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Alec Bennett provides a special bulletin on the sudden (if not unexpected) withdrawal of the public sector version of the ‘two-tier code’, plus we detail this year’s annual payment increases and provide an update on employment equalities developments.
In this article...
The withdrawal of the public sector version of the two-tier code this month has a major impact on the arrangements for employees working on outsourced public sector contracts. As we reported last month, the government has been seeking views on abolishing the Code, but has now announced that it is formally withdrawn, without notice. Please see comments below in relation to Local Authority contracts and the Local Authority version of the Code.
Until Monday 13 December 2010, when the announcement was made, organisations supplying outsourced public services were required by the Code of Practice on Workforce Matters in Public Service Contracts (‘the two-tier code’) to offer employees recruited in to work on the outsourced contract:
The aim of the Code was to prevent a ‘two-tier’ workforce from arising, whereby newly recruited employees were employed on less generous terms than the ex-public sector colleagues working alongside them.
Whilst this may have been seen as a laudable aim, the practical effect for contractors was that it increased the cost of their bid and made it difficult for smaller and / or not for profit organisations to compete. It also meant that the increased cost of servicing an outsourced contract was passed on to the public purse.
The removal of the Code is in line with the new government’s focus on reducing the legislative burden, and encouraging smaller businesses and charities to enter the public sector market.
The public sector version of the Code has been replaced by a set of voluntary ‘Principles of Good Employment Practice for Government, Contracting Authorities and Suppliers’. Those bidding for outsourced public sector contracts will no longer be required offer ‘no less favourable terms’ to new employees compared to the terms of public sector employees working alongside them on outsourced contracts. A copy of the principles can be found here - Principles of Good Employment Practice for Government, Contracting Authorities and Suppliers.
In summary, the principles are as follows.
All six principles are entirely voluntary, and there is no penalty for a failure to adhere to them.
That’s the theory, but what practical issues will now need to be considered by those involved in public sector outsourcing - particularly given that there has been no ‘bedding in’ time allowed for this major change? In general, there are three scenarios in which these changes will bite.
The old Code will not apply where contracts which referred to it are re-negotiated (rather than extended) to omit any reference to it; or where new contracts are entered into without reference to the old Code.
The impact of the principles on employment practices in the delivery of contracted out services will be reviewed by the Public Services Forum in January 2012.
Finally, note that the withdrawal of the public sector version of the old Code by the government does not impact on the local authority version of the Code: the 'Code of Practice on Workforce Matters in Local Authority Service Contracts'. This Code remains in place, and local authorities should continue using it; but only for the time being, as the DCLG has indicated that it would consider the future of the local authority version of the Code, if the general public sector version of the Code were ever withdrawn. Other areas related to outsourcing which remain unaffected by the withdrawal of the two-tier Code are:
The government’s equality strategy has been published and sheds further light on some outstanding matters in relation to employment equalities.
Proposed rates for statutory sick pay and statutory maternity, paternity and adoption pay for 2011 (with effect from 11 April 2011) are:
From 1st February 2011, the new maximum compensatory award for unfair dismissal increases from £65,300 to £68,400.
The new maximum payment for a week's pay increases from £380 to £400, also from 1 February 2011.