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PSM HR Blog: HR Case Study 1 – TUPE

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PSM HR Case Study 1

Background

An SME marketing Company who bought out another smaller provider from receivership after it had gone into liquidation, took on a number of its employees at various levels including a senior account manager, under the “Transfer of Undertakings (Protection of Employment) Regulations 2014” (“TUPE”) legislation (updating the 2006 legislation), whereby the employees retained their full terms & conditions of employment including rights of continuity of employment, meaning that the date they joined their original employer (referred to as the Transferor Company) was the legal date when they were deemed to have now joined the new Company (referred to as the Transferee Company), so they do not lose their length of service already worked.

However, putting aside the requirement under TUPE for both the Transferor (in the form of the liquidator) and Transferee Company’s to fully consult with their employees, there were two key aspects of the transfer that required to be resolved and the Transferee Company thought that their hands were tied due to the TUPE regulations.  These aspects were as follows:

  1. A number of the roles in the original Transferor Company did not match or be reflected within the existing structure of the new or Transferee Company.
  2. Whilst he had not been advised and no formal performance management action had been taken, the performance of the senior account manager was questionable and it appeared possible if not probable, that he did not possess the skill sets required for his role and had been promoted beyond his capability, (“Peter” i.e. Tom Peter’s principle).

Unfortunately it is a common fact that when a Company goes into liquidation, it is due to one or more of the following being the case, poor products/services, poor management or unskilled or poor employees.  Whatever the situation, the Transferee Company were advised by their legal advisors that their hands were tied, they had to live with the situation and do the best they can with the resources (employees) that were transferring.

PSM – HR & Commercial Advice

PSM advised the Company that under the provisions of the Economic, Technical & Organisational provisions (“ETO”) of TUPE, Section 7.2, either the Transferor or Transferee are able to instigate employee changes which would be subject to the normal fairness test, as would apply to any dismissal.    As a result, shortly following the transfer, PSM proposed that a restructuring of the combined workforce be considered, so as to ensure that the new structure both reflected the existing and the future needs of the Company, and ensured that the employees being retained, were all treated equally in the analysis of their skill sets via a skills assessment so as to ensure that the skills matched/reflected the existing and future needs of the Company in the provision of their services.

Whilst the other employees had short service and were modestly paid, hence any costs involved of a fair dismissal would be moderate and commercially viable for the Company, the account manager was very long serving with a substantial benefits package and as such, the cost of any redundancy dismissal would be high and unaffordable for the Company.

Result

It was important for the Company to secure its commercial viability and to do nothing and take everything on board, would have actually placed its financial viability, long term performance and the job security of all the combined groups of employees at serious risk. Yet they had been advised that their hands were completely tied by TUPE. PSM advised the Company to restructure the combined group of employees, by using a matrix analysis of the skill sets available across all of its general employees, with assessments being completed by two separate members of the combined management team, without any collusion between the two, plus taking and using any data available from the personal appraisal and development systems of both Companies. By applying a robust, thorough and transparent consultation and redundancy process, this ensured that procedurally, the process met and indeed exceeded all reasonable standards for a fair redundancy dismissal, under the ETO provisions of TUPE and any redundancy related legislation. With the exception of the account manager, this meant that the Transferee Company was able to fairly dismiss those employees who regrettably did not possess the type and level of skill sets required for the company to fulfil it and its client’s needs and to have a structure and skill set portfolio that would enable them to really benefit from the purchase of the Transferor Company.

However, due to the costs of any potential redundancy dismissal, PSM recommended that the Company retain the account manager, but established a set of Key Performance Indicators and sales targets, so as to enable them to support him, until such time as he either proved himself or it was necessary following performance management procedures, to exit them from the business. In fact within a period of 3 months, it was necessary for performance management procedures to be initiated and soon after, settlement discussions took place and an acceptable settlement package was agreed for them to leave the Company.

The final result was that the new structure, was stronger by having benefitted from additional skills being transferred into the Company and the new structure, was itself far better suited to enable the Company to further its growth and the development of its services. Equally important was that whilst regrettable that some employees were lost as a result of the process, the ones that remained had far greater job security and better job prospects in a growing and increasingly successful Company

 

“Take Away” Message

Risk is inherent in all business decisions and cannot be avoided, but with a careful analysis and the application of proper and robust HR practices and procedures, any risk can be at least minimised if not on occasions, be almost eliminated, especially with PSM on your side.

 

 

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