 10 employees that does what it should do, but the chap round the corner who pays no tax or VAT and has no cognisance of his obligations as an employer. Our concern is that the small man who tries to run a legitimate business is not hampered in a way that makes him vulnerable to competition from the black economy.

Mr Tony Lloyd (Manchester Central, Labour)

The hon. Gentleman will probably be pleased to know that that was one of the best points to be made on Second Reading, and it is very important. However, we must be careful not to respond to the black economy by eroding standards in the formal economy. It is right to call those who compete by avoiding their obligations to society cheats. We must establish that they indulge in a form of cheating, which is not noble or acceptable. They cheat society of what it should receive and they certainly cheat the honest employer, who tries to conform to acceptable standards. I recognise the need to consider measures to assist growing businesses, and all hon. Members hold that aim in common, although we might disagree about individual aspects of it. I certainly concede that

we must deal with the black economy, although I would do that by stamping down hard on it. I hope that Opposition Members would be at one with me on that.

My contribution has been much longer than I had planned, and I conclude by urging my hon. Friend the Minister to stick to his rather robust approach, reject the Opposition's blandishments, ignore their nagging and confirm that small firms will have to meet their obligations, just as slightly larger firms will.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

This has been a fascinating debate, but much of it was not about the amendment. I shall not get involved in a debate about small businesses—

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Oh!

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Are Opposition Members seriously suggesting that no employment rights—that would presumably also include the minimum wage because that is included in schedules 3 and 4—would apply to companies with fewer than six employees? Come along to Third Reading, when I shall be pleased to engage in that debate. The problem is that Opposition Members are under a misapprehension. The reason why I will not answer the five questions or unravel the golden thread of the hon. Member for Boston and Skegness is because I would run into the same problems as the hon. Gentleman and step outside the remit of the clause and the amendment.

The hon. Members for Wealden, for Hertford and Stortford, for Boston and Skegness and, it seems, for Runnymede and Weybridge are under a dreadful misapprehension if they think that the amendment would help small businesses. I hope that they will agree to withdraw the amendment.

First, let me remind the Committee of the purpose of the provisions in the Bill that deal with written statements. Most employees who work for their employer for one month or more have the right to receive a written statement of the main particulars of their employment. The clause will not change that, apart from in respect of the exemption. The amendment would not change that. Why should not employees be entitled to that information? Employers and employees need to know the basic terms and conditions on which the employee is engaged. After working for an employer for two months, employees are entitled to receive a written statement, and the amendment will not change that at all. The written statement sets out the key features of the employment relationship, which is fundamental to understanding rights and responsibilities in the workplace. In an environment where 48 per cent. of businesses who come before employment tribunals do not have internal procedures, employment tribunals complain, time and time again, that their work is dogged by the problem of getting to the core of the employee's terms and conditions. Whether a dispute is about holidays, redundancy or pay, both sides need to know what the basic terms and conditions are.

Mr George Osborne (Tatton, Conservative)

The Minister implies that small employers do not have to give any notice of disciplinary procedures but, as I understand it, when

they employ someone, they must indicate to whom a complaint should be referred and how the complaint should be dealt with. He is now proposing that that should be included in a lengthy document, which sets out all the details in schedule 2, although he admitted in a previous debate that many of the 960,000 micro-businesses do not use written communication very much. Indeed, some may have limited clerical facilities. There is already a procedure whereby the window cleaner who employs an assistant says, ''If you have a problem, come to me.'' That can be delivered orally or in writing. The Minister is now suggesting that that window cleaner must also give his assistant a formally set out copy of schedule 2, even though he may not have access to a typewriter or word-processor. The Minister is misleading the Committee if he is suggesting that small businesses do not already have to comply with certain procedures, and those procedures are adequate.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I am not implying anything of the sort. I am merely stating that one of the things that bedevils employment tribunals is the absence of a written statement. The law already insists that an employer should give an employee a basic written statement, and the amendment will not change that. That is fundamental to an understanding of rights and responsibilities in the work place. It forms a record of the basis of the relationship between employer and employee, clarity on which is essential to prevent disputes from arising.

As matters stand, all written statements must include information about handling grievances, but only those issued by employers with 20 or more staff are required to cover disciplinary procedures. That is not to say that disciplinary procedures need not exist in the case of other employers, but that there is no obligation on the employer to include them in the written statement. It is arguable that that situation is anomalous, but it would be more so in the light of the changes that the Committee merrily agreed, which is that the basic three-step and two-step procedures should apply in all workplaces. That is not in dispute. It has already been dealt with.

In future, under the Bill, all employers will have to operate statutory minimum disciplinary and grievance procedure, or something better, but that is not because of changes to the written statement requirements; other clauses imply those procedures, and they give employers and employees incentives to follow them. For example, they provide for awards to be increased or reduced when the procedures are not followed. The changes to the requirement for a written statement ensure only that employers have to inform employees about their disciplinary and grievance procedures.

It is important that all parties are familiar with the procedures. When we come to clause 37, the Committee will see that we have made them easier in several respects. At the moment, the employer cannot include the procedure in the contract of employment; it has to be made as a separate statement. Furthermore, the law implies that it cannot be handed to the employee until after he has begun his employment; that prevents it being sent with the letter

agreeing to employ that person. We are using clause 37 to sort out such ridiculous anomalies. However, it does not change the responsibility of employers to ensure a basic procedure.

One of our arguments has been that in 62 per cent. of cases no one in the workplace has discussed the issue. That is why small businesses without such procedures find themselves dragged before employment tribunals when they could have resolved those disputes in the workplace. The right place for such clarity to be provided is through the written statement; as all employers will in future be obliged to operate the procedures I believe that it is right that they should all be obliged to spell them out.

