Speaking at a CBI dinner earlier this week, Communities Secretary, Eric Pickles, said:
“I can reveal today I am actively considering scrapping the so-called Local Authority Two-Tier Code. Where councils outsource functions, it required private firms to employ new workers on the same terms as the public sector workers who transferred across.”
The Code was introduced by the Labour Government in 2003. It aims to protect employees recruited to work on outsourced public sector contracts from being appointed at lesser rates in comparison to transferred employees, whose public-sector terms are protected under TUPE. Its purpose is to prevent the creation of two-tier workforces.
Mark Hammerton, Partner at law firm Eversheds, said the comments do not come as a surprise. He commented:
“The market place has been treating the Code as already condemned, since the codes applicable in other public sectors were announced in 2010 as being abolished. It is perhaps inevitable, as the pressure continues on public finances, that the focus in public sector tendering will increasingly be on financial value and service quality, rather than what some may regard as ‘nice to haves’, such as the Code. Another potential example of this is the current HM Treasury consultation in relation to the ‘Fair Deal’ guidance which governs pensions protection in public to private outsourcing. Critics of the Code have argued that it was overly bureaucratic and restrictive on employers, made little sense in what are often multi-tiered workforces and was included in commercial contracts, to tick the box as it were, and then largely ignored.
“However, whilst the passing of the Code will not be mourned by many commercial parties or their client councils, Councils and their service providers should continue to have regard to (a) existing contractual obligations which require compliance, with the possibility of seeking agreed amendments and (b) existing procurement exercises which have obliged bidders to bid on the basis of the Code being applicable. In this latter respect, potential procurement issues could arise if the goal posts are moved.”