TUPE Service Provision Changes: Outsourcing, Insourcing, Retendering

Service provision changes are a distinct category of TUPE transfer, commonly affecting outsourced services, facilities management, cleaning, catering, and IT contracts.

What is a Service Provision Change?

Three Types

Type	Movement
Outsourcing	Client → Contractor (services out)
Insourcing	Contractor → Client (services back in)
Retendering	Contractor A → Contractor B (contract changes)

When SPC TUPE Applies

Three requirements must all be met:

1. Organized grouping of employees
2. Principal purpose is carrying out activities for client
3. Activities don't consist wholly of supplying goods

Outsourcing (First Generation)

What It Is

Client organization transfers services to external contractor:

Example: Hospital outsources catering to external catering company.

Who Transfers

Employees who:

• Were employed by client (hospital)
• Principal purpose was providing catering
• Formed organized grouping
• Assigned to the catering function

Transfer to contractor (catering company).

Common Outsourced Services

Service	Example
Facilities management	Building maintenance, security
Catering	Staff restaurants, hospital food
Cleaning	Office cleaning contracts
IT services	Helpdesk, infrastructure support
Payroll/HR	Back-office functions
Security	Guarding, reception

Client's Position After

• No longer employs those staff
• They transferred to contractor
• Client is now contractor's customer
• Contractor provides service

Insourcing (Bringing Back In-House)

What It Is

Client takes back services previously outsourced:

Example: Council brings refuse collection back in-house from contractor.

Who Transfers

Employees who:

• Were employed by contractor
• Principal purpose was providing services to that client
• Formed organized grouping

Transfer back to client (council).

Why Insource?

Common reasons:

• Poor service from contractor
• Cost savings
• Control over service
• Contract end
• Strategic reasons

Contractor's Position After

• Loses those employees
• They transferred to client
• No longer provides service
• May have other contracts continuing

Retendering (Second Generation)

What It Is

Service contract moves from one contractor to another:

Example: Cleaning contract changes from Company A to Company B.

Who Transfers

Employees who:

• Were employed by Contractor A
• Principal purpose was providing services to that client
• Formed organized grouping

Transfer to Contractor B (not back to client).

Most Common SPC

Retendering is most frequent:

• Contracts typically 3-5 years
• Regular retender processes
• Competitive bids
• Employees potentially transfer every few years

Client Not Involved in Employment

Client is customer:

• Doesn't employ the staff
• Employees transfer between contractors
• But client's specifications matter
• Client often has input on process

Organized Grouping Requirement

What It Means

Identifiable group of employees:

• Working together
• Providing specific service
• For specific client
• Can be defined and listed

Can Be

• Whole team
• Part of workforce
• Across different sites
• Various job roles

But must be identifiable.

Examples

Clear organized grouping:

• 10 cleaners working at Client X's offices
• IT helpdesk team for Client Y
• Security guards at Client Z's site

Not organized grouping:

• Random employees doing bit of everything
• Staff shared across many clients
• Ad hoc arrangements

Principal Purpose Test

Must Be Main Job

Employees' principal purpose must be:

• Carrying out activities for the client
• Not just incidental
• More than 50% of time (rule of thumb)
• Can be assessed over reasonable period

Split-Time Workers

If employee works for multiple clients:

Scenario	Transfer?
80% Client A, 20% other	Yes - principal purpose Client A
60% Client A, 40% other	Likely yes
40% Client A, 60% other	Likely no
Equal split many clients	No - no principal client

Assessment Period

Usually assessed over:

• Recent representative period
• Few months typically
• Not just snapshot on one day
• Pattern of work

Not Wholly Supply of Goods

Must Be Services

Third requirement:

• Activities must not be wholly supply of goods
• Services must be significant element
• Goods alone don't trigger TUPE

Examples

Activity	SPC TUPE?
Providing cleaning services	Yes - services
Delivering cleaning supplies only	No - just goods
Maintaining equipment	Yes - services
Selling equipment	No - goods
Catering and meal provision	Yes - services
Supplying ingredients only	No - goods

Who is the Client?

Must Be For Client

Services must be:

• Provided to identifiable client
• For that client's benefit
• Under contract or arrangement
• Principal purpose test applies

Not Client

These don't count:

• General market services
• No specific client relationship
• Selling to public
• B2C rather than B2B

Multiple Employees, Multiple Roles

Different Job Roles

Organized grouping can include:

• Managers
• Supervisors
• Operational staff
• Support roles

All principally engaged in service.

