Fair work action plan: annual report

3.1. Fair work first

Our commitment

To work with employers and partners to put Fair Work First at the heart of Scottish workplaces.

What we have achieved

In the absence of control over employment law, we are using the Scottish Government’s spending power to leverage employers’ commitment to Fair Work. Fair Work First criteria is being applied to grants, other funding and contracts being awarded by and across the public sector. This means asking employers to adopt the following criteria, which seeks to address significant challenges in the labour market:

• Appropriate channels for effective voice, such as trade union recognition;
• Investment in workforce development;
• Action to tackle the gender pay gap and create a more diverse and inclusive workplace;
• No inappropriate use of zero-hours contracts; and
• Payment of the real Living Wage.

The criteria were updated in 2019 to reflect emerging priorities for encouraging constructive partnerships between employers and workers, and addressing workplace equality.

In line with our Implementation Plan, we have taken an incremental approach to rolling out Fair Work First, engaging widely with employers and their representatives, Third Sector partners, our public bodies, and the STUC. We have also engaged extensively with policy, funding and procurement managers across the Scottish Government and have been guided by the Fair Work Convention.

Fair Work First in grants

Scottish Enterprise has applied Fair Work First criteria since April 2019 to 250 large grants (RSA, SMART and R&D) at a total value of £126.9 million and have signposted over 130 employers to follow-on support related to Fair Work. Although not a condition of grant, companies were also asked about their commitment to Fair Work when applying for Covid-mitigating grants. This included £14 million of pan- Scotland support for the Hotel Support Programme which resulted in 69 applications approved covering 98 hotel outlets. This also applied to a further £21.7 million available through the Scottish Wedding Industry Fund. This pan-Scotland fund is still open and to date has received 2,440 applications with some 1,730 grants approved. The 90 successful applicants to the Early Stage Growth Challenge Fund are also committed to Fair Work First criteria. Early feedback from Scottish Enterprise suggests there has been no drop in applications due to Fair Work First criteria being included. It has also shown that the businesses who were receiving support grants were positive about paying the real Living Wage, as well as the other elements.

In 2020/21, Fair Work First criteria were included in Skills Development Scotland's National Training Programmes, including the £15 million Apprenticeship Employer Grant, which aims to incentivise employers to either recruit or upskill through Modern Apprenticeships, and the Covid-19 relief grant (£2.1 million approved to date), to assist providers who are continuing to deliver services during the pandemic.

SDS also manage 10% of the £2 million budget for the Flexible Workforce Development Fund, aimed at improving productivity and economic growth, and this year has focused on strengthening the employer-employee relationship. This has a particular emphasis on upskilling the existing workforce to retain jobs and support employers as they adapt to a new and very different working environment as a result of Covid-19. The fund supports key Scottish Government priorities including on equality of opportunity to access work and to progress, to ensure everyone has opportunity to maximise their potential, and as such SDS monitor the equalities participation on this programme.

Highland and Islands Enterprise (HIE) began implementing Fair Work First in April 2020. In the year to 17 February 2021, HIE approved 60 applications for grants, loans and equity of £100,000 and over which supported employment, and were subject to Fair Work First criteria – amounting to £23.152 million. HIE also administered 10 Covid mitigation Funds with a total budget of £23.155 million, including the Island Green Recovery Programme, Communities Recovery Fund, and Ski Sector Fund. Recipients of these funds were asked to commit to working towards becoming a Fair Work employer where relevant.

Since South of Scotland Enterprise (SOSE) began implementing Fair Work First in 2020, 190 grants have been approved to a total value of £28.36 million. The grants cover a range of support for community and business organisations in the south of Scotland. In response to Covid-19, SOSE has administered 110 Creative and Hardship Fund awards worth £1.13 million and 166 Pivotal Enterprise Resilience Fund awards totalling £10.91 million. The award of these grants required a statement from the recipient outlining their commitment to Fair Work First.

The Scottish Government itself is applying Fair Work First criteria to grants. To date, the priority has been targeting grants awarded by the Fair Work, Employability and Skills Directorate. This includes grants provided to the STUC (£250,000 in 19/20 and 20/21 to support the Trade Union and Fair Work Modernisation Fund, and £2.6 million to support Scottish Union Learning), Poverty Alliance (£760,000 over 2 years to support the Living Wage Accreditation scheme) and Business in the Community Scotland (£135,000 for delivery of actions to support the Fair Work and Gender Pay Gap Action Plans).

