Fair Work action plan: becoming a leading Fair Work nation by 2025

4. Public sector and the role of leadership

We will:

• Increase the number of people paid at least the real Living Wage and on stable contracts.
• Work with employers, workers, and trade unions to strengthen worker voice, through a range of effective voice channels.
• Further extend Fair Work conditionality with clear standards and minimum requirements to cover all forms of Scottish Government support within the limits of devolved competence in line with the landmark agreement with the Scottish Green Party.
• Increase the number of employers adopting flexible working practices.
• Reduce the gender pay gap in Scotland by the end of this parliamentary term (May 2026), and to maintain or where possible improve our position relative to the UK as a whole and our international neighbours.
• Reduce the Disability Employment Gap to 18.7 percentage points (p.p.) by 2038, therefore halving the gap from the baseline in 2016.
• Improve labour market outcomes for people from racialised minorities and increase the impact of actions taken forward by employers to address racial inequality.

The following actions focus on embedding fair work practices across the public sector. Anchor institutions – such as NHS bodies, public bodies and executive agencies – have a key role to play in realising the transformative potential of the public sector through embedding fair work practices. Many of them, including local authorities, already demonstrate clear leadership across the dimensions of Fair Work.

594,700 Public sector workers

This represents over a fifth of Scotland’s total employment.^[55] (Women make up 64.5 per cent of people over 16 in employment in the public sector).^[56]

£99 billion Public spending in Scotland in 2021/22.

Public sector funding will leverage wider community and societal benefits – supporting a sustainable economic recovery and a successful wellbeing economy over the long term.

The Scottish Government will continue to provide leadership as an employer and funder, and through our policies, to make Scotland a leading Fair Work Nation. By using all the levers available to us, including conditionality in both financial and non-financial supports, we will help create more diverse and inclusive workplaces where workers have security of pay and contract, can develop and utilise their skills, and have an effective voice in the workplace. As an employer, the Scottish Government will continue to embed and promote fair work practices, demonstrating their importance to the wider public sector. This includes: paying and promoting payment of the real Living Wage; full partnership working with trade unions; adopting a policy of no inappropriate use of zero hours contracts; providing flexible working options; being a Carer Positive employer; and having a duty to increase diversity and inclusion.

The public sector sits in the context of a wider equality framework, a key part of which is the Public Sector Equality Duty (PSED). Public authorities with over 20 employees, including the Scottish Government, are subject to a comprehensive set of equality requirements, as set out in the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012. These Regulations are aimed at helping Scottish public authorities improve implementation of the PSED by requiring them to report progress on mainstreaming equality, propose and publish equality outcomes, and assess policies and practices by undertaking Equality Impact Assessments (EQIAs) and include a duty to publish information on their gender pay gap and statements on equal pay and occupational segregation. The Scottish Government is currently reviewing the effectiveness of the PSED and ran a public consultation from December 2021 to April 2022, containing a series of detailed and ambitious proposals for changes to the PSED regime. Widespread engagement took place with stakeholders across protected characteristic groups, as well as public sector organisations, to gather their views. A detailed analysis of responses, including feedback from engagement sessions, is being undertaken and proposals will continue to be developed whilst engaging further with stakeholders. Regulatory changes are expected to come into effect in 2025, in line with the current reporting period.

While we recognise our leadership role, the Scottish Government cannot and should not do this alone. It requires a collective and collaborative effort. The Scottish Government will continue to look to public sector leadership and will use our strategic influence by working with key cross-sector partners, trade unions and workers to drive forward fair work practices to benefit employers and workers alike. We have therefore included some actions being led by key public sector partners that contribute to the fair work agenda.

Case study: Edinburgh as a living wage city

Since the launch of ‘Making Edinburgh a Living Wage City’ action plan in November 2021 the number of accredited Living Wage Employers has risen by 120 employers against a target of 100 in its first year. This covers 36,319 workers, with 1,424 receiving a pay uplift as a direct result of Edinburgh becoming a Living Wage City. In 2020, the City of Edinburgh Council became the first UK local authority to commit to ending poverty by a specific date – by 2030.

Becoming a real Living Wage employer is good for employees, it’s good for business and it’s good for our local communities, including making lower-paid staff feel more valued; improving staff recruitment and retention; boosting productivity, and reducing absenteeism; demonstrating an employer’s commitment to fair work practices; boosting the local economy.

