Transitional Process

Where an LTA has decided to implement its franchising framework following approval from the approval panel, the local bus market will need to transition to the new system.

The 2001 Act and the Public Service Vehicles (Registration of Local Services) (Local Services Franchises Transitional Period) (Scotland) Regulations 2025 (“the 2025 Regulations”) sets out the measures to help smooth the transition and ensure that passengers are provided with reliable services during the transition period.

Applications to vary or cancel registrations for services to be covered by the franchising framework

To minimise the potential disruption during the transitional period and ensure that passengers have a continuity of service, bus operators must observe the notice period for applications to vary or cancel local services that are expected to be covered by a proposed framework.

The notice period will change from the current maximum of 70 days, to a maximum of 140 days. This consists of up to 28 days for LTA pre-registration consideration and 112 days following the date the TC accepts the application as specified in the 2025 Regulations.

This extended notice period only applies to bus services that are covered by the franchising framework. The maximum 70 day notice period will continue to apply to bus services that are excluded from an LTA’s framework.

Transitioning from BSIPs to a Franchise

There may be cases where the LTA makes the decision to proceed with a franchise in areas where a BSIP is already in place.

Where a franchising framework overlaps with an existing partnership scheme (made under a partnership plan), section 13D (4) of the 2001 Act requires that the framework must provide for the revocation or variation of any existing partnership scheme.

This reflects that a partnership scheme under the 2001 Act cannot operate in respect of the same local services at the same time as a franchising framework (due to the exclusivity elements of the franchising model).

It is possible, however, for a partnership plan and a franchising framework to co-exist in so far as the plan may cover a broad geographical area, within which franchising may operate in some areas. Section 13D(4)(b) of the 2001 Act enables the variation of the partnership plan in these specific circumstances to ensure appropriate dovetailing of the two models.

The making of a framework will have the effect of varying or revoking the existing partnership scheme or schemes without any requirement to follow the processes which would otherwise apply under the 2001 Act (such as the operator objection mechanism). However, the processes for preparing, assessing, and making a franchising framework involves extensive consultation and approval which provides procedural safeguards.

Staff transfers

As highlighted earlier in this document, if an LTA is exercising the function of preparing and making a franchising framework, an operator may be required to provide them with types of information as set out in regulation 3(1)(i) of the Information Regulations, including information about persons employed by the operator in the provision of relevant local services.

However, we recognise that where a franchise is introduced, staff may need to transfer to new operators who enter into a franchising agreement. Provisions in the Transport (Scotland) Act 2019 (Consequential Provisions & Modifications) Order 2023 (“the Scotland Act Order”) provides the circumstances in which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) would apply.

This should protect existing staff working on the affected bus services, help reduce the burden of redundancy payments for operators who have ceased trading or downsized because of franchising while ensuring that there is a workforce ready to provide the new services under the franchising framework.

The LTA should in the first instance look to reach agreement with the existing local operators who are affected by the franchising framework, and local employee representatives about the criteria to be applied when determining which staff are ‘principally connected’ with the affected local services and therefore in scope for TUPE and potential transfer to a new operator.

If there is no agreement:

A person’s employment is treated as ‘principally connected’ with the provision of affected local services if that person spends, on average, at least half of their working time –

  • assigned to the provision of affected local services, or
  • assigned to activities connected wholly or mainly to the provision of affected local services.

Consultation notice

After an LTA makes a franchising framework, the Scotland Act Order requires the LTA to publish a consultation notice setting out:

  • the criteria by which they propose to determine whether a member of staff is ‘principally connected’ with affected local services and should therefore transfer under TUPE
  • the consultation process and agreement sought
  • the periods over which the consultation process will take place
  • the parties to be issued with a consultation notice, and
  • what constitutes agreement between the parties.

The LTA should then consult with the relevant local employers and employee representatives, with the aim of reaching agreement and publishing a final notice setting out the agreed criteria by which to determine if staff members are in scope for TUPE and should transfer.

