Open consultation

Consultation on clarifications to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and abolishing the legal framework for European Works Councils

Published 16 May 2024

Foreword

As established in the paper Smarter regulation to grow the economy, published in May 2023, the central regulatory focus of this government is on how we can improve regulation across the board to reduce burdens, push down the cost of living and drive economic growth. By ensuring we have the best regulated economy, we can develop an environment conducive to innovation, investment, and business confidence. When we tie businesses up in red tape, we limit their ability to innovate, and hamper our national growth prospects.

The government has been reviewing UK employment law using the smarter regulation principles and listening to stakeholder views on opportunities for regulatory reform. Our 2023 consultation on reforms to retained EU employment law demonstrated there was appetite for further reform of employment law. Through this work, we have identified several opportunities for improvements.

These include proposals for further clarifications to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) to ensure firms can be confident of their obligations during this process, leading to better outcomes for both businesses and employees. We are also proposing to abolish the legal framework for European Works Councils, which are a legacy of our membership of the EU, and which have been subject to recent litigation.

These proposals take advantage of our new regulatory freedoms having left the EU, and have the potential to deliver simpler, clearer regulations. This benefits businesses, workers, and the wider economy.

We want to use this consultation as part of our ongoing dialogue with businesses and workers to deliver a regulatory framework that will retain our global position as a dynamic, vibrant, and flexible economy.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

Introduction

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) implemented the EU Acquired Rights Directive. The purpose of the TUPE regulations is to protect employees’ employment rights when the business or undertaking for which they work transfers to a new employer. TUPE may also apply when a service transfers to a new provider (for example when another company takes over a cleaning contract).

Where TUPE applies, employees’ employment and associated rights legally transfer from their previous employer to their new one. Some changes to terms of employment are allowed under specific circumstances, for example where there is an economic, technical or organisational (ETO) reason for the variation.

The government recognises that the TUPE regulations provide protections for employees, and a legal framework for transfers of staff. However, we know that businesses find certain aspects of the TUPE regulations burdensome and complex.

This is why the government recently implemented reforms to the TUPE regulations to simplify the TUPE consultation process. As of 1 January 2024, small businesses are permitted to consult directly with employees on TUPE transfers (if there are no existing employee representatives in place) and businesses of any size may consult employees directly where a transfer of a small number of employees is proposed.

In our consultation on these reforms, we asked respondents for suggestions of other changes which could be made to the TUPE regulations. Several respondents suggested that reform or clarification is needed in the following areas:

• the application of TUPE to workers
• the application of TUPE where a business is transferred to multiple transferees

In response to this, the government is now consulting on proposals to reaffirm that TUPE only applies to employees, and to prevent complex contract ‘splitting’ in cases where a business is split between multiple transferees.

In both these areas, case law has introduced uncertainty that the government is seeking to resolve. These reforms will:

• reduce the complexity of the TUPE transfer process for employers and employees
• reduce the administrative burden and costs of the TUPE regulations for businesses
• provide additional clarity for both employers and employees

An initial analysis of the impacts of the changes are included in the annex.

Proposal 1: reaffirming that only employees are protected by TUPE

It was previously accepted that the TUPE regulations cover employees only and not ‘limb (b) workers’. However, the 2019 judgment of the employment tribunal in the case of Dewhurst v Revisecatch Ltd t/a Ecourier concluded that TUPE applies to limb (b) workers as well as employees. People with limb (b) worker status are entitled to core employment rights (such as holiday pay and a minimum wage) but have increased flexibility in the way they carry out their work and therefore do not have all the rights available to employees. Limb (b) workers are often referred to simply as ‘workers’ and we use these terms interchangeably in this consultation.

While the judgment in the Dewhurst v Revisecatch Ltd t/a Ecourier case is not binding, it has created some uncertainty for businesses around whether TUPE applies to limb (b) workers.

The definition of ‘employee’ in the TUPE regulations differs slightly from that in the Employment Rights Act 1996 (the act). The act sets out most of the employment rights and protections in Great Britain.

The government is therefore proposing to amend the definition of ‘employee’ in the TUPE regulations to clarify that limb (b) workers are not protected by the regulations.

Amending the definition of ‘employee’ in the TUPE regulations will address the ambiguity around the question of whether limb (b) workers are covered by the TUPE regulations. This will provide helpful clarity for businesses undertaking TUPE transfers where workers are involved.

