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For better and for worse? Transfer of undertaking and the reshaping of
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For Better and for
Worse?: Transfer of
Undertakings and the
Reshaping of
Employment
Relations

Fang Lee Cooke

Jill Earnshaw
Mick Marchington
Jill Rubery

WORKING PAPER No 13
ESRC FUTURE OF WORK PROGRAMME
ISSN 1469-1531 November 2000
Dr Fang Lee Cooke, EWERC, Manchester School of
Management, UMIST, PO Box 88 Manchester M60 1QD, Tel:
0161 456 9796
Email:fangcooke@compuserve.com, fang.l.cooke@umist.ac.uk

For Better and for Worse?: Transfer of Undertakings and the Reshaping of

Employment Relations

Fang Lee Cooke, Jill Earnshaw, Mick Marchington, Jill Rubery

Manchester School of Management

UMIST
PO Box 88
Manchester M60 1QD
UK

Please send correspondence to:

Dr Fang Lee Cooke (Research Associate)
EWERC
Manchester School of Management
UMIST
PO Box 88
Manchester M60 1QD
UK
Tel: 0161 200 8785
E-mail: fangcooke@compuserve.com
or: fang.l.cooke@umist.ac.uk
17 Nov 2000

1
For Better and for Worse: Transfer of Undertakings and the
Reshaping of Work

Key words: transfer of undertaking, employment contract, employment relations,

experience of work

Introduction
This paper is prompted by the recognition that transfers of undertakings have been a
common feature at many of the case study firms in the ‘Future of Work’ research
project currently being undertaken at the Manchester School of Management. This is
perhaps not surprising considering that during the 1980s, the number of transfers of
undertakings has doubled every three years at EU level, accounting for 40% of the
global number of business transfers (Hardy et al, 1998). Yet limited research has been
carried out to investigate how terms and conditions of employment and other work-
related experience may have changed for the workers who have been transferred from
the transferor employer to the transferee employer. Although relevant legislation in the
shape of the Transfer of Undertakings (Protection of Employment) (TUPE) Regulations
is in place with the objective of protecting these workers’ employment rights, the
effectiveness of the Regulations has proved less than convincing. As Colling (1999,
p138) pointed out, ‘TUPE’s impact has been marginal to date... partly because of the
complexity of the judgments involved and partly because of loopholes in the
regulations’. Theoretically, the contracts of the transferred workers are preserved intact
under TUPE, but in reality, their terms and conditions and other experience of work
may change significantly, albeit incrementally. For example, a study carried out by the
Cabinet Office (1996) found that though most civil service transfers had been subject to
the TUPE Regulations, at least a third of those staff affected had reported changes in
their terms and conditions of employment following market testing (Cabinet Office,
1996: 51). Hardy et al’s research (1998) shows that there is a considerable gap between
what is required by the legislation and the reality experienced by employees following a
transfer. This discrepancy is facilitated by the loose definition of the term ‘a transfer of
an undertaking’ and the subjective/purposive interpretation of the law (e.g. the statutory
defence to unfair dismissal claims). McAnea (1996) also found that increasing pace of
work and reduced opportunities for informal breaks have been the outcome of changed
working practices and sources of stress at work.
Whilst previous studies on transfers of undertakings have provided important evidence
on the discrepancy between firms’ practices and the requirements of the Regulations,
these studies mainly focus on the pre-transfer consultation process and post-transfer
changes to terms and conditions. There still remains a gap in our understanding of other
changes that may have occurred after the transfer. Because TUPE does not (and cannot)
cover all aspects of work, it is likely that workers’ experiences in areas such as work re-
organisation, skill levels, work intensification, career structure and opportunities for
retraining may have altered substantially. Some of these changes may be potentially
beneficial to workers (e.g. multi-skilling training which may enhance the individual’s
employability and job satisfaction) whilst others may be to their detriment (e.g. work
intensification). However, perhaps a more commonly heard complaint from the

2
transferred workers was, ‘they said nothing was going to change, but everything has
changed’. But in what way precisely has ‘everything’ changed? Few studies have been
able to provide a comprehensive picture of life after transfer.
The intention of this paper is to build on previous studies and explore further, through
an in-depth case study approach, the wider issues concerning employment relations and
experience of work in the context of transfers of undertakings. The study draws on
empirical evidence from an outsourced council housing benefit service, a private
finance initiative (PFI) in an NHS hospital which led to the outsourcing of estate
maintenance and hotel services to two private firms, and the outsourcing of product
distribution by a chemical processing firm. In particular, major aspects of post-transfer
changes are investigated which include terms and conditions, custom and practice, work
reorganisation, training and promotion opportunities, work intensity, performance
control, sickness management, job security and satisfaction, company culture and, last
but not least, the continuing role of the trade union. This paper argues that TUPE only
provides limited protection to the rights of the transferred workers with the transferee.
When a transfer of an undertaking takes place, the employment relationship between the
transferee and the transferred workers will be different even if the explicitly defined
contractual terms and conditions remain unchanged. This is largely because the
employment contract is incomplete, and it is often a relational rather than a cost
transaction contract. Its content is modified as the employment relationship develops
and the nature of the relationship changes.
The TUPE regulations
The term ‘a transfer of an undertaking’ means, at its simplest level, a change of
ownership of ‘any trade or business, whether commercial or otherwise’. The issue of the
protection of employees’ rights where there has been a change in their employer is a
difficult one. The central question is whether the contractual and other rights which an
employee enjoyed with his or her old employer should be respected by the new
employer, who may not even want to continue to employ existing employees, let alone
employ them on the same terms and conditions that they previously enjoyed. The 1977
EU Acquired Rights Directive (ARD) was eventually implemented by the UK
Government through the Transfer of Undertakings (Protection of Employment)
Regulations 1981 (TUPE). The intention of TUPE is to provide protection for
employees when the undertaking which employs them is transferred to another
employer. More specifically, the TUPE Regulations provide consultation rights for
workers transferred to another employer and protection of their pre-transfer terms and
conditions of employment, with pension rights being an exception. For example,
Regulation 5 (1) provides that a relevant transfer shall not operate so as to terminate the
contract of any person employed by the transferor in the undertaking or part transferred,
but that any such contract shall have effect after the transfer as if originally made
between the employee and the transferee. Regulation 5(2) further provides that on a
relevant transfer, all the transferor’s rights, powers, duties and liabilities under or in
connection with any such contract shall be transferred to the transferee. The combined
effect of Regs 5(1) and 5(2) is to cause the transferee to take over the employment
contracts of all those employed or deemed to be employed ‘immediately before’ the
transfer. The new employer assumes all the rights, powers, duties and liabilities which
the transferor had under those contracts and is bound by their terms and conditions as if

