Cabinet Office scraps central government "Two-Tier Code"

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16 December 2010

The Cabinet Office has announced the immediate scrapping of the 2005 Code of Practice on Workforce Matters in Public Sector Service Contracts (commonly referred to as the "Two-Tier Code").                         

The 2005 Code applied to service contracts awarded by central government, its agencies and the NHS (with various exceptions).  The main impact of the announcement is that contractors who enter into new or renegotiated public sector service contracts will no longer be required to offer employment to new recruits on terms that are overall no less favourable than those of staff who transferred out of the public sector. 

The 2005 Code is replaced by a set of six voluntary "Principles of Good Employment Practice" which have been developed in discussion with trade unions, suppliers and public service employer organisations.

The scrapping of the 2005 Code will not affect the protections applicable to staff who transfer from the public sector.  The TUPE regulations will continue to apply, as will the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector and the HM Treasury guidance annexed to it, "A Fair Deal for Staff Pensions".

The Cabinet Office Statement and Fair Deal guidance provide that contracting out involving the public sector should be on the basis that TUPE applies and its principles followed even if TUPE does not apply in strict legal terms.  In addition, the protection of pension rights for staff who transfer from the public sector is currently retained in its current form (although please note "A Fair Deal for Staff Pensions" is itself under consideration by the Hutton Report).

It is important to note that the similar 2003 Code of Practice on Workforce Matters in Local Authority Service Contracts will continue to apply, at least for the time being.  In local authority outsourcing, contractors will therefore continue to be bound by the obligation to offer employment to new recruits on terms that overall are no less favourable than those of ex-Authority staff who they work alongside.  However, it seems that the Department for Communities and Local Government will now consider the implications that abolition of the central Government Code may have for the local authority code.

Further detail on the scrapping of the 2005 Code and the Principles of Good Employment Practice can be found here.

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