Minister for the Cabinet Office Francis Maude has withdrawn the two-tier code with immediate effect from today.
The code, which regulated the employment benefits of new staff recruited by contracted providers of outsourced public services, will be replaced by new Principles of Good Employment Practice which provide a more flexible guide giving employers the power to build a motivated workforce.
The decision will remove a significant barrier to smaller organisations that want to deliver public service contracts.
SMEs, charities, social enterprises, voluntary groups and staff owned mutual providers of public services will all benefit from greater freedom to manage their business without central government interference. However, this change will have no impact on the TUPE terms under which public service staff transfer to new organisations.
Francis Maude, Minister for the Cabinet Office, said:
The two-tier code was a voluntary regulation that did little to protect staff while deterring responsible employers from delivering public service contracts. Small organisations have been particularly hard hit by this two-tier code. We should not be making it more difficult for SMEs and voluntary organisations to succeed in the public service market.
The new Principles of Good Employment Practice set clear standards and give employers freedom to provide terms for staff which are motivating and affordable.
The coalition government is committed to opening up government procurement and reducing costs, so that public services benefit from a more competitive market place.
This announcement builds on the government’s aspiration of awarding 25% of government contracts to SMEs. Measures to support this aspiration include cutting away unnecessary red tape, improving transparency in commissioning and ensuring that major suppliers pay subcontractors working on government contracts within 30 days.
An information note for Cabinet Office supplier information is available along with the original Code of Practice on workforce matters in public sector service contracts.