3
the new employer were the original employer. In other words, employees are entitled to
have their existing terms and conditions relating to e.g. salary, holidays and sick pay
(but not occupational pensions) preserved following the transfer. It follows that any
attempt by the transferee to impose changes to those terms and conditions, in order, for
instance to harmonise them with those of the existing workforce, will constitute a
unilateral variation of contract opening up potential liability for breach of contract or
constructive dismissal claims. Moreover, any dismissals in connection with the transfer
are automatically unfair unless they can be justified by ‘an economic, technical or
organisational’ (ETO) reason entailing changes in the workforce. The UK Government
issued guidance on the ETO defence in March 1993 which suggests that: ‘economic’
means ‘where a demand for an employer’s output has fallen so that profitability could
not be sustained’; ‘technical’ refers to the usage of ‘new technology and the employee
does not have the necessary skills’; and ‘organisational’ as a situation which arises
‘where a new employer operates at a different location and it is not practical to relocate’
(Hardy and Adnett, 1999). If there is an ETO, it may be fair to dismiss employees and
then offer them employment on terms and conditions less favourable than those which
they enjoyed under their original employer.
The transferee’s options with regard to achieving harmonisation of the terms and
conditions of the newly acquired workforce with those of existing employees are
therefore severely restricted. A transferee who seeks to pursue such an objective, and
yet avoid liability for unfair dismissal claims under Regulation 8, has the following
options:
• Obtain the employees’ consent to changes the transferee wishes to make in respect of
their contractual terms. Frequently, rather than negotiate changes to specific terms
one by one, the transferee will offer a revised package of terms which may well, on
balance, be advantageous to the employees. However, the transferee’s ability to
pursue this option has been severely limited by a recent ruling of the House of Lords
(in the case of Wilson v. St. Helens B.C (1998) IRLR 1141) to the effect that even a
consensual variation is ineffective if the reason for it is the transfer of an
undertaking. Alternatively, the transferee could seek to obtain the consent of
employees to the required changes prior to the transfer, and may even make it a
precondition of sale that such consent is forthcoming. If so, and the employees agree
to the revised terms prior to the transfer, then the contracts which the transferee
inherits by reason of the operation of Reg 5 are the contracts as revised, since it is
these under which the employees would have been engaged ‘immediately before the
transfer’.
• ‘Red-circle’ the terms and conditions of those employees transferred. This would
ensure that transferees, by agreeing to honour the employees’ terms, do not act in
breach of contract. Transferees would then be in a position to do one of two things.
Either they could seek to improve the terms of the existing employees at the expense
of the red-circled employees, to whom they might offer lower pay increases or
deprive them of other advantageous terms and conditions until the others caught up,
or they could maintain the red circling for so long as is necessary to ensure that any
changes would not be regarded as being ‘connected with’ the transfer.
• Change the job function by repackaging the job and redesigning the work that is to
be done by employees after the transfer (job redesign).

4
TUPE also covers the rights of trade unions when a business is transferred. Hence the
Regulations by necessity deal with the effect of transfers on collective agreements and
trade union recognition, and set out duties of employers - be they transferors or
transferees - to inform and consult trade union representatives about the transfers.
Employment contract as employment relations
Although the TUPE Regulations attempt to substitute the transferee employer for the
transferor employer, so that the rights and obligations contained in the contract of
employment between the employee and the transferor are passed to the transferee, they
provide only minimum protection against any changes that may affect the employees in
terms of their relationship with their employer as a consequence of the transfer of an
undertaking. This is largely because of two peculiar characteristics of the employment
contract: the incompleteness of its composition and the on-going nature of its
construction.
First, an employment contract is more often than not incomplete, and as Guest (1998)
pointed out, ‘all employment contracts have gaps in them’ (p651). The incomplete
nature of a contract, and in particular, an employment contract has been widely noted by
authors on contractual issues (e.g. Cartier, 1993; Deakin, forthcoming; Fox, 1974;
Guest, 1998; Hill et al, 2000; Hodgson, 1999; Lane and Bachmann, 1998; Polanyi,
1944; Simon, 1957). For example, Hodgson (1999) observed, ‘Employment contracts
are imperfectly and incompletely specified. The terms of the contract cannot in practice
be spelt out in full detail because of the complexity of the work process, and the degree
of unpredictability of key outcomes. These problems of complexity and uncertainty are
found to some degree in other contracts, but with employment contracts they are
particularly severe. This is because of the complexity and uncertainty of the work
process, and the fact that it continuously and directly involves conscious and capricious
human agents’ (p170). In effect, an employment contract is ‘in large measure a
convenient fiction, couched in the individualistic categories of modern contract law,
which in fact masks the social and co-operative character of all productive activity’
(Hodgson, 1999, p203).
To address the problem of the incompleteness of the employment contract, sociologists,
organisational psychologists, and more recently economists, have extended the notion
of contract to include a full set of social relationships involved in employment, i.e. the
non-contractual elements, into the study of the employment contract which is close to
what sociologists, industrial relation and HRM theorists call ‘employment relations’.
As such, they argue that an employment contract not only incorporates what is
explicitly required, but also what is not explicitly required but may still be legitimately
expected or fulfilled by the contracting parties. For example, Kalleberg and Reve
(1993) defined the employment contract in a broad framework by regarding it as ‘the
bilateral arrangements between employers and employees that involve reciprocal
expectations and behaviours. Contracts project future exchange into the present, as
each party seeks to satisfy its needs and wants by trading something of value to the
others; employers exchange money and other job rewards to employees in return for
their efforts and sometimes loyalty. The notion of contract encompasses the salient
features of employment relations, including how work is organised, governed,
evaluated, and rewarded’ (p1105). Similarly, organisational psychologists (e.g.
Rousseau, 1995; Shore and Tetrick, 1994) have recently rediscovered the notion of the

