Addressing fair work practices, including the real living wage, in procurement: best practice

Introduction

Please note: the contents of this page is currently undergoing a review.
For further information on payment of the real Living Wage in a procurement process, please see the Fair Work and Procurement section of the Scottish Government website.
For information on Fair Work First in Scottish Public Procurements, including an updated Fair Work First question, please see SPPN 06/2021. Please direct all questions to scottishprocurement@gov.scot

1. Purpose

1.1. This Guidance supports the practical application of, and must be considered alongside, the Statutory Guidance on Addressing Fair Work Practices, including the Living Wage, in Procurement (Statutory Guidance) and other relevant guidance, including the Procurement Journey. It is part of the suite of guidance materials which support the Scottish Process for Sustainable Procurement underpinned by the Sustainable Procurement Duty tools.

1.2. It offers practical guidance to help public bodies and suppliers think about how to develop and adapt their approach to Fair Work practices at the relevant stages of the procurement process.

1.3. It has been developed with support from a working group of representative public sector procurement professionals and in consultation with stakeholders, including the Fair Work Convention and trade unions.

A Toolkit, which includes Information Sheets, Practical Tools and Examples, which can be used at key stages of the procurement process is also available.

2. Introduction

2.1. Scotland’s Economic Strategy sets out an overarching framework for how the Scottish Government aims to achieve a more productive, cohesive and fairer country. It prioritises boosting investment and innovation, maintaining a focus on internationalisation, and supporting inclusive growth.

2.2. Inclusive growth is where the benefits of economic growth are shared more equally across society. There is a growing body of international evidence that more equal societies are more productive and as a result achieve stronger and more sustainable economic growth in the long run.

2.3. A fair and inclusive jobs market in which every individual can participate to achieve their full potential is central to achieving inclusive growth. The Scottish Government’s Labour Market Strategy sets out the action we are taking to deliver our vision for “a strong labour market that delivers inclusive, sustainable economic growth, characterised by growing, competitive businesses, high employment, a skilled population capable of meeting the needs of employers, and where Fair Work is central to improving the lives of individuals and families”.

2.4. The National Performance Framework provides a clear vision for Scotland with broad measures of national wellbeing covering a range of economic, health, social and environmental outcomes, indicators and targets. The Framework comprises eleven National Outcomes, including a Fair Work Outcome: “We have thriving and innovative businesses, with quality jobs and Fair Work for everyone”.

2.5. The National Indicators aid scrutiny of the Outcomes and illustrate how progress will be measured in relation to each of them. The National Indicators which support the Fair Work Outcome, include:

Employees on the living wage;

• Pay gap;
• Contractually secure work;
• Employee voice;
• Skills under-utilisation;
• Work related ill health; and,
• Gender balance in organisations.

3. Fair Work Practices In Public Sector Supply Chains

3.1. Contractors delivering public contracts must comply with workplace standards and labour laws. The Scottish Government expects suppliers to implement relevant policies to give effect to the standards and legal requirements and effectively communicate those policies to employees. Having clarity on workplace rights and responsibilities including on equality, human rights and discrimination, health and safety obligations, recruitment and working hours, pay, and trade unions or other forms of employee representation can make a real difference to employees, to the organisation and to the way the contract is delivered.

3.2. The Scottish Government believes that contractors who go beyond minimum legal requirements by adopting Fair Work practices will increase innovation, improve workplace outcomes and business performance, and can positively impact on the delivery of a public contract.

3.3. In respect of public procurement, the range of Fair Work policies and practices which can be addressed must relate to the nature of the contract being delivered and should reflect the five dimensions from the Fair Work Framework.

3.4. We believe that the way a public contract is delivered can benefit from contractors adopting Fair Work practices. We also accept that the way particular dimensions of Fair Work will impact on the delivery of the contract will differ. This will be dependent on the nature and size of the contract and the size and status of suppliers making up the market, and should be targeted on a case-by-case basis.

3.5. The Scottish Government expects:

• public bodies to promote Fair Work practices in all relevant procurement processes while ensuring the appropriate balance between quality and cost of the contract, including the impact of cost on working conditions, and
• suppliers delivering public contracts to adopt and demonstrate appropriate Fair Work practices, ensuring that these are delivered for all workers engaged on the delivery of the public contract.

4. Procurement Policy

4.1. There are a range of legislative provisions available which provide the framework for a public body to address Fair Work practices through public procurement processes.

4.2. A public body’s approach to addressing Fair Work practices in relevant procurement processes must be consistent with the fundamental principles of the Treaty on the Functioning of the European Union ( TFEU): transparency, equal treatment and non-discrimination, proportionality and mutual recognition. This includes taking account of a bidder’s size and status.

4.3. The Procurement Reform (Scotland) Act 2014 (the Act) contains provisions which support sustainable outcomes for regulated and EU-regulated procurements, including the Sustainable Procurement Duty which places socially responsible decisions at the heart of public procurement processes. The Sustainable Procurement Duty requires a public body to consider how its procurement activity can improve the economic, social and environmental wellbeing of its area. A public body can contribute towards its Sustainable Procurement Duty by adopting a policy to promote Fair Work practices in relevant public contracts.

4.4. The Public Contracts (Scotland) Regulations 2015 (PC(S)R 2015) include provisions for EU-regulated contracts, which enable sustainable outcomes to be incorporated into specifications, contract conditions and award criteria as they relate to the goods, works or services provided under the contract. A public body has this same discretion in regulated procurements.

