TUPE – understanding the basics

Are you buying or selling a business? Then you’ll need to think about what will happen to the employees of the company being transferred. The first step is to get to know the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended by the 2014 Regulations), commonly known as TUPE. Read on for a summary of the basics for small and medium business owners.

In short, TUPE protects the rights of employees when the business or commercial contract that they are working on changes to new ownership. It ensures that employees who find themselves transferred to a new employer, retain exactly the same hours and rate of pay and other contractual benefits as they had with the old employer.

When does TUPE apply?

TUPE applies in two cases. Firstly a “business transfer” and then secondly a “service provision change”, there may also be a situation where both apply; e.g. a company outsources specific services.

To clarify:

A Business transfer is when a business changes hands to a new owner. To qualify for TUPE the business must remain fundamentally the same after the change of ownership; i.e the employees will be doing the same job for the same clients. This is usually the case in most mergers and acquisitions.

A Service provision change can include a number of situations in which work is reassigned. It can be where an activity is outsourced to a third party or vice versa when an activity is brought in-house. It also applies to cases where a contract to provide a service, such as a catering or security contract, is won or lost. There are a few exceptions to this rule so it’s always advisable to speak to an employment law expert as early on in the process as possible to get specific advice.

Does TUPE apply to all businesses and contracts?

Whether it’s a multinational corporation, a cleaning contract or a café, TUPE applies to all UK businesses, regardless of the sector or size.

Who is protected by TUPE?

Most employees on permanent or fixed term contracts. TUPE doesn’t usually apply to agency workers or those who are self-employed.

In a service provision change, there can be some tricky issues about who transfers, but this isn’t usually the case in a straightforward sale.

If you aren’t sure, don’t worry! Help is on hand, get in touch, we’ll be happy to answer your questions.

But is it really that simple?

Not quite. So it’s important that you find out (in good time prior to the transfer) exactly which employees are covered by TUPE and will transfer with the business (or contract). Generally speaking, as a rough guide, if an employee spends 50% or more of their working time on the transferring business or contract then they will transfer with the business.

You will also be required to provide key information about the employees who are transferring (if they are transferring from you) not less than 28 days before the transfer.  This can be difficult in cases where contracts are lost and the customer has not told you who has won the contract.

An example of when TUPE can get tricky…

When an employee spends 50% of their time on the particular service or account that is being transferred but, on paper, they’re assigned to a department or service that is not transferring. This can be a confusing situation. You can avoid this circumstance by carefully considering an employee’s job description in their Contract of Employment (providing, of course, it reflects what’s happening in practice).

What about employees who are away at the time of the transfer?

Employees who are on maternity/ paternity leave or holiday etc will most likely be transferred. BUT it can get complicated if an employee is off on long-term sick leave.

What are the main effects of TUPE?

• Employees of the outgoing (old) employer who qualify, will automatically become employees of the incoming (new) employer. They will retain the same terms and conditions of their employment as outlined in their existing Contract of Employment. Also any contractual terms, such as enhanced redundancy pay that may be contained in an employment policy, will also transfer.
• The transferred employees will also keep their full period of continuous employment, so their start date will be taken from when they started with the old employer (unless they were also transferred to that company, which means their continuous employment would start from the earlier start date.)  The period of continuous employment is important for calculating entitlements to statutory payments such as notice and redundancy.
• An incoming employer may wish to change a new employee’s contract to bring it in line with those of existing employees. However, they cannot change the Ts & Cs of a contract unless it is expressly allowed in the contract in question (e.g. minor admin changes), or when there are Economic, Technical or Organisational (ETO) reasons for the change to the workforce.  Deciding what is a valid ETO justifying changes to Ts & Cs can be tricky to get right and that’s where we can help.
• Also, it would be considered an unfair dismissal if the reason for the dismissal is the transfer, unless there is a valid ETO reason.  Again we would always recommend getting expert advice before making this sort of decision.
• The protection given by TUPE to employees’ Ts & Cs is not time limited.

We strongly advise you carry out proper due diligence when you’re involved in business transfers or service provision changes. Understanding how TUPE applies to your situation is critical.

Both the outgoing and the incoming employer have a duty to inform and consult with employees about the transfer, and if you employ more than 10 people, you’ll also need to give them the opportunity to elect employee representatives.  In addition to being legally required, we always recommend that you take the time to talk to your staff in detail about how the change may affect them. Explain their rights, and any relevant information about the transfer. It can be an alarming time for them, and they deserve to be part of the conversation. After all happy staff are a company’s biggest asset.

The content of this blog is for general information only. Please don’t rely on it as legal or other professional advice as that is not what we intend. You can find more detail on this in our Terms of Website Use. If you require professional advice, please get in touch.