127. Private finance projects can lead to innovations in workforce practices. But this can be unpopular as it risks less favourable terms and conditions for staff who, as a result of PFPs, move from being employed by the public sector to private contractors. HM Treasury guidance states: "The value for money that PFI can deliver should not be achieved at the expense of staff terms and conditions" (NAO p 92). TUPE (Transfer of Undertakings (Protection of Employment)) regulations aim to maintain the terms and conditions of staff transferred from the public to private sector.
128. Ms Jaffe argued staff terms and conditions sometimes change with those on low wages faring "much worse under PFI/PPPs than more skilled workers" (Q 563). On the other hand, the National Audit Office, while conceding little analysis existed in this area, said a survey of 43 PFI schemes showed pay for the least skilled was "marginally worse". Those with skilled and management roles were paid more in the private sector (p 92). The Centre for Public Service Partnerships at Birmingham University plans to study such workforce issues and their impact on services: "The industry has evidence to suggest that transferred employees have a wider range of responsibilities, better training, and better prospects for their future. However, there is also much contrary evidence" (p 290).
129. Unison also opposed the potential for the creation of what it described as a two-tier workforce, where transferred staff's conditions are protected while new staff subsequently hired are often brought in on less favourable terms and conditions. Ms Jaffe said: "So you can have people working alongside each other on exactly the same contracts but with totally different annual leave or sick leave or pension arrangements." She suggested that this affected staff morale and led to poorer quality of service (Q 563).
130. Public sector employees transferred to the private sector during the course of a PFP are protected by TUPE (Transfer of Undertakings (Protection of Employment)) regulations and employees recruited directly are protected by general employment law. Pay and conditions of the two categories of employees may well differ, at least at the outset. Where average labour costs subsequently fall, in a PFP transferred from the public sector, such cost savings may simply indicate that the pay and conditions of the employees previously in the public sector exceeded the market rate.