For all the noise made about the affordability of employer contributions to the Universities Superannuation Scheme in recent years, it is the affordability of the Teachers¡¯ Pension Scheme (TPS) that is threatening to have the most profound consequences for staff benefits ¨C and industrial relations ¨C in UK higher education.

Better stock market conditions allowed a restoration of benefits in 2023 that had been removed from USS members amid fears that a black hole projected during the pandemic era in its finances meant the scheme would otherwise become unaffordable to the pre-1992 universities that make up its membership. The restoration ended years of industrial action.

However, just as one long-running source of grievance was resolved, another arose as the previous government last year announced that employers¡¯ contributions to the TPS would increase?by 5 percentage points?in England and Wales from an already considerable 23.68 per cent ¨C compared with the USS¡¯ current 14.5 per cent (down from 21.6 per cent following the 2020 valuation).

Enrolling new staff on to the TPS ¨C a defined-benefit pension scheme primarily meant for schoolteachers ¨C is a statutory requirement for post-92 universities under the 1992 Higher Education Act, which permitted the conversion of local-authority-controlled polytechnics into universities. But, unlike for schools, the government does not provide universities with money towards employer contributions to the scheme.

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The contribution hike, announced last April, prompted Raj Jethwa, chief executive of the Universities and Colleges Employers Association (Ucea), to declare that an?¡°urgent¡± review?was needed of universities¡¯ involvement in the TPS to maintain financial stability in the sector.?And the possible consequences of not doing so quickly became apparent. A few months later, in July, members of the University and College Union (UCU) at the?University of Portsmouth?threatened to go on strike, accusing the institution of attempting to create a ¡°two-tier¡± workforce after it announced plans to employ all new staff through a wholly owned subsidiary company, allowing it to offer them a much less generous defined-contribution pension, whose returns depend on market conditions.

While the timing suggests Portsmouth¡¯s announcement was a reaction to the hike in the contribution rate, other institutions had already taken the plunge. The University of Staffordshire, which began employing staff through a subsidiary in 2022, said that 60 per cent of its 1,600 staff are now employed this way. Southampton Solent University said that new professional services staff there ¡°have been able to access our competitive defined-contribution pension scheme¡± since 2018, and ¡°this also applies to new academic staff who joined from September 2023¡±.

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But it is Coventry University ¨C which has long had a group structure ¨C that appears to have blazed the trail. In a statement, the university said it ¡°started employing academic colleagues in group companies outside of the university in 1989, with the first significant numbers being employed in 2009, with the launch of Coventry University London¡±.

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According to a recent blog by at Northumbria University, the TPS¡¯s new employer contribution rate of 28.68 per cent means that on a typical academic salary of ?57,500, TPS-enrolled staff cost employers ?16,500 a year, compared with only ?8,300 for USS members.

A spokesperson for Portsmouth told Times Higher Education that the contribution rate hike alone would cost it an additional ?1.1 million this year, while the University of Worcester said it would save ?3 million a year ¡°and have no financial deficit¡± if the TPS contribution rate was the same as the USS rate.

However, staff and union members have argued that such claims are misleading. Duncan Adam, a senior lecturer at?Manchester Metropolitan University and former chair of Staffordshire¡¯s UCU branch, argued that while ¡°TPS contributions have gone up, lecturers don¡¯t all cost the same to begin with¡±, noting that staff in post-92s are typically several points below their comparators in pre-92s on the national pay spine.

¡°The tactical trade-off of working for lower pay within post-92s was that TPS was more secure and a better pension than USS,¡± he said.

The union argues that employing people through subsidiary firms goes against the spirit of universities¡¯ legal obligations.

¡°Pensions are deferred pay and it is completely unacceptable for universities to attempt to tear up nationally agreed terms and conditions and create two-tier workforces,¡± said the UCU¡¯s general secretary, Jo Grady. She added that the Labour government ¡°needs to protect staff pensions by matching the support given to schools and colleges and funding the increase in employer contributions¡±.

Pip Sutton, branch chair of UCU Portsmouth (which has not yet held a strike ballot), argued that employing staff on different contracts creates a two-tier system not only with individual institutions, but also between different post-92 institutions. A university that doesn¡¯t offer TPS membership could become a mere ¡°holding place¡± for newly qualified academics, who seek to move on to ¡°a job on a fiercely competitive TPS contract¡± elsewhere.

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The process of moving staff from university employment on to subsidiary employment is likely to be a bloody one. In December, Coventry announced that it was looking to make 92 full-time-equivalent roles redundant and to move an unspecified number of existing staff to its subsidiary firm. Staff members have claimed to?THE?that the restructure action amounts to fire and rehire, as staff who have been put at risk of redundancy have been told that they can reapply for subsidiary-employed roles ¨C which, as well as offering less generous pensions, also come with 10 days fewer of annual holiday entitlement and ineligibility for union membership. The fire-and-rehire allegations prompted Zarah Sultana, MP for Coventry South, to??to both education secretary Bridget Phillipson and Coventry vice-chancellor John Latham to express her concerns.

In a statement to THE, the university said that employer TPS contributions ¡°are simply unaffordable¡±, so it was consulting on ¡°proposals to reduce the number of roles in the university while at the same time creating a number of new roles more appropriate for the current student population in one of the other companies in our group.?No decisions have been made and no one involved in the consultation process?has been put at risk of redundancy at this stage.¡±

It said the restructuring was ¡°focused on a number of subject areas where student numbers have been hit by Brexit, the international student visa situation and by certain Russell Group universities taking many more students. We are not losing subject areas but we have fewer students and must rebalance our student-staff ratios as a result. However, we will continue to invest in new roles where we have experienced growth in demand.¡±

It said its group companies offer ¡°different but very competitive terms and conditions and we have always found our offer to be compelling and attractive when recruiting new colleagues.¡±

As university deficits continue to grow, prompting ever more redundancies, more universities seem likely to resort to subsidiary hiring. Worcester, for instance, confirmed to THE that it is ¡°exploring the use of alternative [defined-contribution] pension schemes for the future employment of new staff¡±, which it said made it ¡°like many others¡± in the sector.

