Businesses outsourcing to reduce costs must remember TUPE may apply.
The legal implications of outsourcing, particularly from the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”), are complicated. Businesses outsourcing to reduce costs must remember TUPE may apply.
If you’re considering outsourcing any function you need to understand the practical implications of TUPE and how it might affect your plans.
The Effect of TUPE
TUPE protects certain employment rights where there is a ‘service provision change’. A service provision change is where a business engages a third party to carry out certain activities on its behalf (i.e. outsourcing).
For example,
- if you previously did your social media marketing in house and you now want an external company to do it, you are making a “service provision change”.
- If you previously did your payroll in house and you now want an external payroll bureau to do it, you are making a “service provision change”
TUPE Regulations state that employees who are engaged ‘wholly or mainly’ in carrying out the relevant activities or service will transfer from you, the employer to the new provider at the start of the outsourcing arrangement.
You are obliged to inform and consult with affected employees, prior to the transfer taking place. You must give the new provider employer liability information.
When TUPE will not Apply
In most cases, when a service is being outsourced, TUPE will apply. However, this will not be the case where:
- The services being transferred are not carried out by an “organised grouping of employees”
- Once transferred the services will fundamentally change
- The services are transferred to a number of different providers and so the service provided becomes too fragmented.
The case law on these areas is detailed and complex, with each case being decided on its own particular facts. If you think your outsourcing arrangement might fit into one of these exceptions, you should take advice at the outset. Going ahead with an outsourcing arrangement on the basis that you think TUPE doesn’t apply, and later finding out that it should have, could be very costly.
How to Deal with TUPE on Outsourcing
Where a service is being outsourced and TUPE applies, the new provider will need to try to find out as much information as it can about how the service is currently being performed and about the individuals engaged on the service.
Often part of the rationale for outsourcing is that the service can be provided more efficiently, sometimes with fewer staff. TUPE does not preclude redundancies being made, but, in order for any such redundancies to be fair, the new provider would have to make the redundancies after the transfer and may have to pool the new employees with its own workforce. Affected employees would have to be consulted in advance of the transfer and collective consultation obligations may apply.
Businesses outsourcing to reduce costs must remember TUPE may apply. If you would like further advice on TUPE and outsourcing, please contact us now for a no cost confidential consultation.
Metis HR is a professional HR Consultancy based in the North West of England supporting clients across the country. We specialise in providing outsourced HR services to small and medium-sized businesses. Call us now on 01706 565332 to discuss how we may help you.
