Fair Work First: guidance

Conditionality in public sector grants

The default position is that Fair Work First conditionality applies to discretionary public sector grants awarded on or after 1 July 2023, and requires recipients of these grants, as a minimum standard, to:

• pay at least the real Living Wage;
• provide appropriate channels for effective workers’ voice, such as trade union recognition.

The recipients of grants for the following agriculture-related funds awarded on or after 1 April 2024 are also required to meet this conditionality:

• Agriculture Environment Climate Scheme (AECS)
• Forestry Grant Scheme (FGS)
• Food Processing, Marketing and Co-operation Scheme (FPMC)
• Crofting Agricultural Grants Scheme (CAGS)
• Sustainable Agriculture Capital Grant Scheme (SACGS)

The conditionality does not apply retrospectively to public sector grants awarded before 1 July 2023 or the above agriculture grants awarded before 1 April 2024.

Public sector grants awarded before the real Living Wage and effective voice conditionality was introduced, as above, which involve multi-year funding and for which there is a suitable review point, are expected to incorporate the conditionality in the grant agreement for any subsequent funded years for the activity concerned.

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 or effective workers’ voice conditionality.

The real Living Wage and effective voice conditionality does not apply to public procurements. Public procurement exercises should be undertaken in line with the Procurement Reform (Scotland) Act 2014: statutory guidance and Best Practice Guidance.

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.
• The real Living Wage rate to be applied to grants will be the rate (announced annually by the Living Wage Foundation) which is in place on 1 April of the financial year in which a grant is awarded.
• The real Living Wage condition requires that the following groups of workers who are 16 and over, including apprentices, are paid at least the real Living Wage:
  • All staff who are directly employed by the grant recipient and work in Scotland.
  • All staff who are directly employed by the grant recipient and directly engaged in delivering the funded activity but based elsewhere in the UK.
  • All workers (in a third party organisation) not directly employed by the grant recipient who are directly engaged in delivering the funded activity and based anywhere in the UK.^[2]

Funders may approve a limited exception to meeting the real Living Wage condition where a potential grant recipient genuinely cannot afford to pay the real Living Wage to part(s) or all of its workforce, and therefore withholding the grant would undermine the funder’s corporate objectives or delivery of a public service. Further guidance on exceptions can be found in Annex C.

In third-party grant arrangements (as defined in the Scottish Public Finance Manual, Annex 2), grant funding - provided by a public sector funder to a grant recipient - may be used to pay for a third-party (final beneficiary) to deliver aspects of the funded activity. In such arrangements, it is the responsibility of the grant recipient to ensure the third-party is meeting the real Living Wage condition for those of its workforce directly involved in delivering the funded activity. The grant recipient may also approve a limited exception to meeting this condition for the third-party on grounds of affordability, as outlined in Annex C.

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 at both levels. For organisations with fewer than 21 employees, only individual voice must be evidenced, however the collective element is still encouraged.
• Funders can recognise that different forms of voice are appropriate for different organisations. Examples are given in Annex B.

Conditionality in third-party grant arrangements

Details of how a principal grant recipient should apply the real Living Wage and effective voice conditionality through funding provided to third-parties is provided below and is illustrated in the flowchart in the supporting documents of this guidance. Guidance on evidencing conditionality in these grants can be found in Annex B.

All principal grant recipients are required to meet the real Living Wage and effective voice conditions. Where this grant recipient issues funding to third-party organisations to support the delivery of the funded activity, the conditionality applies as follows:

1. If the principal grant recipient provides funding to a third-party to support the delivery of the funded activity:

• The real Living Wage condition applies to workers directly engaged in the delivery of the funded activity who are aged 16 and over, including apprentices and based anywhere in the UK.
• The effective voice condition does not apply.

2. If the principal grant recipient is a public sector organisation or registered social landlord and uses the grant funding to carry out a public procurement for goods, works or services to deliver the grant funded activity:

• The real Living Wage and effective voice conditions do not apply.
• Public procurement rules apply. Guidance on Fair Work First in public procurement exercises is available from Procurement Reform (Scotland) Act 2014: statutory guidance and Best Practice Guidance.