Becoming a leading Fair Work nation means collaborating and engaging with each other more effectively to develop, learn from, and share best practice so we can build greater organisational awareness and knowledge of Fair Work across the public sector. A lack of such organisational awareness was recognised as a challenge to adopting Fair Work in the consultation we held last year on Becoming a Fair Work Nation.

The need to demonstrate strong leadership is also key to addressing workplace inequality and barriers. For example, racial inequality across the public sector was evidenced in the Scottish Parliament’s Equalities and Human Right’s Committee’s inquiry of 2020 into race, equality and skills employment. In taking forward the Committee’s recommendations, which looks at the role of leadership to drive key actions to address racial inequality, the Scottish Prison Service for the first time published its ethnicity pay gap report.^[57] There has also been an increase in the number of employers committing to publish their ethnicity pay gaps.

While there are some signs of progress across the public sector, it is clear that much more remains to be done to ensure that we as an employer - and employers across the public sector - support the delivery of our Anti-Racist Employment Strategy and associated actions to address racial inequality.

We will continue to work with the public sector to support and encourage leaders to take forward the recommendations of the Committee, within the context of our new strategy, and wider workplace equality actions to ensure that all workers can experience a safe, diverse and inclusive labour market. Our work as an employer also includes taking targeted action to address workplace inequality where it is needed most, in order to ensure the Scottish Government workforce becomes representative of the people it serves. By analysing pay gaps and through our Recruitment and Retention Plan for Disabled People (2019) and Race Recruitment and Retention Plan (2021) we are focusing on action to improve our recruitment practices, providing targeted development opportunities (including through mutual mentoring and our Diverse Leaders programme).

As part of NSET we have established a Centre of Expertise in Equality and Human Rights within Scottish Government, advancing our understanding and embedding equality and human rights within the economic policy-making process, as agreed in the Economy Recovery Implementation Plan.

Our actions below seek to build on the action taken across the public sector to support collaboration, proactivity and to help employers to further embed of Fair Work.

Headline Action 1:

We will lead by example on the Fair Work agenda, including sharing and learning of practice, by 2025 and beyond. We will continue to embed Fair Work in all public sector organisations, setting out clear priorities in the roles and responsibilities of public bodies.

What we will do

1.1. Scottish Government will undertake an equal pay audit examining pay gaps by gender, disability, race and age by March 2024. We will act on findings to review and refresh our recruitment and retention policies to address workplace inequalities by end of 2025.

What this provides

Findings from the audit have been published. We have better data on SG pay gaps to inform our actions to reduce pay gaps, improve access to progression and decreased occupational segregation.

Intended outcomes

There is parity of pay and skills recognition across all workers. A better-informed approach can be taken to our recruitment and retention and progression practices.

What we will do

1.2. Work with equality organisations and public sector employers to co-deliver a series of engagements with the public sector by end of 2023 to support employers to address the recommendations of the Scottish Parliament’s Equalities and Human Right’s Committee’s inquiry report into race equality, employment and skills, which recommended employers assess their organisations' understanding of racism and structural barriers; employers subject to the Public Sector Equality Duty as a minimum, voluntarily record and publish their ethnicity pay gap and produce an action plan to deliver identified outcomes.

What this provides

Engagement held, engaged with public sector leaders, supported and encouraged those leaders to take actions on inequalities faced by people from racialised minorities.

Intended outcomes

Organisations better able to implement policies that take account of intersectional barriers, will improve business performance, and enable diverse and more inclusive workplaces.

What we will do

1.3. The EHRC and Scottish Funding Council (SFC) will:

1.3.1 Implement National Equality Outcomes across protected characteristics (including disability, race, sex) from September 2022 to September 2025, in order to:

improve student success and retention rates;

ensure access to and confidence in support for students and staff that fosters good relations and tackle prejudice and discrimination, and;

increase diversity of staff in the workforce and on College Boards and University Courts.

1.3.2 Develop a set of SFC annual thematic reviews to inform and direct improvement.

What this provides

Improved success and retention rates for disabled students

Increased representation of disabled people and racial diversity in the workforce, and on College Boards and University Courts.

Increased access to and confidence in support for students and staff that fosters good relations and tackles prejudice and discrimination.

Increased retention and completion rates for female students in STEM and construction subjects and courses.

Increased enrolment and completion rates for male students in nursing and care-related courses.

Intended outcomes

Reduced student inequalities in Higher and Further Education leading to higher success rates and greater ability to compete in the open labour market.

More diverse workforce which leads to increased productivity and, in turn, to increased economic output.

