TUPE reform: learn from New Zealand's experienceAdd To My Clippings Alt Text

Should “professional services” be excluded from the definition of service provision change (SPC) under the TUPE Regulations?

The Government’s recent response to its call for evidence on TUPE stated that there were “mixed views” about whether professional services should continue to be covered by the SPC regime. In certain sectors, particularly advertising, there was strong support for the idea of introducing an exemption.

Yet ministers at the Department for Business, Innovation and Skills would be well advised to take heed of New Zealand’s experience before entertaining thoughts of providing protection to some employees but not others. The law on transfer of undertakings in New Zealand distinguishes between different categories of employees, albeit in a different way than that being advocated by the UK advertising companies.

In New Zealand, only a limited category of employees, commonly referred to as “vulnerable” employees, have the right to transfer to a new employer on a business sale or service provision change. These employees provide prescribed services such as cleaning and laundry in certain defined sectors, including health and education. Other “non-vulnerable” employees - the vast majority of the workforce - have no right to transfer.

The overriding policy objective of this two-tier system is to provide job security for the lowest-paid employees in industries where work is often contracted out and redundancies would otherwise be common. But it is doubtful whether this objective has been achieved in practice.

One major difficulty is that the definition of so-called “vulnerable” employees has often led to arbitrary results, with employees who could reasonably be described as such left with little or no employment protection. For example, whereas a company’s cleaners are likely to transfer to a new employer in a particular sector, the caretaker at the same company - on similar pay to the cleaners – may well be made redundant.

The New Zealand experience should cause the Government to think very carefully before attempting to define “professional services” for SPC purposes under TUPE. It is also a cautionary tale about the potential pitfalls of restricting employment protection only to certain categories of employees.

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