A subsidiary is any separate, distinct legal entity for the purposes of taxation, regulation and liability that is owned or partly owned by a provider, including any joint venture falling within this definition.

This guidance:

• Sets out a good practice approach to engagement and consultation within a trust considering setting up or dissolving a subsidiary.
• Advises on effective communication and engagement with relevant employee and trade union representative(s).
• Ensures trusts meet the NHS Constitution requirement to engage staff in decisions that affect them and the services that they provide.
• Supplements and should be read alongside Subsidiaries and income generation – Guidance for supporting and assuring complex change (subsidiaries guidance).

1. Engagement with staff as the trust develops its case for change and options for delivery

Where a service, division or directorate is developing a case for change and options appraisal, good practice is for it to use its existing business planning process to engage with staff on the need for change and the options for delivering it. Engagement at this early stage gives staff the opportunity to input into the development of the case for change and options, one of which may be the creation of a subsidiary.

2. Engagement and information sharing with employees and relevant employee and trade union representative(s) before formal consultation

Once the trust has completed its options appraisal and chosen a preferred option, it will likely develop a business case. At this stage, the trust should engage and share information with relevant employee and trade union representatives and then step up engagement and information sharing with affected employees. Trusts should ensure that:

• They use their existing agreed employee and union representative group (for example, Joint Negotiating Consultative Committee (JNCC) or an agreed Partnership Meeting) as the forum for early engagement discussions.
• They consider establishing a joint working group or sub-group of JNCC to undertake more detailed work and report back to the JNCC.

The trust is responsible for the local relationship with staff. Where a subsidiary proposal is classified as significant (see section 4.3 Definition of material change for subsidiary transactions and NHS trust income generation transactions in the subsidiaries guidance for more details) and staff would move into a subsidiary, parties can request that the NHS England review team participate in a meeting between the trust, staff-side representatives, including trade unions, and a workforce integrated care system (ICS) representative. The review team will determine on a case-by-case basis whether one of their members needs to attend; doing so gives the interested parties an opportunity to present their views directly to the NHS England review team. The trust remains responsible for managing the relationship with staff locally.

2.1 Information sharing before formal consultation

The following information should be shared with the relevant employee and trade union representatives to facilitate productive and informed discussions with the trust:

• The proposal and case for change; options for structures, roles and the financial context; description of employees likely to be directly affected; service areas that could be indirectly affected; financial information to enable discussion about objectives and options (see section 2.1.1 for further details).
• Summary of the options appraisal.
• Number (if any) of staff who could be transferred to a different employer.
• Risk assessment to consider the impact of the change on, for example, recruitment, retention, staff morale and employment relations.
• Any proposed changes to terms and conditions for new starters and any that are permitted under TUPE for directly affected existing staff.
• Any further information that directly affected staff need to understand the wider implications of the proposal; for example, the impact on development and training opportunities or other benefits/disbenefits.
• Terms and pension provision for existing staff and new starters.
• Equality impact assessment for each option.
• An timeline of how affected employees will be engaged with.
• Intended consultation process.
• Governance arrangements post subsidiary set up.

As part of the process, trusts should provide affected employees with more detailed information about:

• The proposed case for change information.
• Options for structures and roles (and the financial envelope).
• Engagement so far with employees and their feedback, to enable further discussions around:
  • the proposal
  • the consultation process for employees directly affected.
• The level of information the trust commits to share with employees/service areas indirectly affected by the proposal.

2.1.1 Financial information sharing

Trusts should share an appropriate level of financial information with union representatives and employees to enable discussion about structure options; for example, workforce budget, service delivery budget, pay structure, bands, WTE, projected savings and proposed capital spending.

2.2 Development of a business case for a subsidiary

Where the conclusion from the options appraisal is that the creation or dissolution of a subsidiary is the preferred option, the trust will start to develop the business case for a subsidiary and should discuss the workforce implications with trade unions and relevant employee representatives. The implications should include but not limited to the following:

• Terms and conditions:
  • outline of pay, reward, benefits, recruitment and retention strategies, policies and procedures
  • protection of terms and conditions at the point of TUPE transfer for NHS employees, including contractual policies and procedures
  • whether dynamic protection of pay, terms and conditions will apply for NHS employees and to new subsidiary employees.
• Transfer of employees:
  • which employees are in scope (service assigned including permanent employees, temporary contract employees, agency workers).
• NHS Pension Scheme:
  • pension protection for NHS employees
  • pension provision for new subsidiary employees.
• Trade union recognition and facilities agreement for the subsidiary.
• Employee engagement strategy for the subsidiary (feedback, communication, support).
• Timelines and plans for the preparation of robust human resources and organisational development strategy. These should support the delivery of the benefits outlined in the business case and be finalised before mobilisation, and should include KPIs to ensure the delivery of benefits, timelines and accountable executives for each workstream. Good practice is to survey staff 12 months after implementation.

