Outsourcing

Third party providers for labour and products

What is outsourcing?

To outsource labour or a product is to transfer responsibility onto an external third party from a previously internal service provider. Outsourcing is made up of three phases:

• customer transfer - transferring an existing service to a service provider
• receipt of services
• termination/expiry.

Termination or expiry may entail either:

(a) Renegotiation or renewal of contract of services

(b) Exit management by on of the following:

(i)   service being brought back in-house

(ii) the appointment of a new service provider

TUPE Regulations

TUPE stands for the Transfer of Undertakings (Protection of Employment) and is brought about by regulations set out in 2006, which applied to almost all outsourcing with production based in the EU.

The TUPE ruling transfers employees administering relevant services from the customer to the provider. In the event that one provider is replaced by another, the workers will transfer to the new provider from the old.

TUPE legislation is in place to ensure that the liabilities and rights associated with the employees from the old employer are transferred to the new correctly.

With this in place in the event that a customer employee formed a claim for discrimination against the customer, the liability for that specific claim would be transferred to the provider during the employee pass over.  In the instance that employers fail to carry out TUPE, policy liabilities may arise. Services agreements, however, will ordinarily comprise relevant warranties and indemnities in relation any notable liabilities prior to staffing being transferred, as well as after transfer and upon exit.

Below are a few questions posed involving TUPE regulations:

• What risks are created for the customer through off-shore outsourcing?
• What information needs to be provided regarding employees in an employee transfer?
• How are pension schemes affected by employee transfer?

Off-shore outsourcing

Offshore destination businesses moves are increasingly popular; specific sectors include:

• software development
• mall centres
• mass business processing.

However practical and cost-cutting offshore outsourcing measures may be, there are a few additional implications that should be considered:

• data protection, and other legal regulations and regimes
• across border relationship management
• assignment of auditing responsibility and other managerial tasks
• delivery - liability handling.

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