Bargaining support
Bargaining for Fair Wages
The GLA’s commitment to a fair wages policy marks an important milestone in the campaign against privatisation and the two tier-workforce. This guide will explain the background to a fair wages policy; how it would work in practice; and how branches can campaign to secure similar commitments from other public authorities.The Greater London Authority (GLA) has introduced a fair employment clause into its contracting procedures. Private contractors working for the Greater London Authority (GLA) will be asked if they are willing to pay their staff at least the equivalent of public sector wages. The clause will not only protect transferred staff, but also prevent contractors paying lower rates to any staff working on the contract with the GLA.
The introduction of a fair wages policy by the GLA was based on a commitment by Ken Livingstone, Mayor of London, to ensure that the GLA’s promotion of economic and social development and wealth creation would not be based on financial disadvantage for affected workers and their families.
The GLA’s commitment to a fair wages policy marks an important milestone in the campaign against privatisation and the two tier-workforce. This guide will explain:
- the background to a fair wages policy
- how it would work in practice, and
- how branches can campaign to secure similar commitments from other public authorities.
BACKGROUND TO FAIR WAGES
Until it was abolished by the Thatcher government in 1983, Britain had a successful Fair Wages Resolution. It required companies contracting with public authorities to pay the going rate for the trade or industry, based on terms agreed in national collective agreements.
The UK was also a signatory to ILO Convention 94 which stipulated that public contracts should include clauses ensuring the workers concerned had wages and other conditions " no less favourable than those established for work of the same character".
The Thatcher government renounced ILO Convention 94 and abolished the Fair Wages Resolution. At the same time contracting out and market testing resulted in tens of thousands of staff being transferred from local councils and the NHS to private contractors. The process has continued with outsourcing, PFI, best value and housing transfers.
Under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations) staff have usually been transferred to the new service provider on their existing terms and conditions. More recently pensions protection has been improved and private contractors are expected to offer a ‘comparable’ pension scheme to transferred staff. However, TUPE provides transitional relief only and there are many examples of the terms and conditions of staff being cut over time. And new employees are offered no protection at all – invariably creating a two-tier workforce.
FIGHTING BACK
Over the years, UNISON has campaigned for high quality, publicly provided public services, and to protect the pay and conditions of those workers transferred to private employers. The fight for a new Fair Wages clause is part of this ongoing campaign.
UNISON wants to see fair wages regulation in public contracting that will protect the pay, conditions and pensions of all staff providing public services, regardless of who employs them. Such a clause would also ensure that private contractors could not compete for contracts on the basis of lower pay and conditions and it would remove incentives to privatise in order to cut labour costs.
Following negotiations at the 2001 Labour Party Conference, UNISON secured a commitment from government to take action to end the two-tier workforce. In The Office of the Deputy Prime Minister has introduced changes governing contracting out in local authorities. The Code of Practice on Workforce Matters in Local Authority Service Contracts, introduced in February 2003, obliges contractors to offer new staff ‘fair and reasonable terms and conditions’ which are ‘no less favourable’ than those of transferred employees. Under the Code new joiners will also be offered a reasonable pension provision, which may be either membership of the Local Government Pension Scheme (LGPS), membership of a good quality employer pension scheme or membership of a stakeholder pension scheme with a minimum 6% employer contribution.
The Best Value Code is supported in statutory guidance and a disputes procedure. There is a requirement for it to be included in individual contracts between local authorities and contractors. Most important, the Code will compel contractors to negotiate terms and conditions of new starters with recognised trade unions.
In December 2002 the Scottish executive signed a similar pact ensuring that in all future private finance contracts workers will receive ‘fair pay’ and rights over pensions, holiday and sick pay commensurate with colleagues in the public sector. In April 2002 the Department of Health agreed a ‘retention of employment’ model for new PFI schemes which will keep 85% of support staff in the NHS.
These and other government commitments to strengthen and protect public service provision create a strong case for the introduction of fair wages policies by all public authorities.
