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ITEM CC10 - ANNEX 1

COUNTY COUNCIL – 1 APRIL 2003

MOTION FROM COUNCILLOR BRIAN HODGSON – FAIR WAGES CLAUSE

Code of practice on workforce matters in local authority service contracts

1. This document sets out an approach to workforce matters in local authority service contracts which involve a transfer of staff from the local authority to the service provider, or in which staff originally transferred out from the local authority as a result of an outsourcing are TUPE transferred to a new provider under a retender of a contract. This Code will form part of the service specification and conditions for all such contracts.
2. The Code recognises that there is no conflict between good employment practice, value for money and quality of service. On the contrary, quality and good value will not be provided by organisations who do not manage workforce issues well. The intention of the authority is therefore to select only those providers who offer staff a package of terms and conditions which will secure high quality service delivery throughout the life of the contract. These must be sufficient to recruit and motivate high quality staff to work on the contract and designed to prevent the emergence of a ‘two-tier workforce’, dividing transferees and new joiners working beside each other on the same contracts.
3. Contractors who intend to cut costs by driving down the terms and conditions for staff, whether for transferees or for new joiners taken on to work beside them, will not provide best value and will not be selected to provide services for the council. However, nothing in this Code should discourage local authorities or contractors from addressing productivity issues by working with their workforces in a positive manner to achieve continuous improvement in the services they deliver.

Treatment of transferees

4. In its contracting-out of services, the local authority will apply the principles set out in the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector and the annex to it, A Fair Deal for Staff Pensions. The service provider will be required to demonstrate its support for these principles and its willingness to work with the local authority fully to implement them.
5. The intention of the Statement is that staff will transfer and that TUPE should apply, and that in circumstances where TUPE does not apply in strict legal terms, the principles of TUPE should be followed and the staff involved should be treated no less favourably than had the Regulations applied. The Government has now indicated an intention to legislate to make statutory within local government the provisions in the Cabinet Office Statement.
6. The annex to the Statement requires the terms of a business transfer specifically to protect the pensions of transferees. Staff must have ongoing access to the Local Government Pension Scheme or be offered an alternative good quality occupational pension scheme, as defined in the annex to the Cabinet Office Statement, under which they can continue to earn pension benefits through their future service. There must also be arrangements for handling the accrued benefits which staff have already earned.

Treatment of new joiners to an outsourced workforce

7. Where the service provider recruits new staff to work on a local authority contract alongside staff transferred from the local authority, it will offer employment on fair and reasonable terms and conditions which are, overall, no less favourable than those of transferred employees. The service provider will also offer reasonable pension arrangements (as described at paragraph 10 below).
8. The principle underpinning the provisions of paragraph 7 is to consider employees’ terms and conditions (other than pensions arrangements which are dealt with in paragraph 10) in the round – as a ‘package’. This Code does not prevent service providers from offering new recruits a package of non-pension terms and conditions which differs from that of transferred staff, so long as the overall impact of the changes to this package meets the conditions in paragraph 7. The aim is to provide a flexible framework under which the provider can design a package best suited to the delivery of the service, but which will exclude changes which would undermine the integrated nature of the team or the quality of the workforce.
9. The service provider will consult representatives of a trade union where one is recognised, or other elected representatives of the employees where there is no recognised trade union, on the terms and conditions to be offered to such new recruits. The arrangements for consultation will involve a genuine dialogue. The precise nature of the arrangements for consultation is for agreement between the service provider and the recognised trade unions. The intention is that contractors and recognised trade unions should be able to agree on a particular package of terms and conditions, in keeping with the terms of this Code, to be offered to new joiners.

Pension arrangements for new joiners to an outsourced workforce

10. The service provider will be required to offer new recruits taken on to work on the contract beside transferees one of the following pension provision arrangements:

• membership of the local government pension scheme, where the employer has admitted body status within the scheme and makes the requisite contributions.
• membership of a good quality employer pension scheme, either being a contracted out, final-salary based defined benefit scheme, or a defined contribution scheme. For defined contribution schemes the employer must match employee contributions up to 6%, although either could pay more if they wished.
• a stakeholder pension scheme, under which the employer will match employee contributions up to 6%, although either could pay more if they wished.

11. Throughout the length of the contract, the service provider will provide the local authority with information as requested which is necessary to allow the local authority to monitor compliance with the conditions set out in this Code. This information will include the terms and conditions for transferred staff and the terms and conditions for employees recruited to work on the contract after the transfer.
12. Such requests for information will be restricted to that required for the purpose of monitoring compliance, will be designed to place the minimum burden on the service provider commensurate with this, and will respect commercial confidentiality. The service provider and the local authority will also support a central Government-sponsored review and monitoring programme on the impact of the Code, drawn up in consultation with representatives of local government, contractors, trade unions and the Audit Commission as described in paragraph 17, and will provide information as requested for this purpose. Such requests will follow the same principles of proportionality and confidentiality.

Enforcement

13. The local authority will enforce the obligations on the service provider created under this Code. Employees and recognised trade unions should in the first instance seek to resolve any complaints they have about how the obligations under this Code are being met, directly with the contractor. Where it appears to the local authority that the service provider is not meeting its obligations, or where an employee of the contractor or a recognised trade union writes to the authority to say that it has been unable to resolve a complaint directly with the contractor, the local authority will first seek an explanation from the service provider. If the contractor’s response satisfies the local authority that the Code is being followed, the local authority will inform any complainant of this. If the response does not satisfy the local authority, it will ask the service provider to take immediate action to remedy this. If, following such a request, the service provider still appears to the local authority not to be complying with the Code, the local authority will seek to enforce the terms of the contract, which will incorporate this Code. In addition, where a service provider has not complied with this Code, the local authority will not be bound to consider that provider for future work.
14. The contract shall include a provision for resolving disputes about the application of this Code in a fast, efficient and cost-effective way as an alternative to litigation, and which is designed to achieve a resolution to which all the parties are committed. The contractor, local authority and recognised trade unions or other staff representatives, shall all have access to this ‘alternative dispute resolution’ (ADR) process. The Government has asked local authorities, trade unions and contractors to come forward with an ADR mechanism which is consistent with this Code, for inclusion in contracts. In the event that within a specified timescale the parties are unable to agree, the government will publish as an annex to this Code its proposed ADR mechanism.
15. Local authorities will have a duty in their performance plans to certify that individual contracts comply with best value requirements, including workforce requirements in this Code and the accompanying statutory guidance. The Audit Commission's appointed auditor will through the audit of the Performance Plan:

• provide assurance that councils are meeting their statutory duty of certifying their compliance with the Code and that they have put in place adequate arrangements to ensure compliance;
• receive information from third parties about any concerns with the council's compliance;
• consider the information received and decide how to deal with those concerns;
• where the subject of any concern is of material significance (e.g. large contracts or a major breach of this Code is alleged) the auditor will decide on a proportionate response to investigate the concerns.

16. If as a result of investigations the auditor has concerns about an authority’s compliance with this Code, they may exercise their appropriate statutory powers, which include:

• requiring the authority to respond publicly to a written recommendation;
• recommending that the Secretary of State should give a direction under Section 15 of the Local Government Act 1999.

17. This Code sets out procedures for handling matters between the local authority and a primary contractor. Where the primary contractor to provide services to the local authority transfers staff originally in the employ of the local authority to a sub-contractor in consequence of the terms of the primary contractor’s obligations to the local authority, the primary contractor will be responsible for the observance of this Code by the sub-contractor.

Review of this Code

18. The Government will monitor the operation of this Code and consult with representatives of local government, trade unions, contractors and the Audit Commission to assist in this process.
    
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