The Committee for Employment and Learning welcomes the opportunity to respond to the consultation document initially issued by the Department of Trade and Industry on the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

The Committee also welcomes this consultation document as a benchmark to inform the Department for Employment and Learning and the Executive's deliberations on how best to take forward the TUPE Regulations in the Northern Ireland context.

The Committee's views are as follows:

1. Application of TUPE in the Public Sector

A great deal of uncertainty appears to have developed around the operation of TUPE in recent years, with particular reference to the public sector outsourcing market. This uncertainty has created significant commercial problems for businesses involved in outsourcing. It is therefore important that this review ensures that, in the interests of outsourcing remaining an attractive solution to providing commercial support services, it operates within a commercial and legal environment which provides -

• Value-for-money - delivering the optimum combination of quality and cost.

• An appropriate level of employee protection - creating a secure environment in which to motivate and reward staff and to reduce resistance to outsourcing as a concept.
• A sensible and fair management of risk - Contractors need to be able to allow for the risk that they may lose a contract on a non-TUPE basis and have to make costly redundancies. Careful consideration needs to be given to avoiding the necessity for contractors to 'price in' some or all of the potential cost of redundancy liabilities which reduces potential value-for-money for clients.

Greater consistency and clarity needs to be ensured in the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981.

The current problem is as outlined by the CBI;-

"The key difficulty is that contracts originally won by a contractor on a TUPE basis may be re-let on a non-TUPE basis. This can result in the original provider being left with large and unanticipated bills for redundancies. Contractors argue that there is currently an incentive for some clients to seek to re-let contracts on a non-TUPE basis in order to bring in a new contractor with new staff hired on lower terms and conditions - and so generating cost savings. But this in turn leads to an overall increase in the cost of outsourced services for clients across the economy, as contractors need to price in the risk of future redundancy payments into their initial bid."

"This problem with the TUPE regulations is particularly acute in relation to public sector contracting. In the private sector it is always open to the contracting company to seek an indemnity with the client company to protect against the cost of redundancies caused by re-let on a non-TUPE basis. Such indemnities are, however, almost never available in the public sector. The cost to contractors of redundancies in the public sector is also typically higher as public sector staff tend to have longer service and more generous contractual redundancy terms."

The Cabinet Office's best practice guidance 'Staff Transfers in Public Sector' attempts to deal with this, however, it is not statutory. The Committee would therefore urge consideration of the introduction of legal measures to underpin these policies.

Although there are some merits in the proposed approach to 'service provision changes' in that it would include all service contracts in the scope of the regulations and would potentially provide a degree of certainty for both the providers of outsourced services and their clients. It would also minimise the risk to both parties of unexpected redundancy costs as there would be a much reduced chance of these costs ever crystallising. There are a number of disadvantages, which could outweigh the potential advantages -

• Lack of flexibility for clients - in order to maintain a high quality of service it may sometimes be necessary for the employees of the current contractor to be replaced e.g. where the intellectual capital of the workforce rather than the quality of management is likely to play a crucial role in the delivery of the service.

• It could result in professional services such as consulting or legal advice being covered by the regulation. If a professional services firm has a dedicated group of staff who work on the premises of a particular client, then those staff may be judged to be an economic entity, and any loss of the contract to a different firm could be judged to be a TUPE transfer.

• New legal uncertainty could result, as it is not clear what interpretation the Courts would place on the term "service contract". The position of contracts which supply both goods and services would be unclear e.g. a contract for the servicing of aircraft which involves both the provision of parts and engineering staff. It is vital that this is fully clarified.

When considering the issue of pension rights in relation to TUPE, consideration should be given to the following:-

1. Allowing transferees the ability to switch freely between defined benefit and contribution schemes, and between contracted-out and contracted-in schemes.
2. Should not risk undermining transfers by imposing excessive costs, or used to ratchet up levels of private sector pension provision.
3. Be simple to understand and administer, avoiding any need for actuarial certification.
4. Allow flexibility to agree the fine details on pensions after the transfer so as to avoid disproportionate delays.
5. The amended regulations should state explicitly that transferees could legitimately vary pension benefits subsequent to the transfer for reasons unconnected with it, in order to allow employers the ability to harmonise pension provision.
6. Incorporating into the amended regulations that existing public sector employees in a public sector pension scheme should have the right to remain part of that pension scheme irrespective of any transfers under TUPE.