FILLING THE GAPS
There are significant areas which remain unprotected by these new government measures. Existing PFI projects in the NHS and other forms of market testing are not covered. The Best Value Code does not apply where a local authority has not contracted out the service and is paying contractors to provide the staff for the service - e.g. agency staff, spot contracts, or where the local authority only provides funding to a voluntary or a community sector organisation. Nor do these arrangements apply in sectors such as Further and Higher Education or the voluntary sector.
HOW WILL A FAIR EMPLOYMENT CLAUSE WORK?
Contractors would be obliged to provide staff with pay and conditions at least as good as those received by directly employed staff doing equivalent work.
Contractors would also be required to give contract staff the same pay increases and improvements in conditions as directly employed staff received during the life of the contract. This entitlement would apply both to staff who were transferred from the public service to the private contractor, and to those hired after the contract started.
The GLA have suggested that a clause stipulating the fair employment obligation might read as follows:
‘Each employee of the Contractor who is at any time engaged in [the contract work] shall be employed by the Contractor at that time on terms and conditions of service which are, when considered as a whole, no less favourable to that employee than the terms and conditions of service which the GLA would at that time afford an employee [engaged in equivalent work or of equivalent seniority].
For the purposes of this clause, the phrase 'terms and conditions of service' shall include, but shall not be limited to, all provisions relating to salary, benefits, entitlements, hours of work, holiday rights and pension rights.'
A fair employment policy would prevent new staff being employed on worse terms and conditions than transferred staff. Not only will the new staff benefit, but the contractor will have less reason to seek to attack the terms and conditions of transferred staff.
Details of a fair employment policy would be subject to negotiation between UNISON and any public authority introducing it. Issues to be considered would include:
- Exactly which contracts should be included in the policy, for example, should the policy apply only to contracts worth over a certain amount?
- How to determine what would be considered "equivalent" work, especially when the work done by the contractor is not performed by any of the directly employed staff;
- How to ensure that contractors are kept informed of improvements in the pay and conditions of directly employed staff;
- How to enforce the agreement to ensure that contractors are paying the amount required;
- How to fund increases in pay and improved conditions if they drive up the cost of the contract.
WOULD A FAIR WAGES CLAUSE BE LEGAL?
The legal situation differs from sector to sector.
The Government has amended the Local Government Act 1988 to enable pay and conditions, equality issues and training to be lawful criteria which any council can apply to select bidders and providers of services. At the same time, the Greater London Authority (GLA) has received leading counsel's opinion that it would be lawful for public bodies to ask contractors whether they are willing to insert 'fair wages' clauses into contracts.
James Goudie QC advised Mayor Ken Livingstone that "it is lawful for the GLA to have regard, when it evaluates the tender of a potential contractor, to whether that contractor is willing to agree to a fair employment clause." The opinion states that a 'fair wages' clause can be used in evaluating tenders to:
1) Protect the pay, conditions and pensions of GLA staff transferring to an external provider AND require that they enjoy any subsequent improvement of GLA terms and conditions for the life of the contract.
2) Ensure that 'new starters' on any contract receive pay and conditions which "keep in line with those of equivalent staff employed by the GLA".
The position in the NHS differs from Local Government in terms of the powers of individual Trusts. NHS Trusts have to follow central government guidance on market testing and could not specify a Fair Wages clause in a contract under the current guidance. UNISON is continuing to raise this matter with the Department of Health, along with the issue of pension provision for new staff. Staff transferred after market testing or PFI are guaranteed a broadly comparable pension scheme, but new staff are only covered by their new employer’s arrangements.
While Health Service branches should seek to keep services in house, this may not always be feasible. Under current guidance employers can take into account the union’s views on the overall record of any bidders, and branches are advised to raise the issue of terms and conditions for new staff where the use of any contractor is being considered. Branches should contact their Regional Officer for advice on how to pursue this.
In PFI schemes the union has the right to interview shortlisted bidders and this right should be sought in other contracting situations. Branches should also raise "fair wages" as a bargaining issue with contractors at each site. Working as part of a community campaign can highlight this issue and put pressure on contractors and the Trusts.
For further advice contact your Regional Officer or your service Group.
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