5
‘psychological contract’, which originated in the early 1960s (Argyris, 1962), as an
important social dimension of the employment relationship. Despite unsettled debates
around the concept, the renewed interest in the notion has drawn our attention to the fact
that employees and employers have mutual expectations about their employment
relationship and the rights and obligations that this entails, the great majority of which
are implicit rather than formally defined in a legally binding agreement.
In reality, a written contract which is explicitly agreed between employer and employee
may not exist. When a worker is asked ‘Is that (task or benefit) specified in your
contract?’, the reply is more often than not, ‘I haven’t got a clue what is in the contract;
in fact, I am not sure if I have a contract with the company. When I joined, I just signed
a piece of paper and have never seen it again since’, or even ‘I haven’t got a contract’ -
by which is meant a written contract. This suggests that workers rarely have detailed
knowledge about what is included in their contract of employment, and in many cases
nothing will have been written down. Even when it is, the longer individuals are
employed, the less they are likely to remember what was agreed at the outset of
employment. It is also the case that the longer individuals have been working for the
same firm, the less likely it is that their original contract will bear any relation to their
current activities and obligations. Instead, work and employment-related agreements
are often made on an ad hoc and on-going basis between the employer and the
employee as and when it becomes necessary to do so.
This brings us to the second important characteristic of the employment contract,
namely that an employment contract is often a relational contract rather than a cost
transaction contract. Its content is modified as the employment relationship continues
and the nature of the relationship changes. As Hill et al (2000) observe, ‘in the most
common form of employment contract, employers and employees enter open-ended
relationships, the details of which may emerge only with the passage of time.
Relational employment contracts such as these contain formal contractual terms that are
supplemented by informal understandings. The latter embody tradition and custom and
practice (Baron and Kreps, 1999, p62-3) and may display emergent properties (i.e.
change over time as a result of the interactions between employers and employees)’
(p4). This relationship between the employer and the employee - what organisational
psychologists called ‘psychological contracts’, represents ‘a dynamic and reciprocal
deal’ (Sparrow and Marchington, 1998, p16). The central issue is that, whereas the
formal contract between employer and employee (which in any case is rarely an
agreement between equals) can usually be changed only with the consent of both
parties, the psychological contract can be arbitrarily and secretly changed by either
party (Guest, 1998). These changes inflicted upon one party by the other may occur to
such an extent that the trust built up over time between the two parties to ensure
productive activity in exchange for satisfactory experience of work may be destroyed
without the contractual agreement being violated.
This argument suggests that to be fully understood, an employment contract has to be
interpreted in its context. A transfer of an undertaking changes the context
fundamentally because it displaces the employment relations between the employer and
the employee. A transferee employer may not be fully aware of the implicit agreements
between the transferor employer and the transferred employees and even where such
awareness exists, the transferee may not be prepared to observe them fully (if, for

6
example, the transferee sees a need to amend the situation, which is often the case in a
radical organisational change such as the transfer of an undertaking). It can therefore be
safely suggested that when a transfer of an undertaking takes place, the employment
relationship between the transferee and the transferred workers will be different even if
the explicitly defined contractual terms and conditions remain unchanged.
Based on the above arguments, a transfer of an undertaking may effect a substantial
variation in employment relations between a transferee and the transferred employees
which may in turn have a strong impact on the employees’ wider experience of work
(for better or more probably for worse, given the current competitive business
environment). The remainder of this paper analyses how the experience of work
appears to have changed for the transferred workers in four transferee firms.
The case studies
This paper explores three transfers of undertakings involving three transferor and four
transferee organisations. They are:
• the transfer of the operation of housing benefit from a local council (The Council) to
a private outsourcing firm (ITCo); and
• the transfer of the facilities management from a hospital trust (The Hospital) to a
private designing and engineering firm (FMCo);
• the transfer of the catering, portering and cleaning services from the same hospital
trust to a private hotel services firm (DomesticCo);
• the transfer of the distribution service from a private chemical processing firm
(SaltCo) to a private distribution firm (LorryCo).
An in-depth case study approach was adopted for the study in which over 60 semi-
structured interviews have so far been carried out with senior managers, middle
managers, supervisors, trade union representatives and shop/office floor staff.
Managers interviewed included those from both the transferor and transferee firms and
the staff interviewed were mainly the transferred workers. All four transferee firms
were large nation-wide organisations with between 5,000 and 15,000 employees and
three were specialised in the business acquired under the transfer contract, i.e. estate
and facilities management, hotel services, and logistics distribution.
Background to the transfers and post-transfer changes
A transfer of an undertaking may take place for a variety of reasons. For the three
transfers that have taken place in this study, however, the overwhelming reason was to
reduce cost and to improve the efficiency of the service in question.
The housing benefit operation
A major priority for local authority management recently has been to reduce operating
costs. In the four years between 1993 and 1997, the Council had been investing in new
technology to improve its Benefits Administration Service. Despite the fact that
tangible improvements were made, the achieved service levels still left the Council as
one of the worst performing borough councils in the area. In early 1998, the Council
decided to outsource its Benefits Service to the private sector as a ‘strategic move to
search for radical thinking, innovation and an opportunity to sweep away old cultures

7
and work practices’. ITCo won the contract by proposing a substantial package which
involved genuine shared risk and reward, the transferring of about 100 Council
employees, and considerable investment in IT systems, training and property. In
October 1998, a seven year deal was agreed between the Council and ITCo with the
support of the trade union. Downsizing took place at the outset of the transfer through a
voluntary redundancy in which the workforce was reduced by about 20%. The trade
union was involved to secure co-operation and provide a ‘dignified exit’ for the
employees.
One of the major changes following the ITCo take-over was the continuous introduction
of up-to-date IT systems which, according to a trade union representative, ‘the Council
would have never done because there was no financial incentive for them to introduce
the IT’. ITCo has been investing heavily in updating the technology in order to improve
efficiency by moving away from a paper system to an IT system. A major improvement
to customer service has been achieved by adopting the latest telephone answering
systems which replaced the old paper-based system for dealing with queries and record
keeping. The trade union representative interviewed observed that there have been
more changes than they had expected in terms of IT. It was also recognised that the
reason for ITCo to invest heavily in new IT systems was to reduce manpower need and
its dependence on the staff’s specific knowledge which takes years of experience to
accumulate.
Another major change was the setting up of a call centre after ITCo took over the
housing benefit service. Prior to the call centre, telephone enquires were dealt with by
staff within the sections on a rota basis (1/2 day each). Eight separate telephone lines
with hand-held telephones were available to answer the calls. It was estimated that
about 1500 calls were answered per week. The system was considered to be inefficient
because the case worker had to put the phone down in order to find the file and come
back to the customer on the phone. Meanwhile, the customers on the other end did not
know whether or not they had been abandoned. All staff were on the telephone lines
but the low efficiency of the system made it difficult for the customers to get through.
All calls were logged in a book making it difficult to trace in the event of a repeat call.
It was decided that a call centre should be set up and the staff would be asked to
volunteer to work in the centre. Standard phrases were introduced to help staff acquire
a professional and friendly approach.
Working time is now more structured for the staff with their breaktime formally
allocated. A multi-skilling initiative was launched to allow for the development of
generic case workers with a braoder range of skills. Many of them have taken the
initiative and become multi-skilled. Most staff move around in different units through
job rotation and they need to have a broad knowledge base. Under the Council, staff
had once-a-year performance appraisal. Now they are under a Performance and
Development (P&D) Plan which continuously monitors their performance for
improvement. The company-wide P&D plan is implemented on site to monitor the
performance of each individual. All employees have regular meetings with their
manager to review their performance and make plans for improvement. Support will be
given to the individual for improvement and development, but it is up to the individuals
themselves to decide how far and fast they want to move forward. A new IT system is
to be introduced to cope with the workload which also enables the measuring of