But universities are unlikely to shout about such moves, Manchester Met¡¯s Adam believes. He said universities that employ new hires through subsidiary firms often fail to be transparent about that fact during the hiring process. ¡°Employers certainly don¡¯t put it front and centre that they¡¯re not offering TPS,¡± he said, leading applicants to assume that they would be enrolled given that this is ¡°the industry standard¡± and that ¡°people would expect it¡±.

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Some academics fear that losing TPS access may not be the only negative consequence for subsidiary-employed staff. Nik Wakefield, UCU branch secretary at Portsmouth worries that they may also become ineligible for research grants given that ¡°some funding bodies stipulate that recipients must be employees of a higher education institution¡±. This, his branch chair Sutton added, raises questions over ¡°career progression and EDI issues within some universities for academic staff not employed on direct contracts¡±.

A spokesperson for UK Research and Innovation confirmed that only people ¡°based at¡± can apply for most UKRI grants. And those people could only be ¡°project leads, project co-leads, or any part of the core team, if they have a contract of employment with the eligible organisation for the duration of the project. This would not generally include individuals based at subsidiary firms.¡±

Except in the possible case of funding calls with ¡°non-standard eligibility criteria¡±, the costs of anyone not employed by the eligible organisation ¡°would need to be treated as a subcontracted activity¡±, counted for as ¡°other directly incurred costs¡±.?

Researchers¡¯ contractual status also raises questions for the Research Excellence Framework (REF). One is about the methodology for determining how many outputs and impact case studies each unit of assessment must submit. For the next REF, whose result are due in 2029, this will be based on the number of research staff employed?over a two-year period during the assessment period, as reported to the sector¡¯s main data body, the Higher Education Statistics Agency.

The staff count is supposed to ensure that ¡°the scale of an institution¡¯s submission aligns with its research capacity¡±, according to a REF spokesperson. The concern is that a unit with significant numbers of staff employed by subsidiaries ¨C who are not counted by Hesa ¨C may therefore be able to make an artificially small submission, allowing it to submit only its very best work and, therefore, obtain an artificially high rating.

The spokesperson confirmed that ¡°REF 2029 does not have a policy on subsidiary companies¡± but conceded that the question of whether and how people employed through them should be counted is a ¡°live question for the sector. The ongoing Hesa staff record review statistical consultation?will allow for a comprehensive evaluation of the?record¡¯s capacity to ensure it effectively meets the evolving needs of the sector.¡±

Amanda Bretman, dean for research quality at the?University of Leeds, said that establishing subsidiary firms in order to game the REF would be ¡°quite a big thing to do¡± but agreed that the potential ¡°grey area¡± around staff employment is part of a wider lack of clarity around the ¡°bigger question¡± of ¡°how we actually go about looking at outputs, and the pool of people that those outputs can come from¡±. And since now is ¡°such a difficult time for the sector, that [lack of clarity] is maybe going to drive some poor behaviours¡±, she cautioned.

The submission volume issue may become particularly fraught since one thing that seems clear is that even if subsidiary-employed staff are not counted by Hesa, they will be eligible to submit their outputs to the REF. As the REF spokesperson put it, universities ¡°will be able to submit any output for which they can evidence a demonstrable and substantive link¡±.

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When it comes to altering staff¡¯s terms of employment, it hasn¡¯t been all one-way traffic. In 2023, Falmouth University reversed a 2021 decision to hire new staff through a subsidiary firm after a union campaign. The subsidiary employer paid just 6 per cent of salary into the defined-contribution pension it offered, the UCU said. The union also claimed that there was a lack of transparency surrounding the subsidiary firm, with no mention on the university¡¯s website that new staff would be employed through it. Asked to comment, Falmouth said: ¡°The details of the dispute and resolution are in the public?domain?and we were pleased to work with UCU to reach a positive conclusion.¡±

However, Manchester Met¡¯s Adam suspects that the pace of change in the other direction is about to hot up.

¡°Certain universities were thinking that they might get something out of the new Labour government and might have waited [to shift staff on to subsidiaries] to see if anything emerged from that,¡± he speculated. But given that the small rise permitted by Labour in England¡¯s domestic undergraduate?tuition fees?has been offset by?a rise in employers¡¯ national insurance contributions, Adam thinks more providers may now make their move.

Steve West, vice-chancellor of the University of the West of England, agrees that more subsidiary employment may be deemed to be necessary by universities that are ¡°financially disadvantaged¡± by being required to enrol employees on to the TPS.

¡°Without a change in Treasury mindset and the law,¡± he said, ¡°the only option is for universities to set up subsidiary companies and offer new terms and conditions and pensions to reduce the current costs to universities.¡±

This, he added, would allow post-92s to ¡°protect jobs¡±. But whether staff appreciate that gesture is very unclear. One staff member at Coventry, for instance, described the university¡¯s proposal to increase subsidiary employment as ¡°not illegal, but immoral¡±. And Portsmouth¡¯s Wakefield fears that losing TPS access may not be the only perk that subsidiary-employed staff will lose.

¡°If a subsidiary company permits a university to sidestep and avoid its statutory obligation to offer a pension scheme, what other working conditions are next?¡± he asked.

Industrial relations at post-92s look like they might be about to take a turn for the worse.

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juliette.rowsell@timeshighereducation.com