whether existing services are needed

our performance with other organisations in the public, private and voluntary sectors

with the public about their views and priorities

assess competitiveness of services

Tackling the Two-Tier Workforce - A short guide to the code of practice on workforce matters in Local Authority Service Contracts (issued March 2003)

Unions have consistently argued that if Best Value is to respond to the needs of citizens, first and foremost it must seek to engage the workforce. To do this successfully requires flair and equal treatment for all staff delivering services - whoever employees them. In this respect the two-tier workforce has been a real barrier to better services in local government. The Code of Practice announced in February provides an opportunity to end the two-tier workforce so that all our efforts can be concentrated on service improvement.

Employees who are fairly treated will deliver the improvements needed

There is plenty of evidence to illustrate the link between good employment practice and high quality services. The Government clearly understands this vital point - the Code is clear that Best Value cannot be delivered by cutting the employment conditions of the workforce. As Tony Blair put it at the Labour Party Spring Conference in February the Code "is about offering decent wages and conditions for delivering the service".

• All new service contracts must incorporate the Code when staff are transferred and the principles of TUPE must be applied in all cases.  Local authorities have a duty in their performance plans to certify that every contract complies with the requirements of the Code.
• Contractors must consult unions on any changes to the employment conditions of all staff working on an outsourced local government contract.
• New staff working alongside transferred employees on new contracts must be offered employment conditions that are "no less favourable than those of transferred employees".
• The TUC, CBI and the LGA are working to agree arrangements for resolving disputes relating to the application of the Code. The application of the Code will be monitored by the social partners.
• The Code applies to all contracts where local authority staff are transferred to an external service provider and when an existing outsourced contract is re-tendered. It also applies where a contractor transfers formal council staff to subcontractors to undertake the council contract.
• Pensions are better protected - the employer must contribute up to six per cent to a pension for new employees.
• Local authorities must monitor compliance with the Code and contractors must supply sufficient information to the authority to assess performance.

• Is the Best Value Code of Practice mandatory?
• When does the Code apply?
• Does the Code of Practice apply to all forms of contracting out?
• Does the Code apply to sub-contractors?
• Will there be meaningful consultation with unions?
• What should I do if the contractor wants to negotiate changes to the employment conditions of new starters?
• What about pensions?
• What if the contractor wants to relocate?
• Will there be effective monitoring?
• What if members complain that a contractor is not complying with the Code?
• What if the council fails to act or gives an unsatisfactory response?

Is the Best Value Code of Practice mandatory?   Yes. Local authorities in England are required to apply the Code when contracting out services. Where the Code does not yet apply unions should use the Code of Practice as a reference point and negotiate for the principles of the Code as a minimum standard.

When does the code apply?  It applies to all local authority contracts in England first advertised after 13 March 2003.

Does the Code of Practice apply to all forms of contracting out? Yes, the Code applies when local authorities are contracting out any service and transferring staff to the private, voluntary or community sector.  It applies to PFI, PPPs, Strategic Partnerships, Trusts, Joint Venture Companies, Section 31 Partnerships and Large Scale Voluntary Transfers.

Does the Code apply to subcontractors? Yes - where the main contractor transfers former local authority staff to a subcontractor, the main contractor is responsible for ensuring that the subcontractor complies with the Code.

Will there be meaningful consultation with unions?  The Code gives explicit consultation rights. The contractor must consult recognised trade union representatives on the terms and conditions to be offered to new recruits.  The arrangements for consultation will involve "a genuine dialogue" with the intention being that contractors and trade unions are able to agree on a particular package of terms and conditions to be offered to new starters.  Councils must also inform and consult trade unions under TUPE regulations.

Since 3 April 2003, Best Value authorities in England have had a duty to consult recognised trade unions and staff on Best Value Reviews and the Best Value process.

When considering TUPE transfers the Best Value Performance Improvement Statutory Guidance states that councils "should consult their employees and recognised trade unions or staff representatives throughout the process, with full disclosure of information on all matters affecting the workforce".  It is clear from this that the Government sees effective consultation as a serious matter - take every opportunity to remind the council of its duties under Best Value.

What should I do if the contractor wants to negotiate changes to the employment conditions of new starters? The contactor may seek to negotiate variations to the overall package for new starters with the recognised union. However, the final overall package must be "no less favourable" than that applicable to transferred employees. Negotiating and agreeing a separate package for new starters may involve highly complex trade-offs and advice should be sought from region or national offices on any proposed changes. Such changes should also be subjected to an equality audit.

The JNC, NJC and locally agreed conditions should be used as the reference point for all employees whether they work directly for the local authority or are employed by another organisation. These are the benchmarks against which the "no less favourable" test must be applied. This is the case even when a contract is re-tendered on the second or subsequent occasion.

What about pensions?  The Code offers a much better deal for new starters. The contractor must offer one of the following:

• Membership of the local government pension scheme, where the employer has admitted body status and makes the requisite contributions.
• A good quality contracted out, final salary or defined contribution scheme. For defined contribution schemes the employer must match employee contributions up to six per cent, although either could pay more if they wished; or
• A stakeholder pension scheme, under which the employer matches employee contributions up to six per cent, although either could pay more if they wished.

For transferred staff the contractor must offer one of the following options:

• Membership of the local government pension scheme or
• A "broadly comparable" pension scheme approved by the Government Actuary Department

The priority for unions is to persuade all contractors (new and existing ones) to seek admitted body status to the local government pension scheme and to make the scheme available to transferred staff and new starters.

What if the contractor wants to relocate? First of all remind the local authority of their duty to ensure the social and economic well-being of the area - exporting jobs will have a detrimental impact on the local economy. The contractor and the local authority must remember that TUPE will apply in most cases and when it does not the principles of TUPE must be applied.

Will there be effective monitoring?  Contractors must supply your council with information about the terms and conditions of both transferred staff and employees recruited to work on the contract when the local authority requests it. Make sure that the council commits itself to regular, active monitoring of all contracts and get agreement for regular monitoring meetings with unions. This way you can be sure that they are monitoring contracts effectively and you can report any problems raised by members working for contractors.

The power to promote economic and social well being for the local community represent a significant opportunity for local authorities to spread good employment practice in organisations with which they do business. Remind them that their workforce includes a significant number of local people whose economic and social well-being will be adversely affected by bad employment practices.

The Local Government unions will be involved in the national review of the Code and need to know about any problems members encounter.  We will provide a pro forma for branches to fill in and return to their national offices on a regular basis.

What if members complain that a contractor is not complying with the Code?  Take it up with the contractor. Remind them of their contractual obligations under the Code. If the matter cannot be resolved write to the authority to say that it has not been possible to resolve a complaint directly with the contractor. The local authority should then take the matter up with the contractor and should keep you informed. If a contractor does not comply with the Code the local authority will not be bound to consider that provider for future work.

What if the council fails to act or give an unsatisfactory response? Recognised trade unions will have access to the dispute resolution procedure that is currently under discussion by the social partners. This procedure must be included in the contract. If you are not satisfied with the way the local authority has acted or the response of the contractor you should invoke the dispute resolution procedure. If you need to do this you should contact your regional or national officer for advice and support.