The People in the Package: TUPE Risk on Public Service Retenders

Outsourced public services rarely stand still. A cleaning, waste, leisure or back-office contract may move from one supplier to another, be split between providers, or return to the authority. In each case, the staff who deliver the service may transfer under the Transfer of Undertakings (Protection of Employment) Regulations 2006. TUPE is therefore not a payroll detail to be resolved after award. It is a procurement risk that shapes price, delivery continuity and industrial relations.

Why TUPE belongs at the tender stage

TUPE can apply to a service provision change where activities are carried out by a contractor on behalf of a client and the contract changes hands. It can also apply when work comes back in-house. The legal question is whether an economic entity retains its identity, but bidders cannot wait until mobilisation to test that point. Tender documents should give a clear and consistent account of the service, the workforce and the contractual history. If the authority is uncertain, it should say so and explain how bidders are expected to price the uncertainty, rather than leaving each bidder to make a different assumption.

Risk allocation is not neutral. A tender that transfers all employment risk to the supplier may attract a risk premium; a tender that hides risk may produce an unsustainable bid. The authority's objective is not to offload risk at any cost, but to place it where it can be managed and to ensure the contract reflects the allocation.

Employee liability information: a duty, not a data dump

Where TUPE applies, the outgoing employer must provide employee liability information to the incoming employer. This includes information about the identity and age of employees, their contracts, pay, hours, holiday, collective agreements and disciplinary or grievance matters. The information must be provided at least 28 days before the transfer, and it must be accurate and complete. If it changes, updated information is required. The duty is not satisfied by sending a generic schedule or by relying on the buyer to ask questions.

For contracting authorities, the practical issue is often earlier than the statutory duty. Authorities should require the incumbent to provide a consistent data set during the retender, with a clear basis for assumptions about staff who may not transfer. Bidders should test that data against the service specification, payroll records and consultation history. A discrepancy in headcount or pension status can alter the bid price materially.

For bidders, employee liability information is not merely a compliance document. It is the evidential basis for pricing, for consultation planning and for any warranty or indemnity sought from the authority. Bidders should record the information received, the questions asked and the answers given. If the authority cannot provide complete information, the bidder should identify the gap and price or qualify it expressly.

Pensions and the Fair Deal: looking beyond the payroll

Pensions are often the largest TUPE-related cost and the least visible in a tender. Where staff transferring from the public sector are eligible for the Fair Deal, the authority and the bidder need to understand what pension protection is required. Fair Deal guidance is intended to ensure that staff retain access to a pension scheme that is broadly comparable to the public service pension scheme they leave. In practice, that may mean admitted body status in the Local Government Pension Scheme, a guarantee arrangement, or another mechanism accepted by the authority.

These arrangements take time. Admission agreements, bond or guarantee requirements, actuarial assumptions and pass-through costs cannot sensibly be left to the final weeks before mobilisation. Authorities should set out the pension requirement in the tender, identify who bears the cost of any deficit or change in assumptions, and ensure the contract allows for the agreed pension arrangements to be implemented. Bidders should model the pension cost separately from payroll and should not assume that the authority will absorb any shortfall unless the tender says so.

Insourcing requires equal care. Returning a service in-house does not remove TUPE. The authority may become the incoming employer, with responsibility for consultation, pension continuity and inherited liabilities. Early engagement with HR, pensions and finance is essential.

Risk allocation: precise words, not hopeful clauses

TUPE clauses often fail because they are too general. A statement that the supplier will 'comply with TUPE' does not allocate the cost of historic equal pay claims, pre-transfer redundancies or changes to terms and conditions. A clause that the authority will provide 'all relevant information' does not define what happens if that information is incomplete.

Good tender documents distinguish between: information the authority will provide; assumptions bidders must make; liabilities that remain with the authority; liabilities that transfer to the supplier; and the consequences of a change in the workforce after award. They also address consultation. TUPE consultation obligations sit with the outgoing and incoming employers in different ways, and the contract should not leave the supplier exposed to a process it cannot control.

Authorities should avoid using TUPE as a reason to avoid consultation with staff and representatives. In a retender, early and clear communication about the future service, the identity of the incoming provider and the likely timing of transfer reduces the risk of disputes and helps preserve service continuity.

A checklist for contracting authorities

• Confirm whether TUPE is likely to apply and record the reasoning, including for insourcing or disaggregation.
• Obtain a complete workforce data set from the incumbent and reconcile it with contract and payroll records.
• Set out pension requirements, Fair Deal expectations and cost allocation clearly in the tender.
• Provide employee liability information on time and update it if it changes.
• Draft TUPE clauses that allocate specific liabilities, not just general obligations.
• Require bidders to explain their TUPE assumptions and consultation approach.
• Plan for mobilisation, including staff engagement, pension admission and payroll transfer.

A checklist for bidders

• Read the workforce data and employee liability information critically; do not price from headline headcount alone.
• Identify gaps in pension, holiday pay, bonus or allowances and raise them through clarification.
• Model the cost of consultation, harmonisation and any agreed changes to terms.
• Check whether the authority's indemnities or warranties are adequate and enforceable.
• Record assumptions and qualifications in the bid.
• Engage early with HR, pensions advisers and TUPE counsel.
• Prepare for day-one communication and continuity of service.

Conclusion

TUPE does not reward last-minute improvisation. In a public service retender, the staff who deliver the service are part of the contract. Authorities that provide clear information and allocate risk deliberately will attract more sustainable bids. Bidders that test the data and price the obligations will be better placed to mobilise without dispute. The discipline is the same in either case: identify the workforce, understand the pension position, and write the risk allocation in terms that can be enforced.