We are a *knowledge business

Jo Mackie, Director and Head of Employment at Lawrence Stephens, explains the importance of due diligence and transparency in TUPE.

TUPE may well apply when bringing services back in house and should be paramount in the minds of local authorities seeking to make such an arrangement, whether to increase control over how services are run or to try and save cost.

The question of whether TUPE applies is a knotty problem and depends on many factors, however a good indicator is that;

1. the activities undertaken before and after the transfer remain fundamentally the same, and
2. staff providing those activities are in an organised group to provide those activities to the employer.

For example, think of a team of IT experts who all have similar roles and work as part of one team in order to serve X Housing Services Ltd. If Y Housing takes over X Housing Services, that organised group of IT experts will transfer across to Y Housing as a group.

TUPE dictates that all the rights, duties, powers and liabilities within each contract of employment transfer with those employees to the new employer. This is almost all embracing, and even contains some provisions around pension liabilities and so due diligence will be key for those authorities seeking to bring services back in house. It is essential that authorities know everything they possibly can about those employees they will inherit. It is often incorrect to say that bringing services in-house will save costs. The employee costs will inevitably stay the same because the terms and conditions cannot be changed, and any redundancies because of the transfer will be automatically deemed unfair dismissal.

For authorities this all means an onerous but necessary task of reviewing the HR data available on the employees who will be transferring across. This should be provided ‘in good time’ by the outgoing employer. The authority needs to ask what if any ongoing grievance procedures, or long-term sickness absences there are in the workforce they will inherit. Are there performance or capability issues that may hinder the ability of the new employees to perform as the employer would like them to? Regardless of what these issues are the new employer will inherit them.

In terms of harmonising pay, it is not possible to unilaterally change a contract of employment, and so employee agreement is critical. So, if harmonisation means a reduction in pay it’s unlikely any employee would agree to that. Would be employers need to re think what they mean by harmonisation of pay, as it may mean they are worse off not better.

In terms of what an authority can do, this is very limited because of TUPE restrictions. Due diligence before the transfer is the key to managing any potential problems, as is engaging with staff during the transfer process. Employees will be more positive and engaged if an incoming employer acknowledges they have a responsibility to them, rather than by an employer who fails to engage at all. As with all employment issues a good relationship between managers and employees is crucial and being seen to take your responsibilities seriously pays dividends in the long term, as does hearing the voice of your new employees (either by collective meetings or via a Trade Union).