UK employers prepare for wider protections in public sector outsourcing beyond TUPE

The government has confirmed that new rules to prevent two-tier workforces in public sector outsourcing will be introduced from October 2026 as part of its employment rights reforms. These new two-tier workforce protections will require parity of treatment for workers delivering outsourced services, and that is significant because they could go further than employers typically associate with TUPE, particularly in terms of scope and duration. For organisations involved in public sector outsourcing, that raises important questions about how workforce terms are structured, not just at the point of transfer but across the life of the contract. We’ll speak to an employment expert about that. 

At the heart of the reforms being introduced under the Employment Rights Act 2025 is a new statutory framework requiring contracting authorities to take all reasonable steps to ensure outsourcing contracts include provisions designed to prevent differences in treatment between workers delivering the same service. The key concept is “no less favourable treatment” and, while the detail is still to come, it is expected to go beyond simply matching contractual terms.

In practice, that could extend to workplace benefits, access to facilities and day to day working arrangements, pointing to a broader focus on overall parity rather than just contractual alignment. The scope is also wider than many employers may expect, applying not only to employees but also to workers, and potentially to certain non-transferring staff assigned to the service.

Another important feature is that these obligations are likely to apply throughout the life of the contract, not just at the point of transfer. That means employers may need to monitor and manage workforce parity on an ongoing basis, rather than treating this as a one-off TUPE exercise.

All of that has clear implications for how public sector contracts are bid for and delivered, with employers needing to understand the baseline terms they are working with and how any differences will be addressed.

So, let’s get a view on this. Earlier I caught up with employment lawyer Gillian Harrington who joined me by phone from Aberdeen. I began by asking her how much wider these new protections could be than the position employers are used to under TUPE.

Gillian Harrington: “This could potentially be significantly wider than simply terms and conditions of employment because it may extend to wider treatment, for example, access to facilities, training, and different working practices, so I think that it is quite significant. At the moment, we are still waiting for regulations and codes of practices to be provided to give us more detail on what precisely is going to be required, but I think that organisations should be prepared for it extending further than just terms and conditions of employment.”

Joe Glavina: “The proposals apply to workers as well as employees and may include certain non-transferring staff assigned to the service. How significant is that expansion?”

Gillian Harrington: “This is one point that we thought was very interesting in terms of the ERA developments in that it is going to extend wider than employees. It is going to extend to workers and that is significant because if you have, for example, a contractor who puts other workers and employees on to a contract where there have been TUPE transferred employees from a local authority, then those workers and employees - so for example short term workers, fixed term workers, ad hoc workers - they will still require to get the same treatment as those employees who've transferred over under TUPE from the local authority. So I think it is going to be quite important for contractors to consider how they are going to staff these contracts going forward, and to think about whether they actually need to put in place casual workers, or whether they put in place short term arrangements where terms and conditions are slightly higher if they're working on that contract, and then they change if they move elsewhere in the business. It is something that organisations are going to have to look at before bidding for a contract in terms of looking at what are the terms of the individuals who are currently providing those services and whether that's in the local authority or another provider, and how they are going to be able to replicate them going forward.”

Joe Glavina: “How will these protections sit alongside TUPE? Are they likely to operate as an additional layer of protection?”

Gillian Harrington: “I think these protections are going to add another layer of protection for workers who have transferred following an outsourcing or retender of a contract because TUPE applies to terms at the point of transfer so employees are entitled to transfer under their existing terms and conditions, but there is an entitlement under TUPE to make changes to those terms and conditions  where they fall under ETO reasons, so an economic, technical or organisational reason entailing changes in the workforce. So there is that possibility to make those changes, albeit quite limited, but under the new provisions for the two-tier workforce, transferring employees will be entitled to have no less favourable terms than those other workers who are working on the contract from the outsourced contractor, so it's a slightly different entitlement and I think that they will sit alongside each other. But what is very important is that authorities have got an obligation to monitor compliance with this so it won't be a case of, at the transfer date, as long as the terms are the same, that's okay. There will be a continuing obligation on contractors to make sure that any workers that they put on to the contract where you have got TUPE transferred employees that they are no less favourable in their terms, and also as well, contractors need to be mindful that if they subcontract work, they need to make sure that there is appropriate contractual provisions in that outsourcing agreement, or that subcontractor agreement, to make sure that the subcontractors will also put in place no less favourable terms for their workers because there will be an obligation for that subcontractor to still comply with the requirements of the no less favourable treatment provisions.”

So, while the detail of these new two-tier workforce protections is still to come, the direction of travel is clear. Employers involved in public sector outsourcing will need to start thinking now about how workforce parity is assessed and managed, not just at the point of transfer but throughout the life of the contract. If you would like help reviewing your outsourcing arrangements or preparing for these changes, please do contact Gillian – her details are there on the screen for you.