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The government is considering ending the right of workers at outsourcing firms to expect broadly similar working conditions to those enjoyed by their co-workers who previously worked in the public sector.

The change is not about TUPE - which regulates the initial transfer of staff - but subsequent recruitment. A voluntary code was established between unions and government in 2003 to ensure new recruits to firms running outsourcing contracts enjoyed conditions which were "no less favourable" than their colleagues who were shifted from the civil service.

Cabinet Office minister Francis Maude told the FT the coalition was "minded to abolish it".

The code was meant to stop the formation of a two-tier workforce - some enjoying far better pay and conditions than their colleagues doing the exactly the same jobs.

The changes will hit tens of thousands of people supplying government technology services as well as many other services from cleaning to security.

Maude said the issue would be dealt with by the Public Services Forum which includes union and outsourcing company representatives. He claimed that scrapping of the code would make it easier for small and medium sized firms to bid for government work.

The TUC said it was opposed to the move, which would push down living standards for some of the lowest-paid workers.

Maude told a Parliamentary committee yesterday that government departments have thousands of staff effectively doing nothing because they are too expensive to make redundant.

The coalition is enacting legislation to cap public sector staff redundancy to a maximum of 12 months pay. This move is likely to face a legal challenge. ®

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