Legal

The HR challenges of shared service centres

25 Jun 2018 By Raoul Parekh and Dónall Breen

What employment law issues need to be considered when organisations consolidate back-office operations? Raoul Parekh and Dónall Breen report

Confusing collective consultations

Reducing headcount is one of the key cost savings when creating a shared service centre. This often means triggering the test for whether an employer must start a collective consultation process: do you propose to make 20 or more employees redundant within a 90-day period at one ‘establishment’?

This test can be deceptively difficult to apply because of two issues. First, the law is not clear on exactly what an ‘establishment’ is. Generally, employees based at separate physical sites will be in different establishments, but not always. You should take a close look at the law on this if your project involves making 20 or more employees redundant across your group (even if you reach that threshold considering unconnected redundancies).

The second area of difficulty is when exactly collective consultation should begin – when redundancies are ‘proposed’. The law states that ‘proposing’ precedes the actual decision to make the redundancies. But often the redundancies will follow almost inevitably from a decision taken at board level before detailed HR or legal involvement. This often leads to the creation of unhelpful documents (for example, board minutes and reports) that refer to the dismissals as a foregone conclusion, undermining a genuine consultation. 

Failure to properly collectively consult when required to do so can be an expensive mistake – up to 90 days of pay per worker. You will also need to hold one-on-one consultation meetings with affected employees, although this can take place alongside the collective consultation process.

The TUPE torpedo

TUPE is an oft-forgotten thorn in the side of companies reorganising their workforce during a shared service centre project. In broad terms, the TUPE regulations apply if business activities or assets (including contracts) are moving from one entity to another. TUPE will not apply when a single employer is being retained throughout the reorganisation. 

If TUPE does apply, it is not a roadblock; if you see it coming, it’s more of a twist in the road to shared service centre nirvana. You will need to consult with employees, which can be dovetailed with your collective redundancy obligations if they also apply. Employees will also enjoy some special protection from dismissal and to their terms and conditions.

Keep the remainers and leavers on side 

Just like Theresa May and the Brexit process, you need to keep the remainers and leavers happy in the build-up to the big event. Unlike Brexit, the process of dealing with this parting of ways doesn’t have to be an information vacuum.

Make sure employees know whether they are staying or going as early as possible (subject to your consultation obligations). For those leaving, know your rights and obligations. First, you need to have a fair process and genuinely engage with your employees to avoid troublesome tribunal claims. 

Having a clear road map and pre-approved scripts can help manage this risk. Make use of your ability to have off-the-record conversations to tease out those who may be willing to leave early. Also, make use of settlement agreements to finalise exit agreements and give yourself certainty. Put a template settlement agreement in place that you can cheaply make use of if required.

For those staying (temporarily or permanently), the soft skills will be more useful. Remember, it is in your gift as an employer to offer perks and rewards in return for behavioural change. You could have cash bonuses for those who hit their targets during turbulent times, or give additional days of leave to those who are working particularly hard as new systems get up and running. Finally, the biggest motivator of all can be a simple ‘thank you’ to those who stick with an organisation as you walk the rocky road together. 

Raoul Parekh is a senior associate and Dónall Breen an associate at GQ|Littler

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