For almost 40 years businesses have had to consider the Transfer of Employment (Protection of Employment) Regulations (TUPE) when transferring a relevant undertaking or implementing a service provision change. In the FM world, TUPE is an everyday occurrence. Whether this is dealing with a first-generation outsourcing, a change of outsourced service provider or an in-sourcing contract, TUPE can apply.
TUPE exists to protect the rights of employees and has introduced three concepts into UK employment law. The first concept is an automatic transfer principle that ensures employees transfer on their existing terms and conditions with their continuity of service intact. This requires the transferee to step into the shoes of the transferor in regard to all “rights, powers, duties and liabilities under or in connection with” their employment contracts. The second concept is protection against dismissal in connection with a TUPE transfer and the third concept is the obligation to inform and consult with those employees affected.
From a legal compliance perspective, both outgoing and incoming service providers (and of course customers on a first-generation outsourcing or an in-sourcing contract) have obligations to adhere to under TUPE. Failure to comply with any of those obligations, such as the obligation to provide employee liability information (ELI) within specified time periods and the obligation to inform and consult with the right persons, could result in legal action against the offending party as well as financial repercussions.
From a commercial perspective, being able to price an opportunity correctly relies on thoroughly understanding the cost of the employee base that is linked to that opportunity. Therefore, receiving complete and accurate ELI data for a TUPE transfer is very important to an incoming provider. From a practical perspective, managing a workforce that could potentially be engaged on hundreds of different sets of terms and conditions is a minefield if the correct systems and processes are not in place to accurately capture employee data.
For businesses, it is commercially, financially and reputationally important to get TUPE right so keep the following in mind:
- Consider as early as possible whether TUPE will apply and identify who will transfer. This is not always clear cut. Businesses must consider who is wholly or mainly assigned to the activities changing hands and take professional advice if necessary.
- Allow sufficient time to inform and consult employees.
- Review ELI data thoroughly to guarantee knowledge of the benefits to be provided post-transfer, and ensure that pricing models correctly reflect labour costs.
- Be aware of restrictions in the contract between the customer and the current supplier that prohibit changes to the workforce during the time leading up to the transfer date. It’s important to understand the likely consequences if those restrictions are ignored.
- If dealing with a cross-border service, take jurisdictional advice on the nuances of local iterations of TUPE as the details differ from country to country.