Workforce change remains an enduring and often complex challenge for the rail industry, influenced by shifting passenger demand, technological advances, and evolving project requirements. Louise Price, Partner and Head of Employment & HR Services at Hugh James, highlights redundancy, restructuring, and Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) transfers as unavoidable aspects of this landscape, particularly amidst the ongoing Government renationalisation programme that brings passenger train operators back into public ownership through the Department for Transport Operator Limited (DfTO).

Redundancy in the rail sector typically results from service changes, franchise losses, technological upgrades like digital signalling, or cost efficiency measures. According to the Employment Rights Act 1996, redundancy arises when the need for employees to perform certain work diminishes or when a business or workplace closes. Employers are legally obligated to conduct fair and transparent redundancy processes, including collective consultation where 20 or more redundancies are proposed within a 90-day period. This consultation must commence at least 30 days before dismissals, extending to 45 days if over 100 employees are affected. Failure to adhere to these requirements can lead to protective awards of up to 90 days’ gross pay per employee—a figure set to double to 180 days following the proposed Employment Rights Bill (ERB), projected to take effect in April 2026.

The ERB also introduces nuanced modifications to collective consultation triggers. While redundancies affecting 20 or more employees at a single establishment will remain the baseline, the Government may set higher thresholds for redundancies spread across multiple establishments, a detail yet to be clarified but highly relevant for multi-site rail employers. Enhancements in employee protections are included as well, expanding safeguards for those on maternity, adoption, or shared parental leave, with further anticipated protections for pregnant workers and those returning from family leave. Consequently, rail operators are advised to review and update their workforce policies in preparation for these legislative shifts.

Restructuring within the rail industry need not always lead to redundancy. Role evolution, driven by new safety standards or technology implementation, can be managed through individual or collective consultation. However, in cases where employees do not consent, the controversial practice of terminating contracts and offering re-engagement on new terms—commonly known as "fire and rehire"—remains lawful but fraught with risks. This approach is especially precarious in a unionised sector like rail and could lead to unfair dismissal claims if mishandled. The ERB proposes significant restrictions on fire and rehire, potentially rendering non-consensual contract changes automatically unfair, except in genuine financial distress scenarios. The Government anticipates consulting on this issue in late 2025, with legislative changes expected by October 2026.

TUPE transfers are another pivotal aspect of workforce change, often triggered when a rail contract changes hands or services such as catering, cleaning, or rolling stock maintenance are outsourced, insourced, or retendered. These regulations safeguard employees by ensuring their automatic transfer to the new employer with preservation of existing contractual terms, barring pension rights which fall outside TUPE’s scope but may be governed by other pension legislation. Both outgoing and incoming employers share consultation duties with employees or representatives, a requirement that, if neglected, can lead to financial penalties.

One practical challenge in the rail sector is correctly determining which employees are "assigned" to the transferring service, a key factor in TUPE applicability that relies on a fact-sensitive assessment. Additionally, cultural mismatches between old and new employers can affect employee retention and morale, even if legal requirements are met. The ERB seeks to align collective consultation triggers for redundancies arising from TUPE transfers with those in broader redundancy processes, ensuring uniformity and possibly greater complexity.

The rail industry often faces common pitfalls regarding workforce change, including inadequate consultation, misjudging TUPE scope, cultural clashes, and poor data management. Price advocates for early planning and professional advice, constructive engagement with unions—especially important as the ERB is expected to reinforce union rights—and transparent, consistent redundancy criteria. Coordinated management between outgoing and incoming employers can further smooth transitions by addressing employee data, liabilities, and communications collaboratively.

Beyond legal compliance, a people-centred approach to managing workforce changes tends to yield more positive outcomes. Rail businesses can protect critical skills and reduce redundancy costs by investing in retraining and redeployment, alongside offering wellbeing and outplacement support to affected staff. Clear communication and integration strategies during TUPE transfers can also preserve productivity by mitigating uncertainty and cultural friction.

Looking to the future, the ERB represents a significant evolution of workforce law, with expanded liabilities and strengthened union rights posing new challenges and responsibilities for rail employers. Preparing now by updating consultation frameworks and workforce policies will be critical for businesses navigating the sector’s ongoing transformation. Ultimately, with proactive management, the unavoidable processes of redundancy, restructuring, and TUPE transfers need not escalate into disputes but can be handled in ways that protect both operational continuity and employee welfare.

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Source: Noah Wire Services