The return of the two-tier workforce 



TUPE only protects the terms and conditions of transferring staff. It does not affect the terms and conditions of new employees who join the transferee after the transfer. 



One of the first acts of the Conservative-led coalition government was to abolish the “two-tier codes” for central government (the Code of Practice in workforce matters in public sector service contracts) and local government (the Code of practice on workforce matters in local authority service contracts) in England and Wales. 



These Codes aimed to prevent the privatisation of public services leading to the development of a two-tier workforce, by deterring employers from taking on new external recruits on less favourable terms.



A report by The Smith Institute sponsored by UNISON (see box on page 483) shows that the two-tier workforce is now returning, and that the gap between the two tiers is widening.


The coalition government replaced the central government two-tier code with a set of six “principles of good employment practice for government, contracting authorities and suppliers”. The third principle states: “Where a supplier employs new entrants that sit alongside former public sector workers, new entrants should have fair and reasonable pay, terms and conditions. Suppliers should consult with their recognised trade unions on the terms and conditions to be offered to new entrants.” 



In Wales, the Welsh Government introduced its own two-tier Code in June 2014 – the Code of Practice on Workforce Matters. There are also model contract terms and conditions and a Procurement Advice Note, available from the website of the Welsh Government.


In Scotland, the Scottish Executive and the Scottish TUC agreed an “employment protocol” for “public private partnerships” in Scotland, similar to the former Codes.


An important EU directive, the Public Procurement Directive (2014/14/24/EU), came into force from April 2016, placing new legal obligations on public commissioning bodies, such as local authorities, when choosing contractors. The Directive required EU member states, when providing public services, to take “appropriate measures” to ensure that new service providers comply with EU environmental, social and labour law obligations, as well as national laws and collective agreements (Article 18(2) of the Directive). 



In Scotland, the Scottish Government has published statutory guidance confirming that bidders that pay the Living Wage (that is, the voluntary Living Wage fixed by the Living Wage Foundation – see page 100) should be given priority. In addition, from 18 April 2016 new regulations apply in Scotland – the Public Contracts (Scotland) Regulations 2015 (PC(S)R 2015). These allow Scottish public sector bodies to refuse to award a services contract to the cheapest bidder if that bidder falls below the standards set by the EU Directive (including as to the honouring of collective agreements).