Engagement with affected local operators and employee representatives

The LTA should engage with affected local operators and employee representatives as early as possible in the process and ensure that sufficient time is given to the consultation, bearing in mind the complexity of the proposed franchising framework and potential for staff to be transferred.

In practice, it may be difficult to reach agreement locally. The Scotland Act Order provides that where there is no agreement, the determination as to whether employees are ‘principally connected’ is to be based on whether such employees spend at least half their working time assigned to:

(a) the provision of affected local services, or

(b) assigned to activities connected wholly or mainly to the provision of affected local services.

This provision should only be used if the authority is content that agreement cannot be reached between the relevant operators and representatives of the employees.

Once the LTA, operators and employee representatives are in agreement about the staff who should transfer, a process should be undertaken to determine where they should transfer to (i.e. which employees should transfer to each individual franchising agreement).

LTAs are required to consult affected operators and employee representatives about the proposed ‘allocation arrangements’ – the plan which sets out which grouping or class of employees within the groupings should transfer to which franchising agreement.

Broadly comparable pension schemes

All affected employees who transfer when a franchising framework is made and franchising agreements have been entered into should be provided with access to a broadly comparable to, or better than, pension scheme. There is a requirement placed on the new employer of transferred employees to:

  • procure a pensions statement which satisfies the requirements specified in article 35 of the Scotland Act Order, and
  • provide every transferring employee with a copy of any part of the statement which relates to that employee.

The statement is to be provided in writing from a Fellow of the Institute and Faculty of Actuaries who can certify:

  • that, to the person making the statement has formed the opinion contained in the statement as having had regard to the guidance for assessing broadly comparability between two sets of pension benefits set out in Annex A to the HM Treasury’s note ‘Fair Deal for staff pensions: staff transfer from central government’, and
  • that, in the opinion of the person making the statement, the new operator’s pension scheme offers relevant employees’ rights to acquire pension benefits which meet the requirements of Article 33 of the Scotland Act Order on the date the statement was made.

It is the responsibility of the LTA to ensure this is achieved.

The LTA must ensure for any franchise agreement that is made that bidders commit to providing broadly comparable to, or better than, pension schemes.

The test is for the LTA to be satisfied that if the rights to acquire pension benefits that the transferring employee would have as an employee of the new operator mean that the employee would suffer no material detriment overall in terms of the employee’s future accrual of pension benefits.

Relevant employee related information

To assist with staff transfers, the Scotland Act Order enables the LTA to request information from operators about employees at any point after they have made their Franchising framework. Article 26 of the Scotland Act Order provides details about what ‘relevant information’ that can be requested.

When requesting employee information, the LTA must:

  • specify the date by which the relevant operator is to respond to the request, which must be not less than 21 days from the date on which the request is issued
  • contain sufficient information about the franchising framework to enable a relevant operator to determine which of their employees would be relevant employees for the purposes of that request
  • only request such relevant information as the local transport authority consider necessary in order to carry out their functions in relation to the application of TUPE in connection with the franchising framework, and
  • not include a request for personal data, except to the extent that such a request is for information about the identity of appropriate representatives.

Should a relevant operator, on receipt of such request, be of the opinion that the LTA has not included sufficient information about the franchising framework to enable them to respond effectively, they should inform the LTA within 14 days of receiving the request and provide a description of the information they require.

On receipt of such a request for clarification from a relevant operator, the LTA should consider the information that the operator considers necessary, and provide that information to the operator, together with specifying a revised time period within which the relevant operator should provide their response, which must not be less than a 21-day period.

The legislation provides further detail regarding the obligations on relevant operators when they receive such a request for information from an LTA, including the process to be followed should an operator consider that they are unable to provide any of the information requested. Relevant operations should ensure that the information they provide is complete and accurate, and should provide revised information at later stages, should it change.