Two-Tier Workforce Rules for Outsourced Public Contracts
From October 2026 a reinstated two-tier code aims to stop a split workforce on outsourced public services, where transferred staff and new joiners sit on different terms.
It matters to any supplier that bids for or delivers public contracts, and it sits close to the documentation a public tender already demands.
This guide explains what the code does and what suppliers should have documented.
What the Two-Tier Code Does
The change amends the Procurement Act 2023 so the government can set regulations and a Code of Practice on workforce terms. The aim is no less favourable treatment of protected workers on outsourced public contracts.
In practice that means ex public sector staff who transfer to a supplier are treated no less favourably than when they were in the public sector, and new joiners on the same contract are treated no less favourably than the transferred staff.
Who It Affects
It applies to public contracts, as defined in the Procurement Act 2023, that involve services previously performed by the authority. If you bid for or deliver outsourced public services, it is likely to reach you.
The new standard may go further than the equalisation that staff usually get through TUPE, so it is not safe to assume your existing TUPE approach is enough.
Model Clauses and What to Document
The regulations and Code are expected to set out model contract clauses, with authorities required to take reasonable steps to include them in relevant contracts. Suppliers should be ready to meet those clauses.
- Your TUPE process and how transferred terms are protected.
- How new joiners on an outsourced contract are placed on comparable terms.
- Workforce information you can provide during a tender to evidence compliance.
- Pay and terms benchmarking against the transferred cohort.
Two-Tier Code at a Glance
| Point | Detail |
|---|---|
| Mechanism | Amends the Procurement Act 2023, with a new Code of Practice |
| Standard | No less favourable treatment of protected workers |
| Scope | Public contracts for services previously performed by the authority |
| Tools | Model contract clauses authorities must try to include |
| From | October 2026 |
How Policy Pros Can Help
We help suppliers get the workforce documentation in order so a public tender and the two-tier code do not catch them out, from TUPE handling to the evidence a buyer asks for. Our supply chain policies service covers the supporting documentation.
This ties directly to public tendering, so see our public sector tender documents guide, the Procurement Act 2023 supplier guide and our tender support service. The wider wave is in the October 2026 checklist, and the official position is in the GOV.UK timeline.
Frequently Asked Questions
What is the two-tier code?
It is a reinstated Code of Practice that aims to prevent a two-tier workforce on outsourced public services. It requires no less favourable treatment of protected workers, so transferred public sector staff and new joiners on the same contract are not split onto different terms.
When does the two-tier code start?
The government's current plan is for the changes to come into force in October 2026, through amendments to the Procurement Act 2023 and a new Code of Practice. Confirm the detail before you rely on it, as the regulations are still being finalised.
Who does the two-tier code apply to?
Suppliers that bid for or deliver public contracts involving services previously performed by the authority. If you take on outsourced public services with transferring staff, the code is likely to apply.
Is the two-tier code the same as TUPE?
No. TUPE protects transferring employees' existing terms, but the no less favourable treatment standard may go further, including how new joiners on the contract are treated. You should not assume your existing TUPE approach is enough on its own.
What should suppliers document for the two-tier code?
Your TUPE process, how new joiners are placed on comparable terms, pay and terms benchmarking against the transferred cohort, and the workforce information a buyer may ask for during a tender. Model contract clauses are expected, so be ready to meet them.