1. What effect has the ruling in the case of Dewhurst v Revisecatch (that TUPE applies to workers) had on employers or workers?

2. Do you agree that the government should amend the definition of ‘employee’ in the TUPE regulations to confirm the generally accepted principle that the regulations apply to ‘employees’ but not ‘workers’?

3. Do you think that the government’s proposal to amend the definition of ‘employee’ in the TUPE regulations by explicitly stating that limb (b) workers are excluded is the best way to achieve this?

4. We have analysed the potential impacts of this proposal in the annex of this consultation. Are you aware of any other evidence to inform our analysis of impacts?

Proposal 2: removing the obligation to split employees’ contracts between multiple employers where a business is transferred to more than one new business

In 2020, the Court of Justice of the European Union (CJEU) in the case of ISS Facility Services NV v Govaerts and Atalian NV (the ‘Govaerts’ case) ruled that a full-time employment contract can be split between multiple employers when a TUPE transfer involves multiple ‘transferees’. This is when a business or service is split into 2 or more parts and transferred to 2 or more different companies. In the case of Govaerts, a cleaning contract was divided between 2 different companies and the CJEU ruled that the split should be in proportion to the tasks performed for each company.

Splitting contracts in this way can be impractical for employers and employees. Employees may be required to work between multiple sites and dividing employees’ terms and conditions is challenging for employers.

Some respondents to the government’s May 2023 consultation on reforms to retained EU employment law called for clarity on how similar TUPE cases should be handled following the CJEU’s judgment. Prior to this CJEU case, it was widely understood that an employment contract could not be split as part of a TUPE transfer. There are no provisions in the TUPE regulations to determine how a contract should be split between multiple employers.

The government is proposing to amend the TUPE regulations to clarify that an employment contract should only be transferred to one employer and should not be split between multiple employers. Instead, the employers taking over the business or service would be required to agree who should be responsible for each employee’s contract.

These proposals will simplify the transfer process for businesses and employees and will also ensure that employees only have contracts with a single employer, reducing the need for some employees to work between different sites.

1. What effect has the ruling in the case of ISS Facility Services NV v Govaerts and Atalian NV had on how the TUPE regulations work?

2. In your experience, how common are TUPE transfers involving multiple transferees, and what are the practical considerations that arise from these?

3. Do you agree that the government should legislate to prevent employment contracts being ‘split’ between multiple transferees during a TUPE transfer, reverting to the generally accepted principle that existed prior to the Govaerts ruling?

4. We have analysed the potential impacts of this proposal in the annex of this consultation. Are you aware of any other evidence to inform our analysis of impacts?

Abolishing the legal framework for European Works Councils (EWCs)

Context

European Works Councils (EWCs) are consultative bodies that represent the European workforce of multi-national organisations. EWCs were first established by the European Commission in 1994 through an EU directive to provide member states with the right to establish EWCs in companies or groups of companies that have at least:

• 1,000 employees operating over 2 or more European Economic Area countries (EU member states plus Norway, Iceland and Liechtenstein)
• 150 employees in 2 separate member states

This directive was extended to the UK in 1997.

Through EWCs, workers are informed and consulted by the management on the progress of the business and any significant decision at a transnational, European level that could affect their employment or working conditions.

Following the UK’s departure from the EU, the government legislated to prevent the establishment of new EWCs in the UK. The regulatory framework was maintained to allow existing EWCs to continue to operate, providing certainty for business. However, it was never the government’s intention that EWCs in the UK should continue to operate indefinitely. An initial analysis of the impacts of the changes are included in the annex.

Proposal 3: abolishing the legal framework for European Works Councils

Since the UK’s departure from the EU, there has been a series of legal cases brought by companies who have sought to disband their legacy EWCs in the UK. While the courts have upheld the position that EWCs that existed prior to EU exit should continue to operate, there is an ongoing cost to businesses of having to operate an EWC in the UK in addition to a parallel one in the EU to meet their obligations under EU law. Additionally, following the UK’s departure from the EU, the government legislated to prevent the establishment of new EWCs in the UK.

