6 Outsourcing service delivery: employment
issues
75. A specific concern of witnesses was that outsourcing
service delivery led to lower terms and conditions for staff who
were transferred from a public body to a private contractor,[168]
notwithstanding the protections of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 (TUPE).[169]
These regulations require that terms and conditions of employees
who are transferred to a new body are not worsened (without economic,
technical or organisational reason) and that employee representatives
are consulted about changes. In response some witnesses such as
NOA said that, far from experiencing deterioration in their conditions,
many employees working for outsourcing companies were "more
satisfied" with their employer and considered themselves
to be delivering a better service to the taxpayer.[170]
IACCM told us that benefits for people outsourced could increase
over time, for example with staff being given an improved package
on joining the professional IT stream in a private company.[171]
Unison was concerned that there was potential for different tiers
of terms and conditions to be applied to staff working for a company.[172]
This could occur where staff were recruited in different ways,
with some originally transferred into the employment of the outsourcing
company under the TUPE regulations from the employing council,
while others might be recruited directly under potentially less
advantageous terms.
76. Furthermore, there has been criticism that firms
conducting outsourced work in some circumstances use less favourable
employment models. There are circumstances where zero hours contracts
are mutually acceptable to employer and employee, but some contracts
can disadvantage employees by restricting the employee's ability
to undertake work for others without a counterbalancing commitment
from the employer to provide an acceptable level of work. Unison
was critical of "exploitative" zero hours contracts.[173]
The union considered that council use of outsourcing for homecare
had fuelled the use of such contracts, referring to Care Minister
Normal Lamb's statement that such contracts were "in most
circumstances completely incompatible with a model of high quality
care in which the individual really gets to know their care worker".[174]
Cipfa cited the case of a contract terminated early which had
entailed some workers on zero hours contracts working "extra-ordinary
hours, quite beyond EU limits".[175]
77. A potential concern about the impact of outsourcing
is that, although main contractors might be rigorous in implementing
fair employment conditions, sub-contractors might not maintain
these. Councillor Scott told us that it was harder for the contracting
council to influence staff terms and conditions where service
delivery was outsourced and the council was not the employer.[176]However,
it was possible for contracts to specify the level of wages to
be paid by both contractors and sub-contractors to avoid this
occurring.
78. The increase in outsourcing of service delivery
by a wide range of councils across a variety of services means
that a large number of people once employed by the public sector
are now working for private sector organisations. Whilst there
are statutory measures which safeguard the terms and conditions
of staff transferring from a public body to a private company,
it is imperative that councils recognise the need to engage actively
with private companies to ensure standards are maintained. Councils
should consider when letting contracts whether they wish to take
into account a bidder's policies on employment issues such as
zero hours contracts. The Local Government Association should
produce guidance for councils on how the provisions in the draft
new EU Directive on public procurement may affect councils' ability
to insist that larger contractors apply minimum standards and
remuneration for employees working on their contracts.
Living wage
79. A number of councils told us of their attempts
to raise wage levels for staff, including outsourced staff, to
the 'living wage' level.[177]
Councillor Scott told us that Sheffield City Council's contracts
included a presumption that suppliers paid 'living wages' to employees.[178]
He told us that the council wanted to be a "living wage city"
and intended to score more highly tenders from suppliers who paid
such wage levels, but it was not in a position to mandate this
currently across all of its procurement, including in the care
sector, due to financial constraints.[179]
Other councils were in a similar position. Ian O'Donnell, representing
Cipfa, said that his employing council (the London Borough of
Ealing) was unable at present to afford to pay the living wage
although it would work towards achieving this over a period of
some years. He noted that ultimately it was a "political
choice" as to what level of wages a council should specify.[180]
In January 2014 the London boroughs of Islington and Southwark
became the first councils in the country to sign up to a charter
promoted by Unison under which councils commit to paying a living
wage to all social care staff and to outlaw zero hours contracts.[181]
80. Whilst councils must be free to develop locally
appropriate employment approaches, with the flexibility to adapt
to changing circumstances, we commend those councils which adopt
fair working conditions and terms of employment, including pay.
We recognise that the rising demand for social care services at
a time of financial constraints on council budgets represents
a challenge for councils wishing to adopt optimum pay and conditions
for staff working in the sector. We have not had the opportunity
in this inquiry to take a detailed look at the specific issues
affecting procurement of social care, but we wish to highlight
the need for employment challenges to be taken into consideration
in development of Government policy on the sector. In its
response to this report, we recommend that DCLG explain how it
will monitor the ability of the social care sector to maintain
effective pay and conditions for employees against a background
of rising demand for services and constrained council budgets.
168 Outsourcing has various definitions but we broadly
interpreted it in this inquiry as meaning the procurement of a
service or goods from a third party rather than delivering or
producing that good or service in-house Back
169
Transfer of Undertakings (Protection of Employment) Regulations
2006 (SI 2006/246) Back
170
Q100 Back
171
Q258 Back
172
Q99 Back
173
Q103 Back
174
Unison (LGP 27) para 26 Back
175
Q271 Back
176
Q305 [Councillor Scott] Back
177
The 'living wage' is currently £8.80 per hour for London
(set by the Greater London Authority) and £7.65 per hour
for the rest of the UK (determined by the Centre for Research
in Social Policy). It aims to reflect the cost of living in the
UK and the annual level is announced each November Back
178
Q317 [Councillor Scott] Back
179
Q329 Back
180
Q265 Back
181
"Islington and Southwark Councils become first to ban zero
hour contracts for home care", Homecare.co.uk website, 14
January 2014 Back
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