Analysis: What next for staff from the big four? – 17 May 2007

It is a worrying time for staff caught up in the mergers of the big four with many facing the grim prospect of being made redundant or having to reapply for their job.

But the good news is there are a number of strict guidelines in employment law that companies in these circumstances must adhere to.

Mark Hatfield, a partner in the employment law practice at Mace and Jones said there is a duty placed on employers to provide information and consult with employees over issues such as redundancies. The length of the consultation depends on the size of the group but has to be at least 90 days.

In the case of the Thomas Cook/MyTravel merger the consultation period will start after the new company is officially formed on June 19. There then follows the notice period, which has to be honoured or paid off.

Under the terms of the Transfer of Undertakings (Protection of Employment) 2006, or TUPE, regulations staff who transfer to the merged company will do so on the same terms and conditions they enjoyed at their previous company.

But Hatfield pointed out that under TUPE employers can give economic, technical or organisational reasons for not taking on staff.

“That’s clearly what they will be looking at, and that’s when the consultation will kick in,” he said. “They [staff] are protected on the face of it but it will be foolish to think that everyone will come through unscathed.”

Transferring to a new company under TUPE can leave some staff enjoying better conditions than others.

“Clearly there will be differences, such as rates of pay, but what you’re after now as an employee is to keep your job. You can argue about your conditions later,” said Hatfield.

Susan Fanning, a partner in the employment law group at DLA Piper, said it is common for employers to decide the fairest way to deal with the merger is to let all suitably qualified people reapply for certain jobs.

“That can be a gruelling process, especially if it’s in the same office they have been working in,” she said. And although employees may be allowed to apply for other roles it is “very difficult” for them to challenge the decision.

Some staff may be offered an alternative position but their decision on whether to take it will be based on if it is deemed to be a ‘suitable’ alternative, for example if it is close to the original place of work.

Fanning explained that in some situations employees may be offered a trial period and then choose redundancy if they find it unsuitable.

In terms of seeking advice, Fanning said staff should go to their line manager, union or even their staff forum if they have one.

Although a forum cannot stop a redundancy programme in the UK it can have an impact on the employer’s legal obligation to consult.

However, Fanning expected employees at the big four to be treated relatively well. “I’d be very surprised if their schemes weren’t more generous than statutory,” she said. “It’s almost unheard of for a large company to just offer the basic package.”

It is in the employers’ interests to make employees feel valued because they need to keep morale up to maintain productivity.

“Business continuity is the prime concern here,” said Kim Stubbs, a partner in business restructuring at BDO Stoy Hayward. One way of addressing this is to incentivise staff during the changeover period.

Stubbs also expects the merged companies to be generous. Of the suggested £125 million one-off costs at Thomas Cook/MyTravel resulting from the merger Stubbs estimated three quarters will go on severance pay.

The combined company plans to make annual savings of £100 million in three years time so it can take such one-off costs on the chin.

“There’s a tremendous incentive to do this well,” Stubbs said. “When you look back at these mergers in three years’ time it won’t be the synergies and savings people will be talking about but the radical change in the way these businesses operate.”

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