Outsourcing with TUPE for win-win-win success

As always in times of economic downturn and uncertainty, interest in outsourcing and business restructuring is on the rise.

Outsourcing has established itself over recent decades as a proven strategy for business process improvement. There is widespread appreciation of the long-term advantages it can deliver, from improving the quality of service delivery to enabling a business to refocus around core activity.

But of course, in a recession the chief driver for change is often the desire to reduce costs.

This makes perfect sense with a function like technical services and aftermarket support, where technology manufacturers will consider whether it makes good business sense for them to sustain the fixed costs of a national or international support infrastructure, plus the headcount required to deliver everything from logistics and installation to helpdesk, field service, workshop repair and preventative maintenance.

With such a powerful solution at hand, it is perhaps unfortunate then that as soon as headcount is mentioned, the spectre of TUPE – or The Transfer of Undertakings (Protection of Employment) Regulations 2006 to give them their full name – is inevitably raised.

The widespread view seems to be that TUPE is an obstacle to outsourcing success.

But having implemented scores of successful contracts involving outsourcing with TUPE over many years, we believe that, far from being a barrier, these regulations can help all parties – the outsourcing company, their employees and the outsource provider – get what they want and need from the outsourcing process.

 

The problem with TUPE?

Designed to protect employees when the business they work for changes hands, the TUPE regulations may apply when a business (or part of one) is transferred to new ownership OR when a service provision change takes place.

The latter means that TUPE may apply when a company engages a contractor or outsource provider to carry out work on its behalf, reassigns such an existing contract to a different provider, or brings the work back “in-house.”

Once it is established that TUPE does apply, the regulations mean that the buyer (or outsource service provider) will automatically take on the rights, responsibilities and liabilities of the seller (or outsourcing company) towards the employees who are involved. This carries significant implications which call for detailed disclosure, negotiation and agreement.

The legislation also introduces a mandatory requirement to inform and consult employees throughout the process (click here to visit the CIPD website for much more detail on the TUPE regulations).

At first glance it is easy to see why all of this might be unpopular with businesses looking to implement rapid and hassle-free restructures.

But it is our experience that if you consult and structure the process efficiently, these requirements can be met in as little as a few weeks.

Furthermore, if you approach it in the right way then outsourcing with TUPE can actually help you unlock significant advantages for all parties.

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1. Advantages for the seller (or outsourcing company)

The most immediate advantage of TUPE for the seller or outsourcing company is that it provides a proven and secure framework through which they can reduce headcount and associated liabilities without redundancy and dismissal costs. Once complete, TUPE ensures that (with just a few specific exceptions) all of their rights, responsibilities and liabilities to the employees involved will have been fully transferred to the contractor.

So this brings immediate cost advantages. But for the longer term it also means they have been able to achieve this saving without any loss of capability.

By outsourcing with TUPE they will have kept their people, with all of their expertise and experience, involved in service delivery – rather than seeing them walk out from the new employer or be sacked and replaced by cheaper less able substitutes.

This also underlines just how helpful TUPE can be in demonstrating a company’s commitment to making sure its employees are fairly treated.

Experience tells us how much this matters to the many companies which take a paternal view of their responsibility to employees.

And on a practical level, it can be vital to maintaining morale among the remaining workforce. To see the potential implications of this, just compare and contrast an orderly TUPE transfer with the potential impact of a restructuring based on voluntary and then compulsory redundancies.

2. Advantages for the employee

The original purpose of TUPE was to protect the employees involved in the sale or transfer of businesses, so it is easy to see advantages here.

Most obviously, it allows employees to remain informed and focused on their job throughout the transfer, confident that their employment terms and protections are secure.

But beyond that, TUPE in the outsourcing context can open a range of additional benefits.

Engineers and technicians in our own service and support sector, for example, will typically find themselves joining an organisation like Qcom where service and support is a core, rather than peripheral, function.

This cultural fit and alignment often provides much greater job satisfaction.

And on a practical level, joining a larger service organisation can open new career opportunities for moves into different technical, supervisory or managerial roles.

3. Advantages for the buyer (or outsource service provider)

But with all these employee protections and transferring liabilities, surely the new outsource provider or contractor would be the most resistant to TUPE arrangements?

Well, some possibly are. But our experience is that this is short sighted and misguided.

Having negotiated many outsource contracts involving TUPE over the 15 or so years since the legislation was introduced, we have experienced many business advantages.

First, we are getting people who are delivery ready. They know the technology, the services, the customers and the territories.

Second, these people help speed up the building of bridges between ourselves and the client company. They understand the internal culture and structure, and they know the key people. They help us arrive at a true partnership relationship much more quickly.

Third, we are also bringing in motivated people who know that they have been treated fairly and will continue to be in the future (since TUPE typically extends beyond the initial outsourcing to any subsequent change of provider).

This is hugely important for a service company which thrives, as Qcom does, on the commitment of its people to ‘going the extra mile’.

And finally, TUPE means we can take on the outsource contract in the confidence that, should it ever change hands in the future, we in turn will be able to avoid redundancy and dismissal costs by TUPEing the relevant people across to the new provider.

 

Successful Outsourcing with TUPE

While there might be a few measures that companies can take to manage or mitigate the impact of TUPE, the truth is that trying to dodge the regulations is neither a practical nor desirable approach to outsourcing.

In fact, we believe that the secret to ensuring successful outsource outcomes is to embrace the spirit as much as the letter of the legislation.

Of course proper legal advice is essential from the very outset to establish whether TUPE will apply and to what extent.

Early and comprehensive due diligence checks by all parties are vital, and legal advice will remain important as you work through and negotiate the various liabilities and warranties.

At a process level, our No.1 tip is to make sure that both parties nominate a senior decision maker or project manager with the capacity and authority to drive the outsourcing project forward to an agreed timetable.

But in the midst of these legal and financial considerations, our core recommendation is to keep people at the heart of the process.

You should communicate, consult and engage not just because the TUPE regulations say you have to, but because this is the key to unlocking many of the powerful business benefits we have been discussing here.

Get it right and, far from being an obstacle to successful restructuring and outsourcing, the TUPE regulations really will provide a framework on which you can build effective new outsource and employment relationships with win-win-win advantages for all involved.

 

Qcom has decades of experience in outsourcing with TUPE to deliver the technical, operational and service excellence needed by technology manufacturers meet their technical services and aftermarket support challenges.

Whether you need to increase, outsource, restructure or launch new technical and aftermarket support services, please call +44(0)1905 827650 or email outsourcing@qcom.co.uk to discuss your requirements in confidence.