Alert : Retention of Employment Model - changes after 1 July 2009

The use of the Retention of Employment (ROE) Model will be greatly restricted from 1 July 2009.  This could have significant implications for all NHS Trusts and particularly for Foundation Trusts.
 
From 1 July  2009 access to the NHS  Pension Scheme (NHSPS) will only be available for  employees seconded under a ROE  arrangement made after 13 January 2009 where specifically approved by the Secretary of State.

ROE – A Quick Reminder

ROE is a form of secondment which allows employees who are to be transferred under TUPE from an NHS employer to object to the transfer of their employment (which brings their employment with the NHS Employer to an end). These employees are then re-employed by the NHS employer but seconded to work with the non-NHS employer under the ROE model. As a result, they remain employees of the NHS and retain access to the NHS Pension Scheme. 

Current Position

 Currently, ROE is only approved by the Secretary of State in two specific circumstances:

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

In addition, Foundation Trusts have the freedom to enter into ROE arrangements without the explicit consent of the Department of Health.
 
The Department of Health's view is that ROE has been widely used by NHS organisations (particularly by Foundation Trusts) to allow employees who would normally have transferred to non-NHS employers to instead remain with their NHS employer and continue NHSPS membership.  This enables the non-NHS employer to avoid the requirement to set up a broadly comparable pension scheme under Fair Deal but ultimately at the taxpayer’s expense.  

As we previously reported this led the Department of Health to write to all Chief Executives in the NHS on 13 January 2009 informing them that staff employed under non-approved applications of the ROE model from 13 January 2009 would not be eligible for membership of the NHSPS from a date to be appointed. Only staff who met the approval criteria would have access to or continue to have access to the NHSPS.
 

The Changes

These proposals have now been given statutory force by amendments to the National Health Service Pension Scheme Regulations 1995  and 2008.  The amendments ensure that NHS staff who are seconded to non-NHS organisations for the purpose of performing duties that have been transferred to that organisation under the ROE model may only continue membership of the NHSPS in two specific circumstances approved by the Secretary of State; even if the ROE arrangement is made by a Foundation Trust. There is no longer automatic approval for Foundation Trusts.

The Regulations apply in two specific situations

1 Retention of Employment where the NHS employer enters into a ROE arrangement after 13 January 2009 intending to retain the services of employees who would otherwise transfer to a non-NHS employer under a TUPE transfer but who object to that transfer. This also covers a transfer from a NHS employer to another employer in the public sector by virtue of an arrangement broadly equivalent to a TUPE transfer e.g. transfer within prison service or from PCT to Foundation Trust

 
2 Subsequent secondments – where employees are seconded from an NHS employer to a non-NHS employer   after 13 January 2009 and the purpose of that secondment is, in the opinion of the Secretary of State, for the seconded employee to assist in work which was previously transferred to the non NHS employer under TUPE.

In essence, this covers employees who were covered by a transfer of services to a non-NHS employer but who objected to the transfer and were seconded instead and also employees who were not part of the original transfer but are seconded at a later date.  In all these cases Secretary of State approval will be required.
 

The amendments are not retrospective 
 

• If an ROE arrangement or secondment was made before 13 January 2009 membership of the NHSPS can continue whether or not the ROE arrangement was approved by the Secretary of State (i.e. for staff working for soft facilities management staff in Private Finance Initiative or staff working in Independent Sector Treatment Centres) and even if it was made by a Foundation Trust.
• If an ROE arrangement or secondment was made after 13 January 2009 and the ROE arrangement was not approved by the Secretary of State then membership of the NHSPS scheme cannot continue after 1 July 2009 even if the employer is a Foundation Trust.  The seconded employees must leave the NHSPS after 1 July 2009 but there is no claw back of benefits received from 13 January to 1 July 2009.
   
  This will lead to a review of ROE arrangements after 1 July 2009
• If a non-approved ROE arrangement made after 13 January 2009 continues in existence after 1 July 2009 the employees will remain employed by the NHS employer but will not have access to the NHSPS.  The NHS organisation (including a Foundation Trust) would need to provide equivalent pensions for employees seconded under ROE who remain in their employment.
• If however the ROE arrangement is unravelled after 1 July 2009 the position is not so clear cut. The affected staff objected to the original transfer and it is unlikely that there would be a further TUPE transfer at this point. In some cases there may be specific provisions in the original agreement that, should this situation arise, the private sector provider would become the employer of the affected staff and provide them with broadly comparable pension benefits under Fair Deal. If the agreement is silent on this point this may lead to the NHS employer having to retain the affected staff without having work for them to do or alternatively the service contract arrangement may continue but with the NHS employer having to pay additional costs to fund the pension benefits for affected staff.
• In addition, there may be difficulties for NHS employers (including Foundation Trusts) in future procurements where staff are transferred to the private sector. Private sector employers may be unwilling to fund the high costs of providing a scheme broadly comparable to the NHSPS as required under Fair Deal.