rose to move, That the draft regulations laid before the House on 2 July be approved.

The noble Lord said: My Lords, I am happy to confirm to noble Lords that these provisions are compatible with the European Convention on Human Rights.

The purpose of these amending regulations is straightforward. They restore eligibility for statutory sick pay to agency workers who have contracts of three months or less. That eligibility was removed as a result of a Court of Appeal decision in 2007. In making this amendment, we are restoring the original intention of changes made in 2002. Specifically, the regulations revise the wording of Regulation 19 of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, in order to ensure that agency workers are not excluded from the changes made to statutory sick pay by the regulations. That would take effect from 27 October 2008.

Noble Lords may be wondering why a Work and Pensions Minister is introducing amending regulations under the Employment Act, which might normally fall to colleagues from the Department for Business, Enterprise and Regulatory Reform. However, I am proposing these changes with the agreement of BERR Ministers, because they introduce a change for statutory sick pay, responsibility for which rests with the Department for Work and Pensions.

Before going further, it may be helpful if I set out some brief background information about statutory sick pay and how the various legislative changes relate to the regulations. The Social Security Contributions and Benefits Act 1992 makes provision for a minimum payment to be made to workers who are unable to work due to sickness, provided they meet the entitlement conditions. Statutory sick pay is payable to anyone who is classified as an employed earner for national insurance purposes. Agency workers may be categorised as employed earners for those purposes. If that is the case, they become liable to pay national insurance contributions in the same way as other employed earners and should have the same opportunity to qualify for all statutory payments, including statutory sick pay.

Employers meet the cost of statutory sick pay, although some are entitled to a government rebate if they experience unusually high levels of sickness absence. The Employment Act 2002 and the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations removed working practices or legislation that treated people with fixed-term contracts less favourably than those with permanent contracts. As a result, a restriction which prevented people with contracts of three months or less from receiving statutory sick pay was removed. Thereafter, people who had contracts lasting three months or less became eligible for statutory sick pay in the same way as other workers.

The change in 2002 was introduced on the basis that it would remove the three-month barrier to statutory sick payment for all those who would qualify for entitlement. However, an employment agency subsequently challenged the requirement to pay statutory sick pay to its agency workers. It argued that an effect of Regulation 19 of the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002 was to exclude agency workers from the changes made by the regulations to statutory sick pay legislation. The challenge was successful. The Court of Appeal ruled in favour of the position taken by the Thorn Baker agency.

Hence, that leaves a complex and inequitable position, whereby statutory sick pay is payable to individuals who are not agency workers, regardless of the length of their contract, and to agency workers with contracts in excess of three months, but it is not payable to agency workers with a contract lasting three months or less.

The Government, nevertheless, remain committed to the principle that those who work through agencies should have the same access to SSP as they have to all the other statutory payments and the same access to SSP as other people who pay national insurance. By making this amendment to the Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002, we will remove the inequality and restore the original intent. This is the amendment for which I seek the approval of the House today. Between 1 million and 1.5 million agency workers work for more than 15,000 agencies. We estimate that as many as 60,000 agency workers could benefit from this measure.

We have considered the financial implications for agencies before bringing this amendment to the House. Of course, agencies already meet statutory sick pay costs for those who have contracts totalling more than 13 weeks. Equally, other employers routinely meet these costs when paying statutory sick pay to their employees, regardless of the length of employment.

We estimate that the average cost to each agency of this measure will be in the region of £850 per year. The overall cost to business will be in the region of £13.5 million. Notwithstanding that, I am sure that noble Lords will recognise that there can be no justification for retaining a provision which excludes only this group of workers from sick pay, when comparable workers benefit from this financial protection.

Finally, I hope that we can all agree that it is just to restore the original policy intention and ensure that agency workers are entitled to statutory sick pay on a level footing with other workers. I commend this amendment to the regulations to noble Lords.

Moved, That the draft regulations laid before the House on 2 July be approved. 25th Report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)

My Lords, it seems to me that from time to time strange things happen in your Lordships’ House, and the subject of today’s debate and where it is taking place are two of them. Taking the second one first, one would expect that a non-contentious order such as this to be debated in Grand Committee, but the powers that be clearly decided otherwise. I accept that that decision was not in the Minister’s hands, nor in those of his officials. The other matter is very much in the hands of his department.

As he said in his clear exposition of the reasons behind the regulations, the courts pointed out a lacuna in the law on statutory sick pay. This leads to my first question, because in legislation statutory sick pay and statutory maternity pay have certain links, do they not? The question is whether statutory maternity pay is included in this order, although the Minister did not mention it.