8
individuals’ performance. There is a good response from some of the staff who desire
career progression, ‘but not everybody is happy’ about having their performance
monitored and assessed frequently.
The estate facilities management and hotel services of the hospital
The private finance initiative (PFI) project involved the rationalisation of two large
local hospitals (five miles apart) which provided duplicated services and required the
injection of a large amount of capital for renovation. The rationale for using a PFI as a
way of funding the hospital was purely financial. The amount of investment that would
have been required for updating the old hospitals was impossibly high, so combining
them into one (enlarging one hospital and closing the other) was considered the only
option. Subsequently a PFI was chosen which has led to the outsourcing of the estate
and facilities management and the hotel services of the hospital to two private firms.
The best part of ten years were spent on making this decision. The perceived
distinctiveness of the PFI was that it would provide the on-going hotel services for the
next 30-35 years. But the implication has been the transfer of 500 staff from the NHS
to the private sector. As a result, the estate maintenance workers, the laundry, catering,
cleaning and portering staff (hotel services) were transferred to two separate firms in the
private sector.
Prior to the transfer, the trade unions and the local council had signed an agreement
covering the terms and conditions of the above groups of workers in the hospital for
three years. These terms and conditions have been preserved so far. However,
incremental changes have crept in steadily and radical changes is on the way when the
new hospital opens.
The estate and facilities management FMCo has been very cautious in implementing
any changes because the management team (both from FMCo and ex-Trust) has
experienced a relatively high level of resistance (in the form of non-cooperation and
working to rule) from the skilled workforce, many of whom have a long service record
with the Trust and are unaccustomed to the thought of having to work for a private firm.
As they often put it, ‘the private firms are there to make a profit and not to provide a
service for the public’. Much of the resistance from the workforce to change, or to the
FMCo’s way of managing, comes from the shock of being ‘sold’ by the Trust.
Additionally, because of the externalisation of the estate maintenance service, every
activity has to be officially logged. This is in marked contrast to the informal and
internal practice when the function was part of the Trust. The workforce therefore has a
feeling that ‘everything we do is wrong. They think they know best’. This problem is
exacerbated by FMCo’s unfamiliarity with the custom and practice on site as a
newcomer. As respondents often remarked, ‘they (the FMCo managers) haven’t got a
clue about what is going on. They are bloody useless’.
The espoused ‘teamworking’ management philosophy of FMCo is not well received by
the shopfloor. ‘They said that we are “a team”, but it is not. It is “them and us”’ (a
tradesman). Realistically, “them and us” attitudes commonly exist in management-
labour relations and it was no exception under the Trust, but this “them and us” gulf has
undoubtedly become more entrenched following the transfer. ‘They asked us for good
will, but they can’t even be bothered to send us a Christmas card or say “Merry
Christmas” and thank us for the work we have done for the year. They also made us

9
stay and work till 4:30 pm on Christmas Eve. In the past, we finished at lunch time
(1:00 pm) and went out to have a drink together with the manager before we went home
for Christmas’ (a tradesman).
The hotel services Work content remains largely unchanged for the laundry staff, the
cleaners, caterers and the porters although their work has been intensified due to staff
shortage problems. DomesticCo tried to change the shift pattern of the porters but this
was resisted by them. The plan was dropped instead of imposing it on them. A major
change for the portering section following the transfer was the introduction of a
computer system and a help line to co-ordinate all the calls coming in from different
departments for portering work. The help line was staffed by four operators who logged
all the work requests on the computer thereby informing the porter supervisors what
tasks needed doing and who was available for the work. Under the Trust management,
work requests were done via the telephone and logged on a piece of paper. Nobody had
any idea how much work the porters had to do and there was no way to determine why
work was done slowly (e.g. due to waiting time for the nurses, looking for wheelchairs,
etc). The new computer system has not affected the porters’ job in a real sense, but it
does help the portering section to defend itself in that all the details of work can now be
monitored. For example, an average of 3000 tasks are carried out each week.
‘Everything is now timed because it (DomesticCo) is a private firm and they need to
meet the deadline of the Trust’ (supervisor). The porters now have to report to their
supervisors on the phone the reasons for any delays in tasks (e.g. waiting for a bed to
move a patient, wheelchair not available).
However, the real test to DomesticCo will be in July 2001 when the two hospitals are
combined. DomesticCo is planning to introduce a new way of organising work by
combining cleaning, catering and portering into one role under the title ‘the integrated
workers’ (almost like a house-keeper’s role). This will involve a move away from
central kitchen catering to ward-based catering through ‘regeneration of pre-packed
chilled food’. Seventy-five percent of the chefs (there are currently 21 of them for both
hospitals) will not be needed. It is anticipated that the cleaning and catering staff will
be affected by the new role more than the portering staff who may not be interested in
the post, seeing it as a “woman’s job”. Two hundred posts will be advertised. There
have been discussions between the trade union and DomesticCo management about the
package for the new role, but no details have so far been made available to the staff.
According to the managers interviewed, there will be a new pay scale because the
management understands that the wage level has to be attractive enough for people to
be willing to take on the multi-skilling/multi-tasks role. Equally, the working hours
have to be flexible enough to accommodate the working time requirement of the job
itself and that of the job applicants. There is limited flexibility of the service hours
because of the nature of the business, e.g. meal times. However, the managers also
pointed out that existing staff may well have to apply for these new jobs, otherwise their
employment will be at risk.
The ‘integrated workers’ initiative may be the major radical change anticipated, which
will affect the full-time workers more than the part-timers. Whereas part-time workers
are normally assigned to one specific task, the full-timers have to carry out different
tasks which are not covered by the part-time cleaners. Although there will not be any
dramatic change in skill requirements, all interviewees expressed their disagreement to

