05 Apr 2013

TUPE Changes in the Pipeline

TUPE Changes in the Pipeline

Neil Fraser, Partner, looks at some up and coming proposed changes to the Transfer of Undertakings Rules.

Neil Fraser, Partner, looks at some up and coming proposed changes to the Transfer of Undertakings Rules.

The words “Transfer of Undertakings” are liable to strike fear into the hearts of many in Business and Employment Law alike.

The idea behind Transfer of Undertakings (TUPE) is fairly easy to state.  Employees should not lose their jobs simply because their employer changes.  As with everything, though, the devil is in the detail.  The government are currently proposing to make changes in those details.

Firstly, to protect someone’s employment, the regulations actually protect every term and condition of their contract of employment.  Employer pension contributions in particular, are a thorny problem.  The current regulations mean that if an employee is entitled to contributions from their employer to their fund before a transfer, then those contributions must be maintained by their new employer after a transfer.

So far, so simple.  The problem is that the current regulations do not actually state at what rate the new employer must pay contributions!  The government are now going to make it clear that the employee is entitled to choose the rate of their contributions, and the new employer must match those contributions, up to 6%.

Now things get very tricky.  We are currently in the roll out period of auto-enrolment – a new set of rules that mean that eventually all employers in the UK will have to enrol their employees in a private pension scheme and contribute.  For more details see here http://www.acandco.com/auto-enrolment. Auto-enrolment also sets minimum levels for employer pension contributions.  Until October 2017 the minimum contribution from an employer is 1%.  But what if an employee on a 1% scheme transfers to a new employer before 2017?  Can they insist on jumping to a 6% scheme?

Helpfully the government have spotted this loophole, and they intend to close it, so that simply paying the 1% will be enough to satisfy the TUPE regulations.

If that wasn’t enough for you, the government are also consulting on what actually amounts to a transfer of an undertaking in the first place.  An easy transfer is where Bob, who owns a shop and employs staff in the shop, sells the shop to Sally as a going concern.  A harder transfer is where Fred employs cleaning staff and has a contract with the local council to clean their offices, but the council decide to employ their own cleaners.

At the moment the employees in both of those situations would be protected.  The government is currently proposing to remove the protection from Fred’s cleaning staff, while leaving it in place for Bob’s staff.  The reason given is that the current law goes much further than the original European rules which it enforces.

The government is aware that a number of service providers will have entered into contracts with, for instance, local authorities on the basis that TUPE would apply at the end of the contract, and they would not have the burden of retaining the staff if their contract was not renewed.  There will be financial consequences for such contractors of a change like this.  The government are discussing how much notice to give of the change coming into effect, which could be five years or more.

If you want to have your say on this change to TUPE you can do so here, but you only have until 11th April 2013 to do so.

Neil Fraser, Partner

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