We therefore propose to remove this legacy of the UK’s membership of the EU by repealing the legal framework for EWCs in the UK, which will include a repeal of the current requirement to maintain existing EWCs. We believe that existing structures can effectively represent workers at company level in the absence of an EWC, such as unions or other employee representatives.

1. Do you agree or disagree that the government should legislate to abolish the legal framework for EWCs?

2. Are there any other options the government should consider instead of abolishing the legal framework for EWCs?

3. We have analysed the potential impacts of this proposal in the annex of this consultation. Are you aware of any other evidence to inform our analysis of impacts?

Annex: initial impact assessment of proposals

The measures outlined in this consultation aim to simplify existing rights, such as reaffirming that only employees are protected by Transfer of Undertakings (Protection of Employment) Regulations (TUPE), and so are likely to have small but positive savings for employers, but at little to no cost to workers. 

The analysis contained within this annex is to inform stakeholders of the potential impacts of these changes. However, at this stage, the analysis is preliminary and will evolve as policy work continues and through evidence provided through this consultation.

The department would be grateful for any feedback from stakeholders particularly on the evidence gaps identified, but also on the analysis of the impacts, including those related to assumptions, sources of relevant data and the costs and benefits that have been identified and assessed.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

Proposal 1: reaffirming that only employees are protected by TUPE

What is the problem under consideration? Why is government action or intervention necessary?

It was previously accepted that the TUPE regulations cover employees only. People with ‘worker’ status may also be referred to as ‘limb (b) workers’ in that they have some employment rights but not as many as employees.

The 2019 judgment of the employment tribunal in the case of Dewhurst v Revisecatch Ltd t/a Ecourier concluded that TUPE applies to limb (b) workers as well as employees. While this judgment is not binding, it created some uncertainty for businesses about whether TUPE applies to limb (b) workers.

What policy options have been considered, including any alternatives to regulation?

The definition of ‘employee’ in the TUPE regulations differs slightly from that in the Employment Rights Act 1996, which sets out most of the employment rights and protections in Great Britain.

We are proposing to amend the existing definition of ‘employee’ in the TUPE regulations to specifically state that limb (b) workers are not protected by TUPE. This could not be resolved through guidance or non-regulatory changes as the uncertainty around the definition would remain. Legislation is therefore required to amend the definition of ‘employee’ in the TUPE regulations and address the current uncertainty.

Therefore, the 2 options we are considering are: 

• option 0: do nothing (counterfactual) – that is to allow continued uncertainty about which workers qualify for protections under the TUPE regulations

• option 1: legislate to amend the definition of ‘employee’ in the TUPE regulations to reaffirm that only employees are protected by the regulations – we are proposing to amend the existing definition of ‘employee’ in the TUPE regulations to specifically state that limb (b) workers are not protected by the regulations

Who are the ‘main affected groups’ of this change in regulation?

Employers

Employers who take on the liability of employees under a TUPE transfer, meaning the ‘transferee’, in a transfer of an undertaking or a service provision change, will be affected by this change. While there is no quantitative data available that specifically covers TUPE transfers, we can make an informed judgment on the number of employers affected based on assumptions about the number of transfers.

Data from the 2011 Workplace Employment Relations Survey can be used to broadly estimate the number of business transfers and the number of service provision changes (SPCs) per year^{[footnote 1]}. Although the WERS questions do not specifically refer to TUPE, we are able to consider the following questions to derive an estimate:

• whether the workplace had undergone any of a range of changes, from a change of name or address to a takeover
• whether the workplace uses contracted out services in 10 service areas, whether these services had been contracted out in the past 5 years or whether these services had been brought back in-house

Using this, we estimate that close to 18,000 employers undergo a business transfer and around 30,000 SPCs occur each year.

Furthermore, we estimate that of the employers that go through a business transfer each year, 6,900 are small employers. We also found that SPCs are considered to be more likely in sectors such as cleaning, catering, and building maintenance. Further detail on the methodology for these calculations is available in the impact assessment produced for the most recent amendments to the TUPE regulations.

There may also be effects for employers who are not currently or have not been involved in a TUPE transfer to date, as this proposal may give them more certainty in their business planning. We plan to use this consultation to gather more evidence about the impact of the proposal (option 1) on these firms.