10
the initiative for various reasons. Part-timers are worried that their jobs will be made
redundant because the new design requires a full-time worker to complete all the tasks.
The older workers felt that they would not be able to carry out strenuous tasks such as
pushing a bed with a patient in (currently the porter’s task). There is also a general
concern among the staff that they may not have enough time to perform all the tasks and
therefore work intensification may occur. In addition to that, they are worried that shift
systems may be introduced to cover the long service hours. The staff also fear that they
may have to carry out more work (some of which is classified as more skilled) without
any pay increase because of DomesticCo’s agreement with the local council (under
TUPE) to honour the wage agreement for three years.
The distribution service
The distribution fleet section of SaltCo had been making a loss for a number of years
prior to the transfer, mainly because of the relatively high wages of the drivers. Most of
the drivers had been working for SaltCo for over 20 years and were insulated from some
of the harsher conditions experienced in the ‘hire and reward’ sector of the industry.
They were earning up to £800 per week. In early 1996, SaltCo management proposed a
new deal to the drivers and their union in an attempt to reduce the operating cost by
reducing wages and increasing productivity. But the trade union and drivers walked out
of the meeting with no intention of negotiating with the company. The antagonised
SaltCo management (many of whom earned less than the drivers) would not back down
and decided to outsource the whole unit. Bids were invited and subsequently, LorryCo
was chosen as the contractor and signed a contract in September 1996 for an initial
period of three years with a 12-month extension.
Work has been intensified for the drivers since the transfer. In fact, work intensification
and wage reduction has been the sole purpose of the transfer of the undertaking. The
delivery schedules are much tighter for the drivers now which eliminates their idle time
and takes away their informal breaks. When they are on a long-distance run, e.g. going
to London, they are expected to come back the same day whereas previously they would
have stayed there for the night and would have been paid overtime and night allowance.
LorryCo also makes use of the vehicles more efficiently through a multi-delivery/drop
method, e.g. sending two vehicles instead of three for three deliveries. ‘We are
working a lot quicker now, flat out all day’ (a driver). ‘There is no time for informal
breaks any more. We are given a quarter of an hour to check the vehicle before we set
off. We used to chat at that time as well. But we don’t bother now, just get in the
vehicle, get it done and go home’ (a driver). There is a slight increase in the level of
time flexibility for the drivers in when they start and finish their work of the day unless
it is a time-specific delivery. The drivers have to take their statutory break-time at work
as required by European regulations for lorry drivers, or they will be given a warning by
their manager. No formal performance target is imposed on the drivers other than an
informal assessment by the Manager. In addition to that, the drivers are under a nation-
wide tachograph monitoring system when they are on the road. They are monitored on
everything they do or do not do. LorryCo has also fitted another monitoring device to
the vehicle which provides even tighter control of the drivers, e.g. when they change
gear, when they leave the engine on for too long (wasting fuel). But this device was
abandoned because ‘it was faulty most of the time. Perhaps it is the salty environment’

11
(or perhaps, and more possibly so, ‘because of sabotage’, as was admitted by a driver
interviewed).
A new package of terms and conditions was ‘negotiated’ and accepted by the drivers,
which took effect in September 1997, a year after the transfer. Both management and
drivers (including the trade union representatives) were under the impression that there
was a 12-month period of TUPE protection on terms and conditions, whilst in fact there
is no specific legal time limit within which change would be deemed ineffective. The
new terms and conditions were virtually forced upon the drivers, because both LorryCo
and SaltCo management let it be known that if the terms and conditions were not
accepted, they would then outsource the contract again, a deal from which, they
claimed, the drivers would lose their TUPE rights because of the lack of transfer of
assets (In fact, this is not necessarily true, although it is certainly the case that whether
or not assets were transferred is a factor in deciding whether or not a ‘TUPE’ transfer
has taken place). When they were employed by SaltCo, the drivers worked an average
of 50-55 hours weekly for £27,000 per year. Under the new terms and conditions, the
drivers’ total and real income has taken a huge drop. For example, in the past financial
year (1999-2000), most of the drivers were £5,000 down in their wage because of the
‘negotiated’ change. On average, they work 55-60 hours per week with annual earnings
of £20-25,000, depending on the level of overtime.

Table 1 Post-transfer changes

______________________________________________________________________
Items ITCo PFI (FM) PFI (HS) SaltCo
______________________________________________________________________
Workers transferred 80 housing 85 tradesmen 50 porters 15 drivers
benefit staff 80 caterers
140 cleaners
Current No. of staff 90 85 300 15
Downsizing 20% imminent imminent no
Technological change yes yes yes no change
Work task same same same same
Skill requirements multi-skilling same multi-skilling same
Training increased increased increased no change
Wage structure same same will change changed
Work reorganisation yes no will change no
Promotion opportunity more no change more more
Work intensity intensified intensified same intensified
Shift pattern changed same same changed
Break time more structured same same less
Overtime same same more less
Grievance & disciplinary
procedures changed same same more specific
implementation interviewees widely reported tighter implementation of
disciplinary procedures by new employer
Sick pay same same may change less
Performance measure tighter tighter tighter tighter

12
Responsibility of work more more same same
Autonomy of work less more same more
The role of trade union same same more involved little
Perceived management style very different different better informal
Job satisfaction lower lower lower lower
Job security same less less less
Cultural change significant some some some
______________________________________________________________________