1. There should be a requirement within the revised regulations to ensure that there is effective release of information; full disclosure of all policies and protection; effective measures for pension handling; or the effective transfer of equality obligations.
2. The revised regulations should set out clearly at what stage of the process the transfer of the information would take place. The timing of the transfer of information is particularly important to ensure confidentiality of information and should only be made available when the bidding process has reached a select number of bidders.
3. All transfer information should be made available to the individuals concerned to ensure accuracy and validity of the information prior to the actual transfer taking place.
4. The review needs to address how employees facing transfer can have a guarantee for the length of the contract and succeeding contracts of the preservation of their terms, conditions and entitlements.

4. Application of the legislation in relation to insolvency proceedings

The Committee would support this proposal and acknowledges the intent to mix employee protection and business flexibility by protection for employees at least equivalent to that provided for in situations covered by the EC Insolvency Protection Directive and the provision that employers and employee representatives, may, exceptionally, agree changes to terms and conditions of employment by reason of the transfer itself; provided that this is in accordance with national law and practice and with a view to ensuring the survival of the business and thereby preserving jobs.

5. Changes to the terms and conditions of employment of affected employees

1. There are explicit 'get-out' clauses (relating to Economic, Technical and Organisational (ETO) reasons or insolvency processes) in the proposals that allow TUPE to be set aside under certain conditions. Given the equality benefit from the proposals and general principle of TUPE it follows that these exceptions should be carefully set out to avoid abuse by rogue employers.
2. UNISON thought that consideration should be given to setting up a mechanism, which would examine whether genuine economic and technical or organisational reasons existed in the event of an employer proposing changes to TUPE transferred conditions. This would in effect be a compulsory arbitration process (CBI).
3. There is a need for a clearer definition of ETO.

1. The Department should clearly quantify the impact of the proposed amended TUPE Regulations on the public sector in Northern Ireland.
2. The Department must clearly set out the discretion Northern Ireland has under the EC Directive to inform future consideration of this issue.
3. The Department should undertake a preliminary assessment setting out and quantifying the impact of TUPE in the past and consult those affected by TUPE, both employees and employers. For example, UNISON, during their evidence session, outlined that they considered that standards had slipped due to privatisation in the health sector. More specifically the Committee seeks a brief on the implications of TUPE on the incorporation of Further Education Colleges (FEC) and the merger of Training Centres with FECs.
4. The Committee would strongly recommend the drawing up of detailed guidelines in handling TUPE incorporating model contract clauses, this would be invaluable for employers, employees and legal advisers alike. This should reduce/avoid the potential for cases having to be settled through costly procedures.
5. It is important that tendering is properly conducted to avoid the problems of the past e.g. low bidders not being able to fulfil their contracts. This in turn results in a waste of limited public sector money.
6. The Committee do not wish these regulations to be seen as 'cost cutting' at the employees' expense. Neither do they want to see the employers not having incentives to improve service quality and improve efficiency through good management practice, introduction of technology etc. The TUPE Regulations must not dissuade/prevent continuous improvement.
7. In order to establish the scale of impact in Northern Ireland, consideration should be given to carrying out a Workplace Employee Regulations Survey (WERS). This would be particularly important given that the analysis in the survey carried out in Great Britain noted that small firms were much less likely to be affected and firms in Northern Ireland are on average smaller than those in Great Britain.
8. The Committee endorses the proposals to underpin the existing best practice guidance in the public sector with legal force. This should ensure uniformity of practice by public sector clients when dealing with staff transfer issues. Consideration should be given to a new requirement under the Local Government Act that commercial indemnities covering redundancy costs should be made available to contractors (as is the case in the private sector).
9. Given the significant equality implications in administrative related transfers, greater uniformity of policies and procedures is needed across the public sector employers in Northern Ireland.
10. The issue of protection of pension rights is particularly important given the scale of the public sector in Northern Ireland (31.9% of employment in Northern Ireland is within the public sector).
11. The regulations do not contain any specific consideration of gender. This does not preclude the potential (in the absence of protection) for TUPE transfers to disadvantage women significantly more than men. Given that -

1. The categories of employment most affected by transfers (including from the public sector), have a high level of female employment, e.g. catering, cleaning, clerical.
2. The potential for a transfer to worsen an individual's conditions depends on their vulnerability in the labour market. This vulnerability is strongly associated with those receiving low pay and/or other disadvantage, women have a higher representation in this group.

12. The Legislation should be easily understood by all.