31.13  Calculation of Adjustment

In calculating any adjustment to be made to the Service Payment, pursuant to clause 31.11:

(a)  no account shall be taken of a decrease in the Remuneration Costs or Reorganisation Costs to the extent that it arises from a reduction in the number of Relevant Employees (or their whole time equivalent) such that there are, immediately after the Service Commencement Date, fewer suitably qualified persons, available than are required in order to establish the Proposed Workforce and to the extent that the Service Provider has employed replacement staff on equivalent remuneration and has used all reasonable endeavours to mitigate all expenses in recruiting and employing such replacement staff2526;

(b)  to avoid double counting, no account shall be taken of any change to the Remuneration Costs or the Reorganisation Costs to the extent that the Service Provider has been, or will be, compensated as a result of any indexation of the Service Payment under this Agreement;

(c)  to avoid doubt any changes in such costs which fall to be dealt with under clause 31.11 and which arise from a Change in Law shall be dealt with in accordance with the provisions of clause 31.11 and shall not be taken into account for the purposes of clause 45 (Change in Law);

(d)  no adjustments under clause 31.11 shall be made in respect of overpayments made by the Service Provider or a relevant sub-contractor to Relevant Employees which arise from reliance on the Final Employee List to the extent that the Service Provider or a relevant sub-contractor is unable to correct overpayments in respect of continuing employment having taken reasonable steps to do so27;

(e)  if there are underpayments by the Service Provider or a relevant sub-contractor to Relevant Employees, whether claimed or established as unlawful deductions from wages or as a breach of contract, which arise from reliance on the Final Employee List, there shall be an immediate increase to the Service Payment in respect of all such liabilities of the Service Provider or the relevant sub-contractor for all such underpayments which are retrospective (save that any such liabilities which relate to the period prior to the Service Commencement Date shall be dealt with in accordance with clause 31.6 or clauses 31.18(a) - 31.18(c)) and an appropriate increase in respect of such liabilities of the Service Provider which represent ongoing costs28;

(f)  in order to prevent duplication, no adjustment shall be made under this clause 31.13 if any indemnity given by the Authority under any other provision of this Agreement would apply. and

(g)  no adjustments under clause 31.11 shall be made to the extent that any payment is made to the Service Provider or a relevant sub-contractor under Regulation 12 of TUPE.

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25  If insufficient numbers of staff to establish the Contractor's projected workforce are in place at the time of service transfer, this does not reduce the Contractor's staff costs, because additional staff will have to be recruited to fill the gaps.  If there is re-profiling before Transfer at the request of the Contractor or if other changes have been included in pricing assumptions then this Clause should be amended to reflect costing assumptions.  NOTE: If bids have been invited on the basis that the Authority will assume costs of redundancy this Clause will need to be developed to reflect the bid.
26  These details are taken from the Service Provider's final bid. Authorities and their advisors should ensure that sufficient details are included in bids to ensure that all the assumptions made by bidders are transparent. Otherwise, it will be difficult for Authorities to audit the adjustments which are to be made to the Unitary Charge to reflect changes in the employee information in the Final Employee List.
27  The Service Provider may have made binding contractual commitments, having relied in good faith on information provided by the Authority.
28  This could mean that the Service Provider will recover the costs of higher salaries due to successful equal pay claims brought by transferring employees.  The parties should discuss and agree the risk in this regard.