Fair work practices and the award of public contracts : statutory guidance

Guidance to help public bodies evaluate fair work practices, including the Living Wage, when selecting tenderers and awarding contracts.

Scope and application

10. International labour standards, set both by the European Union and the International Labour Organisation, should be respected by those who deliver public contracts, including sub-contractors. They should be able to demonstrate that they are good employers who have adopted policies which comply with relevant employment, equality and health and safety law, human rights standards and adhere to relevant collective agreements, and describe how they adopt fair work practices for all workers engaged on delivering the contract. This includes, for example, fair and equal pay (for example, supported by equal pay audits), respecting employee rights, avoiding exploitative employment practices, supporting progressive workforce engagement by, for example, involving their employees in decision making and encouraging staff to join an appropriate Trade Union and play an active part in it. In the absence of a recognised Trade Union or where conditions of employment are not covered by a collective agreement, the existence of alternative arrangements to give staff an effective voice are important aspects of fair work which should be provided for.

11. Stability of employment and of hours of work is an important element of fair work, and fair work practices are not consistent with inappropriate, exploitative and avoidable zero-hours contracts. Where feasible, more stable forms of employment and hours of work, for example direct employment or fixed term employment contracts, should be offered to workers. Denying workers regular or sufficient working hours does not offer such stability.

12. Under certain circumstances, we recognise that the use of zero-hours contracts may be appropriate where their use aligns the needs of an organisation or sector with the needs of particular workers. For example: in respect of seasonal work in sectors such as agriculture or tourism; where there is a need to cover unanticipated peaks in service delivery; during holiday periods or where workers may find some benefit in retaining access to an employment contract until stable work becomes available again. However, where there is no specific justification for the use of zero-hour contracts or where they are used to avoid protections afforded by employment law we would consider their use to be inappropriate and potentially exploitative.

13. The Scottish Government and public bodies across Scotland are working to promote equality, reduce social inequality and ensure that individuals are not denied opportunities or disadvantaged through discrimination, prejudice or exclusion due to factors such as race, gender, gender identity, disability, sexual orientation, religion or belief, or age.

14. Equality legislation places duties on certain public bodies to promote equality through their actions and they must have due regard to whether the award and conditions of contract should include considerations to enable the better performance of the public sector equality duty. In addition human rights standards recognise the right of everyone to just and favourable working conditions; in particular fair and equal pay, safe and healthy working conditions and reasonable working hours.

15. Fair work practices for those who work on public contracts should therefore be broadly comparable with those adopted by public sector organisations and those working on public contracts should receive fair, equitable and non-discriminatory pay, terms and conditions and reward packages. Contracting authorities should also consider the Statutory Guidance to Local Authorities on Contracting (section 52 guidance) and the PPP Protocol in relation to removal of the scope for a two-tier workforce on the delivery of the contract.

16. Being considered as a good employer not only relates to workers directly employed but also workers who are engaged through, for example, employment agencies, "umbrella" companies and/or other employment intermediaries. In this context, an "umbrella" company is one which acts as an employer to agency workers who work under fixed term contract assignment. Inappropriate use of an "umbrella" company is inconsistent with the standard of a good employer adopting fair work practices. Such use could include, but is not limited to, engaging staff employed by the company to exploit workers who may otherwise be directly employed, through excessive administrative charges, issuing incomplete or confusing pay slips, moving staff on to the "umbrella" company without their prior knowledge and consent and using them as a device to reduce workers' pay or conditions.


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