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Unscrupulous private contractors will be the main beneficiaries of changes to outsourced workforces, it was claimed this week. Private firms and social enterprises will now find it cheaper to manage outsourced public services, following Monday's Cabinet Office decision to end the two-tier workforce code and replace it with new guidance. But Paul O'Brien, chief executive of the Association of Public Service Excellence said: ‘It is likely to create huge tensions among the wider public sector workforce and trade unions at a time when local councils are considering a range of new delivery models to cope with cuts of up to 30%. Decent employers had nothing to fear from the two-tier code, and that included those in the third sector.' Huw Rolant Jones, partner in Eversheds, commented: ‘Our experience of working with private sector tenderers is that the removal of the requirements to comply with the code will be a welcome move to facilitate outsourcing, although employees and trade unions may well be concerned that it will also provide an opportunity to drive down costs through less beneficial terms and conditions of employment.' But John Cridland, director-general designate of the CBI, said the code had ‘long been a barrier for smaller companies and social enterprises wanting to enter the public services market.' Technically, the scrapping of the code does not apply to local government, as it requires the CLG to withdraw its own code, introduced in 2003 by its predecessor department, the ODPM – and then widened out to the public sector by the Cabinet Office in 2005. The CLG intends to consult before it makes a decision to withdraw its own code. Mr Jones added: ‘It is difficult to see why local government should be treated differently from the wider public sector and the expectation may be that the local government two-tier code will also be revoked.' The code was introduced under the last government to ensure that when new staff joined contractors employing ex-public sector workers, their terms and conditions were the same. It followed union complains that contractors were employing new staff on worse terms than the ex-council staff whose former terms and conditions were protected by the employment law, TUPE, when they were outsourced. Instead, there will now be a voluntary ‘Principles of good employment' code which says new staff must have ‘fair and reasonable pay, terms and conditions.' Existing employees will be unaffected. The Cabinet Office said: ‘The decision will remove a significant barrier to smaller organisations which want to deliver public service contracts.'

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WHITEHALL

Fears for staff rights as two-tier code is axed

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