The last two years have witnessed dramatic changes in job market conditions. The tight labour market, which has seen record job-to-job moves as employers compete for talent, has left many employers battling staff shortages and rising labour costs.
This has led to the unusual situation in which employers are actively seeking to acquire the staff of outgoing suppliers under TUPE transfers. The Transfer of Undertakings (Protection of Employment) Regulations 2006 have typically been regulations employers have generally sought to avoid.
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A TUPE occurs when either a business transfer or a service provision change takes place, such as a new caterer taking over the contract of an outgoing supplier.
The purpose of TUPE is to protect employees when their employer ceases to provide the service to a company or organisation but the service provision, which will have the same or very similar specification, is to be provided by another company or organisation.
We are increasingly finding that outsourcing providers are unable to fulfil contracts due to rising costs making contractual terms no longer profitable. For example, we recently acted for a catering company taking over a contract for a supplier which had terminated the agreement because it could no longer profitably service the contract on the terms agreed before wages and prices surged.
Given the difficulty of recruiting new staff and the possibility that new people can only be recruited on more favourable pay and conditions, incoming suppliers are encouraging TUPE transfers so they can avoid spiralling costs and hit the ground running.
When presented with the option of a TUPE transfer of existing staff on £12 per hour or being unable to adequately service the contract while scrabbling to recruit staff on £13/14 per hour, the TUPE transfer is now very often the more appealing option.
With the pressing need in the current economic climate for the transferee to retain the outgoing provider’s staff, preparation and communication are doubly important. While it is not possible to complete the transfer in 24 hours a smooth, swift transfer taking just a few days is far less likely to give staff the jitters and avoid them giving notice.
At the outset the incoming provider should ensure that staff are fully informed of the process, their concerns listened to, and assurances given that there won’t be any redundancies or changes to pay and conditions. It is important to bolster morale during the transition phase to minimise departures, which would undermine the whole rationale of the TUPE transfer.
It might even be advisable to consider additional perks for staff as a signing-on bonus. In the case of the aforementioned catering provider, offering a free lunch everyday could help shore up retention by helping with the cost of living.
Over time, it would add up to a significant benefit and potentially more than offset the cost of replacing staff lost, potentially on higher hourly rates.
Even if the transferee wants to change employee terms and conditions, allowing the situation to settle for three to six months rather than doing so in the middle of the transfer is likely to be sensible given the ease workers can find alternative roles at present.
The key to making the success of a TUPE transfer is planning and communication. With high inflation it may only be attractive for the incoming provider to persist with the existing contract if staff can be retained.
If, on the other hand, large numbers of staff leave leading to the hiring of new staff on terms less favourable to the employer, the existing problems can be compounded. It’s an unusual state of affairs but if carefully managed a TUPE transfer can be a successful outcome for both employer and staff.
Gary Smith is a partner in the London employment team at Nockolds
