The government has scrapped the ‘two-tier code’, the set of regulations covering employee benefits for staff recruited by public service providers, in order to make contracting easier for smaller organisations.

It has been replaced by New Principles of Good Employment Practice, which the government says is “more flexible” and will give charities and social enterprises greater freedom to manage their workforce.

The change will not, however, affect the terms of TUPE.

Francis Maude, minister for the Cabinet Office, said: “The two-tier code was a voluntary regulation that did little to protect staff while deterring responsible employers from delivering public service contracts.

“Small organisations have been particularly hard hit by this two-tier code. We should not be making it more difficult for SMEs and voluntary organisations to succeed in the public service market.

“The New Principles of Good Employment Practice set clear standards and give employers freedom to provide terms for staff which are motivating and affordable.”