In times when budgets are stretched, many academies are deciding to outsource cleaning, catering and other services to external contractors, in order to save costs. 

As a result of any such outsourcing, non-teaching employees of the academy who are currently carrying out the services in-house will become employees of the contractor, pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The terms of the outsourcing will usually be set out in an outsourcing agreement (also known as a services contract), entered into between the academy and the contractor.

When the outsourcing contract is being negotiated, the academy will need to ensure that it includes appropriate provisions on pensions which comply with the requirements of HM Treasury’s new Fair Deal policy 2013, in which HM Treasury made it very clear, for the first time, that the Fair Deal terms will apply to staff transferring from certain maintained schools (including academies) where the local authority is not the employer of the staff. 

For academies, the new Fair Deal policy (broadly) provides that:

  • Staff who are members of the LGPS and who are compulsorily transferred from a public sector employer (the academy) to a private sector contractor, and who remain continuously employed on the delivery of the outsourced service or function, will remain eligible to be members of the LGPS while they continue to be employed on the transferred service or function.
  • This protection does not apply in relation to other staff of the independent contractor, including any staff employed to deliver the outsourced service or function who were not compulsorily transferred from the academy.
  • It is the responsibility of the academy to ensure that the terms of the outsourcing contract require the contractor to provide protected staff with continued access to the LGPS in their new employment.
  • Academies must also ensure that staff protected by the Fair Deal policy are provided with continued access to the LGPS on any subsequent compulsory transfer while they continue to be employed on the contracted-out service or function, including any transfer to a sub-contractor or on a sale by the contractor of part of its business.

Although the Fair Deal policy does not have the force of law, the Department for Education – and public sector unions – will expect academies to comply with it as a matter of practice.  It is also important to note that the policy is not overriding, and that failure to include appropriate provisions in the outsourcing contract will result in staff having no protection.  Further information on the new Fair Deal policy can be found on the Government’s website at:

https://www.gov.uk/government/publications/fair-deal-guidance.

Continued access to the LGPS for staff post-transfer is provided by the well-established mechanism of an admission agreement, which in these cases will be a tripartite agreement between the contractor, the academy (who must stand as guarantor of last resort for the contractor’s LGPS liabilities) and the relevant LGPS administering authority.  The contractor may also be required to obtain a bond from a third-party provider, which will help to protect the academy against financial risk as ultimate guarantor. 

Academies can expect contractors to seek protection against any existing deficit relating to the relevant staff (which would otherwise transfer to the contractor along with the contracts of employment), and also against the need to make good any deficit which may be present when the contract comes to be let again.  Obtaining an early indication from the LGPS fund actuary of the size of any existing deficit is therefore strongly recommended.