Discussion
The transferred employees working for the four transferee employers have all
experienced a level of change, to a greater or lesser extent, in their terms and conditions,
the way work is carried out and other aspects of their work. Not all these changes
necessarily point to a worsening scenario and in fact, some changes have been well
received by the workers (e.g. increased training and promotion opportunities). These
changes include elements of an employment relationship ranging from what are
expected to be protected by TUPE regulations (e.g. terms and conditions, downsizing)
to what are not protected by TUPE but are essential to an employment relationship (e.g.
custom and practice, work reorganisation, work intensification). In particular, changes
have taken place or will take place in these four transferee organisations in the
following areas:
• terms and conditions and local informal agreements;
• work reorganisation;
• increased training and promotion opportunities;
• work intensification and tightened performance monitoring;
• implementation of sick leave procedures;
• employment security and job satisfaction;
• the need to adapt to new company culture; and
• the role of the trade union.
Terms and conditions and local informal agreements
As was reported in the previous section, LorryCo drivers were obliged to take on a new
package of terms and conditions which was clearly to their disadvantage. The drivers
received a pay rise of 3% for the first time in the last three years in September 1999.
For the workers transferred from the hospital, some local agreements which had been
negotiated between the Trust and the workforce (through the trade unions) over the
years have been changed by the transferee employers, for example, extending working
time on Christmas Eve and on public holidays. Although these informal agreements
have never been incorporated into the employment contract, they have become
established custom and practice at the workplace as the ‘goodwill’ from the previous
employer. In fact, according to the case law, terms and conditions can be established
by custom and practice, i.e. some customs and practice is exactly that, but custom and
practice which satisfies certain conditions will form a source of contractual terms.

13
These informal agreements are clearly considered to be important issues in managing
the employment relationship in that the transferee employers in the PFI have
headhunted a few middle and junior managers from the Trust side and promoted them to
senior and middle managers responsible of the day-to-day operation of the business.
These managers were poached for their local knowledge of the Trust procedures,
policies and working practices (which are often different from ward to ward). For
instance, the reporting of sickness from the staff can be different from ward to ward. In
some wards, it has to be reported one hour before the shift starts while in others it can
be up to one hour after the shift starts. It is an established practice that the staff were
allowed 15 minutes to go to the bank on site. They are also allowed two hours to go to
the dentist or doctors (if they show their appointment cards). If the transferee employer
wishes to change those practices, it has to be negotiated with the trade union and staff
who may have little power to resist. As a matter of fact, these conventions are being
eroded incrementally because of, according to management, the need of business
efficiency. Where changes to working practices have occurred, they have caused strong
resentment in the workforce.
Work reorganisation
Work reorganisation has not happened at a significant level for the transferred workers
in all four transferee firms apart from the call centre workers of ITCo. They have been
given the call centre post on a voluntary basis but without any adjustment in their terms
and conditions, although new skills were required and trained for. For the PFI, it is
obvious that if the ‘integrated workers’ initiative is implemented as planned, it will
bring significant changes to the different groups of workers affected in terms of their
pay, occupational identity, skill requirements, work tasks, work intensity and working
time, etc.
Training, skills and promotion opportunities
The transfer of the housing benefit business has brought an increased level of training
for the transferred council housing benefit workers, which was aimed to change their
way of thinking and make them adapt to their new employer’s way of conducting
business. A training course on customer service and communication was delivered to
the staff in the early stage of the transfer. The purpose of the training was to ensure that
staff are providing excellent customer services and preventing stressful
communications. Line managers and supervisors were sent to the company’s
headquarters for managerial training to adopt the company culture so that they can
cascade it down the workforce. IT skill training has also been a major part of the
training as a result of continuous technological change. A heavy investment in training
was promised by the PFI transferees as a main feature of the new way of managing the
workforce, but this has so far not materialised at the shopfloor level, mainly because of
staff shortage problems. However, managers and supervisors have received
considerable amounts of training on finance/budget management, health and safety
management, and other managerial skills. The managers and supervisors interviewed
all expressed the view that there would be an increase in the level of training for both
the supervisors and the staff ‘once everything is settled. At the moment, it is getting
the feet on the ground first’. However, thre remain doubts about whether DomesticCo
and FMCo will ever increase staffing levels sufficiently to enable people to be given
time off for training on skills which they do not need urgently to perform their tasks.

14
In terms of promotion opportunity, more supervisory positions have been created by
ITCo and DomesticCo to which staff have been promoted. These opportunities have
emerged since the transfer as a result of increased workload for the existing supervisors
who found it increasingly difficult to cope. The externalisation of the services has
generated a huge amount of paperwork and meetings. For example, since the portering
service was transferred to DomesticCo, the supervisors have been bombarded by
meetings of all sorts and have had to ask for three porters to be promoted to assistant
supervisors to stand in for them on such occasions. Theoretically, all transferred
workers - including managers and shop/officefloor staff - have more career
opportunities with the new organisations as they have establishments nation-wide. The
employees can apply for vacancies which arise at other sites, but whether it is practical
for them to relocate themselves and their family elsewhere is another matter.
Work intensification and tightened performance monitoring
Work has been intensified for a number of groups of people in this study. Among
them, the supervisory group has been affected most. The supervisors of all three
transferees (LorryCo drivers do not have supervisors other than a manager) have widely
reported that their work has intensified since the transfer. Owing to the management
style of ITCo, individuals who work for the company are expected to be highly
motivated and take their own initiative. Supervisors in ITCo are now taking work home
and think hard about new ideas of managing work in their spare time, whereas before
they ‘just switched off once we finished work for the day’. This new approach to work
gives them a sense of ownership and satisfaction but the invisible pressure is constantly
present. ‘You feel that you have to make an impression on ITCo’ (a supervisor). For
the supervisors in the estate maintenance and hotel services, work has not only been
severely intensified following the transfer but also the nature of the supervisory work
has changed significantly. The supervisors are having to work much longer hours
(unofficially) and are now taking work home as well. One of the major changes is
financial awareness. They have to learn to manage the budget and to put a cost to
everything that is purchased and done. For example, prior to the transfer, if spare parts
were needed for maintenance purposes, supervisors simply went ahead and ordered
them without having to worry about the cost. Now they have to raise the docket,
itemise the cost, raise the invoice and then shop around to find the cheapest parts before
making the order. Similarly, prior to the transfer, if a work request came from a ward,
they would carry out the work first and worry about the cost afterwards. Now they have
to estimate the cost of the work and obtain ‘go ahead’ approval from the Trust authority
before work can be scheduled and carried out. A subsequent major change in the
supervisor’s job is the significant growth of paperwork which is an outcome of the PFI
relationship. The amount of paperwork forces the supervisors to spend less time at the
bench, something they find difficult because that was what they enjoyed doing. ‘We
have to get used to getting away from the tools and dealing with pens and paper work’
(Supervisor).
For the workers, tightened performance monitoring comes from both internal and
external sources. As reduction of cost and improvement of efficiency were the prime
reasons for the transfer of these undertakings, the workers in general have faced
increased performance pressure from which they cannot escape and in relation to which
there may be little legal protection. As a senior manager from ITCo observed, ‘TUPE

