Proposals to reform Transfer of Undertakings and Protection of Employment (TUPE) regulations, risks driving down pay and increasing unemployment, the TUC has warned.
TUPE protects employees' terms and conditions of work when a business is transferred from one owner to another. Staff automatically become employees of the new employer on the same terms and conditions as they were on before, and their continuity of service is also protected.
The Government is considering increasing the flexibility for employers to cut pay and conditions after a transfer takes place. This could lead to a race to the bottom, warns the TUC, with companies using low wages to compete for contracts in the public and private sector, rather than by quality of service, efficiency or innovation.
In its response to a Government call for evidence on TUPE, the TUC said changing legislation could also lead to an increased involvement of the private sector in public services, with contractors competing for business on lower wages rather than on the quality of the service they provide.
The TUC argues that TUPE regulations also benefit employers by creating a level-playing field for businesses and enabling restructuring to take place more easily and without disputes.
Employers are also pressing the government to remove the amendments on 'service provision changes' introduced in 2006. This would create major uncertainty for businesses, employees and their unions on whether TUPE applies to the outsourcing of services, or when services are brought back in-house, says the TUC, and would generate needless and costly litigation.
These changes could also lead to the erosion of the pay and conditions of low-paid service sector staff such as cleaners and catering staff. The TUC argues this would have an adverse impact on women, who are disproportionately employed in contracted-out services. According to the Annual Survey of Hours and Earnings (ASHE) 2011 74 per cent of cleaners and domestics are female. Similarly 65 per cent of kitchen and catering assistants are women.
TUPE regulations also maintain employment levels, as new employers must retain original staff when they take over a business, argues the TUC. Cutting back on this vital right means employees could lose their jobs when the owner of their company changes, which would increase unemployment and reliance on welfare benefits.
TUC general secretary Brendan Barber said: "TUPE law protects workers and gives businesses valuable security. Tampering with the regulations would not only generate uncertainty and needless litigation, it would also make low-paid workers vulnerable to mistreatment.
"Weakening the guarantee on pay and conditions would encourage companies to compete for contracts based solely on wage and other employment costs, and not on the quality of service. This could lead to an increase in poverty wages for the many female employees who work in catering and cleaning.
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