Two-tier workforce
A two-tier workforce may be created when employees are transferred from the public sector (local government, the NHS etc) to the private sector (a profit-making company) and new employees get worse pay and conditions than those workers transferred from the public sector – leading to two tiers of pay and conditions.
This means there are effectively two classes of workers, working together on the same contract, one of whom gets less favourable pay and benefits.
Workers are often moved from the public to the private sector when the services they provide are outsourced.
If you think you are part of a two-tier workforce, there are steps you can take to address this with the help of UNISON.
On this page
The disadvantages of a two-tier workforce
UNISON believes a two-tier workforce is divisive and unfair. The disadvantages include:
- Workers performing the same tasks being treated differently by employers.
- Worse morale which may have affect service quality.
- Wages being driven down for everyone.
- Turnover of staff, particularly among less well paid, newer employees.
Who is most commonly affected?
While all kinds of workers in all kinds of jobs can find themselves part of a two-tier workforce, women and low-paid workers are two groups that are most frequently affected.
UNISON wants to reduce differences in the wages of workers doing similar jobs. The union has proposed a fair wages resolution as a solution to the two-tier workforce, which could define national rates of pay for different types of work.
The two-tier workforce and the law
Local and central government employees transferring from the public sector have their pay and conditions protected by regulations known as TUPE, or the Transfer of Undertakings (Protection of Employment) Regulations of 2006 to give them their full name.
In Northern Ireland, there are additional provisions called the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006.
In 2010, the government got rid of the Code of Practice on Workforce Matters in Public Service Contracts, better known as the two-tier workforce code. and replaced it with six Principles of Good Employment Practice. These principles are supported by government, but they are voluntary.
One principle states that when a ‘supplier’ – or private sector company – employs new recruits who work alongside former public sector workers, they should have fair and reasonable pay, terms and conditions.
The principles encourage consultation with trade unions on workforce training and development issues.
They also highlight that contracting organisations should make sure that supplier policies and processes are compliant with the Equality Act (similar issues are addressed in Northern Ireland by section 75 of the Northern Ireland Act 1998).
However, following UNISON’s campaigning, the Employment Rights Act 2025 aims to strengthen the position by re-introducing the guiding principles behind the ‘Two-tier workforce code’.
The Government now has powers to make regulations specifying the provisions to be included in outsourcing contracts.
While we are awaiting the specific regulations to be set out, the intention is that where public services are outsourced, the contractor’s workers and the public sector workers are not treated any less favorably than each other.
Frequently asked questions
If you find your job has gone due to the change, you could consider making a claim for unfair dismissal against both employers in an employment tribunal.
You may also claim for ‘failure to consult before a TUPE transfer’. Contact your UNISON rep for advice.
Both the new Local Government Pension Scheme in England and Wales, which came into force in 2014, and the new NHS Pension Scheme, which started in 2015, include measures to allow staff transferred to the private sector to keep their membership of these schemes. Find out more about pensions.
Legal disclaimer
The information contained within this article is not a complete or final statement of the law and is based on the laws of England, Wales, Scotland and Northern Ireland.
While UNISON has sought to ensure that the information is accurate and up to date, it is not responsible and will not be held liable for any inaccuracies and their consequences, including any loss arising from relying on this information. If you are a UNISON member with a legal problem, please contact your branch or region as soon as possible for advice, or for non-employment matters call UNISONdirect.