My hon. Friend the Member for Wolverhampton, South-West was right in his persistent questioning. Removing the 20-employee threshold will not create a new requirement on smaller employers to issue written statements. That is already required. Nor will it oblige them to introduce minimum procedures, as that will be required under other clauses. It will merely ensure that, when issuing the written statement, the employer must include information about its discipline procedures as they apply to the employee.

The effect of the amendment would be that employers would have to have a discipline and grievance procedure; and that they must issue a written statement. Those procedures would exist, but there would be no obligation on employers of fewer than six employees to tell those employees what the procedures were. With the best will in the world, it is a ridiculous amendment. I hope that it will be withdrawn.

Mr George Osborne (Tatton, Conservative)

Will the Minister concede that the clause will require very small business to have much more complicated employment contracts? Indeed, when he was resisting a powerful argument made by the hon. Member for Wolverhampton, South-West about written statements at different stages during the schedule 2 procedure, he made the precise point that small businesses do not have access to the sort of clerical facilities that may be required to produce a more complex employment contract. I return to the example of the window cleaner. Is the Minister saying that a window cleaner employing a window cleaning assistant now needs a complicated employment contract that sets out all the details of schedule 2?

Mr Charles Hendry (Wealden, Conservative)

The Minister's response was disappointing. The amendment was essentially intended to probe the Minister and giving him a chance to talk about the effect of the Bill on micro-businesses—an opportunity that he declined to take. Specific points put to him were entirely in the spirit of the relevant provisions. For instance, my hon. Friend the Member for Boston and Skegness asked whether the clause relates to part-time workers, but Minister did not give any guidance or clarification on those matters. That was particularly disappointing.

We responded to a plea for help from the Federation of Small Businesses, which has spoken to us eloquently about the pressure of legislation and regulation and

has sought to have some of its smaller members spared from further regulations. Again, the Minister has turned a deaf ear.

We sought to offer a degree of compromise to the hon. Member for Manchester, Central and to try to find a place where he and we can meet in the middle. We are not set on particular numbers, but we feel that the Minister should have dealt more thoroughly with some serious issues. We must recognise that the Minister seems reluctant to move further, but I will seek leave to withdraw the amendment.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

With the best will in the world, I cannot see this as a probing amendment. An amendment that simply excluded businesses of fewer than six employees from the statutory minimum procedures might, at a stretch, have been a probing amendment. We could have discussed why the Government believe, as do 86 per cent. of respondents, including the Small Business Council and the Forum of Private Business, that it is in the best interests of small businesses not to be left subject to employment tribunals without having the help that they need to resolve disputes in the workplace.

If Opposition Members were being honest, they would agree that the amendment is not probing in nature. The measure is purely about written statements, and nothing else. I do not want to be discourteous; I usually try meticulously to answer questions. The hon. Member for Boston and Skegness asked a relevant question, which I will answer. Yes, the measure would apply to part-timers, because part-timers will be treated in the same way as full-timers.

The hon. Member for Hertford and Stortford asked whether the measure would mean that every employer had to draw up and issue a new statement to employees. That is not how we envisage matters working. We intend to bring the measures into force in such a way that they can be issued as a statement of change. We do not intend to revise the whole procedure for businesses that do not already have a disciplinary procedure; we just want to add to the written terms and conditions.

That brings me on to the point made by the hon. Member for Tatton (Mr. Osborne), who suggested that the measure would be burdensome because it would involve employers putting tons of paper in front of an employee. We toyed with the idea of saying that the contract of employment should be the written statement. We backed away from that for the reasons given to us by many employers and trade unions. They pointed out that some contracts of employment run to a couple of volumes.

The idea of a concise written statement setting out the basic terms and conditions, which already exists in law and will not be changed by the Bill, was felt to be right. The measures add the basic minimum procedures to that. I do not want to return to the argument of the other day about the garage in Hull having to produce everything in writing.

The Committee has ensured that the procedures are simple. It would have been onerous to add 56 clauses from the ACAS code to the contract of employment. Employers, many of whom will have procedures already, have only to attach such procedures to terms and conditions. If they do not have disciplinary and grievance procedures, they need to introduce and apply such regulations. If they have disciplinary procedures but are excluded by the get-out clause for those with fewer than 20 employees from putting that in the statement, they need to change that and put those procedures in the statement. I do not think that that is onerous.

Having made that distinction, I should say that I do not agree that the Bill will add to burdens on business. Let us discuss other measures as we come to them. I am perfectly happy to debate the fixed-term workers directive, maternity leave and paternity leave when we get to those issues. However, to try to discuss those broad issues in a debate on a narrow clause that relates purely to written statements would not get us far, even in terms of the arguments of Opposition Members.

Mr Mark Prisk (Hertford and Stortford, Conservative)

Part of our point is that every brick in the wall is another burden for small businesses. Sometimes they will be perceived as tiny, but the cumulative effect is often—I must mix my metaphors with care—the straw that breaks the camel's back.

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

We are extraordinarily sensitive to the argument that we are burdening businesses with regulation of any kind. That is why we set up the Small Business Service and why we have introduced the various regulatory regimes. The argument in terms of these tribunals is that micro-businesses end up in front of employment tribunals. It costs them money and time and very often they could have sorted out their disputes through a clear written statement and by disciplinary and grievance procedures in the workplace. That is the kernel of this part of the Bill.

Mr Charles Hendry (Wealden, Conservative)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 ordered to stand part of the Bill.