15
does not cover performance issues’. The contractual relationship between the transferor
and the transferee has likewise resulted in the transferee and its workers losing their
autonomy in the work they carry out. For example, under government legislation,
private firms cannot make decisions on benefits. The final decision has to be made by
the local authority. The letters that ITCo staff write to the customers need to be
checked and authorised by the council workers who will change the content if they do
not like it. This procedure is resource consuming. Ironically, when the staff were
working under the local council prior to the transfer, they had the authority to check
their own work. Now everything they do has to be checked by the council, or to be
more precise, by the people who did not want to join ITCo when the site was
transferred. Similarly, the Estate Maintenance Department has lost its previous
autonomy/authority in its work. If any work is requested, the FMCo has to write down
the detailed plan and inform the Trust in order to obtain its authorisation before the
work can be carried out . ‘Before, we just needed to inform them but now we have to
wait for their approval now we are the private contractors. This is a major source of
frustration but that is how they (the Trust) like it. They like it in black and white’ (a
supervisor).
Implementation of procedures
It appears that all four transferee employers have been operating the disciplinary
procedures more stringently than the transferor employer, mainly in dealing with
absenteeism and non-genuine sickness. Responses from staff to this management action
is mixed, with both resentment and plaudit. The level of long-term sickness among the
maintenance craftsmen was relatively high (17%) at one stage. Two or three of the
sickness cases were stress-related. Under the Trust, these sick employees would be left
alone until they were considered (by themselves and by their doctors) well enough to
return to work. With a service level agreement to meet, a mounting backlog of
maintenance work to tackle and a profit target to achieve, FMCo has less tolerance for
sickness. Long-term sick cases are to be investigated through counselling (e.g. home
visits) to determine if the employee is well enough to get back to work or to take ill-
health retirement. This practice has invoked much resentment from the workforce.
‘They should trust us enough. If we are sick, we are sick. They don’t need to check us
out. If we are working, they don’t come and see us in the workshop and ask “How are
you”. They are just trying to catch us out’ (a tradesman). Similarly, DomesticCo is
more strict with the absentees in applying the sick leave procedures. The sickness
record would be used as a performance indicator for selecting people for the new posts
after July 2001. Under SaltCo, sick leave was fully paid. But under LorryCo, sick
drivers do not receive sick pay for the first 3 days. They can ring in for sick leave for
the first five days. If the sick leave lasts more than three weeks, the manager has to
report the case to LorryCo’s vocational nurse who will then investigate the case on
behalf of LorryCo in order to decide what to do. LorryCo also buys ill-health insurance
for its drivers who retire on the ground of ill health.
Reduced job security and job satisfaction
Although job security and satisfaction are two separate aspects of the experience of
work, they are somehow closely related especially in a period of dramatic
organisational change. Job security is currently a serious worry for the PFI workers
although the workers generally accept that a job for life does not exist any more. The

16
impending downsizing and the uncertainty of how long the transferee firms will stay as
their employer are the major concerns. The lack of information of what may happen to
their jobs (in terms of new terms and conditions and job security) is the greatest source
of anxiety for the workforce which contributes to push their morale to the lowest level.
The perception that private firms give poor terms and conditions also reinforces their
fears that the new employment package may become less beneficial. Most of the
interviewees felt that the Trust should not have sold the services to the private firms
whose prime objective is to make a profit. They wanted to be pensioned off (or made
redundant with a good package). ‘We don’t want to be with them’ (a tradesman). They
also believed that outsourcing of the service would not provide ‘value for money’ for
the Trust because of the excessive use of official procedures (paper work) in order to
accomplish a simple task and the profit orientation of the private firm. In addition, the
nature of the relationship between the Trust and FMCo prohibits the staff from giving
value-added service to the wards in an informal way which has been a major source of
their job satisfaction: the feeling that they were needed and that they have given people
the help they needed. ‘There is no favour that we can do for anybody now. For
example, if people want us to take a notice board down, we will do it, but they will need
to pay for it to be put up somewhere else. So people from the Trust now have an
impression that we are not interested in our job any more’ (a tradesman).
Job satisfaction for the cleaning staff is very low because of privatisation, the
uncertainty about the future, the failure of DomesticCo to keep their ‘manifesto’
promises (e.g. more training, more people, more materials for cleaning, general ways of
making work easier for staff, etc.). ‘The service is going down. Things are getting
cheaper. They said the cleaning materials are as good as they were, but they are not,
and you have to work so much harder to get the place clean’ (a cleaner). ‘They talked
about giving us shoes but they have now taken that back’ (a cleaner). Whereas there is
no overt threat to job security for the housing benefit staff, job satisfaction appears to be
low. ‘People are not very happy at the moment because of the mistakes made by the
previous General Manager (which has created even more backlog). We are under a lot
of pressure due to understaffing. You can’t do this job without caring for the public.
We do care and want to provide the best. But it is far from that at the moment’ (a trade
union representative). For the LorryCo drivers, job satisfaction is ‘zero’, not because of
the new manager (whom they praise highly) but because of the shock of being
‘disowned’ by their former employer.
The supervisors, however, generally felt that their job satisfaction had increased
because they are now given more support and responsibility from their superior to
manage their staff, even though they felt at the same time that their work had been
significantly intensified due to the increasing amount of paper work.
The need to adapt to new company culture
The change of employer often means a significant change of company culture and ways
of managing. This has been the case for the transferred workers in ITCo and the
hospital from being a public sector to a private sector. Again, line managers and
supervisors are the most affected group in that they not only need to adapt to the new
culture themselves but also have to persuade staff to accept this change. Supervisors
are asked to do new tasks, to make presentations, to adopt the company’s core value (of
customer care and profit focus), to take ownership of their work, to challenge existing

