Outsourcing, insourcing, or changing a contractor? You need to know about TUPE

Wednesday April 13, 2022

If you employ people and have recently won or lost a contract to provide outsourced services to a client, or you are thinking of bringing an outsourced service in-house, this is known as a Service Provision Change. The likelihood is that TUPE applies.

What is TUPE?

TUPE stands for Transfer of Undertakings Protection of Employment rights. It’s the law that exists to protect employees and their rights when the service they provide for their employer changes hands.

You may be wondering: Why would their employment need to change? Under certain circumstances, a Service Provision Change will mean that employees transfer from one business to another.

It’s TUPE law that makes sure this is done fairly.

To help set the scene, the following examples show some common scenarios wherein an employer should check if TUPE applies during a Service Provision Change:

  • A venue outsources its catering services, but due to bad reviews decides to end its existing contract and start a new one with a different provider.
  • A care provider is contracted by a local council to provide care services, until the council wants to seek a new provider.
  • A serviced office contracts a cleaning company but isn’t happy with the service and so ends the contract to find a new provider.
  • A company uses a branding agency but decides to bring the role inhouse.

If TUPE were to apply, one company assumes the role of transferor: where employees move from. The other assumes the role of transferee: where employees move to. Both have responsibilities to fulfil under TUPE law.

As with many areas of employment law, there are ifs and buts that you will need to apply to your own unique situation to understand if TUPE applies.

TUPE or not TUPE?

So how do you know if you need a TUPE process? There are some key identifiers, starting with the following questions:

  1. Is there an organised group of employees assigned to carry out activities (services) on behalf of the client? For example, the same employees carrying out the work for the client regularly.
  2. Will the service be the same before and after the change of provider? E.g. is the new cleaning company providing substantially the same service as the old one?
  3. Are the activities intended for the long term? E.g. not a one-off event or for a short-term period.
  4. Do the activities consist of more than just the supply of goods to the client?

If TUPE applies the staff will transfer with all their current contractual benefits including their date of continuous employment. Pension arrangements can be even more complicated, particularly if a local authority is involved.

If you’re new to TUPE, it would be wise to seek professional HR advice to keep your business and your processes compliant.

The risks of getting TUPE wrong

If TUPE sounds complicated, it’s because it is. Employers tendering for new business should always consider any potential TUPE obligations that could fall upon them.

Understanding what these might be is also essential as there are risks for those who don’t follow the process correctly.

Failure to comply with TUPE requirements, which include consultation with elected representatives for all affected employees, may result in a financial penalty. This can be 13 weeks’ pay for each employee.

If you’ve got questions about a transfer of employees for your business, don’t forget, we’re here to help.

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