Weekly dilemma: TUPE and redundancies

Roger Tynan, partner in the employment, pensions and benefits team at Maclay Murray & Spens, examines why it is important to take TUPE regulations into consideration when making redundancies.

We plan to outsource part of our IT support function to a provider based in India. It is likely to affect just one employee in our IT department, who we propose to make redundant. Are there any particular legal issues we need to consider?

Before you start consulting over redundancy, you need to ensure you have met your obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

Although TUPE has been with us since 1981, the 2006 revisions extended its reach to 'service provision change', which is where activities carried out by a group of employees cease to be carried out by the organisation and are, instead, carried out by a contractor on its behalf.

Although just one employee appears to be assigned to this particular activity, it can still constitute a service provision change. If TUPE applies, you must inform and consult your employee and any other affected staff in advance of the change. Should you fail to do so, you could be liable to pay compensation of up to 13 weeks' pay and benefits per affected employee.

The employment appeals tribunal has also recently ruled, in Holis Metal Industries Ltd v GMB Newell Ltd, that TUPE can apply where, following the transfer, a business or service will be based outside the European Union. Your employee should, therefore, transfer to the Indian provider with their terms and conditions intact.

When you consult with the employee, you are likely to find that they object to the transfer. In which case, you must treat them fairly and, in particular, follow the statutory dismissal procedures before dismissing them. Assuming you are unable to redeploy them, you can offer the equivalent of a redundancy package.

A legal compromise agreement will protect the company should the employee claim that this is an automatically unfair dismissal connected to a TUPE transfer. You cannot legally compromise claims arising from a failure to consult under TUPE, so in the circumstances, you are advised to conclude the TUPE consultation process before entering into a settlement.