Fair Work First in procurement

Building on the requirement for public bodies to include a Fair Work criterion in relevant procurement processes, as highlighted in Statutory Guidance for Public Procurement since 2015, Fair Work First criteria is being included in the procurements for public contracts where it is relevant and proportionate to do so and applies to those workers engaged on the contract. Contracts awarded by the Scottish Government, to the total value of £619.8 million, to which the criteria is being applied are:

• £96 million Fair Start Scotland contracts, designed to help people into work;
• £42 million Electronic Monitoring of Offenders;
• £8 million Electronic Counting of Votes contracts;
• The fund management contract to support delivery of the £800,000 Workplace Equality Fund 2019/20;
• £400 million facilities management contract, to run for 7 years, due to be awarded in March 2021.
• £56 million for Scotland's Babybox contract, due to be awarded in March 2021; and
• £17 million contract for Scottish National Standardised Assessments, due to be awarded in March 2021.

In 2019/20 Scottish Enterprise awarded 72 regulated contracts worth £23.8 million. Suppliers are routinely asked to demonstrate Fair Work practice in line with Fair Work First criteria, and this is scored and evaluated as appropriate. The agency strongly encourages payment of the real Living Wage across tender documentation and this is a requirement for those contractors working within Scottish Enterprise offices. To date positive outcomes from this approach include an increasing number of suppliers demonstrating Fair Work approaches within their businesses.

Of 31 procurement exercises undertaken by HIE since April 2020, at a total value of £14.69 million, 29 included Fair Work First criteria.

In addition, procurement contracts awarded by SOSE include articles asking the supplier to commit to Fair Work practices. This has been included in a £400,000 tender for due diligence services, and a £90,000 regional strategy consultancy tender.

Skills Development Scotland has applied Fair Work First criteria to contracts for the delivery of Modern and Pathway Apprenticeships programmes, valued at £80 million and £4.5 million respectively. The Social Care and Healthcare Pathway Apprenticeships currently have 83% Scottish Living Wage Accredited employers and by March 2021 this is expected to be 100% accreditation. SDS are also promoting Fair Work through the Skills for Growth scheme, which assists 150 businesses annually to undertake a skills analysis and produce an Employer Action Plan, which includes the dimensions of Fair Work. This scheme is currently in the process of re-procurement, and there is now a Fair Work specific question as part of the assessment.

Driving Fair Work First through the affordable housing sector

"The Scottish Government will shortly publish Housing to 2040 following extensive public engagement. This will set out a 20 year plan to deliver good quality, energy efficient, zero emission housing with access to outdoor space, transport links, digital connectivity and community services. Programme for Government 2020-21 includes a commitment to develop guidance focusing on greater use of offsite construction for new social housing which has the potential to speed up delivery of affordable homes, reduce waste and achieve the quality of construction needed to support zero emissions homes, and it offers opportunities to improve productivity and attract a more diverse workforce. This represents an opportunity to ensure Fair Work First criteria are built into this change and will support business improvements and increased productivity within industry and help to make construction a more attractive career choice for young people and other groups."

Aileen Campbell MSP, Cabinet Secretary for Communities and Local Government

Fair Work First in public bodies

As early adopters of Fair Work First, the enterprise and skills agencies started implementation in 2019/20. Building on this, the Cabinet Secretary for Economy, Fair Work and Culture and the Cabinet Secretary Finance wrote jointly to all public bodies in December 2020, setting out their expectation that all public bodies will be adopting Fair Work First criteria in their capacity as an employer by March 2021; and that from April 2021 they shall apply the criteria to any grants, other funding or contracts they award. The public bodies were asked to provide information to the Scottish Government about the action they are taking now and will take in the year ahead.

Through the No One Left Behind Partnership Agreement with all 32 Local Authorities and the strengthening of Local Employability Partnerships and engagement with City Deal partners and supply chains, we have ensured Fair Work First is promoted through City Deals and Regional Economic Partnerships. This builds on the Edinburgh & South East Scotland City Deal approach, which is being adopted across the whole £1.4 billion programme and is being driven through the Integrated Employability and Skills Programme to respond to the Gender Pay Gap, Disability Employment Gap and the wider Fair Work agenda. We have also supported developments in Ayrshire to realise the first funded Scottish Community Wealth Building model, which seeks to take a holistic approach to promoting Fair Work through a series of projects and actions.