Employees

The core affected employee group would be limb (b) workers who may currently be receiving TUPE protections from employers, despite not being entitled to them under the legislation. HMRC research from 2019 suggested that limb (b) workers represent a small share of the UK working population (around 2.6%). Furthermore, we expect that only a small share of these will be involved in TUPE transfers given that TUPE transfers are relatively uncommon.

It is worth noting that there is not a time constraint on the protections given under TUPE regulations, and there may therefore be some cumulative effect over time. However, we expect that there are still only a very small number of instances where limb (b) workers have been receiving protections in TUPE transfers, and some employers may continue to treat limb (b) workers the same as their transferring employees under option 1.

Description and scale of key costs and benefits by ‘main affected groups’

Employers

The proposed changes (option 1) will provide employers with a greater level of certainty and clarity concerning which workers are protected during TUPE transfers. This increased clarity around changes may bring small administrative savings to affected employers. Businesses may currently be offering protections to workers that they are not obligated to, and clarification would increase consistency of application and would therefore create a more level playing field for businesses. We cannot currently estimate the financial benefit that this would offer for businesses as the frequency of this occurring is unclear, as is the average cost incurred.  

Option 1 may, in some cases, lead to savings for those employing limb (b) workers if the regulatory clarity means they no longer provide TUPE protection to those workers. We would expect these savings to be small given the low frequency of business transfers and SPCs and the number of limb (b) workers in the labour market, but for an individual business this could represent a net saving.  

There would be familiarisation costs for employers which, based on a previous TUPE change, we would expect to be small. For example, in a recent impact assessment (IA) on TUPE changes we estimated that familiarisation for approximately 18,000 employers undergoing a business transfer (both transferer and transferee) annually would be £90,000 per year.

These costs are likely to be incurred ‘as and when’ a transfer happens given that TUPE transfers are relatively uncommon (around 40,000 a year^{[footnote 2]} among 1.4 million employers)^{[footnote 3]}. In the same IA, we assumed all 6,715 small, medium and large employers in industries most likely to undergo SPCs affected by TUPE would familiarise themselves with changes at a one-off cost of around £30,000. Both figures were calculated using the hourly labour cost for a HR manager or director (£28.99), the time taken to familiarise (10 minutes) and the number of affected employers.  

Of the 6,715 small, medium and large employers in the industries where SPCs are most likely to occur (cleaning, catering, security and building maintenance), 5,840 are small. We do not currently have information on the number of TUPE transfers involving small and micro businesses, nor the proportion of limb (b) workers who are employed by them. We are therefore unable to estimate the extent to which smaller employers will be affected by option 1, however they are likely to benefit given that they make up a large proportion of those we think would be affected. We welcome evidence and input on this from stakeholders through this consultation.

Employees

Where individuals have limb (b) worker status, they may receive fewer protections^{[footnote 4]} under option 1. This would happen if their employer would have otherwise extended TUPE protections to them as a result of the uncertainty created by the 2019 non-binding employment tribunal case. However, businesses may be more likely to take on limb (b) workers and pay them more if they do not carry the liability from TUPE protections, so it may have positive effects for limb (b) workers. We welcome evidence and input on this from stakeholders through this consultation. 

Wider impacts and risks

Trade and investment impacts

We do not expect there to be significant impacts on trade and investment as the saving to businesses will be small and will affect a small part of the labour market. Additionally, TUPE transfers and SPCs may be more likely to occur in sectors that are not traded, such as cleaning. We welcome input and evidence from stakeholders on this.

Environmental impacts

We do not consider this proposal to have any negative environmental impacts.

Justice impacts

We expect there to be a small positive impact of option 1 on the justice system, as the increased clarity around the regulations could reduce non-compliance, leading to a decrease in employment tribunals. We cannot robustly estimate the exact effect of this, but we will use this consultation process to understand the potential effect further.

Equalities impacts

Although we do not have data on the demographics of workers undergoing a TUPE transfer nor for the limb (b) worker population, we know that SPCs are most likely to occur in labour intensive services such as cleaning, catering, building maintenance and security. Employees in these industries are more likely than employees overall to be: 

• aged 50 years and over
• male
• disabled, as classified by the Equality Act 2010
• from an ethnic minority
• affiliated with, or belong to a religion

As a result, it’s possible that the proposal could disproportionately impact these protected groups as they are overrepresented in the sectors in which SPCs happen most frequently. However, we expect that only a small number will be affected as TUPE transfers are relatively uncommon and we expect that only a small proportion of these would involve limb (b) workers. Furthermore, under option 1 this would only affect individuals whose employer believed that they were entitled to the same protections as employees prior to the regulations being clarified. We welcome stakeholder evidence on the possible equalities impacts through this consultation.

