Fair Work First: guidance - March 2023

Conditionality in public sector grants

In line with the Bute House Agreement, the default position is that all grant recipients awarded a public sector grant on or after 1 July 2023 will be required to pay at least the real Living Wage and provide appropriate channels for effective workers' voice as a minimum standard.

This conditionality does not apply retrospectively to public sector grants awarded before 1 July 2023.

This conditionality will apply to recipients of eligible agriculture grants awarded on or after 1 April 2024 (Scottish Government Agriculture and Rural Economy Directorate will advise the sector which grants are within scope in advance).

The Scottish Government expects public sector grants awarded before 1 July 2023 which involve multi-year funding to incorporate this conditionality as part of the grant agreement for any subsequent funding years for the project concerned.

Only in limited circumstances, outlined below, may an exception to these conditions be considered; such cases must be agreed by the relevant senior authorising/accountable officer. The relevant grant maker/funder must maintain a record of any exemptions agreed and update the Scottish Government in the format and timescale to be advised by the Fair Work Policy team.

Payment of at least the real Living Wage

• In general, a grant recipient must demonstrate it is paying at least the real Living Wage before it can access a grant.
• All UK-based staff aged 16 and over, including apprentices, who are directly employed by the grant recipient, must be paid at least the real Living Wage; and any UK-based workers who are not directly employed but are directly engaged in delivering the grant-funded activity, whether they be sub-contractors or agency staff, must also be paid at least the real Living Wage.
• The Scottish Government or other relevant funder may apply limited exceptions to provide funding to organisations who cannot pay at least the real Living Wage in order that the measure is proportionate.

Appropriate channels for effective workers' voice

• All organisations with a workforce must be able to demonstrate, before they can access a grant, that all workers employed within that organisation have access to effective voice channel(s), including agency workers.
• Voice exists at both collective and individual levels and organisations will be expected to show how genuine and effective voice is evidenced.
• The Scottish Government or other relevant funder may apply flexibility to recognise the different forms of voice that are appropriate for different organisations.

Real Living Wage and effective workers' voice conditionality in the supply chain

The flowchart at Annex A illustrates how the conditions to pay at least the real Living Wage and provide effective workers' voice in public sector grants can be applied not just to the grant recipient but down through a supply chain (if there is one).

Where a third sector or private sector organisation uses grant funding to procure services from another third or private sector organisation, and workers from that organisation are directly involved in delivery of the grant-funded activity, Bute House conditionality will apply as set out in the flowchart at Annex A.

The position as regards public bodies is slightly different. Where a public body in receipt of a public sector grant from the Scottish Government uses the grant funding to, in turn, award a public sector grant to another body to deliver the grant funded activity, the grant recipient will be required to meet the real Living Wage and effective voice conditions.

However, where a public body procures goods or services to deliver the grant-funded activity, real Living Wage and effective workers' voice conditionality will not apply, as in that scenario there are public procurement rules and requirements that should take precedence instead, including the Fair Work First approach, as set out in the approach and how the guidance should be used .

Limited exceptions to real Living Wage and/or a flexibility to effective workers' voice conditionality

Any exceptions to conditionality will require to be approved by the relevant Senior Authorising / Accountable Officer for the funder concerned, within agreed governance arrangements for grants. It will be for individual funders to justify any exceptions.

Where an exception to real Living Wage and/or a flexibility to effective workers' voice conditionality is approved, the Fair Work First criteria should still be encouraged and asked as part of a public sector grant process.

The Scottish Government or other relevant funder may apply limited exceptions to provide funding to organisations who cannot afford to pay the real Living Wage in order that the measure remains proportionate. In particular, where grants are essential for an organisation to continue its activities, it will be important to ensure that there is an exception to address any situation in which a potential grant recipient is heavily or entirely dependent on grant funding but cannot pay the real Living Wage. Alternatively, the funder may commit to pay a bigger grant in circumstances where there is arguably no choice for the recipient, so as to allow the recipient to pay the real Living Wage and thereby meet the grant condition. If the funder cannot commit to pay the bigger grant needed, the grant recipient may have to be considered exempt from the real Living Wage condition.

On effective voice, the Scottish Government and other grant makers/funders may apply flexibility to recognise the different forms of voice that are appropriate for different organisations, and there is scope for new and innovative channels to emerge. Although it is important that voice exists in all organisations, it is recognised that the collective element of voice may be more difficult to achieve/evidence in some smaller organisations. As such, while this is encouraged and evidence of collective voice very much welcomed, organisations with fewer than 21 workers will not have to provide evidence of collective voice but must show how it is evidenced at an individual level and that this is genuine and effective. Further flexibilities can be considered in certain circumstances.

Emergency grants, such as those awarded to help mitigate the impacts of the Covid-19 pandemic, or to mitigate negative effects of other government-mandated action, will not be subject to real Living Wage and effective workers' voice conditionality.

Evidence to be provided for real Living Wage and effective voice conditionality

Details and acceptable forms of evidence for real Living Wage and effective workers' voice conditionality are provided in Annex B.