It has quite rightly always been the Government’s intention that the two benefits should apply to all employees paying national insurance contributions, whoever they work for. This was intended to cover agency and other part-time employees. It was not until the matter was tested in the courts that the Government discovered that agency workers were not covered, and thus some of them did not receive benefits, while others did. The situation, as the noble Lord explained, is even more complicated than that.

I understand that the confusion dates back to 2002, when the law was last amended. One rather wonders why this manifest unfairness was not spotted at the time. It is not only an unfairness—if I may be allowed to use such an inelegant expression—for people employed by agencies, which have viewed the law differently, but between full-time and agency employees. There is no doubt that Parliament slipped up and it is impossible to blame any individual. However, over the past few years I have come to the conclusion that all proposed legislation, whether primary or secondary, should be read by a lawyer outside the department that is to propose it. A certain amount of that is done already in the modern invention of draft Bills, by the Joint Committee on Statutory Instruments, and the fairly new Merits Committee. None the less, occasional annoying lapses occur and the law has to be returned to the original policy intention—as in this case.

Inevitably, I have a few questions on the detail of the regulations. The first is based on my rather shaky knowledge of statutory sick pay. If the illness falls towards the end of a period of employment and extends beyond that point, what recourse does the sick or injured person have to state benefits? Secondly, my colleague in another place, while welcoming the regulations, as I have done, asked a question which the Minister’s ministerial confrère in another place failed to answer. My honourable friend had noted that if an employee became sick in their current employment and had been on incapacity benefit within the past two years, they should claim incapacity benefit, not statutory sick pay. Given that the two incidents may be totally unrelated—the first, perhaps, for a back injury and the second for influenza or something even more serious, like meningitis—there seems to be no logic at all to that. I am giving the Minister another chance to answer.

While the Minister is at it, he might, with advantage, remind the House of the rates of incapacity benefit and statutory sick pay, and of the new employment and support allowance, which will be up and running for new payments within days, I understand. Also, can we be assured that statutory sick pay law covers part-time, non-agency workers, as it should?

I note that one of the effects of the original policy, as amended by the order, is to save 2,000 reams of paper as a result of not having to process incapacity benefit claims. How many civil servants will be made redundant or, more likely, moved to another job within the department as a result? I also note that this measure will, according to the Explanatory Memorandum, save the Exchequer some £14 million—although I think that the noble Lord mentioned a marginally lesser figure of £13.5 million. That does not really matter, because it is not a lot of money in government terms.

In these constrained and straitened financial times, any money that the Government do not have to borrow to support banks or speed up the increase in the national infrastructure must be a bonus. Will the £14 million, or whatever the figure is, remain within the departmental budget, or will it be returned to the Treasury? If the answer is the former, what will it be used for?

Notwithstanding these matters of detail, we on these Benches—all of us—support the order.

My Lords, the point that the noble Lord, Lord Skelmersdale, has just alluded to was very telling: he is, in fact, alone on the Conservative Benches, as I am on these Benches, I fear.

I on these Benches support this measure. Agency workers, as the very helpful Explanatory Memorandum makes clear, are a poorly paid and vulnerable group. It points out that on average they earn only £7.80 an hour, compared to an average of £11.47 an hour for other people. A very high proportion of agency workers are recent immigrants; something like 13 per cent of immigrants since 2003, compared to only 2 per cent of the population as a whole, are agency workers. In an increasingly outsourced world, we believe that they must not be treated less favourably than other workers.

My honourable friend Lorely Burt in the Commons has worked hard on this issue and has been involved in putting through a lot of legislation to make the situation for agency workers just as fair as that for all workers. We are firmly in favour of this measure.

I have one or two questions. I was intrigued to see in the greenhouse gas assessment that there will be a saving to the department of approximately 2,000 reams of paper from the consequential reduction in the use of 63,000 claims forms. Does that mean 2,000 reams a year or once? I cannot remember what a ream is—it is a long time since I was at school. Is that a number of pieces of paper, like a quire? Perhaps the Minister can help me on that.

Five hundred, my Lords.

Thank you, my Lords; that is a lot of pieces of paper. Can the department recycle the forms, or are they now just waste paper?

More seriously, the Minister explained—although I am not sure that I followed the division of responsibilities—why he, as a DWP Minister, moved the amendments to the regulations, as opposed to a Minister from DBERR. Has the Minister seen today’s Independent, which has the dramatic headline, “Mandelson halts flexitime reforms” or the nasty little spat that has blown up between him and the Chief Secretary to the Treasury, reported in today’s Evening Standard? This measure, which we support, is very much of a piece with other measures which are family friendly, but are a cost to business. The noble Lord, Lord Mandelson, is today quoted as saying that the Government are searching for ways to help businesses to survive the downturn and are looking to postpone measures such as extending paid maternity leave, an extra bank holiday and, indeed, family-friendly working. Has he cleared this measure with the noble Lord, Lord Mandelson? Does support for business come first, as the noble Lord, Lord Mandelson, is briefing the press? Obviously, in this case we would not be doing things like this which will cost business about £14 million a year more, or is family-friendly working the priority, as Yvette Cooper insists?

