THE PFI RECKONING · ARTICLE 8 OF 12
TUPE, Pensions, and the Human Cost of PFI Expiry
When a PFI contract expires, the building transfers to the authority. So does the workforce. The FM staff who maintained the building for 25 years either transfer under TUPE, move to a new contractor, or face redundancy. The pension obligations, the employment terms, the skills, and the institutional knowledge about the building all sit inside this workforce. How the authority handles TUPE is not a HR process. It is a strategic decision that shapes the cost, capability, and operational continuity of the post PFI estate.
What TUPE means at PFI expiry
The Transfer of Undertakings (Protection of Employment) Regulations 2006 protect employees when a business or service transfers from one employer to another. At PFI expiry, if the FM services transfer from the SPV or its FM subcontractor to the authority or to a new contractor, TUPE applies. The affected employees transfer on their existing terms and conditions. The receiving employer cannot change those terms to the employee’s detriment because of the transfer.
In practice, TUPE at PFI expiry is more complex than a standard service contract transfer. The workforce has been employed under PFI terms for up to 25 years. Their contracts may include terms that were negotiated at financial close and that do not align with the authority’s own employment framework. Their pension arrangements may be significantly different from the authority’s standard provision. Their roles may have been shaped by the SPV’s operating model rather than the authority’s requirements.
The authority is not just inheriting people. It is inheriting an employment structure designed by the SPV for the SPV’s commercial objectives. Reshaping that structure to fit the authority’s post PFI operating model requires planning, legal advice, and time. None of those are available if TUPE is addressed in the final six months.
TUPE at PFI expiry is not a standard service transfer. The authority is inheriting an employment structure designed by the SPV for the SPV’s commercial objectives. Reshaping it requires planning the authority has not done and time it may not have.
The pension problem
Pensions are the single largest financial risk in TUPE at PFI expiry. The scale of the liability depends on the type of pension provision and whether the transferring employees are members of public sector or private sector schemes.
NHS Pension Scheme and Fair Deal: Direction Order vs Pass-Through
Many PFI FM staff on NHS estates are members of the NHS Pension Scheme under the direction order provisions that applied to early PFI contracts. Staff who were originally transferred from the public sector under the Fair Deal policy in the early 2000s may have a legal entitlement to return to the NHS Pension Scheme when they transfer back to the authority. When these staff transfer, their NHS Pension Scheme membership continues. If they transfer to a new contractor, the contractor must provide broadly comparable pension provision, which is expensive and complex to administer. The employer contribution rate for the NHS Pension Scheme is currently 23.7%. A new contractor inheriting 50 staff on NHS pension terms faces a pension cost that is significantly higher than a standard auto-enrolment workplace pension.
The mechanics matter. Under the Fair Deal 2013 / New Fair Deal regime there are two routes by which protected pension arrangements travel with transferring staff. Under the Direction Order route, the contracting authority directs the new provider to offer pension terms broadly comparable to public-sector arrangements; the provider is then formally directed and the protection is administered by the new provider with the appropriate scheme. Under the Pass-Through route, the provider passes the pension obligations through to a contracted-in scheme (typically the public-sector scheme itself, on a pass-through funding basis), with the cost mechanism flowing through the contract to the authority. The two routes have different legal mechanics, different cost profiles for the new contractor, and different administrative burden. Authorities reprocuring FM at PFI handback need to specify which route applies in the new contract before the procurement opens, because it materially affects bidder pricing. Specifying late, or leaving the route ambiguous, produces wide variance in bid responses and risks legal challenge from non-winning bidders.
LGPS
For local authority PFI estates, transferring staff may be members of the Local Government Pension Scheme. LGPS is a funded scheme. The transfer may require an actuarial assessment of the pension fund position for the transferring employees. If there is a deficit, the question of who funds it is a negotiation between the SPV, the authority, and potentially the pension fund administrator. This negotiation can take months and requires specialist actuarial advice.
Private sector pension provision
Where the FM provider offered a private sector pension scheme, the transferring employees may have defined contribution or legacy defined benefit entitlements. The authority or new contractor must either continue comparable provision or offer the statutory minimum. The cost differential can be substantial, particularly for long serving employees with accrued benefits under a defined benefit scheme that closed to new members years ago but continues for existing members.
Pensions are the single largest financial risk in TUPE at PFI expiry. The employer contribution rate for the NHS Pension Scheme alone is 23.7%. A TUPE transfer of 50 staff on NHS pension terms creates an annual pension cost the receiving employer must absorb.
The knowledge that walks out the door
The FM workforce on a PFI estate holds something the authority cannot buy on the open market: 25 years of operational knowledge about the building. The engineer who knows that a specific air handling unit vibrates at a certain frequency before it fails. The maintenance manager who knows that the roof access on block C requires a specific approach because the hatch was modified in 2012 and never updated in the drawings. The plumber who knows where the isolation valves are that are not on any schematic.
