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ITEM CC10

COUNTY COUNCIL – 1 APRIL 2003

MOTION FROM COUNCILLOR BRIAN HODGSON – FAIR WAGES CLAUSE

Report by the Monitoring Officer

1. At the Council’s meeting on 14 January 2003 Councillor Hodgson moved and Councillor McIntosh-Stedman seconded the following motion:

"This Council resolves to amend its Constitution in order to provide for a fair wages clause in its contracting procedures as part of its plans to improve public services. The intention is that this will give staff who work for private contractors and voluntary organisations pay, sick pay, holiday entitlements and pensions that are at least as good as those employed directly by the Council and doing equivalent work.

The advantages of a fair wages clause include the following:

1. Prevents a two-tier workforce;
2. Promotes contracting based on quality, not on cuts in service and staff numbers;
3. Tackles low pay and local poverty;
4. Promotes ethical employment practices."
   
   
2. In accordance with Council Procedure Rule 21(b) the motion was deferred for consideration at this meeting in the light of a report from the Monitoring Officer.

Background to the Motion

3. The motion follows a campaign by Unison calling on all local authorities to introduce a fair wages clause in their contracting procedures. Such a clause would require companies contracting with public authorities to pay the equivalent of public service wages and pensions to all staff affected by contracting out. Unison argue that this is needed to give staff working for contractors pay and conditions that are at least as good as those received by directly employed staff doing equivalent work. It would also remove the incentive to privatize simply to save on labour costs.
4. Unison identify the following reasons in support of such a clause:-

• It will prevent a two-tier workforce ie the terms and conditions of staff transferred to the private sector could not be cut and new employees taken on would have the same terms and conditions of employment.
• It would help to alleviate low wages, long hours and minimal conditions of service thus addressing child poverty, the gender gap and social exclusion.
• It would stimulate the local economy insofar as workers paid an adequate wage buy more goods and services in the local area, and are also enabled to play a more active role in the community.
• It is legal insofar as the Government has amended the Local Government Act 1988 to enable pay and conditions, equality issues and training to be lawful criteria when selecting bidders and providers of services.
• The Greater London Authority has introduced a fair employment clause into its contracting procedures.
• Other authorities not committing to a fair employment clause are willing to build in "TUPE-plus Agreements" into their particular contracts. TUPE-plus agreements build on the rights of the Transfer of Undertakings (Protection of Employment) Regulations 1981. These arrangements guarantee no deterioration in pay and conditions during the life of a contract, provide trade union bargaining rights for all staff including new starters and extend protection to staff not covered by TUPE including staff employed after the start of a contract.
• It would demonstrate that the Council has a clear commitment to ethical employment practices.

5. Since Unison’s campaign was started the Government announced on 13 February this year measures to tackle the two-tier workforce issue in local government. The proposals are:-

• A code of practice to be applied where a local authority transfers employees to a private or voluntary sector partner, as part of a contract to provide any local public service.
• The code will require contractors to confirm their obligations to protect the terms and conditions of transferring local government employees including the right to on-going access to the local government pension scheme or to an alternative good quality occupational pension scheme.
• The code will also ensure that new joiners will be offered terms and conditions which are, overall, no less favourable than those of transferred employees.
• Under the code new joiners will also be offered a reasonable pension provision, which may be either membership of the local government pension scheme, membership of a good quality employer pension scheme or membership of a stakeholders pension scheme with an employer contribution.

6. The full code of practice on workforce matters in local authority service contracts is attached as Annex 1. The code will form an annex to new statutory guidance on best value and will require local authorities to include its provisions in the terms of any contract between them and their private or voluntary sector partner. Local authorities will be required to confirm, in their annual Best Value Performance Plans, that individual contracts comply with requirements in the code.
7. The code will apply to all local authority contracts in England which are first advertised following publication of the code in the statutory guidance. The code will not apply retrospectively to any contracts which have already been advertised or entered into although the Government intends to publish statutory guidance on this for local authorities in early March.

Effect of the Government’s Proposals on the Motion

8. The Government’s proposals address the issues raised in Unison’s campaign, which seeks to prevent the development of a two-tier work force arising from the contracting out of public services.
9. However Councillor Hodgson confirms that his motion goes further than this and seeks to introduce a fair wages clause into all the Council’s contracts. This would not be covered by the Government’s latest proposal.

Implications for the Council of Introducing a Fair Wages Clause

10. The measures proposed by the Government to end the two-tier workforce issue may well have cost implications for the Council. The Council will have to meet these costs because the measures will be incorporated in statutory guidance and audited by the Audit Commission.
11. However, if the motion were to be adopted and applied to all contracts then there could be significant implications for the Council including:-

• potential increases in the cost of contracts;
• difficulties in identifying ‘benchmark’ levels of pay, sick pay, holiday entitlement and pensions for areas of work in which the Council does not have an equivalent workforce;
• the impact on contractors of having to adopt different terms and conditions of employment for those members of their workforce who may not work on Council contracts, or are only partially employed on Council contracts;
• the impact on providing Council services if contractors were unwilling to accept the consequences of having to adopt such a clause;
• the impact on the Council’s ability to use contracts negotiated by the Central Buying Consortium or other collective buying organizations if such contracts are not based on a fair wages clause.

12. On the other hand, the introduction of a fair wages clause would go some way to address a series of social, local economic and ethical employment issues such as those identified in the Unison campaign. Although the government’s implementation of the code to end the two-tier workforce problems will address some of these issues.

Implications for the Council’s Constitution

13. Contracting issues are dealt with in Section CC of the Council’s Constitution which sets out Contract Procedure Rules. I do not believe these would need amending in order to incorporate the provisions of the Code of Practice proposed by the Government to end the two-tier workforce problem since this will be applied and enforced in other ways.
14. If the Council wishes to adopt a fair wages clause for all its contracts then this could be achieved by the Solicitor to the Council incorporating a change into the Council’s Standard Terms and Conditions of Contract rather than making a change to the Contract Procedure Rules.

Conclusions

15. If the Council is minded to adopt the motion and to introduce a fair wages clause into all its contracts it is suggested that the Council defer a final decision pending consideration of a further report on the financial and practical implications of adopting a fair wages clause for all the Council’s contracts, and that the report should also be considered by the Executive so that it can advise Council on these issues.

RECOMMENDATION

16. The Council is RECOMMENDED to determine Councillor Hodgson’s motion in the light of the advice in this report.

Background Papers: Nil

Contact Officer: Chris Impey Tel: (01865) 815307

March 2003

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