Outsourced, but not outdone

Employees can benefit as fee-earners.

When Tony Fishwick heard that his team's internal bid to run the Home Office IT department had failed, and that the department was to be outsourced to Sema Group, his initial reaction was one of "bitterness and disappointment".

His experience is not unusual: outsourcing is a fashionable business practice. It involves the contracting out of part of a company's support function to another company. Since the late Eighties, whole sections of a workforce have found themselves working for an organisation other than the one they joined.

Why do firms decide to outsource? Luan Kane, a partner at the law firm Masons, says the reason is simply to save money: "Sometimes it's not because of the cost of paying staff; it's the hidden costs - the costs of paying recruitment consultancies to recruit new staff, or the cost of buying new kit."

Peter Falconer, associate director of marketing at the outsourcing player Hoskyns, sees other benefits: "Firms not only have the services of their former employees, but they also have access to a much wider pool of resources, with a greater number of skills."

Although most outsource suppliers stress that they are there to offer a better IT service and not to make cuts, redundancies are sometimes inevitable. Sema, for example, shed 25 per cent of staff when it took over the Home Office's IT service, although it filled all the redundancies voluntarily.

When IT staff at Ernst & Young found out that they were likely to be working for another company, there was a great deal of unease about job security.

Employees are protected, though, under the Transfer of Undertakings Protection of Employment (TUPE) regulations. This means that if you are transferred to another employer, your length of service, and redundancy payment, remains the same. Your new employer must pay you the same and give you equivalent benefits to the ones you were already receiving. The new service provider, however, is not obliged to offer you the same pension scheme and, clearly, cannot offer the same employee share options. TUPE, however, obliges the outsourcing company and the outsource supplier to consult staff about changes, either through a trade union or elected staff representatives.

Once anxieties about job security are over, employees can often be pleasantly surprised about the experience of being outsourced. One Ernst & Young project manager who is looking forward to working for an IT firm says: "I really like the idea of being an IT professional as a fee-earner rather than as a cost to a business. There isn't much scope for career progression in an accountancy firm but in an IT firm there are other directions you can move in."

Ms Kane says: "Don't be frightened. Welcome it as an opportunity to grow your skills and be part of the core of a large company. And insist on consultation."