Approved uses of Retention of Employment model by the NHS

22 January 2009

The TUPE Regulations protect employees working in undertakings and services that transfer to new employers; employment rights and liabilities automatically transfer. One important exception to this protection is that all pension rights do not transfer, this can be especially important in the NHS.

The Retention of Employment model (“RoE”) has been used by the NHS to allow staff due to transfer to the private sector to remain employed by the NHS, thereby protecting their pension rights. The employee resigns from their post and is ‘re-employed’ by the NHS employer who then usually seconds the individual to work for the private sector organisation. This is of particular relevance to transfer issues arising from contracts been lost to ICAT providers.

The use of the RoE model is specifically restricted to the following circumstances;

• soft facilities management in Private Finance Initiative Schemes
• staff working in Independent Sector Treatment Centres.

Last week, the Department of Health wrote to all NHS Trusts in England to remind them when it is appropriate to use RoE and that even where Trusts wish to use RoE in those limited circumstances, the Trust still needs to obtain approval from the Department of Health. The underlying position in Wales is the same, but no such reminder letter has been issued to Welsh Trusts. Foundation Trusts do not need such explicit approval, it should be raised with Monitor.

The clear rationale for the restrictions on the use of RoE is financial. NHS employees who transfer to the private sector are already protected by the Government’s "Fair Deal for Staff Pensions" Guidance issued in 2004, and the subsequent "Code of Practice on Workforce Matters in Public Sector Contracts" issued in 2005;

HM Treasury pensions BTA guidance

NHS Employers advice

The Guidance requires private contractors to whom NHS employees transfer, to offer those employees a ‘comparable pension arrangement’ thereby protecting those staff and limiting the need for implementing the RoE model at a cost to the taxpayer.

The Department of Health intends to review the possible use of RoE arrangements within the NHS. However, until that review provides its conclusions, the RoE should not be used for any other purpose than those set out and formally approved by the Department of Health. The letter warns that from June 2009, the Department intends to deny employees access to the Pension Scheme if they were employed after the 13 January 2009 under a RoE that was not approved.

Comment
The use of the RoE to prevent an employee from transferring to the private sector will attract scrutiny in view of the additional costs this places on the NHS and the taxpayer. Where, in the limited circumstances RoE can be used, no agreement should be reached with the employee or their representatives before approval from the Department is received.

This recent letter highlights two additional issues. First, where an NHS employer wishes to retain the services of an employee who is due to transfer, then there are ways in which this might be achieved by redeploying that individual to another post in the organisation. Secondly, NHS employers need to carefully consider the use of secondments generally, even outside of a TUPE situation, which in most circumstances, will result in the employer retaining liability and incurring costs for the seconded employee.