Government withdraws the Code of Practice in workforce matters in public sector service contracts

21 December 2010

On 13 December 2010, the government announced that it was withdrawing the Code of Practice in Workforce Matters in Public Sector Service Contracts (the "Code") with immediate effect. The Code was introduced first in March 2005, in order to apply the principles set out in the “Cabinet Office Statement of Practice on Staff Transfers in the Public Sector”, sometimes known as COSOP.

What did the Code require?
The Code applied to public sector service contracts which involved a transfer of staff from the public sector organisation to the service provider, or in which staff originally transferred out from the public sector organisation as a result of an outsourcing were TUPE transferred to a new provider under a retender of a contract. The Code formed part of the service specification and conditions for all such contracts, except those where the Best Value Code of Practice on Workforce Matters in Local Authority Service Contracts applied.

The Code was designed to prevent the emergence of a two-tier workforce when public sector employees are contracted out to a new service provider. New recruits (i.e. those subsequently employed directly by the contactor) were to receive comparable treatment to the transferred staff, whose terms and conditions are protected by the TUPE Regulations.

Why was the Code withdrawn?
The government press release accompanying the announcement stated:

“Removal of the Code will help enable SMEs, mutuals, co-operatives, charities and social enterprises to enter the public sector market and have a much greater involvement in the running of public services and is designed to facilitate greater competitiveness and to drive value for money for the taxpayer.”

What is the effect of the withdrawal of the Code?
The Code’s withdrawal does not impact on existing TUPE regulations and provisions in the Employment Act 2008. Neither does it reduce or remove the statutory duties on public authorities to have due regard to the need to eliminate unlawful discrimination and promote equality of opportunity, which can apply to contracting authorities and to suppliers in some circumstances. The government statement accompanying the withdrawal states:

“Where contracts are renegotiated and any provisions giving effect to the Code are removed as part of the renegotiation, the changes will apply only to future new entrants. Existing employees’ terms and conditions will be unchanged.

"Where contracts that have previously applied the Code are being re-competed (resulting in a new contract), the Code will not be invoked upon award of the contract.

"When existing contracts which have invoked the Code are being extended, the Code will continue to apply where adherence to the Code is included in the terms and conditions of the original contract, unless both parties agree otherwise.”

What has replaced the Code?
The government wants to encourage and safeguard good employment practice. In order to achieve this aim, the Cabinet Office has published a set of voluntary Principles of Good Employment Practice that have been developed in discussion with trade unions, suppliers and public service employer organisations (“Principle of Good Employment Practice: a statement of principles that reflect good employment practice for Government, Contracting Authorities and Suppliers”).

Click here to access these principles >>>

Voluntary principles
There is no obligation on suppliers to implement these principles to their contracts. The government wants contracts to be awarded on the basis of value for money and not on the basis of who signs up to the principles. Whilst these principles do not form part of the procurement process, government hopes that suppliers will work with departments to apply the principles where appropriate.

Comment
Clearly the effect of this is likely to be that there will be greater flexibility for contractors to move away from the national terms and conditions of employment that public sector bodies commonly apply.