2.3 Board certifications

For all subsidiary transactions, the parent trust board must certify to NHS England that it has satisfied itself concerning key risk areas. The latest subsidiaries guidance has an increased focus on staff-related risk, and with this, in making the certification, the trust board must be satisfied and be able to evidence that it has:

• Sought legal advice on the transaction, including on transfer of staff and TUPE arrangements, to confirm the transaction can legally proceed.
• Engaged staff in decisions that affect them and the services they provide as pledged in the NHS Constitution, and has plans to comply with any consultation requirements, including staff consultations.
• Undertaken comprehensive staff engagement on the commercial rationale (including options considered) and consequences for staff.
• Appropriately considered the labour market for each category of staff, and pension provision and continuity of service implications for staff before determining the approach to terms and conditions, taking into account (where relevant) its role as a major employer in a locality.
• Ensured that it has regarded staff engagement good practice guidance at all stages of the transaction, including reference to terms and conditions and pension provision.
• Undertaken an equality impact assessment of the proposal.
• Established the organisational and management capacity and skills to deliver the expected benefits of the proposed subsidiary, including where relevant, the delivery of services at scale. In particular, it should assure itself that the subsidiary will be able to attract and retain staff with the appropriate skills and experience to deliver the service requirements, and that staff will become more engaged and committed over the life of the business plan.

Common potential workforce-related risks that a trust board will want to consider and, where appropriate, mitigate or have plans in place to mitigate before making the certifications, include but are not limited to the following:

• The range of staff views up to and including strong opposition to the proposal and the threat of industrial action.
• Whether employee engagement has been sufficient to give staff a clear picture of the benefits and potential disadvantages of moving into the subsidiary; for example, staff should be made aware of planned changes to ways of working and whether their terms and conditions will change over time or if they are promoted into a new role.
• Where the proposal includes an intention to remunerate new staff at a level below that for a similarly graded current employee or employ them on less favourable terms and conditions, trusts need to consider whether they will be able to attract staff with the skills required to enable it to deliver the expected benefits of the proposed subsidiary.

3. Formal consultation process

The consultation process is the trust’s formal engagement of staff in decisions that affect them and the services they provide, as pledged in the NHS Constitution, and to meet its legal obligations to consult individuals, including on TUPE arrangements. The process enables the trust to engage affected employees on the formal consultation document and, with this refine the proposal as the organisation moves towards implementing it.

The trust should not start any formal consultation or enter into any legally binding arrangements in relation to the transaction before NHS England has confirmed in writing that it has finished its business case review and concluded that the transaction can proceed.

In line with the NHS Constitution requirement, we expect trusts to ensure that:

• The formal consultation process is launched following the conclusion of the engagement phase.
• The formal consultation documentation includes:
  • the proposal under formal consultation
  • service delivery information
  • workforce structure information (including budget envelope and reporting structures, and job descriptions)
  • workforce impacts: subsidiary terms and conditions; and TUPE
  • consultation engagement and timeframe
  • equality impact assessment.
• All TUPE requirements have been met.
• At the end of the formal consultation process, the following documents are updated and circulated/made available:
  • final consultation document with the implementation timeframe
  • job descriptions
  • final equality impact assessment.

The list above is not comprehensive, and we expect trusts to obtain legal advice to ensure they meet all consultation requirements. Trusts should also ensure that any consultation meets the Consultation Principles.

4. Communication with those indirectly affected and wider trust communication

Following consultation with unions, trusts should ensure all staff receive appropriate information, including those indirectly affected by the proposal, including the following:

• Communication is undertaken with trust services that are indirectly affected by the proposal under formal consultation.
• Wider trust communication regarding the establishment and transfer process for the subsidiary under formal consultation.

Publication reference: PRN1798ii