OVERVIEW AND SCRUTINY MANAGEMENT COMMITTEE

‘The Living Wage’

1. INTRODUCTION

At the Council meeting on 25 March 2015, it was resolved that:

This Council notes that 65% of its services are delivered by private and voluntary sector organisations. This Council notes that many private and voluntary sector employees working on behalf of the County Council are paid less than the Living Wage. This Council is concerned that employees who provide essential services to Gloucestershire residents, such as care workers, are receiving poor pay and poor terms and conditions for the important service they provide. As a Council we believe that it is our responsibility to ensure that in work poverty is not experienced by anyone employed to work on behalf of GCC. Therefore this Council requests that the Overview and Scrutiny Management Committee undertakes a review of the pay, terms and conditions that employees working on behalf of the County Council receive and assess the merits and costs of paying all low paid employees working on behalf of GCC the Living Wage. The review will also investigate the use of zero contract hours by Council contractors and it will establish whether or not the practice of black listing members of Trade Unions occurs in Gloucestershire.

OSMC have focussed their review on the follow key aims:

To review pay, terms and conditions that employees working on behalf of the County Council receive

To assess the merits and costs of paying all low paid employees working on behalf of Gloucestershire County Council the Living Wage.

Investigate the use of zero contract hours by Council contractors Establish whether or not the practice of black listing members of Trade

Unions occurs in Gloucestershire

Members spoke to:

Director: People Services and Principal Adviser - Employee Relations & Policy

Lead Commissioner Community Infrastructure

Assistant Director Adult Social Care Commissioning

Director: Strategy and Challenge

Head of Commercial Services

Trade Unions

Bureau Manager, Gloucester & District Citizens Advice Bureau

Business Manager, Gloucestershire Care Providers Association

Team Manager, Contracts and Commercial

2. GLOUCESTERSHIRE COUNTY COUNCIL STAFF

Before formulating conclusions in relation to those staff providing services on

behalf of the County Council through an external contractor, it was important

to clarify the position of those staff directly employed by the Council.

2.1 Terms and Conditions

Members understood that the terms and conditions of employment of

Gloucestershire County Council (‘the Council’) employees are covered by:

The Employment Rights Act 1996 and any other relevant legislation

Collective agreements negotiated by the national body relating to their employment group

Local collective agreements negotiated from time to time by the Council with a specified trade union or unions recognised by the Council for collective bargaining purposes in respect of the employment group to which they belong

The majority of the Council’s employees (including school support staff in

Community/Voluntary-Controlled schools) are covered by the terms and

conditions of the National Joint Council for Local Government Services. This

is commonly referred to as ‘Green Book’.

This does not include academies and so academies have not been

considered as part of this review.

From time to time variations to terms or conditions of employment will result

from negotiations and agreements at national and/or local levels with the

specified union or unions. The Council introduced revised terms and

conditions for employees in 2013 through a collective agreement negotiated

with the recognised Trade Unions, to support the ‘Meeting the Challenge’

programme.

2.2 Zero Hour Contracts

Members understood that concern elsewhere around zero hours contracts

centred on exclusivity clauses whereby the worker is prohibited from obtaining

work with any other employer while still engaged under the zero hours and

unpaid onsite standby requirements.

Members were pleased with the appropriate way zero hour contracts were

handled by the Council. This related to a very small group of staff within the

Council: around 40 on zero hours contracts and 150+ casual workers.

2.3 Living Wage

The living wage supplement was first agreed for Gloucestershire County

Council staff in February 2014 and implemented in September 2014, with

schools also bringing it in.

2.4 Conclusion

Trade Union representatives agreed that in the main Gloucestershire County

Council was a good employer and that they felt they had a good relationship;

issues were able to be raised and dealt with in an appropriate manner. It had

been a difficult period with reduced budgets and times of austerity, but

communication was good and issues were dealt with in the correct way. The

Council operated in an open and transparent way.

No blacklisting issues involving the County Council were raised.

Members have used this process to undertake a thorough examination of how

the County Council operates its employment practices. Members are pleased

to report that, from the evidence they have seen and the individuals they have

spoken to, the County Council follows best practice. As we look to the future

and the change and uncertainty on the horizon, members have been

impressed by the maturity of officers and the extent to which they understand

the implications of change.

Gloucestershire County Council uses zero hour contracts in an

appropriate way and members have no issues to raise with regards to

pay, terms and conditions of staff, including living wage supplement.

3. CONTRACTORS WORKING ON BEHALF OF GLOUCESTERSHIRE

COUNTY COUNCIL

3.1 Background

Since the motion was formulated earlier this year, the national picture has

changed considerably with the proposed introduction of a ‘National Living

Wage’ in April 2016. This differs from the Council’s own discretionary Living

Wage Supplement or the National Living Wage Foundation’s non-statutory

recommended hourly rate.

In addition, there are a number of factors with regards to our role as a

commissioner and the application of procurement law and other legislation

that need to be understood.