4.5. Section 15(5)(b)(iii) of the Act requires a public body to include in its Organisational Procurement Strategy, a statement of its policy on payment of the Living Wage and to report on compliance. The Act requires this statement to focus on payment of the Living Wage to those working on the contract and Statutory Guidance under the Procurement Reform (Scotland) Act 2014 states that this should form part of an approach to promote Fair Work practices.

4.6. Contractors must continue to comply with all relevant legislation in the delivery of public contracts and the PC(S)R 2015 require all EU-regulated contracts to include conditions to ensure that the contractor complies with environmental, social and employment law (see Scottish Procurement Policy Note 09/2016). This includes for example breaches of the Employment Relations Act 1999 (Blacklists) Regulations 2010, tax and social security obligations, relevant health and safety, employment and equalities legislation established in national, European and international law obligations, including the International Labour Organisation’s Conventions.

4.7. A public body must have regard to the Statutory Guidance, published in October 2015, in all regulated and EU-regulated procurements which commence on or after 1 November 2015. This guidance requires a public body to consider how to address Fair Work practices, including the real Living Wage, as part of a procurement process. This will include, for example, those directly employed and those employed via an agency and /or umbrella company.

4.8. The public sector equality duty ( Equality Act 2010) requires a public body to have due regard to equality when exercising its functions. The duty is to:

• eliminate unlawful discrimination, harassment and victimisation and other prohibited conduct;
• advance equality of opportunity between people who share a relevant protected characteristic and those who do not; and,
• foster good relations between people who share a protected characteristic.

4.9. The Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012 also requires a public body to consider for EU-regulated procurements whether the award criteria and contact performance conditions should include considerations to enable it to better perform the equality duty. By completing an equality impact assessment a public body can identify the impact of its decisions on people who share one of the protected characteristics and therefore inform how the procurement process can identify opportunities to comply with equality duties.

5. Fair Work Policy

5.1. The Scottish Government fully endorses the Fair Work Framework produced by the Fair Work Convention in 2016. The Framework sets out the Convention’s vision and definition of Fair Work.

• Vision: By 2025, people in Scotland will have a world leading working life where Fair Work drives success, wellbeing and prosperity for individuals, businesses, organisations and society.
• Definition: Fair Work is work that offers effective voice, opportunity, security, fulfilment and respect; that balances the rights and responsibilities of employers and workers and that can generate benefits for individuals, organisations and society.

5.2. The dimensions that are detailed in the Fair Work Framework are summarised below. Many of these areas may also form part of internal policies and will therefore be covered by the existing rules in the workplace.

5.3. The Scottish Government strongly believes that all public bodies should be exemplars of Fair Work and that they should be able to demonstrate practices which cover each of the five dimensions of the Fair Work Framework. Some Fair Work practices will cover more than one dimension. Perhaps most significantly, by giving workers a right to be heard, through an effective voice, which underpins the other dimensions of Fair Work. Real dialogue between organisational stakeholders can help deliver on opportunity, security fulfilment and respect.

5.4. While employment law is reserved to the UK Government, the Scottish Government is taking action using the levers available to deliver Fair Work. This includes:

• Establishing and continuing to support the Fair Work Convention.
• Promoting the real Living Wage and achieving a target of 1000 Scots-based accredited employers by autumn 2017.
• Supporting trade unions and providing support to the Scottish Trades Union Council.
• Encouraging collective bargaining.
• Encouraging businesses to make the Scottish Business Pledge thereby demonstrating commitment to Fair Work, employee engagement and innovation.
• Launching the Workplace Equality Fund to deliver employer led innovative solutions to overcome workforce inequality.
• Encouraging flexible working practices by funding Family Friendly Working Scotland, which is working with employers to change workplace cultures.
• Establishing the Pregnancy and Maternity Discrimination Working Group who have among other things strengthened the availability of guidance to pregnant women, new mothers and employers about rights and responsibilities within the workplace.

Information Sheets including a more detailed overview on Fair Work practices is available are the Toolkit.

Summary of Fair Work Framework

Fair Work

The real Living Wage

5.5. The Scottish Government considers the payment of the real Living Wage to be a significant indicator of an employer’s commitment to Fair Work practices and that payment of the real Living Wage is one of the clearest ways that an employer can demonstrate that it takes a positive approach to its workforce.

5.6. Research shows that paying the real Living Wage helps businesses recruit and retain better staff, reduce absenteeism, encourage higher productivity and 93% of businesses say Living Wage Accreditation has improved their reputation.

5.7. The real Living Wage should not be confused with the National Minimum Wage (including the “national living wage”), which is the legal minimum an employer must pay an employee and is set by the UK Government. The real Living Wage is a voluntary wage rate of pay which is calculated by the Resolution Foundation and overseen by the Independent Living Wage Commission. The Scottish Living Wage Accreditation Initiative provides more information.

Accreditations

5.8. There is no singular accreditation which would reflect Fair Work in its entirety and public bodies and suppliers can support effective Fair Work practices without being accredited to any of these schemes.

5.9. Accreditations which reflect aspects of Fair Work include, but are not limited to:

• Scottish Living Wage Accreditation;
• Scottish Business Pledge;
• Investors in People;
• Investors in Young People; and,
• Healthy Working Lives Award Programme.