PolicyLens

Methodology note

Equal terms for outsourced workers: calculation note

Scenario estimate showing gross costs, offsets and behavioural uncertainty; not an official costing.

View main policy page: Equal terms for outsourced workers

Central fiscal result

+GBP 4.5bn - Net public-finance impact in 2027-28

Low case: +GBP 1.0bn. High case: +GBP 15.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Require outsourced, agency and directly employed comparable workers to receive equal core terms.
  • Baseline is current law and published official data unless stated.
  • Private business costs are excluded unless they affect tax or procurement.
  • Target year is 2027-28, with later years shown separately.

Affected population

  • Unit is outsourced and agency worker jobs.
  • Central affected count is 1.5m worker jobs.
  • Public procurement exposure uses WGA purchases.
  • Private-sector employer costs are not fiscal unless taxed.

Gross impact

  • WGA purchases of goods and services were GBP 263.7bn in 2023-24.
  • Central public-contract labour-cost uplift is GBP 5.0bn.
  • Private direct business costs are excluded from fiscal score.
  • Tax and NI offsets reduce net cost by GBP 1.0bn.

Fiscal build-up, central case

  • Public procurement pass-through: +GBP 5.00bn
  • Administration and disputes: +GBP 0.25bn
  • Tax and NI receipts: -GBP 1.00bn
  • Benefit savings: -GBP 0.20bn
  • Provider failure reserve: +GBP 0.45bn

Central net impact: +GBP 4.5bn in 2027-28.

Behaviour and pass-through

  • Low case assumes narrow public-sector comparators.
  • Central assumes labour-intensive public contracts reprice.
  • High case assumes broad private and public coverage.
  • Some outsourcing shifts back in-house.
  • Service volumes fall if budgets are fixed.

Phasing

  • 2026-27: +GBP 0.4bn. Contract audit.
  • 2027-28: +GBP 4.5bn. First contract reset.
  • 2028-29: +GBP 6.0bn. More contracts renew.
  • 2029-30: +GBP 7.0bn. Wider pass-through.

Main source groups

  • S1: S1 WGA: GBP 263.7bn purchases of goods and services.
  • S2: S2 ERA analysis: flexible-work measures impose employer costs.
  • S3: S3 HMRC: receipts offset some wage increases.
  • S4: S4 DiNardo et al.: institutions can compress wage gaps.
  • S5: S5 Autor/Kerr/Kugler: adjustment costs can reduce productivity.