Transfer of Undertaking (Protection of Employment)

By Christopher Head

Director at Eurenicon Ltd (A specialist employment law consultancy)

Charities who are tendering to provide services that are currently provided by local authority, civil service or quangos find themselves caught in the TUPE regulations, which apply where a change of service provider is taking place.

TUPE has the effect of putting the new employer in the legal situation they would have been if they had employed the transferring staff from the day they started with their original employer (the transferor). Outstanding liabilities under the contract will transfer through to the new employer – anything from accrued holiday, to back pay, equal pay claims as well as unfair dismissals relating to the transfer.

Government itself has created an additional problem for charities by agreeing with Unions a set of protocols for that to go beyond the basic legal provisions of TUPE. For example, under TUPE there is no obligation on an employer to create a final salary pension scheme, or to honour discretionary termination payments. But the Cabinet Office Statement of Practice concerning Staff Transfers in the Public Sector sets out “there should be appropriate arrangements to protect occupational pensions, redundancy and severance terms of staff in all these types of transfer”. Whilst this guidance has been revoked for local authorities it has not been revoked for all of the public sector.

There is a significant difference between the redundancy entitlements of ordinary employees and civil servants. An ordinary worker is entitled to statutory redundancy pay at a maximum allowable weekly pay of £430 whereas the civil service redundancy scheme has no limit and even has a minimum. Statutory redundancy is calculated on age related multipliers of a week (or a week and a half, or half week depending on the age of the worker) whereas the Civil service scheme is calculated with multipliers of months at full pay.

Whilst charities do not always pay their existing employees at the statutory basics when it comes to contractual benefits, few charities are well enough funded to have staff on the same terms as civil servants.

For example.

Charities who are receiving staff via TUPE transfers find themselves paying higher benefits than they normally pay, with much higher termination payments if they cannot afford to keep the staff on. Charitable funding tends to be quite short term, often project by project, or year by year at best. Such higher benefits and termination payments can risk the viability of the Charity itself if they are not foreseen and budgeted for.

Charities who intend the service to be provided by volunteers may be able to work around the TUPE problem if their existing delivery model is long standing and pre dates the transfer. The situation is changing but it is still a high-risk scenario for many Charities to simply ‘pitch’ to provide services that are currently provided by salaried staff.

My experience of working with social enterprises and charities and helping them plan TUPE transfers is that much of the advice they are given encourages them to take on obligations beyond the ones they are obliged to in law (or even by the government’s own standards) and leaves them very vulnerable if there are changes in funding at a later stage. A well planned tender to outsource work needs to properly evaluate the TUPE situation and prepare for it.

Christopher Head is qualified as a barrister. He edited Harvey (the bible of employment law) on Industrial Relations and Employment law and is currently a director of Irenicon Ltd a specialist employment law team.

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