Industry news

Cast your mind back to before 2006 and consider this question: when does TUPE apply upon a change of contractor in relation to outsourcing contracts, in other words before the service provision change (SPC) elements of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) were introduced?

Pre-2006, the answer was often far from clear by virtue of a number of European and domestic UK cases. One of the main reasons for the introduction of the SPC concept was to seek to achieve greater certainty. However, in January this year the Government launched a consultation on certain reforms to TUPE which included a proposal to abolish the SPC provisions.

TUPE derives from the European Acquired Rights Directive (ARD) and the ARD does not explicitly provide for or require there to be a SPC concept. The Government has characterised the SPC as "gold-plating" the ARD and hence is considering its removal.

As with any proposal there will be pros and cons – the aim of this article is to assess what these might be.

What is a SPC?

TUPE provides that a SPC can occur when: services are outsourced for the first time; a new contractor takes on services that have already been outsourced (second generation contracting); or outsourced services are brought back in-house.

Paraphrasing slightly, the SPC concept requires there to be an organised grouping of employees whose principal purpose is the provision of the services in question.

To understand the impact of the proposal to remove SPC from the scope of TUPE, we need to remind ourselves of TUPE pre-2006.

What was so different pre-2006?

Since its introduction, TUPE has sought to protect employees when there is a 'relevant transfer' i.e. the transfer of a stable economic entity which retains its identity following the transfer. The prime example having always been the traditional sale of a business as a going concern through an asset disposal. However, that has never been the only scenario and the ECJ developed a "multi-factorial" test to determine whether a transfer occurs. The essence being that no single factor is the clincher – rather the situation has to be assessed in the round.

The ECJ accepted in 1994 that the transfer of a single cleaner without any (or many) associated assets could attract the protection of the ARD when a German bank outsourced its cleaning operations.

This was the high-water mark of the case law and there then followed almost a decade's worth of conflicting views from the European Court on the application of the ARD and hence TUPE to labour intensive activities such as cleaning and security services – namely non-core activities that are often outsourced – especially in a second generation context when contractors were changing.

This led to litigation as to the application of TUPE commonly to determine which entity might have to bear the responsibility for redundancy costs if some or all employees who may be viewed as assigned to the services might be dismissed. Often, that uncertainty led to references to the European Court, increasing the indirect business costs.

Impact

It was that uncertainty that the SPC concept was intended to address.

Therefore, various service providers and customers have expressed concern that if the SPC provisions are abolished we will simply be left having to revert to the uncertainty in the case law that led to the 2006 change in the first place which will ultimately increase rather than decrease costs.

One of the reasons for the abolition of the SPC is the "gold plating" point mentioned above. For example, the German interpretation of the ARD is much narrower than it is in the UK and affords less protection for employees of an outgoing provider of outsourced services.

Perhaps therefore it is not unsurprising that in the UK TUPE has been viewed as inhibiting business growth and development because of the liabilities and employees that new suppliers can be required to inherit. It is also recognised that economic times have changed since 2006 and removing TUPE could help stimulate business growth once again.

The Government is certainly hoping that removing the liabilities that TUPE carries will encourage more businesses (particularly SMEs) to bid for outsourcing contracts and will help create a more level playing field. Indeed the Government suggests that the removal of SPC will create more freedom for businesses "to out-source work and change service providers giving service providers more freedom to bid for contracts."

However, the proposals will not necessarily benefit all suppliers. Given that contracts will have been priced on the basis that TUPE would be expected to apply on exit - outgoing suppliers could now face unforeseen (and expensive) redundancy costs on termination. Consequently, the Government has recognised the impact of this proposal will greatly depend on when the changes are introduced and a lead in time of between 1 and 5 years has been suggested. Without doubt, the longer the delay, the fewer contracts will be affected.

