Outsourced public sector services: what are the new protections for workers?

These changes aim to strengthen worker protections when services move out of the public sector. Although further detail is still awaited, the government expects the new rules to come into force from October 2026.

How will the new rules work?

The new obligations are expected to apply where:

• a service previously delivered directly by a public body is outsourced to an external supplier or subcontractor; and
• staff transfer as part of that outsourcing arrangement

Importantly, these protections will not be limited to employees. They are expected to apply to workers as well. 

Suppliers must ensure that transferred staff are treated no less favourably than when they worked in the public sector. Suppliers must also ensure that their existing workforce is treated no less favourably than incoming public sector workers when they are working on the same outsourced contract. 

As the government explains in its ‘Factsheet: Public Sector Outsourcing (Protection of Workers)’, the aim is to prevent the emergence of a “two-tier workforce”. This is where workers doing the same job are treated differently in respect of their terms and conditions. The government says this can damage morale, increase staff turnover and ultimately affect the quality of public service delivery. 

New responsibilities for contracting authorities

Public sector contracting authorities will also have new obligations. They must take all reasonable steps to include provisions in outsourcing contracts to ensure workers are treated no less favourably. 

Further guidance is still needed

At this stage, it is not yet clear what “no less favourable treatment” will cover in practice, or how far the obligations will extend. The government has also indicated that the rules may be tailored to different types of contracts. This could include targeting certain sectors, applying different requirements depending on contract value, or allowing exemptions where appropriate. 

The government is expected to set out further detail in regulations and a new Code of Practice.

What does this mean?

Taking on outsourced public services is likely to become more expensive where changes to terms and conditions are needed to comply with the new rules. This may also make it more challenging for public sector bodies to find suppliers willing to take on outsourced services.

You will need to keep a close eye on developments as the regulations and Code of Practice are published. 

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