3.1.1 Commissioning

Commissioning within public services means understanding what is needed

and deciding on the best ways of meeting those needs to make a positive

difference to people’s lives. This involves examining evidence; understanding

future needs; consulting service users, providers of services and potential

partners; engaging communities and creating and consulting on options; and

then planning how to put these options into place. This might include

contracting for services with external providers, or it could mean providing the

service ourselves.

When we do decide to contract for services with external providers, the

Council has to comply with the relevant legislation and procurement law

throughout the process. This has an impact on what and how criteria can be

used in a procurement process. There are limitations on what the Council can

ask about terms and conditions of contractors’ staff.

3.1.2 Procurement Law

Members noted that this is a complex and challenging environment to work in

and that there are a number of limitations with regards to the Council’s role:

Aside from the legal requirement to pay the statutory ‘National Living

Wage’, any insertion of a straight blanket requirement that a contractor

pays a ‘Living Wage’ into a procurement Invitation To Tender (ITT) is in

breach of both the Public Contracts Regulations 2015 (PCR 2015) and

The Treaty on the Functioning of the European Union (TFEU).

There is a real risk that Living Wage clauses in contracts are likely to

be considered a breach of Article 56 of TFEU.

Where appropriate constructed clauses are inserted into contracts,

they will need to be supported by a robust contract management

framework.

Issues could arise where such clauses are breached or where a

contractor does not provide sufficient evidence to support compliance

with a contractual obligation. These breaches in themselves may be

insufficient to enable the Council to terminate the contract.

If the Council was found to have included such Living Wage criteria in

the procurement process or contract clauses unlawfully, an aggrieved

contractor issuing proceedings through the courts would be entitled to

an automatic freezing injunction preventing the award of the contract.

The aggrieved contractor may also be entitled to damages or the court

may order the re-running of the tender process and impose further

financial penalties on the Council.

While recognising the limitations, members understand that there is some

scope to influence the payment of a Living Wage through the Public Services

(Social Value) Act 2012 which places a duty on the Council before it

commences a procurement exercise to consider ‘…how what it is proposed to

be procured might improve the economic, social and environmental well-being

of the relevant area, and how in conducting the process of the procurement, it

might act with a view to securing that improvement.’

The Act also provides that the Council must consider: ‘…only matters that are

relevant to what is proposed to be procured and, in doing so, must consider

the extent to which it is proportionate in all the circumstances to take those

matters into account.’

Accordingly, this prevents a blanket approach as the Act requires

consideration on a case by case basis. While it is possible for the Council to

take into account social and environmental criteria in the contract award,

these have to be linked to the subject matter of the contract.

In addition, any such criteria also have to ensure effective competition and

that they do not breach Regulation 18 of PCR 2015 which requires that the

Council: ‘…shall treat all economic operators equally and without

discrimination and shall act in a transparent and proportionate manner.’

A more structured approach would be needed so that the criteria being

assessed allowed a contractor to achieve the result of paying the Living Wage

other than by simply receiving an enhanced score for actual payment of the

Living Wage itself. This could be done by addressing workforce matters

through examining how a contractor rewards its employees and tackles in

work poverty to ensure a well motivated workforce

Commissioners recognise the importance of a sustainable workforce and how

this can achieve better outcomes. Members heard positive examples of how

commissioners engaged with the market in advance of procuring to

understand what contractors could offer in an open and transparent way and

understand how a contractor ensures the sustainability of their workforce. In

relation to Domiciliary Care, a ‘competitive dialogue stage’ had been added to

the commissioning process to ensure we fully understand providers.

3.2 Living Wage

3.2.1 Changes Nationally

Members noted the introduction of a statutory National Living Wage on 1 April

2016 beginning at £7.20 per hour with an aspiration for it to rise to at least £9

per hour by 2020. This presents a challenge for employers, not just on cost,

but also the impact on pay and grading differentials and the speed with which

it will rise.

The LGA estimates that an additional £330 million would be needed in 2016

to initially cover increased contract costs to home care and residential care

providers in order for them to pay council care staff the National Living Wage.

Members understand that there is great uncertainty around the impact of

these changes with the introduction of a National Living Wage coinciding with

reductions to tax credits and changes to income tax thresholds.

While the Government had set the initial rate of the National Living Wage

supplement (which is 50p on top of the adults national minimum wage rate),

future increases will be subject to recommendations made to Government by

the Low Pay Commission. The Commission is due to report to Government in

February 2016 with recommendations on the National Minimum Wage rates

to apply from October 2016 and to report to the Government in October 2016

with recommendations on the rate at which the National Living Wage should

be set from April 2017.

It is anticipated that the Comprehensive Spending Review announcement on

25 November 2015 will begin to provide some clarity on the arrangements

and that this will be considered as part of the Council’s draft Medium Term

Financial Strategy.

