August 1, 2016

Ten steps for managing a successful TUPE

There’s a lot of takeover talk in football at the moment, with Wolverhampton Wanderers and West Brom looking likely to follow recent-buy-outs Everton and Swansea City in taking on new owners.

And when a business is bought out – whether it’s a premiership football club, a multinational conglomerate or the local chip shop – the first thing any new owner is likely to do is make changes to the team and put their own stamp on it.

But there are rules in place to ensure those changes don’t affect the terms and conditions of employees, and every employer has to follow them.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) provide protection for employees’ terms and conditions of employment in the event their employer changes as a result of a transfer of a business undertaking.

There are two types of transfers which are protected under TUPE:

Business transfers

In a business transfer, all or part of a business transfers from one employer to another. This can include a complete buy-out of a business – for example, when all assets such as buildings and moveable property (ie machinery) are sold to a new owner – or a merger between two businesses to create a new employer.

A transfer of company shares from one owner to another does not qualify under TUPE because the company retains the same legal operating status and continues to be the employer.

Service provision changes

A service provision change is common in contracts for office cleaning, workplace catering, or security. It normally happens when:

  • a contract is awarded to a different contractor (‘contracting out’ or ‘outsourcing’).
  • a contract is assigned to a new contractor after a re-tendering process.
  • a contract is brought ’in house’ (‘contracting in’ or ‘insourcing’).

There are two exceptions:

  • the supply of goods for the company’s use (eg a restaurant changing food suppliers).
  • a single event or short-term task (e.g. catering for a corporate event).

Recognising when a TUPE applies

Generally, TUPE will cover anyone who spends the majority of their time in the business or activity. For service provision changes, protection of employment only arises if the employee can be clearly identified as performing the service that is being transferred. For example, the employee would not be part of an identifiable team of employees if the employee works for a courier service and the collections and deliveries could be performed by a number of different couriers.

If you believe your business is in, or about to be in, a situation that may come under TUPE regulations, our expert advisers can give you detailed advice on what steps you need to take.

In the meantime, here are our 10 steps for managing a successful TUPE:


1. Do your research

When thinking about acquiring a business or a contract, research is key to avoiding risks. Becoming responsible for employees you didn’t know about, or discovering terms and conditions you weren’t aware of that lead to higher staffing costs, are easily avoided by asking the right questions.

Remember terms like sick pay, enhanced redundancy clauses or enhanced payments on early retirement will all be transferred under TUPE regulations.

Your diligent research should be carried out as early as possible in the buy-out or merger process, and definitely before entering into a legal agreement.

2. Remember that transferring employees’ terms and conditions cannot be changed for a reason relating to the transfer

The TUPE regulations provide protection for employees’ terms and conditions of employment. If you’re buying out a company because it’s making a loss and you want to make big changes to turn it into a profit-making operation, you can’t impose new contracts on the existing employees that give them less favourable terms.

Indeed, even if the terms were more favourable the employer still couldn’t impose the changes without agreement from the employee/representative.

In such cases you’ll simply have to absorb the cost.

If you’re conducting a merger and employees in one business have less favourable terms than the other, you’ll have to work with staff on different contracts of employment.

Even if employees were to agree to changes to contract terms you cannot change the transferring employees’ terms and conditions for a reason relating to the transfer.

3. Don’t forget pensions

Although occupational pension schemes technically do not transfer, under the Pensions Act employees are entitled to broadly equivalent pension benefits with their new employer as they had previously. The maximum employer’s contribution is limited to 6%. Obtaining expert pensions advice is highly recommended.

4. Establish whether TUPE regulations apply

If you lose a contract to a competitor, or are considering buying part or all of a business, you need to establish whether TUPE applies. The Moorepay advice line will help you do this – speak to an advisor on 0845 073 0240.

5. Check who transfers

Generally, TUPE will cover anyone who spends the majority of their time in the business or activity. There are often disputes about which employees actually transfer.

The percentage of the employees’ time spent on work activities for the entity that is transferring (i.e. greater than 50%) is relevant but will not fully determine the outcome. Who should transfer will be decided by looking at all of the circumstances.

6. Inform and consult

There are obligations for both the outgoing employer (transferor) and new employer (transferee).

The transferor needs to inform and consult with elected representatives of the affected staff.

Businesses with fewer than ten employees are not required to elect representatives where there is no recognised trade union or representatives in place – employees in this situation would need to be informed and consulted with directly.

If you are gaining staff you will need to tell them before the transfer what changes for staff are likely to take place.

Both the outgoing and new employer may be liable for compensation of up to 13 weeks gross uncapped pay per employee affected by the transfer for failure to comply with the information and consultation requirements.

7. Don’t forget employees who are absent from work

All affected staff must be included when informing and consulting about the transfer – this includes employees who are on sick leave and maternity, adoption or paternity leave.

8. Provide accurate, up-to-date and securely-sent employee liability information

The outgoing employer (transferor) is obliged to provide the following information to the new employer (transferee) in relation to employees who are transferring:

  • The identity and age of the employees.
  • Written statements of terms and conditions of employment.
  • Details of any collective agreement affecting those employees.
  • Disciplinary proceedings taken or grievances raised in the previous two years.
  • Legal action taken by those employees against the transferor in the previous two years, and any such potential legal actions which the transferor believes could be taken.

This information must be provided not less than 28 days before the transfer. If the transferor does not provide this information, there could be a large financial penalty (the potential award is a minimum of £500 for each employee whose information was incorrect/not provided).

9. Are there any agency workers?

Employers must provide details of the transferor’s agency workers to the representatives of the employees‎ affected by the transfer under TUPE information and consultation requirements. If this information is not provided, employers will be in breach of the rules which could lead to an award of up to 90 days’ pay per employee.

10. Dismissals could be automatically unfair

If the main reason for the dismissal is the transfer or a reason connected with it, the dismissal will be automatically unfair. However, if the reason for the dismissal is an economic, technical or organisational reason (ETO) the dismissal may be justifiable.

The reason for dismissal may include redundancy because of the absorption of work into the transferee’s existing workforce. However, this could be deemed to be an envisaged change and must be consulted on prior to transfer.

If an employee is dismissed unfairly in connection with the transfer, their claim is against the transferee, not the transferor.

If you’re about to enter into a merger or buy-out, this information should have given you a good idea of your responsibilities and the steps you need to take. Every case is different though, so for advice on your particular circumstances contact us or call 0345 184 4615.

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About the author

Louise Gillibrand

About the author

Louise Gillibrand

Louise is a generalist Human Resource professional with over 18 years’ experience across a variety of sectors including care, medical, retail and telecommunications, and is a member of the Chartered Institute of Personnel and Development. Louise provides sound practical and business-focused advice in line with employment legislation and best practice, and has worked in partnership with line managers, senior operational managers and directors. Typical consultancy projects include advice on complex employee relations issues, redundancy programmes, restructures, TUPE, recruitment, policy writing and grievance/disciplinary handling. In addition to her generalist knowledge she is experienced in delivering training on a wide variety of employment law and HR subjects. Louise joined the Moorepay consultancy team in October 2007.

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