This knowledge is not documented. It is not in the CAFM system. It is not in the O&M manuals. It exists only in the people who have worked on the building for years. If those people leave at expiry, the knowledge leaves with them. If they transfer and are then made redundant or restructured within the first year, the knowledge is lost anyway.
Article 6 of this series examines the data handover problem in detail. But data is only part of the picture. The undocumented operational knowledge held by the FM workforce is the part that no data migration, no asset register, and no CAFM export can replace. Article 4 examines the institutional knowledge problem from the authority’s side. This article examines it from the workforce side.
The FM workforce holds 25 years of operational knowledge about the building that is not documented anywhere. If those people leave at expiry, the knowledge leaves with them. No data migration can replace it.
The workforce the authority actually needs
The workforce that transfers under TUPE is the workforce the SPV employed to deliver the SPV’s operating model. It may not be the workforce the authority needs to deliver its own post PFI operating model.
The SPV may have structured the team around a shift pattern that minimised cost. The authority may need a different shift pattern to match its operational requirements. The SPV may have employed generalist multi skilled technicians. The authority may need specialists for specific systems. The SPV may have employed a contract manager whose role disappears when the contract ends. The authority may need a building manager whose role is different.
TUPE protects the employees’ terms and conditions. It does not prevent the authority from restructuring roles for genuine operational reasons after the transfer, provided the restructuring is not connected to the transfer itself. In practice, the legal boundary between transfer related changes and operationally justified changes is narrow, contested, and requires careful legal advice.
For NHS PFI estates, the post-handback workforce model should align with the trust’s ERIC reporting obligations. The ERIC Reckoning series examines how ERIC data drives workforce planning, capital allocation, and critical infrastructure risk assessment across the NHS estate, and how the workforce structure inherited at PFI handback maps to the operational categories ERIC reports against.
The skills gap
The SFG20 State of FM Report 2026 found that 51% of FM organisations report a shortage of FM staff headcount and 42% cite a lack of compliance and safety expertise. The workforce transferring from a PFI contract may carry the same gaps. If the SPV underinvested in training and development in the final years, the transferring workforce may not have the current competencies the authority requires. The SFG20 Reckoning series examines how SFG20 task durations that underestimate real job duration lead to contracts that systematically underfund the workforce. That underfunding shows up at TUPE as a skills and capability deficit the authority inherits.
The human dimension
TUPE at PFI expiry is not only a legal and financial process. It is a human one. The FM staff on a PFI estate may have worked on the same building for 10, 15, or 20 years. They have built relationships with the building’s occupants. They take pride in the estate they maintain. They may feel abandoned by the SPV, which is winding down, and uncertain about their future with the authority, which they have never worked for.
Morale, retention, and engagement during the transition period directly affect service continuity. If the workforce feels the transfer is being managed as a cost exercise rather than a strategic transition, the best people will leave before the transfer completes. The authority will inherit the people who had no other options rather than the people it most needs to retain.
Early communication, clarity on roles and terms, and genuine engagement with the transferring workforce are not HR luxuries. They are operational necessities. The authority that manages the human dimension well retains the knowledge, the skills, and the goodwill it needs to operate the estate from day one. The authority that treats TUPE as a compliance exercise loses all three.
If the workforce feels the transfer is being managed as a cost exercise, the best people leave before it completes. The authority inherits the people who had no other options. That is not a workforce. That is a liability.
Union and employee relations cannot be deferred
TUPE transfers on PFI estates frequently involve trade union represented workforces. Formal consultation obligations apply. Union engagement, workforce communication, and the management of political sensitivity around public sector employment decisions all require early, structured attention. An authority that leaves union engagement to the final months will face formal disputes, avoidable resistance to transition, and reputational damage that complicates the transfer and undermines workforce trust.
On PFI estates, the recognised trade unions typically include UNISON (predominantly in NHS, local government, and education estates), GMB (mixed sector representation, particularly strong in waste, water, and social housing), and Unite (strong in defence, transport, and engineering trades). The statutory consultation framework that applies during the transfer is set by the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), Regulations 13 and 14 of the TUPE Regulations 2006 (which require information and consultation with appropriate representatives in good time before the transfer), and any sector-specific consultation expectations under Cabinet Office guidance for public sector transfers. The authority should establish at year five which unions are recognised on the estate, the terms of any collective agreements that will travel with the workforce under TUPE Regulation 5(b), and the consultation requirements that will apply during the transfer. Engaging recognised unions in the post-PFI operating model conversation early, not as a notification exercise in the final months, is the difference between a transfer that completes on schedule and one that escalates into formal industrial dispute.
Silence is not a neutral position. In the absence of communication from the authority, the workforce will draw its own conclusions. Those conclusions are rarely optimistic. The authority that communicates early, even when the message is that decisions have not yet been made, builds more trust than the authority that says nothing until the final year.