Members recommend that the implications of the Living Wage are

considered as part of the Council’s budget setting process

3.2.2 Implications on the Care Sector

While understanding the limitations with regards to the influence the Council

can have, a number of issues were raised in relation to the Health and Social

Care Sector that members wish to raise.

a) Members understand that the introduction of a National Living Wage

will have a significant impact on the care sector which is already

operating under difficult financial constraints. This is a sector with a

high turnover of staff, high sickness absence rates and at times

negative media attention. It was suggested to members that providers

will find it difficult to find the additional funding to meet increased staff

costs without impacting on the quality of service and retention of staff.

b) Potentially care providers could look to meet the costs by reducing

training provision to their staff and that raises concerns about the

quality of the service that is being offered. In this changing

environment, the Council has to be clear when procuring care services

that we are paying for the quality of service that we believe to be

appropriate to meet the need.

c) Members were informed that CQC rates had gone up this year by 9.5%

and care providers were required to pay this (some exceptions to apply

depending on the type of provider). This increase in rates has been

raised as a concern by care providers who feel this is an additional

financial pressure. This is a national issue and one we flag up here as

a concern that should be forwarded on through the appropriate

channels.

d) It has been suggested that the introduction of the National Living Wage

would help to create ‘upward pressure’ to improve the terms and

conditions of staff in the care sector. Despite this, there is real

complexity in the market, with the use of agency staff by providers at

high costs and the introduction of providers catering for private users,

just some of the examples.

e) Members discussed examples of organisations setting up residential

care homes in certain areas in Gloucestershire. This was where the

organisation had identified a business opportunity in providing for

private users coming in from out of County. Members recognise that

this adds another layer to the complexity of the market and it is

important to consider the implications upon planning and the economic

impact.

Members recognise the scale of the challenge in this area and are already

looking to the future to see how this can be met. Gloucestershire has

submitted a devolution bid to central government, part of that submission is a

desire to improve health and care. This has a vision of a joined up

Gloucestershire where services work in partnership with individuals, carers

and local communities to transform the quality of care and support we provide.

Gloucestershire has already committed significant resources to integrated

commissioning for health and care and the ongoing development of the Better

Care Fund programme. By working with a fully integrated health and social

care budget and an increased level of delegated commissioning from NHS

England, Transforming Care Programme groups will be able to take fully

informed decisions that will focus on improving outcomes within available

resources.

This, though, is not an approach which will necessarily see immediate results

and so it is important that there is monitoring of the immediate challenges

facing the sector with the introduction of the National Living Wage just being

one of a number.

3.3 Zero-hour contracts

Some of the individuals that members spoke to did not agree that zero hour

contracts had a place in any organisation. Others could see that they could be

beneficial for all sides but that they had to be managed in an appropriate way.

Concern was expressed about the possibility of employees working a large

number of hours without the security of a long term contract.

It was also suggested that zero hour contracts provided uncertainty with the

changing work pattern each week meaning that entitlements to benefits or tax

credits were also changing on a regular basis. It was suggested that the

paperwork associated with these changes could not keep up with the pace of

change and therefore individuals could be ‘out of pocket’ until the system

caught up.

While there were differing views on the appropriateness of the contracts, there

was a consensus that when issues did arise it stemmed from the way in which

some employers treated their employees and were potentially part of wider

issues. Members had no evidence to suggest these issues were widespread

amongst staff working on behalf of the County Council but suggested that:

commissioners need to be vigilant in monitoring the practice of

contractors in particular in relation to zero hour contracts.

Members recognised the role of the Citizens Advice Bureau in considering the

concerns of individuals with regards to how they are treated by employers.

Members were pleased that where rogue employers were identified these

were passed on to the relevant body, for example HealthWatch.

3.4 Black listing

In discussions with Trade Union representatives, members heard anecdotal

evidence of how black listing had occurred in the past and how it potentially

could occur in the future. Despite this:

Members have not seen any evidence that black-listing currently occurs

in Gloucestershire.

4. SUMMARY

Based on the information members have received as part of the review,

members have made the following conclusions and recommendations:

Positive picture with regards to pay, terms and conditions for employees

working for GCC.

There is appropriate use of zero contract hours for GCC staff. Members

understand that there is the potential for inappropriate use by other

organisations.

There are limits to the amount of influence the Council can have on the

pay, terms and conditions that employees working for contractors on

behalf of the County Council receive.

Contractors can be encouraged to carry out measures to ensure a

sustainable workforce through the procurement process through the

Public Services (Social Value) Act 2012, on a case by case basis.

Officers explore this where it is appropriate to the service being

tendered. Members heard examples of how a sustainable workforce

leads to better outcomes.

There is uncertainty regarding the wider implications of the introduction

of the National Living Wage, but there will be a significant impact on the

Health and Social Care Sector.

Residential Care Homes are being set up in some areas, potentially to

meet the demand of private users coming in from out of County.

Members note that this adds another layer of complexity to the market

and it is important to consider the implications upon planning and the

economy.

Members have not seen any evidence that black-listing currently occurs

in Gloucestershire.

Overview and Scrutiny Management Committee recommends:

That the implications of the National Living Wage are considered as

part of the Council’s budget setting process

That commissioners are vigilant in monitoring the practice of

contractors, in particular in relation to zero hour contracts.

That the concerns of Care Providers as detailed in the report be

passed on to the Local Government Association.