Final thoughts

Clearly if the SPC provisions are abolished this will change the way that businesses approach outsourcing contracts in the future. It should however, be remembered that removing SPC will not mean that all outsourcing contracts will fall outside the scope of TUPE. Unless clarification of the pre-2006 case law is provided, the abolition of the SPC provisions may simply mean that parties dust off the same arguments on whether or not there is a 'relevant transfer' once again.

That said, we are still only at the consultation stage of the proposals and only time will tell if we have seen the end of the SPC provisions. In the meantime when entering into outsourcing contracts, it would be prudent for businesses to make provision on termination to deal with the situation both if TUPE would and would not apply.

NOA HRO roundtable

The location of contact centres is becoming increasingly dispersed with countries such as Sweden, Egypt, Northern Ireland and Britain becoming ever more popular for a variety of reasons. Of course, contact centres here in the UK and overseas both have merits that need to be considered when setting one up.

20 years ago, India was the destination of choice for overseas contact centres, and when comparing countries that are currently popular, they both have much in common, the obvious being language.

English is either the first or second language in both India and the likes of Sweden and Egypt. Likewise all countries that are popular with overseas call centres have a robust and reliable infrastructure.

Today, it’s rare to find a call centre where English is badly spoken. With the increasing importance of impeccable customer service and the fact that consumer are more demanding and expecting better service, companies are realising that the contact centre plays a key role in a company or brand image. The contact centre is a vital part of the customer journey and any business which doesn’t recognise its strategic importance will do so at their own peril.

As an industry, contact centres are hard to police with areas such as PPI tarnishing the industry and giving it a bad image. Calls are untraceable which makes any complaint procedure impossible. With this in mind it is ever more important to invest in optimising the customer journey and infrastructure to ensure these annoyances are avoided.

So you may well ask what is better; setting up a contact centre in the UK or abroad? Setting up a call centre in the UK means that workers share a common language and cultural values, technologies are first rate and there is a good talented workforce. Northern Ireland has become an increasingly popular destination for call centres over recent years – there is no language barrier, travel is easy and costs are generally lower than mainland UK. Likewise, Sweden is beneficial due to most workers being multi-lingual with fluency in English and through having a good infrastructure and communications networks. Similarly Egypt has a skilled linguistic workforce and a good infrastructure. Due to the time difference, both the US and Europe benefit from outsourcing to Egypt, however, due to the Arab Spring and their unstable government the future of the industry is not 100% secure.

Both UK and overseas have valuable merits, however, keeping contact centres in Britain is good on a number of levels including investing in a British company and providing employment for UK workers.

While companies may not see the initial financial rewards, the gains made in quality control and ownership make for better results. Management can visit the centres themselves, without the long-haul flights and they can ensure that people representing their brand are doing so as required. On top of these are of course the language and cultural values, all of which go a long way to ensure the brand values are adhered to and upheld.

So while it is a personal choice of companies, it is always beneficial to support ones own economy and internal workforce. In this case where everything from the infrastructure to the talented workers, cultural values and language skills are readily available, the UK is definitely worth considering when deciding where to set up your contact centre.

Offshoring v Onshoring - Which Way is the Pendulum Swinging?

Outsourcing your payroll function can have a massive impact on your business, and so before embarking on such a proposition, it takes far more than price comparisons and due diligence to make sure that you have chosen the right outsourcing company.

What do you wish you had asked, before you signed on the dotted line with your current outsourcer? Or perhaps you are contemplating outsourcing your payroll function at the moment and want to be certain you have made the right choice. Neil Lagden, Head of Bond Payroll Services, a Division of Bond International Software, runs through the most salient points.

1.How will I be looked after?

Many outsourcing companies will sign up as many customers as possible, and then simply offshore the service delivery to reduce overheads, leaving customers having their payroll processed by teams with whom they will have little or no direct contact. It is therefore essential that before signing the contract, you ascertain exactly how the service delivery and account management is structured, who your primary points of contact would be, who is actually doing the work, and who your escalation points are if necessary. Having good communication channels to the right people is crucial to a successful delivery of service

2.What if my business changes?

