The government’s intention to scrap an informal code guaranteeing public sector benefits for thousands of workers outsourced to the private sector will open up the market to medium and small-sized outsourcing companies.

Mark Fox, chief executive of the Business Services Association, the trade body for the outsourcing industry, told Recruiter that the code, under which new recruits to outsourcing companies are offered terms that are “no less favourable” than those of transferred employees, adds additional costs to outsourcing.

“It’s true to say that the rules add additional costs to outsourcing from the public sector to the private sector, and the removal of the code will make the outsourcing market more accessible for small and medium-sized companies,” said Fox.

The voluntary code was agreed between the unions, employers and the Labour government in 1993.

Fox was responding to comments reported in the Financial Times by Cabinet Office minister Francis Maude that he was “minded” to scrap the code.