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Clients of 3PLs can find themselves ‘locked in’ to overpriced and inefficient contracts by TUPE rules

Many UK third party logistics (3PL) service providers are using the TUPE Regulations as a means of persuading their existing clients not to switch to competitors – even if the client is convinced that the alternative 3PL is able to provide the same level of service for a significantly lower cost.

That is the view of William Walker, head of sales and marketing, at fast-growing Berkshire-based fulfilment specialist, Walker Logistics.

Under TUPE – Transfer of Undertakings (Protection of Employment) –rules, if a service company, such as a 3PL, wins a new contract, it inherits relevant workers from the previous contractor if they have been part of a group that has served that particular customer. This can mean becoming responsible for a group of workers’ accrued service and employment rights.

William Walker comments: “Walker Logistics has pitched for and won new accounts from several 3PLs operating in the UK on the basis that we have been able to demonstrate that the contract can be serviced by, say, five workers – only to be told that the incumbent 3PL operated employed double that number of staff to undertake the same level of activity.”

He continues: “The cost implications of taking on the extra staff that would be ‘Tuped over’ to our business undermines the proposal and, in a number of cases, has left the client with little choice but to remain with the existing service provider – even though switching would have brought a significant benefit to its bottom-line as well as increased service levels.”

“Because TUPE laws were introduced to protect workers’ rights, TUPE issues are often perceived as a problem for the Human Resources department to contend with. However, they are clearly a key commercial issue and a company’s potential obligations under TUPE must be considered when tendering for new business.

“From a 3PL’s point of view, it is quite easy to see how the anticipated profit from a new contract can be eaten into by costs incurred under TUPE obligations. These should be factored in to any new business tender from the outset.

“But for many users of 3PL services TUPE rules are being used to ‘lock’ users of contracted services in to relationships that are not financially beneficial and, in my experience, this is causing significant frustration to many companies.”

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