Recently, many businesses have reduced their workforce, and many more have been finding it tough in the current climate. Having said that, many other businesses are able to grow their headcount over the forthcoming months. This all has impact on the payroll services provided and will differ from what has been contracted for several months or years ago, but the crucial question is whether the contract is flexible enough to accommodate your current needs. And if they can change the services they are currently providing, will you be charged for it, especially if the functionality you need sits slightly beyond their standard packages. A good outsourcer will be able to flex with your business, and not necessarily charge you for it.

3.What is ‘Accuracy’ to me, and how does it compare with the agency’s view?

Outsourcing relationships can tarnish rapidly if the time theoretically saved by outsourcing is then wasted on checking and amending the companies work. Payroll in particular is not a business process that can frequently have mistakes or be delayed, and so it is essential that the company adheres to the same, or even higher, standards of accuracy as your own. For example, is the outsourcer aiming to just get the entire payroll through BACS on deadline, or are there further levels of accuracy that they aspire to, and that you need? Indeed, a good payroll agency will actually identify errors or misnomers in the data provided and take an active part in resolving any problems.

4.How is my account team targeted internally?

One of the most frequent complaints of outsourcing is the lack of urgency in responding to queries. This is often a reflection of how the agency account teams are targeted – if the team is concerned simply with the volume of payroll being processed, which in itself encourages errors for the sake of speed, then client engagement is rarely focused on. However, a good outsourcing company will instead target its payroll managers on retention and satisfaction of clients, ensuring that all the stops are regularly pulled out.

5.How is my team structured?

Ideally, over time you will build up a close working relationship with the payroll manager within your outsourced team, as the day to day management of the payroll naturally requires frequent two-way communication. However, because of this close relationship, frank discussions regarding performance or further necessary services need to be directed at a separate person, responsible for the business side of the relationship, not just the payroll operations. This account manager – a role that is being rapidly cut out by many outsourcers in order to reduce headcount – must be concerned with more than upselling, and instead make sure that the payroll outsourcing relationship addresses all the needs of the client business.

6.What experience do you have with payrolls of similar complexity to my own?

References are a key part of choosing any supplier, whether outsourced or not and whatever the business process. Multiple offices, varying points of contact within the business and high proportions of remote workers can create a particularly complex payroll procedure – one which requires experience to manage. Seeking out payroll outsourcers who can manage payrolls of varying sizes misses the bigger picture – it is the complexity of the payrolls, and the company’s ability to tackle them, that determines their suitability.

The future of procurement

Defence giant BAE has secured a five year contract to supply the U.S. army with equipment in a deal valued at $780 million.

The contract will see the arms manufacturer supply newly developed explosives from its Tennessee plant to the U.S. military, as a high stability replacement for TNT, which is being phasing out within U.S. forces.

The contract comes as welcome news to the company’s shareholders, at a time when BAE is suffering from reduced contracts being put for tender, as the world’s largest defence spender makes significant cuts to defence programs, in light of global recession and the changing theatre of warfare.

Erin Moseley, president of BAE Systems’ Support Solutions sector, said of the new explosives: “Once fully fielded, it will help to save lives on and off the battlefield.”

BAE selected as preferred bidder for Foreign and Commonwealth office framework

The potential for the country exiting the Eurozone had been a real risk due to the scale of the financial crisis in Cyprus. The European Central Bank (ECB) had stated that it would cut off funds to banks in the country by this Monday, if a deal had not yet been agreed on.

The potential impact of an exit by Cyprus from the Eurozone on other European countries facing economic hardships had caused investor panic and instability from a loss in market confidence.

The bailout has led to the reconstruction or closure of parts of the banking infrastructure in Cyprus, as the county seeks to move to a sustainable solution with capital security.

Jeroen Dijsselbloem, the president of the Eurogroup of eurozone finance ministers, said the loan would "put an end to the uncertainty" surrounding Cyprus’s economic stability and the support of Europe.