Evidence gaps

To help develop our assessment further, we would welcome views from stakeholders in the following areas:

The number of TUPE transfers

Our estimates of the number of TUPE transfers that take place each year are based on data from 2011. TUPE transfers tend to come in waves and are affected by economic cycles, meaning that information drawn from the past may not be applicable, particularly given that all TUPE situations have unique features. Therefore, it would be useful for stakeholders to confirm if this represents a good approximation for current levels.
 

The proportion of limb (b) workers involved in TUPE transfers

We would expect this to be low, but further evidence would support our assessment of the impacts of the proposed change.
 

Savings for employers

The administrative and ongoing savings for employers from the clarity brought by this proposed change.
 

Workers with protected characteristics

We intend to continue developing our understanding of the equalities impacts of these proposals. We would welcome further evidence provided by stakeholders on how this change may affect those with protected characteristics highlighted in the previous section.

Proposal 2: the application of TUPE where a business is transferred to multiple transferees

What is the problem under consideration? Why is government action or intervention necessary?

In 2020, the Court of Justice of the European Union (CJEU) in the case of ISS Facility Services NV v Govaerts and Atalian NV ruled that a full-time employment contract can be split between multiple employers when a business transfers to 2 or more different companies (multiple ‘transferees’). This has introduced some ambiguity as, prior to this case, it was widely understood that an employment contract could not be split as part of a TUPE transfer.

Splitting contracts in this way can be impractical for employers and employees. Employees may be required to work between multiple sites and dividing employees’ terms and conditions is challenging for employers. Some respondents to the government’s consultation on retained EU law reforms in May 2023 called for clarity on how similar TUPE cases should be handled following the CJEU judgment. There are currently no provisions in the TUPE regulations to determine how a contract should be split between multiple employers. 

What policy options have been considered, including any alternatives to regulation?

The policy objective could not be achieved through non-regulatory changes as the uncertainty around whether employment contracts can be split between multiple employers would remain. Removing the uncertainty would simplify the transfer process for employers and employees. The 2 options we are considering are: 

• option 0: do nothing (counterfactual) – that is to allow the complex obligation of splitting employees’ contracts between multiple employers where a business is transferred to more than one new business to remain in place

• option 1: amend the TUPE regulations to clarify that an employment contract cannot be split between multiple transferees – instead, the employers taking over the business or service would be required to agree who should be responsible for each employee’s contract

Who are the ‘main affected groups’ of this change in regulation?

Employers

Employers receiving employees that would have previously been part of a ‘split’ transfer will be affected. ‘Split’ transfers occur during service provision changes (SPCs). Data from the 2011 Workplace Employment Relations Survey (WERS) suggests that around 30,000 SPCs take place per year. This is explained in more detail in the analysis accompanying Proposal 1.   

SPCs are most likely to occur in labour intensive services such as cleaning, catering, security and building maintenance. Office for National Statistics (ONS) business counts suggest that in these industries there are around 6,715 small, medium and large employers, 5,840 of which are small.

We do not currently have an estimate of the number of ‘split’ transfers that occur each year, but we expect this to be low.

Employers

Similarly, employees will be affected if their contracts would otherwise be split across multiple employers. We do not have evidence on the number of employees covered in split transfers, but again we expect this number to be low.

Description and scale of key costs and benefits by ‘main affected groups’

Employers

The 2020 CJEU ruling in the case of ISS Facility Services NV v Govaerts and Atalian NV has introduced some ambiguity as to whether employment contracts should be split between multiple employers as part of a TUPE transfer. The proposed changes (option 1) would therefore benefit employers through increased certainty and clarity when undertaking a ‘split’ transfer. This may have a small positive impact on the business that previously delivered the service (the ‘transferor’), as they will only have to transfer employees over to a single ‘transferee’. There may therefore be a small administrative saving for affected employers. 

Under option 1, there would be an additional cost to employers where they take on the full cost of an employee but only part of their work (due to their work being split by a transfer), although it is currently unclear the extent to which this will be the case.

