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TUPE matters and should be strengthened, not diluted

Monday May 16th, 2011

By John Tizard, Director, Centre for Public Service Partnerships

The Government has announced that as part of a wider review of labour market regulation it wishes to consider the future of TUPE. If this is about finding ways of avoiding TUPE it would be very regrettable, especially at a time when the Government is also promoting more outsourcing of public services to the private, social enterprise and third sectors.

The Government has already abolished the so-called ‘two tier’ code, which offered further protection to staff when new people are recruited during the life time of a public service contract. This too was regrettable but to abandon or dilute TUPE would be a step too far.

There are many strong practical arguments for retaining TUPE rights for staff who involuntarily transfer employers because of outsourcing, a partnership arrangement, or the acquisition or merger of the employing body.

TUPE is enshrined in European Union law, so the scope for disregarding or fundamentally changing it will be limited. However, even if this were not the case the argument for retention would be very strong.

The importance of TUPE has been recognised for many years by committed employers in the public, third and private sectors as well as trade unions and policy makers.

The application of TUPE offers staff involved in a public sector outsourcing process some protection and assurance that a new employer will not be able to change their terms and conditions unilaterally and without agreement. Whenever a service is being considered for outsourcing or transfer to another agency in the public, private or third sectors staff will understandably be anxious. They will seek assurances, and TUPE ensures that they have some. This makes the transfer and subsequent transition to the new employer easier to cope with, which in turn is important in minimising disruption to service performance. This is beneficial to the public sector client, the provider, the staff and, most importantly, the service user.

There is a correlation between good employment practice and service standards; so why risk the latter in order to make savings at the expense of the former? TUPE removes the opportunity for bidders to compete on their willingness to reduce the terms and conditions of staff. This has long been understood by the major public service outsourcing companies. They have sought to win bids on their service solutions, their performance management and their ability to improve productivity, not by cutting terms and conditions. They have also wanted to minimise the anxiety of transferring staff and remove what would be a very strong reason for opposing the outsourcing.

Good practice requires clients and potential service suppliers (bidders) to consult staff and their trade unions on if and how TUPE will be applied to a particular project at every stage in the procurement process. It is important that the Government’s review confirms and strengthens this requirement in guidance rather than diluting it. Public sector clients should be required to monitor how their contractors and partners apply TUPE post-contract.

Any changes to terms and conditions that the new employer seeks to make in order to improve service outcomes or to meet new economic conditions – which are permissible under the existing TUPE regulations – should be based on a proven case and subject to negotiation with staff and their trade unions.

Public sector clients must be prepared to pay the price for contracts that are based on the application of TUPE. This offers protection to employees and to providers – especially smaller companies, social enterprises and third sector organisations. Cost reduction if and when required should be achieved by service redesign, good performance management and productivity improvements, not by cutting terms and conditions.

It may be very tempting at a time of deep public expenditure cuts for the public sector and providers in all sectors to support an easement of the TUPE regulations, but it is important to recall what happened prior to the introduction of TUPE. It is also worth examining some of the worst employment practices associated with outsourcing in the period of Compulsory Competitive Tendering (CCT), when staff were forced to accept poorer terms and conditions or forced out of employment to make way for new recruits on significantly worse contracts – sometimes with no holiday or even sick pay; no pensions; little if any training or development; and very low wages (under CCT there was no minimum wage threshold). Understandably this led to large-scale employee and union opposition to outsourcing. The public sector driver was lowest price and service quality suffered: everyone was engaged in a race to the bottom. Surely no one wants to return to this?

However, some of the current policy and practice trends do require some new thinking and new approaches. There is a need to balance the requirements and objectives of TUPE and related regulations with the new policy and practice agendas of personalisation and direct budgets; co-payments; social enterprises spinning out of the public sector; the public sector pension review; the drive towards a ‘living wage’; and shared services often located outside the area of the original employment. The aim of any review should be to protect the spirit and objectives of TUPE and its application to public sector partnerships and social enterprise ‘spin-outs’ as well as outsourcing. It should embrace the pension position of all employees providing public services, and ensure that the core elements of any employee’s terms and conditions are not omitted from the regulations. It should also address the need for service change so that the argument can move beyond what otherwise could be construed as a defence of ‘no change’ and ‘no reform’ of public services – both change and reform are compatible with TUPE.

The starting point must be to ensure quality services for the public and to recognise that these are best secured when staff are involved in decision-making and service design, are well motivated and are properly rewarded with good pay, terms and conditions.

In conclusion I would argue that responsible employers in the public, private and third sectors should resist any attempt to dilute TUPE when applied to public services. There are many practical, financial and contractual reasons for so doing. Above all, there is a moral imperative too!

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