How imminent changes to TUPE could reduce the cost of your supply chain

As most retailers will testify, managing the risks and costs associated with TUPE can be a real problem when making changes to supply chains. As the law currently stands, a change of supplier or service provider will usually trigger the application of TUPE. The main effect of this being that the relevant employees (generally speaking, those who are engaged in providing the work that is the subject of the transaction) will transfer to the incoming supplier or service provider on their existing terms and conditions. Not only does this mean additional overheads for the incoming provider, but it quite often works against the business’s primary reason for wanting to change the service provider in the first instance — in other words, the fact that the people delivering the service are not providing the required quality.

Moreover, an incoming supplier will often wish to provide the services in a different way or from a different location. A significant change of location usually means that the employees are redundant, giving rise to redundancy and notice pay costs. In addition, the way in which TUPE currently works means that such geographically induced redundancies would be automatically unfair dismissals as well. This would mean additional costs for compensation for unfair dismissal (of up to £74,200 per employee). These costs are often significant and the costs, one way or another, will find their way into the price being quoted for the proposed new contractor (that new contractor being most vulnerable to these risks and costs)…

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