There will also be familiarisation costs for employers. We expect that the familiarisation cost would be small and would largely be offset by the increased simplicity and certainty under option 1. In a recent impact assessment on TUPE changes, we estimated that familiarisation costs for the approximately 18,000 employers undergoing a TUPE transfer (both transferer and transferee) annually would be £90,000 million per year. These costs are likely to be incurred ‘as and when’ a transfer happens given that TUPE transfers are relatively uncommon (around 40,000 a year among 1.4 million employers). In the same IA, we assumed all the 6,715 small, medium and large employers in industries most likely to undergo SPCs affected by TUPE would familiarise themselves with changes at a one-off cost of around £30,000 million. Both figures were calculated using the hourly labour cost for a HR manager or director (£28.99), the time taken to familiarise (10 minutes) and the number of affected employers.  

We do not currently have information on the proportion of SPCs that involve a ‘split’ transfer, nor the proportion of these involving small and micro businesses. The higher proportion of small businesses in the sectors where SPCs are most likely to occur suggests that they may see more impacts of the changes, although we are not currently in a position to be able to quantify these. We welcome input and evidence from stakeholders on this.

Employees

Employees would largely benefit from the changes to clarify the law, as the splitting of contracts across multiple employers can be detrimental to working conditions through issues such as complexity around the splitting of hours across multiple employers, expense of travelling between employers, and splitting annual leave entitlement. Furthermore, employees’ terms and conditions are protected regardless of whether a transfer is split or not, so there will not be an impact in this respect.

Wider impacts and risks

Trade and investment impacts

We do not expect there to be significant impacts on trade and investment as the saving to businesses will be small. Additionally, sectors where SPCs are common are generally not traded and there will therefore not be implications on the Trade and Cooperation Agreement with the EU.

Environmental impacts

We do not consider this proposal to have any negative environmental impacts.

Justice system impacts 

We expect there to be a minor positive impact of this proposal on the justice system as the increased simplicity and clarity following the changes could lead to a reduction in employment tribunals. However, we cannot robustly estimate the exact effect of this, and we will use this consultation process to understand the potential effect further.

Equalities impact

Employees in industries where SPCs are most likely to occur (cleaning, catering, building maintenance and security) are more likely than employees overall to be: 

• aged 50 years and over
• male
• disabled, as classified by the Equality Act 2010
• from an ethnic minority
• affiliated with, or belong to a religion

We expect there to be positive impacts of this proposal on protected groups as they are overrepresented in the sectors in which SPCs are most likely to occur, but at this stage we are unable to estimate the impact of this proposal on those groups. However, this consultation process will be used to help understand such impacts.

Evidence gaps

To help develop our assessment further, we would welcome views from stakeholders in the following areas:

The proportion of TUPE transfers involving a ‘split’ transfer across multiple employers

We would expect this to be relatively low, but further evidence would support our assessment of the impacts of the proposed change.

Savings for employers

The administrative and ongoing savings for employers from the clarity brought by this proposed change.

Workers with protected characteristics

We intend to continue developing our understanding of the equalities impacts of these proposals. We would welcome further evidence provided by stakeholders on how this change may affect those with protected characteristics highlighted in the previous section.

European Works Councils

Proposal 3: abolishing the legal framework for European Works Councils

What is the problem under consideration? Why is government action or intervention necessary?

European Works Councils (EWCs) are the primary European bodies representing workers at company level. They seek to inform employees and consult with businesses on EU-wide business decisions that could affect employment.  

Under the UK Employment Rights Regulations 2019, UK employers are still required to retain EWCs, despite the UK having left the EU.  

It means that around 70 businesses in the UK must employ both EU and UK councils. By repealing the UK iteration, it would remove the costs associated with the continued administration of such a body.

Both the 2008 Business, Enterprise and Regulatory Reform (BERR) impact assessment and the 2009 EU Recast Directive raised questions about the role of EWCs in the provision of information and consultation of employees, and recent evidence suggests this remains problematic 15 years later. Indeed, there have been numerous legal cases where EWCs have reported no consultation or information provision from firms. 

Alternative frameworks already exist whereby employees could be notified and consulted. For example, through trade unions or employee representatives, thereby reducing the need for EWCs.

What policy options have been considered, including any alternatives to regulation?

