Previous Article Next Article Comments are closed. Will code end two-tier tears?On 25 Feb 2003 in Personnel Today A new code is to protect the rights of staff providing local governmentservices while working for private sector contractors, but will it proveeffective? Asks Ben Willmott The willingness of private sector companies to bid for local governmentcontracts will come under scrutiny following a new code of conduct designed toprevent two-tier workforces. The code, which covers contracts between localauthorities and private companies, will mean new staff will get pay andconditions in future, including pensions which are no less favourable thantransferred staff. Currently, existing local government staff who transfer to private companieshave their pay, conditions and pensions protected, but new starters do not havethe same protection. The code, announced earlier this month by local government minister NickRaynsford, will be enforceable through a new dispute resolution mechanism to befinalised over the next five weeks. Unions have claimed it is a significant victory for workers and will preventcontractors employing staff on different terms and conditions for the same job.However, some employers and employment law experts are concerned it mightprevent the private sector from competing for local government contracts. Philip Sapwell, chair of local government HR body Society of Chief PersonnelOfficers’ (Socpo) pay and employment relations group, welcomed the code in principle,providing it did not deter the best private sector contractors from bidding torun local government services. “We would welcome anything that clarifies the rules because it is anambiguous area. Anything that brings greater fairness into the arena is apositive development. But I would be concerned if it put the better qualityprivate sector organisations off entering into contracts.” Sapwell stressed it was essential that the new dispute mechanism was thoughtthrough properly. “I am interested to know how the code is going to beenforced through the dispute resolution mechanism. What powers will it have?How will it make a judgement over what is comparable?” he asked. The code will require contractors to confirm their obligation to protect theterms and conditions of transferring local government employees, including theright to ongoing access to the local government pension scheme or analternative good quality occupational pension scheme. Besides local authorities, the guidance will also apply to police, fire,waste disposal and passenger transport authorities, Transport for London, andthe London Development Agency. The CBI accused the Government of moving the goalposts for private sectorstaff over the code and undermining its own att-empts to improve publicservices. CBI’s director general Digby Jones said: “The Government wants toimprove the delivery of public services but this is a significant stepbackwards and raises real questions about whether ministers are ready to takethe tough decisions necessary for meaningful reform. “By enforcing an inflexible pay structure, the Government has made itharder to reflect differences in regional economies,” he said. “Whatthe unions want is to replicate old local authority employment practices withno reform. Many privately employed public service workers know that ‘different’does not mean worse.” Jones also highlighted the CBI’s concerns over the Government’s disputeresolution plans and raised the possibility of third-party interference in everydisagreement. “Firms could be left permanently uncertain about thelegitimacy of terms and conditions they agree with staff.” Restricts private sector Many public private partnership (PPP) and Private Finance Initiative (PFI)employers would be extremely worried about the code says Emma Burrows, head ofemployment at City law firm Trowers and Hamlins. “Arguably, it restricts the private sector’s ability to deliverservices in the most efficient manner. This is not just because it increasesstaff costs, but also because it makes it harder to improve productivitythrough introducing incentives such as performance-related pay which might beseen as less favourable to public sector terms.” Burrows said the code might create a two-tier workforce among contractors’staff – those providing local government services and those who are not. However, outsourcing specialists Capita, which has secured numerous localgovernment service contracts, said the company would be happy to implement thenew guidelines. John Tizard, director of policy and public affairs for Capita Group, said hedid not forsee any particular problems. “We offer competitive terms andconditions for all our 17,000 employees – whether they have joined throughTransfer of Undertakings (Protection of Employment) – TUPE – or directly,”he said. Tizard said the firm’s low staff turnover demonstrated its commitment to allstaff. “We will continue to work with our managers, public sectorcustomers, staff and trade unions to address and implement the code on ‘twotier’ to ensure we deliver to our customers and for our business.” The CIPD’s lead adviser on public policy Diane Sinclair hopes changes willnot place too much emphasis on the importance of terms and conditions at theexpense of other issues impacting on the working environment. “The code is not the only answer for good employee relations in thepublic sector and outsourced services,” she said. “It is not onlyterms and conditions that are important to achieve the reform of public services,but overall workplace culture, including issues such as work-life balance andlevels of personal autonomy and control. It is also important to create theright environment to reap the benefits of a diverse workforce.” John McMullen, head of employment law at Pinsent Curtis Biddle, said thecode gave local authority workers much greater protection. “This goesbeyond what is required by TUPE because it does not just protect public sectorworkers transferring to the private sector but also new starters who work onthe same contracts,” he said. McMullen agrees the code may well undermine the competitive advantageprivate sector contractors have traditionally had in bidding for localgovernment contracts. “The cost of contracting may well become moreexpensive and in-house teams more competitive. There may not be such anemphasis on cutting costs and more on service delivery and efficiency,” hesaid. Union victory McMullen added that he would not be surprised if central government and NHSstaff were given the same protection in the future – something which theTransport and General Workers Union has already called for. The GMB and Unison proclaim the code as an important victory for the unionmovement. Unison’s general secretary Dave Prentis, said: “When this codecomes into force, private companies will be prevented from winning contracts bycutting the pay and conditions of staff and it will have to compete on a levelplaying field for the first time. “I am confident that when it comes to competing on quality, the publicsector will beat private sector companies hands down and more contracts willreturn in-house.” www.odpm.gov.ukFactfilePension arrangements for new joinersunder the new code will mean the service provider will have to offer one of thefollowing pension provision arrangements:– Membership of the local government pension scheme, where theemployer has admitted body status within the scheme and makes the requisitecontributions– Membership of a good quality employer pension scheme, eithera contracted-out final salary-based defined benefit scheme or a definedcontribution scheme– Employers providing defined contribution or stakeholderschemes must match employee contributions up to 6 per cent Related posts:No related photos.