Government’s next plans for TUPE – implications for charities

Fiona Sheil was responsible for co-ordinating NCVO’s programme of seminars, training and advice work on public service commissioning and procurement. Fiona left NCVO in October 2013 but we have retained her blog posts for reference.

The conclusion to the government’s two year consultation on TUPE is broadly positive. Yes, it could have been better, but certainly from the initial proposals they set out in January it is a far better result than we had hoped to see. While Department of Business, Innovation and Skills (BIS) has been consulting on legislative changes to TUPE we’ve been arguing that the problem to address is the way the law is implemented, not the law itself (see our consultation response). Our enthusiasm is therefore tempered by a feeling that the right questions weren’t being asked in the first place.

So what have BIS said?

The main conclusions (from our perspective – employees and unions will have a different emphasis) published by BIS in their consultation response are:

• BIS has scrapped plans to repeal the Service Provision Change (SPC) clause brought in in 2006. This clause means that TUPE applies more broadly and as a result covers contracting‐out exercises, changes of service provider and contracting‐in exercises,with limited exceptions.
• The deadline for incumbant employers to make known the full Employee Liability Information (ELI) connected to a transfer has now increased from 14 days pre-transfer to 28 days. BIS had originally proposed scrapping any sort of deadline, something that 75% of consultation respondents opposed and on which BIS noted a clear ‘strength of feeling on the subject’.
• One year after the transfer date new employers and transferred employees will be able to negotiate a ‘harmonisation’ of terms derived from collective agreements. Recognising this will be a challenging process, BIS are looking to develop a Europe-wide framework to outline proper process.

What were we really after?

Over the past two years NCVO has worked with a range of VCSE regional and national infrastructure bodies and kept in dialogue with CBI and FSB (representing the private sector). We’ve submitted a range of evidence to the BIS through roundtables, a collection of anonymised and confidential case studies, and two responses to the initial 2012 ‘call for evidence’ (read our recommendations and survey evidence from across the sector) and the subsequent 2013 ‘consultation’ (read our response). Our main comments have been on:

Employee Liability Information

Employee Liability Information (ELI) sets out the details of the liabilities involved in transfer. This needs to be made available to potential bidders at the ITT stage of procurement if providers are going to be able to make informed decisions about whether to bid or not. Without this information, we know that providers waste time on bids that can’t stack up. We’ve seen repeated examples of organisations winning bids then having to drop out before contract once the liabilities reveal themselves to be too great. What a wasted exercise!

Increasing commissioner’s responsibility

The commissioner’s role in TUPE needs to be strengthened and given greater clarity. We don’t like it when employers are left to battle it out. It’s unproductive and unfair. Back in 2012 we asked that Government publish codes of best practice for commissioners, supported by case studies and local authority networking.

Preserving SPCs

In opposition to some other VCSE organisations we opposed the repeal of ‘Service Provision Changes’ (SPC) from the TUPE Regulations. This is despite strong evidence in favour of repeal:

• The weight of pension liabilities often attached to TUPE’d staff is well-documented as proving an absolute barrier to VCSE organisations bidding for contracts so reducing market diversity.
• Forced inheritance of  underperforming staff via TUPE leads to failing services and causes significant impediment to quality, reputation, and service design, as well as additional financial and legal costs. It is sometimes suggested that some outgoing employers deliberately use SPCs to ‘TUPE out’ their worst performing staff.

But on balance, we felt these arguments weren’t as strong as the evidence in favour of maintaining SPCs:

• First up, the continuation of staff is often a very good thing for staff, organisations, service users and preserving expertise and experience across markets
• Secondly, we believe the opportunity for employers to take on contracts without maintaining current staffing terms and conditions will lead to cost-cutting in services where, as with social care, employee terms are already very low, and already impact negatively on the quality of service provision. As price becomes a determining factor in who wins contracts, employers will seek – or be forced to seek – the lowering of unprotected pay and conditions in order to win business.
• Thirdly, the repeal of SPCs will reduce clarity, rather than aid it. There is already a lack of clarity around the application of TUPE – and this poses a very real barrier for organisations who cannot afford the legal costs of TUPE and therefore avoid contracts where it may apply.

What next for TUPE then?

The amendments to TUPE (including others not mentioned here but listed in the full Government response) will be presented to Parliament in December. Guidance will then be published to explain how the changes will work.

In addition, the Government will be working to develop a ‘framework’ around harmonisation of terms for transfered employees.

What next from NCVO?

We will look to work with BIS on the guidance and framework: in public policy everything always comes down to the quality of implementation.

Finally, building on the capacity building support we’ve been providing the sector on TUPE ( legal training, a free due diligence checklist for TUPE transfers, and a free legal guide) we’ve currently working with Mind to produce information on how larger VCSE and private sector organisations manage transfer.

Any questions? Contact psdnetwork@ncvo-vol.org.uk