The government’s intention is not for legacy EWCs to continue indefinitely.  

The alternative is to retain and reform their current role – to better uphold worker information provision and consultation regarding EU business decisions. This would not however meet our current objective of seeking to provide flexibility to businesses and remove unnecessary bureaucracy in the way employment rights operate.

The 2 options we are considering are:

• option 0: do nothing (counterfactual) – that is, to continue business as usual with legacy EWCs operating in the UK, but no new EWCs being established  

• option 1: legislate to remove the legal framework for EWCs in the UK

Who are the ‘main affected groups’ of this change in regulation?

The 2 affected groups will be multinational corporations (MNCs) that currently have a UK EWC and the employees of UK-based EWCs. The European Trade Union Institute (ETUI) database shows that there are around 70 active EWCs with UK headquarters, each employing between 3 and 30 UK council members. 

Description and scale of key costs and benefits by ‘main affected groups’

Employers

The key benefit for businesses of option 1 is the removal of associated costs from EWCs. Each EWC consists of a minimum of 3 and a maximum of 30 employees. Although there is a significant variation in the cost of an EWC by firm, converting the estimate from Department for Trade and Industry (DTI) research published in 2000 to current prices, suggests that average annual running costs could equate to £109,000^{[footnote 5]}. Other EU Commission funded research puts the annual running cost at an average of £65,000 (currency and price adjusted).

Using these figures, suggests that the total cost savings of option 1 across 67 UK-based EWCs would therefore be £4.4 to £7.2 million. Note that these studies use small sample sizes and EEA costings, so may not fully reflect operating costs of UK EWCs.

Survey data has shown that some firms believe that EWCs demonstrate a positive commitment to employees. There is therefore a potential loss of ‘symbolic value’ from removing EWCs.

Employees

Under option 1, employees who lose a EWC may feel unaccounted for on decisions taken at the European level that could affect them, thereby reducing their workplace satisfaction and job quality.

However, this impact will be small where EWCs are ineffective as reported in some cases. Additionally, while EWCs are the primary European institutions representing workers at company level, we anticipate that these functions could be fulfilled through other existing structures, such as unions or other employee representatives.

Wider impacts and risks   

Information provision

Where EWCs were used effectively as vehicles to inform employees, option 1 may create potential for greater information asymmetry between employees and firms. This is despite existence of other substitutable structures for employee consultation like unions. This is because EWCs have a specifically EU-wide focus, allowing employees to be informed not solely on domestic decisions.

Trade and investment impacts 

We do not expect this proposal to have any impact on the UK’s ability to trade or provide services overseas.

Environmental Impacts 

EWC board meetings require the travel of many delegates, sometimes by air. Although we have no data regarding the mileage, reported travel expenses can be as high as £22,000 annually for a single council. When aggregated, the removal of EWCs could reduce the current environmental impacts. It is uncertain whether remote working may have reduced this impact.

Justice system impacts 

We do not expect this proposal to have impacts on the UK court system as it does not relate to an employee’s individual rights. 

Equalities impacts  

Without access to EWCs, we do not believe that workers with protected characteristics will be impacted beyond what has been covered for all employees.

Evidence gaps for full impact assessment

We would welcome views from stakeholders in the following areas to help develop our assessment further: 

• information regarding the annual cost of EWCs for the approximately 70 UK firms – specifically, hospitality, travel, venue and staff expenses
• the effectiveness of EWCs in their role to act as a conduit between firms and their employees
• the degree to which other structures like unions can fulfil the role of EWCs

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1. TUPE transfers tend to come in waves and are affected by economic cycles, meaning that information drawn from the past may not be applicable, particularly given that all TUPE situations have unique features ↩

2. A previous impact assessment used the 2011 WERS data to estimate that there are 8,800 business transfers and around 30,000 SPCs per year ↩

3. Business Population Estimates, 2023: https://www.gov.uk/government/statistics/business-population-estimates-2023/business-population-estimates-for-the-uk-and-regions-2023-statistical-release ↩

4. More information around the rights that limb (b) workers are entitled to can be found here: https://www.gov.uk/government/publications/employment-status-and-employment-rights/employment-status-and-rights-support-for-individuals ↩

5. This analysis includes an annual EWC meeting plus 2 select committee meetings and an extraordinary meeting every other year ↩