Select Committee on Health Minutes of Evidence

Annex 3



  Clearly, these are the most directly important matters which will face Trusts, employees and private contractors. There are a considerable number of the issues which we believe will need to be addressed before embarking down this route. No doubt many if not all have been considered during the past few months but we believe it is necessary to address them again, this time along with the private sector and the Trusts. These include

"Them and us"

  Prior to the award of the contract to the private sector, all staff worked for the Trust. Under the current proposal, some staff would remain Trust employees while others would become staff of the private contractor (PC). This is bound to lead to a "them and us" culture which would destroy team spirit and working relationships. This would become more pronounced as secondees were offered promoted posts for which they had to become employees of PC.

  Inevitably, there is high turnover in blue-collar staff. While it is intended that replacement staff will be secondees, there may be many who do not wish to become public service employees, thus the proportion of seconded workers (SW) could become increasingly reduced over time.


  Where there were large percentages of SWs and PC staff, communication would become more difficult and complicated. This has the potential to lead to mixed messages and misinformation. This is not helpful in the context of a fast moving, frontline hospital environment.

Staff level appropriate for secondment

  The initial proposal related to non-managerial staff. Current debate with the trades unions centres round what level of staff will second as opposed to transfer. Unison have realised that many of their activists might transfer rather than second and that this could weaken their power base. They are now seeking to raise the level of secondees.

Reduction in employment protection

  Whatever that level, promotion is going to result in staff ceasing to be SWs and becoming employees of PC. They will transfer with no employment protection and no TUPE rights, because they are accepting a different job from that in which they transferred. This will sour relations between the PC and those workers and their trade union.

Disciplinary and grievance procedures

  These would become much more difficult. New PC employees would be treated differently from SWs. At least two different sets of procedures would be required. If Trusts are to retain the final appeal the manager would have no real control or sanction over SWs. Sanction would be imposed by the employer, placing the manager in an invidious position where there is a dispute between employer and manager.

  A further issue is the resolution of a grievance raised by a SW against a PC manager. The SW is not an employee. A further twist on this arises where the "manager" of PC staff is a SW. Whose procedure prevails?

  A further complication arises where a PC rejects a SW for gross misconduct and the case is taken to an Employment Tribunal. Who will be liable to pay any compensation awarded? If it is the Trust will it accept the ruling or will there be arguments about the actions taken by the PC?

TU recognition and union membership

  One of the advantages to trades unions of TUPE transfers is that recognition rights transfer with the staff. This keeps up the level of union membership. Under the secondment model, despite the staff remaining public sector employees, recognitions agreements would not transfer. This could adversely affect union membership levels.

Staff records

  There is an issue over who will hold staff records for SWs. The Trust is likely to be reluctant to hand over its records. Equally, the PC will have reservations about making its records available to the Trust. Would there have to be duplicate records? The Data Protection Act repercussions are not clear.

Staff remuneration

  PCs will tend to deal with increases in staff remuneration on a generic basis. NHS Trusts, on the other hand, often have local practices and agreements related to specific staff groups. The whole meaning of consultation and negotiation would be diminished if the Trust were to negotiate a local pay deal for catering staff when all the staff are working for a PC. It would also create antagonism among other staff who were not the recipients of the benefits of that deal.

Staff benefits

  Public sector staff enjoy substantial benefits but these differ from those enjoyed by PC staff. There will be unrest from SWs if they see PC staff receiving superior benefits.

  Many PCs have employee share option or profit sharing schemes. SWs would not be eligible to join them, which will be another source of grievance.

Recruitment and Selection

  How is staff recruitment to be managed? Whose responsibility will it be? PCs are more aggressive and more innovative in recruiting staff—particularly in times of labour shortage. Indeed the need to recruit staff could be transformed into a proposal to invest in new equipment—entirely at the PC's discretion.

  We have a concern that Trust HR functions will simply "turn the handle" in recruiting these staff, and that ultimately quality will suffer. There will need to be an agreed timescale for recruiting new staff if PC is to be able to meet the terms of the contract.


  It is not clear who will make the assessment of promotion prospects for SWs. Will it be the Trust, the PC or a combination of both? Particular issues will need to be addressed where an SW is offered promotion which will take that worker out of the SW category to become an employee of PC. The SW will need to be advised that no protection of employment rights (including pension) will transfer and that PC normal terms and conditions will apply. This could be a major disincentive to SWs, to their detriment and that of service provision.


