In line with its promise to remove red tape and bureaucracy the Government has announced that the Code of Practice on Workforce Matters in Local Authority Service Contracts – otherwise know as the ‘Two-Tier Code’ – has been withdrawn with immediate effect. This follows the withdrawal in December 2010 of the Code of Practice on Workforce Matters in Public Sector Service Contracts, which applied to Central Government and NHS Transfers.

Local authorities were required to have regard to the Two-Tier Code when contracting out services as part of its best value obligations. It required those who contract with local authorities to offer new joiners no less favourable terms than those who transferred to the contractor under TUPE.

Councils, the voluntary sector and businesses have called on the Government to remove unnecessary barriers and burdens that prevent fair and open competition. The removal of the Two-Tier Code will help provide a level playing field, ensure more opportunities for innovation and help ensure better value for taxpayers’ money for the provision of public services. It is intended that the Government will consult employers, employee representatives and others to see whether there is any benefit for the Code to be replaced with a ‘Statement of Good Employment Principles’.

The withdrawal of the Two-Tier Code will not have retrospective effect. It will continue to apply to existing contracts, but future contracts will no longer need to refer to the Two-Tier Code.

The Government is also currently consulting on the future of ’Fair Deal for Staff Pensions’, the policy which requires public sector bodies who are outsourcing services to ensure that transferring employees are provided with access to a scheme which offers broadly comparable pension benefits to the existing pension scheme following the transfer. More news on this will follow.