Two-tier workforce

Two-tier workforce: an introduction

A two-tier workforce may be created when employees are transferred from the public sector (local government, the NHS etc) to the private sector (a profit-making company) and new employees get worse pay and conditions than those workers transferred from the public sector – leading to two tiers of pay and conditions.

This means there are effectively two classes of workers, working together on the same contract, one of whom gets less favourable pay and benefits.

Why do public sector employees sometimes end up working for the private sector?

Workers are often moved from the public to the private sector when the services they provide are outsourced.

The disadvantages of a two-tier workforce

The disadvantages of a two-tier workforce include:

  • workers performing the same tasks being treated differently by employers;
  • worse morale which may have affect service quality;
  • wages being driven down for everyone;
  • turnover of staff, particularly among less well paid, newer employees.

Who is most commonly affected?

While all kinds of workers in all kinds of jobs can find themselves part of a two-tier workforce, women and low-paid workers are two groups that are most frequently affected.

The two-tier workforce and the law

Local and central government employees transferring from the public sector have their pay and conditions protected by regulations known as TUPE, or the Transfer of Undertakings (Protection of Employment) Regulations of 2006 to give them their full name.

In Northern Ireland, there are additional provisions called the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006.

Read more about TUPE.

In 2010, the government got rid of the Code of Practice on Workforce Matters in Public Service Contracts, better known as the two-tier workforce code. and replaced it with six Principles of Good Employment Practice. These principles are supported by government, but they are voluntary.

One principle states that when a “supplier” – or private sector company – employs new recruits who work alongside former public sector workers, they should have fair and reasonable pay, terms and conditions.

The principles encourage consultation with trade unions on workforce training and development issues.

They also highlight that contracting organisations should make sure that supplier policies and processes are compliant with the Equality Act (similar issues are addressed in Northern Ireland by section 75 of the Northern Ireland Act 1998).

See our section on equality duties.

Next steps for UNISON reps

UNISON wants to reduce differences in the wages of workers doing similar jobs. The union has proposed a fair wages resolution as a solution to the two-tier workforce, which could define national rates of pay for different types of work.

Make sure you are familiar with the points of the Principles of Good Employment Practice and use the UNISON bargaining support tools available online.


Two-tier workforce

  • I am paid much less than colleagues doing the same job who have been transferred from the public sector. Am I being treated unfairly?

    UNISON’s position is that this may well be unfair.

    The 2003 code of practice did provide for new workers to have “no less favourable terms” – but unfortunately it is no longer the law. Get in touch with your UNISON rep who can check the Principles of Good Employment Practice for guidance.

    You can also call UNISON Direct on 0845 355 0845.

  • What should I do if my employer, who is a contractor, has lost their contract to another contractor?

    Unless you are told otherwise you should turn up for work as normal. Your employment contract should transfer automatically to the new contractor, with no major differences to your job.

    If you find your job has gone due to the change, you could consider making a claim for unfair dismissal  against both employers in an employment tribunal

    Read more about unfair dismissal

    Read more about employmen tribunals

    You may also claim for “failure to consult before a TUPE transfer”. Contact your UNISON rep for advice.

    Read more about TUPE

    Find out how to contect your rep.

  • What will happen to my pension if my job moves from the public sector to a private company

    Private contractors are generally expected to offer a “comparable” pension scheme to transferred staff.

    Both the new Local Government Pension Scheme in England and Wales, which is due to come into force in 2014, and the new NHS Pension Scheme, which is due to start in 2015, include measures to allow staff transferred to the private sector to keep their membership of these schemes.

    Find out more about pensions.