The Scottish Government has published new procurement guidance (17-page / 229KB PDF) that will require public sector organisations in Scotland to consider "whether it is relevant and proportionate to include a question on fair work practices" before inviting companies to bid for contracts. Only if public bodies have "good reason for doing so" should they ignore the guidance, it said.
Other factors for selecting contractors, such as cost, will remain relevant. The new guidance will apply to procurements launched on or after 1 November.
"The Scottish Government believes that employers whose staff are treated fairly, who are well-rewarded, well-motivated, well-led, have access to appropriate opportunities for training and skills development, and who are a diverse workforce are likely to deliver a higher quality of service," it said in its guidance document. "Further, we hold that good relationships between employers and their workforce contribute to productivity and ultimately sustainable economic growth."
"The Scottish Government considers the payment of the Living Wage to be a significant indicator of an employer’s commitment to fair work practices and that payment of the Living Wage is one of the clearest ways that an employer can demonstrate that it takes a positive approach to its workforce… We expect contractors who deliver public contracts to adopt policies which demonstrate how they comply with relevant employment, equality and health and safety law, human rights standards and adhere to relevant collective agreements. We further expect contractors to have policies which describe how they adopt fair work practices for all workers engaged on delivering the public contract," it said.
The 'Living Wage' rate of hourly pay that will be relevant to Scottish public procurements will be different from the 'National Living Wage' (NLW) outlined by UK chancellor George Osborne in his summer Budget.
Under the NLW plans, businesses will be required to pay all workers aged 25 and over £7.20 an hour from April 2016, rising to £9.00 per hour from 2020. for the purposes of the new public procurement guidance in Scotland, the living wage rate will be the one set by the independent Living Wage Foundation. The Foundation's current living wage is £7.85 an hour, except in London where it says the living wage is £9.15 an hour.
The Scottish Government said that EU law prohibits it from requiring public sector contractors to pay staff above the national minimum wage.
Public procurement experts Stuart Cairns and Ayla Skene of Pinsent Masons, the law firm behind Out-Law.com, said, contracting authorities and economic operators would welcome the provision of guidance on workforce matters and in particular the living wage, which they said "remains a hot topic".
"Whilst the guidance is clear that the Scottish Government has obtained clarification from the European Commission that authorities should not impose a mandatory requirement on contractors to pay the living wage, it does set out some points on how authorities can encourage suppliers to do so," Skene said. "It is expected that further statutory guidance on the new sustainable procurement duty and procurements for health or social care services should follow."
Cairns said: "Such developments are welcome and are further evidence that in an improving economic climate there has been a very real shift away from simply buying for the lowest possible cost."
The new guidance makes clear that Scottish public bodies should view businesses that use 'zero-hour' contracts unfavourably when selecting contractors, except in "certain circumstances" where their use is "appropriate".
The Scottish Government said there are other practices which businesses can demonstrate to show their commitment to fair working practices.
"Fair and equal pay (for example, supported by equal pay audits), respecting employee rights, avoiding exploitative employment practices, supporting progressive workforce engagement by, for example, involving their employees in decision making and encouraging staff to join an appropriate Trade Union and play an active part in it. In the absence of a recognised Trade Union or where conditions of employment are not covered by a collective agreement, the existence of alternative arrangements to give staff an effective voice are important aspects of fair work which should be provided for," the guidance said.
"Stability of employment and of hours of work is an important element of fair work, and fair work practices are not consistent with inappropriate, exploitative and avoidable zero-hours contracts. Where feasible, more stable forms of employment and hours of work, for example direct employment or fixed term employment contracts, should be offered to workers. Denying workers regular or sufficient working hours does not offer such stability," it said.