Code change could boost job creation | 05 April 11

COMPANIES looking to do more work in the public sector have been boosted by a change in employment rules, according to a leading law firm.

Employment law experts at Ward Hadaway say the Government’s decision to scrap the so-called ‘Two Tier Code’ could make it more attractive for businesses to take on local government work and make it easier for local authorities to contract out functions and save costs.

The firm, which has offices in Newcastle, Leeds and Manchester, adds that the move could end up helping to create more jobs in the future.

The ‘Two Tier Code’ – or the Code of Practice on Workforce Matters in Local Authority Service Contracts to give it its official title – has been in place since 2003.

It covers private companies who take on new staff after a local authority function such as IT is outsourced to the business.

Under the Code, any new employees which a company takes on to carry out that outsourced function have to be hired on similar terms and conditions as any local authority staff who had transferred to the company.

Tim Smith, partner in the employment team at Ward Hadaway, said: “Since many local authority staff have better terms and conditions such as pension and sickness rights than their counterparts in the private sector, the Two Tier Code has meant that private companies doing outsourced public sector work are often reluctant to take on additional employees because of the higher cost of employing staff on these enhanced terms and conditions.

“This has meant that in some cases, companies have been dissuaded from taking on local authority functions because they have found it harder to make such contracts profitable.”

However, Communities and Local Government Secretary Eric Pickles has now announced the immediate repeal of the Two Tier Code, enabling companies who take on new staff for public sector outsourced contracts to set their own terms and conditions.

Mr Pickles said: “Councils, the voluntary sector and businesses - especially small firms - have called on the Government to remove unnecessary burdens and barriers that act to prevent fair and open competition.

“Removing this guidance will help create a level playing field, ensure more opportunities for innovation, help ensure better value for taxpayers’ money in the provision of public services, and remove red tape that hinders job creation.”

Tim Smith from Ward Hadaway said: “This is potentially good news for employers in both the public and private sectors.

“With these restrictions removed, private companies may look again at bidding for more local authority outsourcing contracts since they are likely to be able to make the work more cost-competitive.

“They are also likely to be less reticent about taking on more staff to perform such functions if they are able to set their own terms and conditions, so this may help to create jobs.

“In the public sector, local authorities may now get more competition for outsourcing contracts, which should help drive down the price and enable councils to make valuable savings without resorting to redundancies.”

Ward Hadaway has one of the largest specialist employment law teams in the North with more than 30 dedicated lawyers and human resources professionals.

The firm provides employment law advice to a range of private and public sector clients, including national retail chains, international plcs, local authorities and NHS Trusts.

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