With the announcement of the deal investor confidence has been bolstered, with Asian markets showing growth as investors respond to the agreement.

Negotiations enter final stages as Cyprus’ fate is decided

The UK Border Agency (UKBA) has been criticised for supplying six years worth of inaccurate data by the Home Affairs Committee.

Invalid data included the size of the immigration asylum backlog and the measures that were being employed to trace immigrants that had lost contact.

The Home Affairs Committee reported that the failure to trace immigrants who had lapsed in contact with the UKBA, had resulted in the mistaken belief that such individuals had left the UK, when in fact many are still believed to be in the country.

The Home Affairs Committee criticised Lin Homer, the then head of the UKBA: “Lin Homer, who was in charge of the Agency for much of the period in question, has repeatedly misled the Committee over the size of the asylum backlog and still refuses to take responsibility for her failings”.

Ms Homer said that the criticisms related to events and failings that occurred long after she left the UKBA 18 months ago.

UKBA and Capita to be investigated by ICO

Equity firm Blackstone Group has reportedly submitted a counter-bid to buyout Dell, undermining the current favoured offer by founder Michael Dell.

The reported deal citied by the New York Times to unnamed sources, reported that Blackstone made the bid during last Friday, in a proposal which would see the equity group offer above the offer of $13.65 per share by Michael Dell and Silver Lake Partners.

The new competition is likely to result in Dell’s move to becoming a private organisation dragged out over many months by multiple meetings and debates involving Dell’s core shareholders, surrounding the competing offers.

Other counter-offers are expected to appear on the horizon, with dissent from shareholders surrounding the value of the business.

$24 billion acquisition of Dell confirmed

Apple has taken the top spot with consumers as the leading cloud storage provider, ahead of competitors including Amazon, Google and Dropbox.

In a survey of Internet users carried out by Strategy Analytics found that 27 percent of users had used Apple’s iCloud, compared to its nearest competitor Dropbox, with 17 percent.

The survey revealed that the cloud storage market was still ripe for expansion, with 55 percent of those surveyed having never used cloud storage services, and only 33 percent using the services on a regular basis of once or more within a week.

The survey revealed a divide in the sexes with men favouring Google and women choosing Apple’s offering.

The results also demonstrate that cloud storage services are becoming increasingly used for music storage, with around 90 percent of customers using Apple, Amazon and Google cloud storage for music files, as users move their media library content from on-site storage to the cloud.

US Homeland Security move to cloud

Gas prices jumped by as much as 50 percent after a technical fault caused the closure of one of the UK’s key pipelines.

The closure amidst continued cold weather and increased demand, has led to fears that the UK energy infrastructure is risking shortages, however the government has denied this.

The major gas pipeline running is scheduled to run at a reduced capacity in the near future when Norway carries out essential maintenance work in April.

The impact of the shortage on current prices is likely to impact the rise of home energy bills as companies pass down cost rises.

A spokesman from the Department of Energy and Climate Change, said: “'Storage levels are low at the moment - as you'd expect towards the end of winter”, adding that “the UK gas market is tight”.

EDF given the go-ahead to construct new generation of power stations

The stability of the Eurozone and Cyprus lies in the balance as today’s negations seek to prevent the country from crashing out of the Eurozone as debts mount up.

Cyprus has been in negation with European countries including Greece and Russia as it seeks to secure a bailout, with its European future resting on the success of today’s negations.

Over the next two hours the political leaders of Cyprus are set to meet and decide on a proposal set out today, including the decision to sell parts of the Bank of Cyprus to Greece as well as Cypriot assets.

While today's actions will have a significant impact on Cyprus and its European future, German finance minister Wolfgang Schäuble said that the calm reaction in finical markets predicts a positive response, saying: “The financial markets clearly recognise that the euro zone is essentially better prepared for possible turbulence.”

August reveals extent of global economic slowdown