17
ways of managing, to be innovative and be more flexible in order for the company to
deliver the contract. ‘It is a cultural change for us. But this has not filtered down to the
case workers yet’ (a supervisor of ITCo). All interviewees had noticed the sharp
difference in management style and organisational culture between the local authority
and the private firms. Trying to wean the workforce from a public sector culture to a
private sector culture is seen as the biggest challenge for the managers. There is an
issue of profit and penalty, but the workers are ‘absolutely lacking in commercial and
financial awareness. It was just a big pot for everybody to dig in. If someone wants
more chips, then they will be given more chips. Customer satisfaction means more on
their plate... People have never needed to be accountable for anything they did. If it is
over-budget, then it is over-budget’ (a manager from DomesticCo). Now the workforce
is being educated to improve their financial awareness. This is a dramatic cultural
change for the transferred staff. Many of them did not like this change. ‘We are here to
look after the people, not to make a profit’ has been a common remark from the
interviewed workers.
The role of the trade unions
Although trade union presence and density has generally declined in the last two
decades, the study of the change of employment relations will not be complete without
looking into the role of the trade union (or lack of it) in the change of employment
relations. The role of the trade union in the process of these transfers of undertakings
and in the post-transfer changes has largely been reported as limited and/or negative.
Some sympathetic workers felt that the trade unions had done a good job or done as
much they could have to look after the interests of the workers. But ‘there is a great
wall built fast in front of the trade union representatives. FMCo does not like the trade
unions. So you have to have a strong personality to be the representative. They make
your life hard for you, but the trade union is very important for the workers to voice the
power imbalance’ (a tradesman). Some interviewees also believed that the trade unions
had been very weak as a consequence of Thatcher Government, ‘otherwise this lot
(FMCo) would not have got in. The trade union has sold us down the road’ (a
tradesman). Resentment about the transfer and contempt for the trade unions were
apparent throughout the interviews with different groups of workers. ‘We have no say
in selling our (employment) contract. Why should they be able to just walk in and buy
my contract without any consultation?’ (a chef). Staff’s perception of the trade unions
is also heavily related to their perception of the representatives. ‘They (the trade
unions) are a waste of space’ (a catering assistant). In DomesticCo, the trade union
representatives have been involved with the ‘integrated workers’ initiative. But instead
of collecting the members’ views and representing their interests, they went off to
negotiate with the management without disclosing much information to the staff until
‘things are sorted out’. The drivers (with the exception of one) are members of the
United Road Transport Union (URTU). The drivers felt ‘very let down’ by the trade
union because the trade union did not explain the situation to the drivers properly. They
felt that the trade union could have done more for the drivers although the drivers did
not know what it was to be done for them. Half of them do not go to the trade union
meetings any more. The drivers felt that ‘there is no point in fighting for better terms
and conditions because we are not going to get it. There is no point upsetting SaltCo in
case they don’t renew the contract with LorryCo’.

18
Conclusions
As its name suggests, the Transfer of Undertakings (Protection of Employment)
Regulations 1981 was intended to protect the employment rights of employees when a
change in ownership of the business in which they were employed took place. In
consequence, if a particular transfer is regarded as being covered by the Regulations,
the transferor will be able to reassure affected staff that, for example, their continuity of
employment will be maintained and that they will be transferred to the new entity on
their existing terms and conditions as to salary, hours of work, sickness benefit and
holiday entitlement. However, ‘the principal effect of TUPE is to ensure minimum
standards are maintained in negotiated transfers. The legislation is designed merely to
assure the continuity of employment’ (Domberger, 1998, p143). As these case studies
clearly demonstrate, the employment contract itself delineates only imprecisely and
incompletely the regime under which employees work and the expectations required of
them. Thus, for example, a change of ownership may leave untouched an individual’s
right to contractual sick pay, but if the sickness absence policy is operated more
stringently, then employees will feel that things have changed. Even an explicit post-
transfer change to a sickness absence policy is unlikely to be outlawed by the
Regulations in that its status as a contractual term would be doubtful. Similarly,
informal ‘practices’ such as those allowing the transferred hospital staff to take short
periods of time off work are unprotected by TUPE.
More significantly, perhaps, the case studies reveal that work intensification and
increased performance monitoring are common features of post-transfer working life
and yet the ITCo manager’s remark that ‘TUPE does not cover performance issues’ may
not be far from the truth. Whilst wholesale changes to jobs would clearly not be
permitted, changes in the manner in which jobs are done are unlikely to involve an
alteration to contractual terms and conditions. Furthermore, whilst future changes in
contractor does not, in theory, mean loss of jobs provided TUPE is applied, the worry
about job security experienced by the PFI workers is both understandable and likely to
affect negatively their job satisfaction. In many ways we can therefore see that TUPE
protection is limited in significant aspects and that theses limitations may not be
appreciated by either the transferred employees or the transferor. One implication of
the case study evidence is that trade unions may need to broaden their negotiations on a
transfer to include such non-contractual-and therefore unprotected- issues as work
intensity, sick leave arrangements and the maintenance of custom and practice.
However, the case studies also indicate that even in those areas supposedly protected by
TUPE, employees may be unable to resist changes implemented by the new employer.
The experience of the distribution fleet drivers demonstrates that packages of less
beneficial terms and conditions may be foisted onto the workforce because all parties
have misconstrued TUPE case law about, for example, the so-called ‘12 month rule’ or
about the application of the Regulations to future transfers. Regardless of such
misapprehensions, however, employees may take a pragmatic view and accept the
imbalance of power inherent in any ‘agreement’ to contractual changes.
The transfer of undertakings as a result of outsourcing in all our cases offers the new
employers opportunities to improve organisational performance by creating change
through reducing staff numbers; introducing new skills and working practices; and
modifying individual incentives, employment terms and conditions, and attitudes to the

19
workplace (Domberger, 1998). As we have seen, none of these changes can be
prevented effectively by TUPE largely because the employment protection legislation
on the transfer of undertakings in the UK is limited in its application (Wenlock and
Purcell, 1990). Unfortunately, none of these issues has been picked up by the recent
Amendment of the Acquired Rights Directive (1998). Perhaps the real value of the
TUPE Regulations lies not in their ability to protect the terms and conditions of staff
transferred, but in the fact that they prevent transferees from selecting only those
individuals whom they regard as valuable to their organisation and refusing to take on
those whose ability, motivation or disciplinary record would otherwise make them an
unattractive proposition. It should also be remembered that for the workers transferred,
some aspects of their working environment such as increased opportunities for
promotion and training have been altered for the better. Nevertheless, the mandatory
nature of TUPE should not be forgotten, employees are transferred automatically unless
they ‘object’ - in which case their contracts of employment terminate at the time of the
transfer. As one interviewee commented, ‘we have no say in selling our employment
contract’.

20
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