Fair Work is also in the legislation for our new Scottish National Investment Bank launched in November 2020. The legislation stipulates that the Bank is to seek to promote Fair Work in exercising its functions. The Bank is also subject to the Fairer Scotland Duty, and will align its activities with the Scottish Government's Fair Work First policy agenda.

Fair Work First guidance

On 29 January, Fair Work First Guidance was published to support all those involved in the implementation and delivery of Fair Work First. The guidance is the product of extensive collaboration involving the Scottish Government, public and third sector partners; employers and business representatives; the STUC and affiliated trade unions; CIPD and other HR specialists and supplier networks, and has the support of the Fair Work Convention. It explains the Fair Work First approach, provides good practice examples to guide employers' approaches and, importantly, explains the Fair Work benefits for workers and organisations.

Importantly, the guidance introduces, for the first time, the concept of verification through unions, or if they are not present, workplace representatives. This recognises the core principle of Fair Work that practice which is built on strong partnerships between employers and workers has the best outcomes. It is crucial that both employers and unions engage constructively with conditionality measures, and the Fair Work Convention will offer support to achieve this, recognising the benefits to all if Fair Work is realised.

Fair Work First in Scotland's Green Ports

"Our sustainable, fair, green port model is designed to be an exemplar of Scotland's ambitions so that it not only boosts innovation and inclusive growth within communities, but also delivers Fair Work First practices, a net zero-carbon pathway and upholds the highest environmental protections. Through our flagship Fair Work First approach, we would expect the operators and beneficiaries of the new incentives offered in green ports to make a commitment to adopting our Fair Work First criteria.

As part of our model, being a green port or operating within one will come with responsibilities for upholding high standards and actively supporting our vision for Scotland to become a leading Fair Work Nation by 2025 and to make a just transition to a net-zero carbon society by 2045.

I believe that together, these elements give us an opportunity to make a real difference to Scotland and a real contribution to our economy, our workers and businesses, and to our communities."

Ivan McKee MSP, Minister for Trade, Innovation and Public Finance

Our future priorities

While we will need to be mindful of the significant challenges potential funding recipients and contractors will face during the economic recovery stages, the Scottish Government will continue to engage with public bodies and the wider sector to extend Fair Work First to further grants, other funding and public contracts. This will include:

• Funding to support affordable housing, through the Housing to 2040 Strategy;
• Scotland's Green Ports Model;
• Our Mental Health Transition and Recovery Plan;
• Full Fibre Broadband provision;
• Our Trade and Investment Strategy;
• Transport infrastructure and service delivery;
• Social justice and community regeneration;
• The Green Economy, such as decarbonisation, green jobs and low-carbon manufacturing; and
• Training and re-skilling.;
• Engaging with public bodies to support them to be Fair Work employers;
• Engagement with COSLA,the NHS and Police Scotland to extend the application of Fair Work First to our local government, health and social care and police sectors.

We will also build on the work already underway in Ayrshire through the Growth Deal, by supporting the development of Community Wealth Building in five areas – Clackmannanshire, South of Scotland, Western Isles, Tay Cities and Glasgow City Region. Working with local partners to produce actions plans in each area, the aim is to identify bespoke solutions that will support local people and economies to thrive and embed a targeted approach to Fair Work.

Furthermore, we will build on the existing City Deal activity to ensure Fair Work First is fully incorporated into plans and delivery across the country through monitoring and evaluation to ensure that these principles are embedded.

We will also:

• Review our internal systems and processes to facilitate further roll-out;
• Develop a tool for monitoring the impact of Fair Work First within funded organisations;
• Continue to promote the Fair Work First guidance across the Scottish Government, the public sector and relevant networks and supporting capacity building accordingly; and
• Evaluate the adoption of our Fair Work First approach and criteria; and effectiveness of the Fair Work First guidance by the end of 2021/22.

Case Study

Scottish Enterprise: facilitating Fair Work First

From April 2021, Scottish Enterprise will be launching a new operating model which aims to build capacity, support resilience and stimulate growth. This model will include a number of funding calls targeted at key economic development opportunities such as Green Jobs. These will position a commitment to Fair Work First at the forefront of all grant support and business services provided by the agency. Scottish Enterprise will adapt its internal systems and processes in order to facilitate this and measure progress.