Two-tier code: delayed, dropped or under review?

The latest update to the Government's implementation timetable for the reforms being introduced under the Employment Rights Act 2025 (“ERA 2025”) comes with a notable omission: the proposed “two-tier workforce” measures, which were due to come into force this month, have disappeared from the roadmap altogether.

The ERA 2025 includes provisions enabling the Government to introduce regulations intended to prevent workers of non-public sector employers working on outsourced public sector contracts from being employed on less favourable terms than workers transferring from the public sector to work on the same contract. However, those provisions cannot take effect without further regulations, which are required both to bring the regime into force and to set out the detail of how it will work in practice. Those regulations have been anticipated for some time but have not yet materialised.

So far as we are aware, there has been no formal Government announcement explaining the omission or indicating a revised implementation date. The measure seems to have simply disappeared from the updated timetable. As a result, it is unclear whether implementation has been postponed, whether the reforms have been abandoned, or whether the Government is reconsidering the detail of the proposals. The most likely explanation appears to be a delay, rather than the policy having been dropped altogether.

While these measures have attracted less attention than many other aspects of the ERA 2025, they have caused significant concern among charities and social enterprises taking on contracts with the public sector to deliver public services, given the potential for substantial additional employment costs without any corresponding commitment to additional Government funding to meet them.  

For now, organisations may take some comfort from the fact that the reforms will apparently not be introduced this month. However, as the measures have not been formally withdrawn and the necessary regulations are still yet to be published, there is still no clarity as to exactly how the regime would work in practice, or indeed whether and when it will come into force. Charities and social enterprises delivering public services under public sector contracts will therefore be watching closely for further updates. While the apparent delay may provide some short-term breathing space, the lack of any formal explanation to date leaves significant uncertainty about the Government's longer-term intentions.