Union considers legal challenge over claims that Prudential did not
properly consult staff on redundancies.
Hundreds of IT staff at Prudential face an uncertain future after
the insurance giant announced plans earlier this week to close its
UK call centre and move operations to an offshore service centre in
India.
Although Prudential insisted that IT professionals at its Reading
call centre would not be among the 850 redundancies, the IT union
MSF Amicus claimed it was unlikely that all of the call centre's IT
staff would be kept on.
Union leaders are considering mounting a legal challenge to the
deal with Indian supplier ICICI OneSource, alleging Prudential had
not undertaken a proper consultation with its workers.
Mark Woods, chief executive at Prudential UK, said, "We have
adhered completely with the requirements and obligations on us,"
adding that he hoped to continue consulting the unions. Prudential
expects the deal to deliver annual savings of £16m from 2006.
With a growing number of companies moving IT development and
support offshore to cut costs, a legal challenge to the Prudential
could delay or block future offshore deals.
High street bank Abbey National announced last month that it was
considering outsourcing its IT in contracts that could be worth up
to £100m a year.
Chris Gray, representative of MSF Amicus at Prudential, said staff
had been informed only two weeks ago by Prudential about the
decision to shut down the call centre.
He also claimed the consultation was inadequate because the
decision to transfer call centre support overseas had already been
taken. "We are having a staff meeting this week but our decision is
to challenge the outsourcing deal to India," he said. "What
happened could open the floodgates for other insurance companies to
go down this route."
Legal experts said the definition of what constituted a proper
consultation with employees before redundancies can be announced is
a grey area in employment law, and is ready to be tested in the
courts.
Insurance industry experts said more offshore IT outsourcing deals
are inevitable as companies push to reduce costs, in response to
tighter margins.
"Insurers have always handled almost every aspect of the value
chain in the whole customer proposition, from financial advice and
selling to product development and administration," said John
White, executive chairman of insurance consultancy Winchester
White.
"But now [with tighter profit margins on products] insurers have
got to service each of these components from a cost-effective
source."
In the long term, the trend towards outsourcing is likely to reduce
the need for internal IT support staff in the industry, he
added.
Who is outsourcing?
- One in five US Fortune 100 companies has outsourced some
software requirements; UK businesses are following suit
- UK users of offshore outsourcing include Royal & Sun
Alliance, J Sainsbury, Asda, and British Airways
- The main attraction is the potential to cut IT running costs
because of lower costs for skilled labour overseas
- India is the leading provider of offshore outsourcing but
markets are emerging in Asia, South Africa and South
America.