What authorities should do before the transfer
NISTA explicitly frames continuity of public services as a primary objective of PFI expiry alongside asset condition and completeness of data. Workforce transfer is not HR administration. It is the public service resilience question. The Senior Responsible Owner (SRO) for PFI expiry should treat workforce planning as a programme level priority from the seven year mark, with formal board reporting on TUPE, pensions, skills continuity, and service resilience throughout the transition.
Demand Employee Liability Information early, and demand the full list
Under TUPE regulations, the outgoing employer must provide Employee Liability Information (ELI) to the incoming employer at least 28 days before the transfer. In practice, 28 days is not enough time to model the cost implications of the transferring workforce. Request the ELI from the SPV at least two years before expiry. The full list NISTA workforce guidance expects authorities to request comprises: identity (name, position, role); age; pay (basic salary, bonuses, allowances, working time including overtime patterns, shift premia, on-call arrangements); pension status (scheme membership, contribution rates, accrued benefits, protected status under Fair Deal); qualifications (academic, vocational, professional); training records (statutory, refresher, and skills-based); ongoing claims (employment tribunal, civil); disciplinary and grievance records (last two years); and collective agreements (recognised unions, terms incorporated by collective agreement). Authorities that ask for a subset get a subset. Authorities that ask for the full list, citing TUPE Reg 11 and the NISTA expectation, get a workforce data set that can be modelled. The cost gap between the actual workforce inherited and the workforce assumed in the financial model can run to the high six figures or low millions on larger contracts. Modelling that gap accurately requires the full ELI.
Skills, qualifications, and accreditation continuity
ELI tells the authority who is transferring and on what terms. It does not on its own answer the operational question: can these people keep doing their jobs without interruption on the day after handback? Many roles in PFI FM operations require accreditations and authorisations that travel with the person, not the employer. Authorised Person status (high-voltage electrical, mechanical ventilation, water and Legionella, gas, lifts) is held individually under regimes that require sponsor employer approval and ongoing competence assurance. CSCS cards, F-gas certification, IPAF and PASMA, manual handling, infection control, asbestos awareness, fire safety, COSHH, each has a renewal cycle, a sponsor-employer requirement, and a continuity-of-authorisation regime that needs to be planned for at handback. Two practical risks recur. First, a transferring engineer’s AP authorisation may need formal re-issuance under the new employer’s authorising scheme on day one, which depending on the regime may take days or weeks to process; without it, they cannot lawfully isolate the equipment they were lawfully isolating the day before. Second, where the SPV held the F-gas company certification or other employer-level accreditations, those certifications do not transfer with the workforce; the new employer (whether the authority itself, an in-house FM arm, or a new contractor) must hold or apply for its own. Authorities should map the full accreditation register against the workforce list as part of the year-five readiness work, and engage with each accreditation body or sponsor employer about the transition timing well before the handback date. Sector-specific operational standards (the dual benchmark in Article 7) often depend on individuals who hold the relevant accreditations being available on the operational rota from day one of post-handback.
Start workforce planning at year five
Identify the in scope workforce. Understand their terms, pension arrangements, skills, and qualifications. Model the cost of absorbing them on their existing terms. Model the cost of the post PFI operating model and determine whether the transferring workforce matches it. Identify gaps early.
Get specialist pensions advice early
Pension costs at TUPE are the largest single financial variable. Commission an actuarial assessment of the pension position for the transferring workforce at least two years before the transfer date. Understand the cost of continuing NHS Pension Scheme, LGPS, or legacy private sector provision. Build the pension cost into the post PFI financial model.
Engage the workforce directly
Do not leave communication to the SPV. The SPV is exiting. Its interest in workforce morale is limited. The authority should establish direct engagement with the transferring workforce as early as contractually permissible. Explain what is happening. Explain what it means for them. Be honest about what is known and what is not yet decided.
Protect the knowledge holders
Identify the individuals who hold critical operational knowledge about the building. These are not always the most senior people. They are often the long serving engineers and technicians who know the building’s operational reality. Ensure they are prioritised in retention planning. If they leave before or shortly after the transfer, the knowledge they hold is gone.
The full financial modelling requirement for the post PFI operating environment, including the pension cost, the VAT implications, and the capital investment required, is examined in Article 9 of this series. TUPE costs are a major input to that model.
PFI expiry transfers a building. It also transfers a community of people who have maintained that building for a generation. How the authority manages that transfer determines whether it inherits a capable, motivated workforce or a demoralised, depleted one. The difference between the two shows up in maintenance quality, compliance performance, and operating cost from day one.
The hardest part of PFI handback was never the contract. It was the human transition. Authorities that ignore TUPE and pensions discover this too late to change the outcome.
PFI Reckoning Reports
This article represents Baachu Works Limited’s independent analysis based on publicly available information, NAO and NISTA reports, BAILII case law, and Baachu’s commercial experience. It is not legal or financial advice. Baachu Works Limited has no commercial relationship with any SPV, investor, FM provider, or PFI advisory firm referenced in this series.