Trust takes 'unviable' HR service back in-house

HSJ has learned that the provider Arvato told the trust it would need £2.4m a year, more than double the current annual charge, to continue running the service.

East Cheshire Trust signed a four-year contract with Arvato in April 2013 aiming to save £1.5m. It now plans to take the services back in house when the contract finishes, in April 2017.

Moving the service in house will involve increased costs for the trust, which ended 2015-16 with a £24m deficit; and transferring back 45 staff four years after they moved to Arvato.

HSJ understands a review of the service by the trust in recent months identified it was not meeting key strategic objectives. There were complaints that the service led to duplication, was inflexible, and that delays were caused because Arvato teams were based eight miles away in Congleton, rather than on site at Macclesfield Hospital.

In response to the review, Arvato told the trust the current contract was no longer commercially viable, and it would only consider extending it if the trust agreed to pay £2.4m a year, more than double the current £1.1m.

In addition to an anticipated increase in the cost of running the service when it takes it back in house, the trust is expected to face one-off transfer costs as high as £350,000, HSJ understands.

East Cheshire chief executive John Wilbraham told HSJ: “East Cheshire Trust’s four-year contract with Arvato comes to an end in March 2017 and we have decided not to renew it beyond that point.

“It has been decided that the trust will deliver its HR function in-house from April 2017, with the transfer of around 45 members of staff currently employed by Arvato.

“The trust will be identifying how it can work with partners in the local health and social care economy to further develop the efficiency and effectiveness of the service.”

A spokesman for Arvato said it would not comment on the details of the contract or costs as it deemed this commercially sensitive information. However, he claimed it had delivered cost savings of 28 per cent. He added: “The trust has decided to take its HR service back in house at the end of the contract period and we will be working closely together to ensure a smooth transition.”

Outsourcing of corporate services is one of the major themes of Lord Carter’s review on NHS efficiency, published in February. It said trusts should be spending less than 7 per cent of their income on corporate services, and should have plans in place for sharing or outsourcing these services.