Public sector outsourcing
New regulations and a Code of Practice will introduce new requirements for private-sector suppliers who bid for public contracts. These rules are designed to protect workers when public services are outsourced.
The changes are expected to take effect from October 2026, although further detail is awaited in regulations and the Code of Practice.
The obligations will apply where:
- Services or functions previously delivered directly by a public body are transferred to an external supplier or subcontractor; and
- Staff move as part of that outsourcing arrangement
The protections will apply to workers as well as employees.
Where staff transfer from the public sector to you as a supplier, you will be required to ensure that they are treated no less favourably than they were when employed in the public sector.
The requirement also extends to your existing workforce.
Workers who did not transfer from the public sector must not be treated less favourably than the incoming public sector workers if they are doing similar work.
The aim is to prevent a “two-tier workforce”.
This where one group of workers is employed on less favourable terms than another.
Public sector contracting authorities will be required to take all reasonable steps to include the no less favourable treatment provisions in outsourcing contracts, and ensure that suppliers comply with these obligations throughout the contract.
Further detail is needed from the regulations and the Code of Practice, including how “no less favourable treatment” will be interpreted in practice.
Until that detail is published, there remains uncertainty around how the rules will operate and how far the obligations will extend.
What does this mean for you?
Taking on outsourced public services could be costly, particularly where changes are required to pay, terms or working conditions to ensure compliance.
It will be important to keep up to date with developments and understand the new obligations before bidding for, or taking on, outsourced services.
