Government review of Tupe set to encourage outsourcing

As the public sector makes budget cuts and redundancies, private-sector companies that will provide outsourced services at lower cost are making a vocal case for slashing red tape.
So far the government appears to be listening: last month, employment relations minister Ed Davey announced an employment law review that, among other things, will examine possible reforms to the Tupe (Transfer of Undertakings Protection of Employment) regulations. Davey said Tupe was being reviewed because some businesses think it is “gold-plated” for staff and overly bureaucratic.

But before a timetable for the review has even been announced, experts have already questioned how far the government can move on Tupe, given that it is underpinned by EU legislation – the acquired rights directive.

Ben Willmott, CIPD employee relations adviser, said: “The actual legal framework underpinning Tupe comes from Europe so it’s difficult to see how that will be unpicked to make the framework simpler. But there might be some scope for making the guidance easier to understand.”

The government’s intentions in this area cannot be dismissed as rhetoric, however, as it has already shown an appetite for reform. It withdrew the “two-tier code” – officially called the Code of Practice in
Workforce Matters in Public Sector Service Contracts – on 13 December 2010, while a parallel code for local authorities was withdrawn on 23 March this year. These codes placed additional requirements on employers to avoid creating a two-tier workforce.

Chris Maddy, senior HR policy and transition consultant at HR outsourcing firm NorthgateArinso, said: “In terms of the private sector taking on public-sector work, the government has already made quite a considerable change by withdrawing the code of practice on workforce transfers, which used to really ‘gold-plate’ Tupe regulations – new people recruited had to be on the same terms as those transferred in.”

Yvonne Williams, National Outsourcing Association board member and representative for individual professional development, highlighted further opportunities for change. “My view, and probably that of anyone involved in outsourcing, would be that they need to look at lining up the pension rights between the two sectors under Tupe,” she said.

If the government takes this line, it could change the Fair Deal rules brought in under Labour in 1999 and revised in 2004. These rules mean that many private sector employers are obliged to offer relatively generous defined benefit pensions to staff transferred from the public sector. The higher cost of benefits is one of the main factors deterring firms from bidding for service contracts, according to Williams.

The implications of reform to Tupe and Fair Deal would stretch beyond outsourcing: shared services in the public sector could also be affected, according to Dean Shoesmith, executive head of HR at the London boroughs of Sutton and Merton.

“There are Tupe implications in sharing services in one place, for example between police, health and local authorities, because you need to know who the lead provider of those services is,” said Shoesmith. “The lead service has to Tupe staff over from the others. So I hope they do focus on Fair Deal and Tupe to make the process easier for employers. Most local authorities are already looking at their staff terms and conditions with a view to reviewing them down because of the sheer financial pressure that they face. This is also a way of trying to protect workforce employment and avoid redundancies.”

Shoesmith said that any legislative changes that made transforming public services easier, and therefore quicker, would help councils deal with the issue of “front-loaded” budget cuts. While the current cuts must be made over four years, public service employers are being asked to make bigger spending reductions in years one and two, while organisational transformation can take longer than this, he explained.

Whatever the employment law review holds for Tupe, it seems certain that the outcome of the Fair Deal consultation, which is set to end on 15 June, in combination with the government’s reaction to the Hutton review later in the summer, will give a firm indication of the direction of travel.

Personnel Today

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About elaineonyc

HR generalist who is passionate about the benefits of good HR practice. Experienced in delivering strategic and operational HR initiatives to clients in both public and private sectors. Specialises in working with SMEs.
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