The recent industrial strife at British Airways should ring alarm bells at those West Midland companies tempted to outsource some of their own operations to cut costs.
The warning comes from Ian Marshall, head of the employment and pensions group at Birmingham and London law firm Martineau Johnson.
Mr Marshall said: "If you do look at outsourcing in a bid to cut operating costs, you have to be careful not to go too far.
"If your remaining employees see job cuts when services are bought in rather than provided internally, they may take industrial action because they fear it may be their turn next. The effect may not be felt until the company providing the outsourced service makes its own cut backs.
" Through global and national competition, the pressure is on today to buy non-core services in from outside suppliers. However, directors need to be careful with the agreements they enter into and about how responsible the outsource partner is likely to be."
One reason for the pressure to outsource is the fact that the service provided, catering in the case of the BA situation, can often be managed more effectively by a business that is specialist in its sector.
However, the continuing increase in employment costs and associated red tape are other catalysts, according to Mr Marshall.
He said: "Higher employment costs give a real impetus to buying in services rather than employing people to do the work in- house. The Transfer of Undertakings legislation, known as TUPE, ensures that employees who are part of an outsourced operation keep their previous pay and conditions.
"If these are fairly generous, as seems to have been the case in the BA/Gate Gourmet situation, losses can be a problem for the company providing the outsourced service, which can be faced with fixed revenues from a major contract." Reportedly losing £25 million a year on its Heathrow operation, American-owned Gate Gourmet must have felt the need to cut costs.
The dispute started when it dismissed around 350 workers in a row over pay and working conditions and the recruitment of temporary summer workers.
However, much of the difficulty caused to BA and its passengers was due to approximately 1,000 unofficial strikers at the airline, such as baggage handlers, who came out in sympathy. Many were members of the Transport and General Workers' Union, like the Gate Gourmet workers.
Gate Gourmet's chairman David Siegel has blamed BA and its inability to deal effectively with its own workforce either now or in the past for the bad industrial relations climate at the company.
The now independent catering operation was part of BA until it was sold in 1997 and Mr Siegel believes that he has inherited a poor industrial relations culture with many restrictive practices.
Mr Marshall said: "BA has chosen so far not to take action against its own unofficial strikers. This suggests a challenging industrial relations situation across the board and this is a difficult basis for effective outsourcing.
"West Midland companies should think carefully about the medium to long term implications before pressing forward, however attractive the apparent short term gains.
"Mistakes can be very damaging especially where the group concerned relies on the outsourced service in the future."
