TUPE and Beckmann issues in a private sector outsourcing
Produced in partnership with Dentons

The following Pensions practice note produced in partnership with Dentons provides comprehensive and up to date legal information covering:

  • TUPE and Beckmann issues in a private sector outsourcing
  • Automatic statutory transfer of terms and conditions of employment
  • What benefits fall within the pensions exception?
  • What pension benefits pass to the Supplier under TUPE?
  • The Beckmann case
  • The Martin case
  • The Procter & Gamble case
  • Areas of uncertainty
  • Due diligence, warranties and indemnities
  • What should the Customer and the Supplier say to employees being outsourced?
  • More...

TUPE and Beckmann issues in a private sector outsourcing

THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL AND PERSONAL PENSION SCHEMES

Automatic statutory transfer of terms and conditions of employment

In a private sector outsourcing, employees transferring to a Supplier must be employed on the same terms after the transfer as applied before the transfer in accordance with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), SI 2006/246, but subject to a pensions exception.

What benefits fall within the pensions exception?

TUPE (which is derived from EU law) provides that a Supplier will not take on:

  1. the obligations and liabilities of the outsourcing Customer which arise under or in connection with so much of a contract of employment or collective agreement as relates to an occupational pension scheme (as defined in the Pension Schemes Act 1993 (PSA 1993), s 1), or

  2. any rights, powers, duties or liabilities under or in connection with any such contract or agreement and relating to such a scheme

The exception is a narrow one and only applies to three types of benefits:

  1. old age benefits

  2. invalidity benefits, and

  3. survivors’ benefits

Two European Court of Justice (ECJ) cases (known as the Beckmann and Martin cases) and a further case in the High Court (the Procter & Gamble case) have considered the nature of these excluded benefits. Although it is clear that invalidity benefits include

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