My Lords, I welcome the support of both noble Lords for this measure. I think we all recognise the importance of the equity in it. The noble Lord, Lord Skelmersdale, raised a number of points and I shall try to deal with each of them. He asked whether the regulations included references to statutory maternity pay; the answer is no. Only SSP is affected by the three-month exclusion. The agency workers who meet qualifying conditions are eligible to all statutory maternity pay on the same basis as anyone else. He asked why that was not corrected earlier. We have corrected it as quickly as possible following the court judgment. Until that court judgment, obviously, we had maintained that our interpretation was as we now have it.

My Lords, that was not quite my question. I certainly was not blaming the department. I was expressing surprise that no one outside the department had picked it up earlier, which is a rather different point.

My Lords, the need to put us back to where we believed we were arises from the judgment of the court. Up until that judgment, we believed that the position that we will now be in if these regulations are passed was where we always were.

The noble Lord asked about the rates of employment and support allowance and the rates of SSP. The basic rate of the employment and support allowance, after the initial 13-week period, has been set at £84.50. That is not for the support group. Noble Lords will remember that there is a higher rate of allowance. Statutory sick pay is currently £74.50 per week, so there is a difference between those two. He also asked about part-time workers. The number of hours an employee works does not affect entitlement to SSP. Part-time workers are covered by the scheme and by this amendment to it. They are entitled to SSP from their employers if all the qualifying conditions are met. Of course, SSP is subject to a qualifying condition that an employee’s average earnings in the eight weeks prior to sickness have been at least at the lower earnings limit—currently £90 a week, which is the point at which earnings become relevant for national insurance contributions. The fact that they may be part-time does not preclude statutory sick pay becoming due.

The noble Lord referred to my figure below £40 million. It was £13.5 million which we believe is the cost to employers. Obviously, there will be some agencies that do not bear the cost of statutory sick pay for people with contracts below 13 weeks and that will cause them to have to meet those costs. I was referring to that figure. He also asked about what recourse a person has to state benefit beyond the end of the period at the end of their contract. Once the contract has terminated or entitlement to SSP has been exhausted, a person can claim employment and support allowance or incapacity benefit or even income support in the normal way if they have insufficient income or no entitlement to employment and support allowance or incapacity benefit as the case may be. The normal benefits would potentially kick in.

The noble Lord also asked about the right to return to benefit for up to two years after claiming. The right to return to benefit is important for two reasons. First, it applies only to people who have been receiving incapacity benefit—that will be the position in the future with employment and support allowance—for longer than six months before leaving that benefit to take up work again. It gives them the confidence to enter the workforce again without the fear of returning to a lower level of benefit should their condition worsen shortly after returning to work. Secondly, of course, it gives employers the confidence to take on such workers without the burden of having to pay statutory sick pay for two years. We believe that this is a straightforward approach and avoids having different rules depending on circumstances, length or type of illness. It is encouragement for people to move into work. Noble Lords may recall that we touched on that from time to time in relation to our debates on the Welfare Reform Bill last year.

The noble Lord, Lord Oakeshott, offered his support, for which I am grateful. He asked whether the 2,000 reams of paper were per year. The answer is yes. He also asked about the DWP's ability to recycle. We have robust policies on recycling in the DWP, as elsewhere in government. He tempted me to comment on today's article in the Independent and its speculation about the future of a range of policies. I can assure the noble Lord that we have agreement with BERR, as I indicated earlier, in moving and supporting these regulations. That agreement is welcome indeed and thoroughly anticipated from BERR, it being the progressive department that it is.

I believe I have dealt with each of the points raised. I am grateful for the support of noble Lords. We are determined to ensure that workers have equal entitlement to statutory sick pay so that no one group is marginalised.

My Lords, before the Minister finishes, like the noble Lord, Lord Oakeshott, I asked about the 2,000 reams of paper. Currently, they are processed by officials of the Minister's department. Therefore, if 2,000 reams of paper no longer need to be processed, there is a saving of officials’ time. I asked what would happen to those officials.

My Lords, as ever, the department is looking to drive efficiencies in how it operates consistent with producing increasing improvements to customer service. Doubtless, any saving of any nature will be deployed to that good effect; I am sure that that will happen in this case.

On Question, Motion agreed to.

My Lords, I beg to move that the House do now adjourn during pleasure until 8.55 pm.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 8.17 to 8.55 pm.]