Change Management and Managing Change – Harmonisation and Achieving Harmony

When any major and significant change takes place in the structure of a business that involves merging with another business, via a takeover or the re-awarding of a third party contract, one of the most important aspect of the pre-transfer due diligence should be the examination of the terms and conditions of the employees whose work will be affected.  Should be.  But frequently it is not.

What does this mean for a Company and how does it come about?

It may be that a part of a Company’s growth plans includes acquisitions, buying a similar company and taking its work and its staff on board.  Or it may be an agreed merger, in which two companies with a similar product or service agree to come together, perhaps forming a new Company, with a much bigger workforce.

Then there is a contract provision change.  In this case, an outsourced contract is moved from one company to another by the contract holder.

What all these changes have in common is that, from an HR point of view, TUPE will apply to the transferring staff.

TUPE is the Transfer of Undertakings (Protection of Employment) regulations that govern the rights and protection of the transferring employees’ terms and conditions of employment.

In essence, it means that when employees transfer into a new Company, their existing terms and conditions will continue and, except in very exceptional circumstances, cannot be changed to match those of their new associates.  So, it’s possible and quite likely that following the transfer there will be significant differences in pay for staff doing the same job, different allowances for holidays, level of maternity and paternity pay, sick pay, etc. In fact, any term or condition that has a financial aspect is protected from unilateral change under TUPE regulations.  And that protection is permanent, in relation to any change that comes about as a direct outcome of the transfer.  For example, after a year, the Company decides that it must re-organise its workforce because since the transfer the way in which groups of people work together has never functioned correctly, and brings in changes that might include changes of hours, shift patterns or the introduction of new job titles.  Despite going through a formal consultation procedure, if the change is only taking place as an outcome of the transfer, then it can be voided.  And even if it has been agreed, any employee subject to the change can at a later date, refuse to accept it.

So, any change that takes place that affects terms and conditions must be as the result of what is called an ETO – Economic, Technical or Organisation – reason and not one connected to the transfer.  And this is always going to be risky.  It’s one of those “prove you didn’t” situations.

Is there any good news here? 

Some.

What the Company can do is to prepare for any redundancies that might have to take place following the transfer.  Provided the process is carried out fairly, reduction of the workforce can take place.   However, in deciding that redundancies may be unavoidable, there has to be a pool of employees to be notified and put at risk.  And this pool must include all employees in the new Company, not just those who have transferred in.

So, is there any way that Terms and Conditions can be harmonised?

This is where your due diligence comes in.  The Company should know, as part of its decision, what are likely to be the significant issues in what they are taking on and how this will affect the whole workforce.

If the differences are minor, then leaving them alone is probably the best path to take.  If it isn’t truly broken, then fixing it for the sake of fixing is a waste of time and will expose the Company to risk

Next, is it possible to give the incoming employees enhanced Terms and Conditions?  For example, an extra day’s holiday, a small increase in sick pay?  People rarely object to being given more.  And if people feel that they can trust the Company, this will make any future attempts at harmonisation easier to negotiate.

The most difficult issues to deal with are when there are significant differences in pay for people doing the same job.  And in sick pay, if the terms for the incoming staff are better than the Company has offered to its own staff.  It probably isn’t practical or affordable to upgrade to the existing workforce’s terms and conditions to match the incoming, although there might be some room for manoeuvre and it’s worth consideration. 

But there are ways in which salaries can move towards harmonisation over time.  For example, if the Company knows that it is paying a median wage in the industry for the work done, and has done its homework, it could be possible to ringfence the higher salaries until the two are closer together.  But this is a long-term prospect.  In the short term there is little that can be done about significant differences in pay.  Again, over time, changes may occur that will lessen the impact of the differentials.  For example, if there are promotion opportunities, these can be offered on the existing terms and conditions.  And if the person promoted has TUPE terms and conditions, these will not apply to a new role.

There is another key factor at play here, when change of this nature occurs.  All of the above is about the immediate change, challenges that will always have to be faced when a significant change occurs that involves a legal process such as TUPE.

What about the long term?  What does the Company ultimately want to ensure that its new business is successful and has provided the platform for growth that made it decide to go ahead with such a momentous change?

In the long term, to make the business successful, it has to be one Company.  One set of values, one culture.  And this is where advance plans and due diligence can make or break the merger/ acquisition/contract transfer.

People will make the success happen.  And the failure.  Failure to give thought to fundamental matters such as vision, mission and values could result in an incoming workforce feeling like they have landed on an alien planet.  To a certain extent this may be inevitable, but truly understanding the differences between your own Company’s values and culture and that of an incoming workforce can help to prepare the way and lay out a plan of assimilation.  Explaining the differences is vital.  If people are going to have to work at a different pace, interact with a new team in a new way.  They have had no say in what has happened to them.  Handled badly, with little or no information they will feel helpless, nervous, angry, suspicious and even aggressive.  It’s the lack of choice that brings these emotions to the fore.

But given a plethora of information, helped to believe that they will be welcomed and supported through the changes to come, and encouraged to participate and ask as many questions as they need answered, there is a good chance that the workforce can reach a state of harmony in a not-too-long period of time.

And the feelings of the existing workforce should be taken into account too.  Some may feel unsafe as a new group of people arrive.  Will this affect their jobs?  Again, information is the key.  Make sure that Managers are well briefed and able to answer any questions from their side of the fence or have a route to get answers that they may not have.

Employees holding interlocking gears

Social events can help in allowing people to get to know each other.  Breakfasts and lunches give people time to talk.  Team building exercises, designed with the purpose of creating harmony in the new workforce will encourage staff to learn about each other.  Consider creating a “buddy” system for the first couple of months, so that peer level associates can support each other without having to resort to a Manager in situations where that might feel uncomfortable.

Whatever the choice of method, the achievement of an integrated harmonious workforce should be one of the fundamental aims when facing a merging of workforces through whatever situation.

Many integrations fail because emphasis is placed on processes and systems.  Put the people up there with the processes/systems/machinery etc and you will move much closer to the success that drove the Company out onto this path of change in the first place.

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