Increased gender balance in subject/courses and reduced occupational segregation on the basis of gender.

What we will do

1.4. Work with partners to establish senior leadership networks to build capability and understanding of racism and racial inequality in the workplace by the end of 2023.

What this provides

The network is established, public sector leaders feel more confident in taking actions to address racial inequality due to increased knowledge, including taking an anti-racist approach and challenging racism in the workplace.

Increase understanding and awareness of institutional racism.

A platform is established for public sector leadership to discuss addressing racial inequality and anti-racism.

Public sector leaders feel more confident in taking actions to discuss and address racism.

Intended outcomes

Leaders better able to take forward or advocate practices that would address racial inequalities.

Leaders take and promote an anti-racist and intersectional approach to decision making in their organisations.

Employers create more safer, diverse and inclusive workplaces.

Employees at all levels in the organisations take an anti-racist approach.

All staff benefit from more inclusive workplaces.

What we will do

1.5 We will work with Scottish Government’s analysts to run a series of official statistics dissemination sessions with interested stakeholders to help inform their understanding of the labour market landscape in relation to fair work. Where available data allows, this will include considering intersectionality.

What this provides

Increase in stakeholder awareness and understanding of labour market data, the intersectional nature of labour market inequality, and the role of Fair Work.

Intended outcomes

Increased use by stakeholders of labour market data to inform their practice to deliver change.

A key programme of action within NSET is leveraging our public spending to drive fair pay and conditions, which is crucial to tackling poverty. In line with the Bute House Agreement and NSET, we will continue to strengthen our conditionality approach and apply Fair Work First criteria wherever relevant and proportionate to do so, asking employers to commit to the following criteria:

• appropriate channels for effective voice, such as trade union recognition
• investment in workforce development
• no inappropriate use of zero hours contracts
• action to tackle the gender pay gap and create a more diverse and inclusive workplace
• payment of at least the real Living Wage
• offer flexible and family friendly working to all workers from day one of employment
• oppose the use of fire and rehire practices.

Since 2019, Fair Work First criteria have been applied to some £4bn worth of public sector spending. This includes our City Region Deals programme, which is expected to deliver over 80,000 new jobs. Associated skills development and employability programmes will ensure these opportunities are open to all, particularly underrepresented groups and the long-term unemployed. We are committed to applying Fair Work First criteria to public sector grants and contracts awarded by and across the affordable housing sector.

This will help to tackle the gender and disability pay gaps, contributing to our efforts to tackle child poverty by supporting families with children to gain more income through employment.

Since 2019, Ministers have asked public bodies to demonstrate leadership by adopting Fair Work First both as employers and through the funding they administer. We will continue to promote Fair Work First across the public sector, to Non-Departmental Public Bodies and Agencies encouraging them, through annual strategic guidance letters, to take action to tackle the gender pay gap, disability employment gap and address racial inequality to create more diverse and inclusive workplaces

We expect public bodies to promote Fair Work First in all relevant procurement processes, in line with statutory procurement guidance. We also expect suppliers delivering public contracts to adopt and demonstrate appropriate Fair work practices, ensuring these are delivered for all workers delivering the public contract.

Children in priority groups have a higher risk of being in relative poverty

Source: Family Resources Survey

Headline Action 2:

We will continue to use conditionality to further embed Fair Work in all public sector investment wherever possible.

What we will do

2.1 As part of the Bute House agreement and NSET, and within the limits on devolved competence we will:

2.1.1 Extend Fair Work conditionality with clear standards and minimum requirements to cover all forms of Scottish Government support within the limits of devolved competence. We will use all levers at our disposal to deliver on this commitment – including the use of grants, reliefs and licencing provisions.

2.1.2 Consider how we can extend conditionality to the other Fair Work principles, including opportunity, security, respect and fulfilment by 2025.

What this provides

Increased numbers of people, particularly women and those on low pay being paid the real Living Wage.

Improved effective voice and more people benefit from Fair Work practices.

Intended outcomes

People have increase incomes.

Workers have better engagement with their employers and are able to negotiate over appropriate terms and conditions.

What we will do

2.2. By 2023 update the Fair Work First criteria to better reflect priority action required to address labour market inequalities faced by women, people from racialised minorities, and disabled people, ensuring people can enter, remain and progress in work.

What this provides

More employers implement Fair Work practices with a specific focus on addressing workplace inequality for women, people from racialised minorities, disabled people, and the over 50s.

Intended outcomes

Improved business performance.

Workplace diversity is improved.