  BSA is in detailed negotiations with Prudential Corporation to set up a Group "GAD" Pension Scheme. We have had a useful meeting with Bill Guy of HM Treasury and Andrew Johnston, Deputy Government Actuary, at which much progress was made on a number of technical issues. Subsequently, Inland Revenue have agreed to waive their "top-slicing" rule in respect of this scheme.

  This approach, taken with our group proposal on pensions would remove all but one of the concerns of the trades unions—that of continued employment by the public sector. Our proposals on National Agreements and payment of trades union dues will deal with the issue of continuing trade union membership of transferred employees.

Vulnerability in reorganisations

  Where there is a reorganisation during the lifetime of the contract, PC staff can be moved round the company if there are appropriate vacancies. This reduces the number of redundancies. Such would not be the case for SWs. Should a reorganisation result in less staff being needed to perform the contract. SWs would be returned to the Trust which would have to find the alternative employment or make them redundant. Since the service delivery has been transferred to the private sector, opportunities for alternative employment will be limited.


  One of the main drivers in a PFI scheme is the ability of the PC to innovate and to incentivise its staff. Financial incentives play an important part in motivating staff to do better. SWs will have little or no incentive to perform the tasks better as there is no financial reward for doing so. Promotion will also be little incentive as they would lose protection and would have to become PC staff..

  The straitjacket of public sector working practices will stifle innovation. Tightly defined job specifications and grading with lack of incentivisation do not promote a desire to do things differently. There is security in familiarity. What is the reward for trying something different?

  Furthermore, the real difference between private contractor and public sector management styles is that the contractors are much more responsive to the needs of their employees. There are conscious policies in place to develop close links between the contract managers, and the workers. The removal of these links will de-motivate the workforce.

Insurance and Health and Safety

  There will be insurance and Health and Safety issues around SWs using PC equipment. Who is the employer? Is a SW an "employee" within the meaning of the relevant legislation?

2.  RISK

  Since it is proposed to include only "soft" service staff in the current arrangements, the major risk under the REM model will be in payment mechanism deductions for performance rather than availability. While in certain situations the cleaning or catering or portering staff can cause unavailability (eg through late delivery of meals) the risk is considerably lower than that for hard FM staff, eg central heating engineers. The risk to the PC will relate to additional performance/availability deductions which the PC will suffer as a consequence of not employing the staff and having control to enforce performance.

  One way to address this issue is to price the additional risk. This will be difficult and is unlikely to offer a value-for-money solution.

  Another is to water down the payment mechanism through relaxing response periods and KPIs. This is not a good option, as it will impact on the quality of the services provided.

  A further option is to increase the excusing causes by obtaining relief from deductions in circumstances where deductions are incurred as a result of the SW failing to act in accordance with management instructions, or acting vexatiously. This would be difficult to control and would be likely to result in numerous disputes being referred to DRP, dependant on materiality.

  Additionally, the project agreement will have to address who will be responsible for SWs who cause damage to the fabric of the building or to fixtures and fittings. For example, who pays for damage to walls or doors caused by trolleys, or areas which are persistently not cleaned leading to a rectification requirement of premature decoration? These will have to be allowed for in the life cycle cost or else a duty of care and risk profile will be served on the Trust by the PC.

  The only viable way to address these issues would be through adoption of the "starter for ten" option outlined in Annexe 2.


  Implementing the secondment approach as set out on the "starter for ten" model does, as we have shown above, logically exonerate the PC from any performance penalty. PCs have shown themselves willing to work under penalty regimes, but these are fundamentally incompatible with the secondment employment model.

  In order to police effectively and fairly the payment mechanism under any REM proposal, both the Trust and the PC will need to have a full-time commercial team scoring points off each other to ascertain who caused what, why, where and when, by how much and to whom. This will take so much time to monitor that neither side is likely to have the time to carry out the recruitment, training and management process properly, leading to a downward spiralling effect to a point where the contract is in default.

  In addition, PCs would require contractual protection against any acts and omissions of the Trust, which are shown to impact contractual performance.

October 2001

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