Business transfers and outsourcing

UK employment law reforms on the horizon

Business transfers and outsourcings

The Procurement Act 2023 will be amended to provide powers to introduce regulations and publish a statutory Code of Practice to protect workers who transfer on an outsourcing and those they will be working with.

Implementation Status (November 2024)

  • Part of the Employment Rights Bill.
  • Consultation and regulations on proposals around the Code expected.
  • Additionally, the government has called for evidence on TUPE to holistically examine a "wide variety of issues" relating to TUPE and process.
     
Action
  • Any changes to the TUPE provisions will impact all employers involved in business transfers and outsourcings.
     
  • Employers engaged in public sector outsourcings will need to take account of the new Code of Practice in negotiations and service agreements and ensure that this is reflected in practice.   
In detail

  • The Bill provides for regulations to be made to ensure that in "relevant outsourcing contracts" where workers are transferring to a supplier from the public sector, transferring workers are treated no less favourably as workers of the supplier than as workers of the contracting authority they were transferred from and that other workers of the supplier (who are not transferring) are treated no less favourably than the transferring workers.

  • Contracting authorities will be required to take "all reasonable steps" to comply with the regulations and "have regard" to the code of Practice.

  • The government has also committed to reviewing "a variety of issues relating to TUPE regulations and process, including how they are implemented in practice". The Next Steps paper also indicated that the government would be taking forward wider measures, including a requirement for contracting authorities to carry out a public interest test before outsourcing and, when contracts come up for renewal, making social value mandatory in contract design, and using public procurement to raise employment standards.

  • The government has also indicated that it is looking to extend the Freedom of  Information Act to apply to private contractors providing public services and to publicly funded employers.

Impact

  • The power to make regulations and to impose a duty to publish a statutory code of practice are intended to to avoid the emergence of a workforce consisting of ex-public sector employees and private sector employees, with each group on different terms and conditions (referred to as a "two tier workforce"). Employers should anticipate that the regulations will seek to address anti-avoidance measures and enforcement mechanisms.

  • Before the new government was elected, the previous government published a consultation looking at specific aspects of TUPE. One of these was to clarify that workers were not covered under the definition of employee – however, in light of the current government's proposals around employment status, this seems unlikely to be a point that is taken forward in the review.