Example

Hospital catering outsourcing might transfer:

• Catering manager
• Chefs
• Kitchen assistants
• Service staff
• Food hygiene officer

All principally engaged in hospital catering.

Practical SPC Scenarios

Scenario 1: Office Cleaning Contract

Company X has cleaning done by Contractor A (20 cleaners). Contract retenders, Contractor B wins.

Result:

• 20 cleaners transfer from A to B
• On same terms
• Contractor A loses the staff
• Contractor B inherits them
• Company X still gets cleaning (just different contractor)

Scenario 2: Bringing IT Back In-House

Company outsourced IT helpdesk to Contractor. Decides to insource.

Result:

• IT staff transfer from Contractor to Company
• Company now employs them directly
• Contractor no longer provides service
• Terms preserved

Scenario 3: Security Contract Retender

Building has security contract with Firm A (5 guards). Retenders, Firm B wins with different staffing model (3 guards, more technology).

Result:

• 5 guards transfer to Firm B
• On existing terms
• Firm B has 5 staff but only needs 3
• May need redundancies but must be fair
• Cannot refuse to take them on

Common Issues

Over-Resourcing

New contractor may have:

• Transferred staff plus own staff
• More staff than needed
• Duplication of roles

Must:

• Take on all transferred staff
• Cannot refuse them
• If redundancies needed, fair process
• ETO reason required

Terms Differences

Transferred staff on:

• Different terms than new contractor's staff
• May be better or worse
• Cannot immediately harmonize if connected to transfer
• Creates two-tier workforce

Integration Challenges

Practical issues:

• Different working practices
• Cultural differences
• System incompatibilities
• Management challenges

But TUPE still applies - cannot avoid it.

Fragmentation

What Is It

When single contract splits into multiple:

Example: One cleaning contractor does whole hospital. Retenders into three separate contracts (wards, offices, grounds).

TUPE Still Applies

Each new contract:

• Relevant organized grouping transfers
• Ward cleaners to new ward contractor
• Office cleaners to new office contractor
• Grounds staff to new grounds contractor

Assignment Issues

Determining which employees go where:

• Based on principal purpose
• Where they mainly worked
• Assignment test
• Can be complex

Client's Role

Limited Employment Role

Client typically:

• Not party to employment relationship
• Employees transfer between contractors
• Client just buys services

But Client Influence

Client can affect:

• Service specifications
• Staffing levels required
• Timing of transfer
• Communication to staff
• Cooperation in process

Good Practice

Client should:

• Clarify TUPE applies in tender
• Facilitate information sharing
• Allow consultation
• Reasonable timescales
• Support smooth transition

Contractors' Obligations

Outgoing Contractor

Must:

• Identify transferring staff
• Inform and consult
• Provide employee liability information
• Cooperate with incoming contractor
• Not dismiss because of transfer

Incoming Contractor

Must:

• Take on transferred staff
• Honor existing terms
• Inherit all liabilities
• Plan for integration
• Cannot refuse or cherry-pick

Duration and Frequency

Short-Term Contracts

TUPE applies regardless:

• Even if contract only 1-2 years
• Employees may transfer multiple times
• Each retender is new TUPE transfer
• Terms continue throughout

Employees' Experience

Some employees:

• Transfer every few years
• Multiple TUPE transfers in career
• Continuous service throughout
• Terms accumulate protections

Summary

Service Provision Changes

Three types:

• Outsourcing (client to contractor)
• Insourcing (contractor to client)
• Retendering (contractor to contractor)

Requirements

All three must apply:

1. Organized grouping of employees
2. Principal purpose is carrying out activities for client
3. Activities not wholly supply of goods

Who Transfers

Employees whose:

• Principal purpose is providing service
• To the specific client
• Part of organized grouping

Transfer to new service provider.

Common Services

• Cleaning
• Catering
• Security
• IT services
• Facilities management
• Payroll/HR services

Key Points

• SPC is distinct type of TUPE
• Applies to service contracts
• Employees transfer with service
• Cannot be avoided by contract structure
• Same protections as business transfers

Practical Impact

• Regular retender cycles
• Multiple transfers possible
• Terms protected throughout
• Integration challenges
• Over-resourcing issues

Service provision changes are a common TUPE scenario affecting thousands of employees annually. Understanding when SPC applies protects both employees' rights and helps contractors plan for transfers.