Notice to Employees When Selling a Business (TUPE)

Selling a business involves multiple, complex obligations and considerations, including how you manage and support your workforce through the process.

The following guide for employers examines the rules relating to employee rights on the asset sale of a company — including how much notice to give employees when selling a business, together with advice and guidance on how to handle workforce issues through the period of change.

Impact of employment law on business sales

When selling a business, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended by the 2014 Regulations) can govern employees’ rights where the transaction amounts to a TUPE transfer, for example, an asset sale where the business (or part of it) transfers as an economic entity and retains its identity. The rules can also apply in certain outsourcing and insourcing situations. For employers, the starting point is therefore whether TUPE applies in the first place, including scenarios where it may not apply: when TUPE applies and when TUPE does not apply.

The Transfer of Undertakings (Protection of Employment) Regulations 2006 are often referred to as TUPE. These regulations can be collectively described as the TUPE Regulations, and the core concepts are also commonly explained as the meaning of TUPE for employers and employees.

The TUPE Regulations can be both complex and technical, although their underlying purpose is simple: to protect and preserve an employee’s rights when a business changes ownership, ensuring that employees are not disadvantaged when they move across to a new employer.

The net effect of TUPE is to automatically transfer all employees who were employed immediately before the transfer — together with any associated rights, powers, duties and liabilities arising under or in connection with their contracts of employment — from the outgoing employer (the transferor) to the incoming employer (the transferee). In practice, that means the transferee “steps into the shoes” of the transferor in relation to transferring employees, subject to TUPE’s specific rules around dismissals, changes to terms and conditions and information and consultation.

Employee rights on the sale of a business

When TUPE applies to the sale of a business, the incoming employer will be stepping into the shoes of the outgoing employer. In this way, the new employer will effectively be taking on the rights, responsibilities and liabilities of the old employer towards all assigned employees.

In broad terms, employees transferring to a new employer will continue to enjoy the same terms and conditions of employment and, with the exception of certain occupational pension arrangements, their existing employment rights will remain intact. They will also carry over the same continuity of employment for the purposes of any statutory rights for which continuous service is a qualifying requirement, such as unfair dismissal — as well as any statutory or contractual rights where length of service impacts any entitlement, such as redundancy payments and notice periods on dismissal.

The TUPE Regulations will usually render any dismissal automatically unfair where the sole or principal reason for the dismissal is the transfer, either before or after the transfer takes place. This is because, under TUPE, employees receive certain protections around dismissal and redundancy in connection with the transfer. However, a transfer-connected dismissal is not automatically unfair where the employer can show an ‘economic, technical or organisational reason entailing changes in the workforce’ and the dismissal is handled fairly, including following an appropriate process and acting reasonably in all the circumstances. This is commonly referred to as an ETO reason.

If an employee is subsequently dismissed for reasons unconnected to the transfer, by reason of redundancy or otherwise, the 2-year qualifying service requirement to bring a claim for ordinary unfair dismissal or statutory redundancy pay will run from the original start date with their previous employer. An employee can also be lawfully dismissed prior to the sale of a business, provided the reasons for their dismissal are unconnected to the transfer and a fair process is followed.

Minimum notice periods for dismissal on sale of a business

In some cases, despite the protections against dismissal and redundancy afforded to employees under TUPE, there may be circumstances in which redundancies connected with the transfer can be justified. This can arise, for example, where there is unlikely to be sufficient work for all employees following the sale. The key exception to the general rule against dismissals before or after the transfer is where the employer can demonstrate an economic, technical or organisational reason entailing changes in the workforce. These are known as ETO reasons and may include genuine redundancy situations or organisational restructuring following the transfer.

However, any dismissal or redundancy based on an ETO reason will still be subject to the ordinary principles of fairness under UK employment law. This means employers must act reasonably in the decision to dismiss, apply fair selection criteria where redundancy is involved and follow a fair procedure, including meaningful consultation and consideration of suitable alternative employment where available.

Where a dismissal is lawful and procedurally fair, employees will be entitled to a minimum statutory notice period based on their length of service with the business, including continuous service transferred under TUPE. The statutory minimum notice periods are:

• at least one week’s notice where the employee has worked continuously for between one month and two years
• one week’s notice for each complete year of service, where the employee has worked continuously for between two and twelve years
• twelve weeks’ notice where the employee has worked continuously for twelve years or more.

These statutory minimum notice periods apply unless the employee’s contract of employment provides for a longer notice period, in which case the contractual notice entitlement must be honoured. Employers must therefore review both statutory and contractual notice obligations carefully when planning dismissals in connection with a business sale.

Minimum notice of transfer for affected employees

The TUPE Regulations impose specific information and consultation obligations on both the outgoing employer and the incoming employer in relation to affected employees. In this context, giving “notice” to employees refers to providing information about the proposed transfer and consulting about it, rather than giving notice of dismissal or redundancy.

Under TUPE, employers must inform appropriate employee representatives, or affected employees directly where permitted, of certain prescribed information. This includes:

• the fact that the transfer is to take place, the date or proposed date of the transfer and the reasons for it
• the legal, economic and social implications of the transfer for affected employees
• any measures which the outgoing or incoming employer envisages taking in connection with the transfer, or confirmation that no such measures are envisaged.

There is no statutory definition of “measures” under the TUPE Regulations. In practice, measures can include dismissals, redundancies or changes to working arrangements, as well as less obvious changes such as alterations to reporting lines, working hours, job roles or workplace policies. Even where no changes are planned, employers must expressly confirm that no measures are envisaged.

Although TUPE affords employees significant protection against dismissal and changes to terms and conditions, the Regulations do not impose a fixed minimum notice period for informing employees of a transfer. Instead, the obligation is to provide the prescribed information long enough before the transfer to enable meaningful consultation to take place. What amounts to “long enough” will depend on the scale and complexity of the transfer, the number of affected employees and whether employee representatives need to be elected.

Where contractual variations are proposed in connection with the transfer, these will generally be void if the sole or principal reason for the change is the transfer itself. Variations may only be lawful where they are for an economic, technical or organisational reason entailing changes in the workforce and the employee agrees to the change. Employers should therefore exercise caution when planning any post-transfer changes and ensure these are fully assessed for TUPE compliance.

How should employees be informed of a decision to sell the business?

Once a decision has been made to proceed with the sale of a business and the transfer is envisaged, both the outgoing employer and the incoming employer must identify any affected employees for the purposes of TUPE information and consultation. The statutory obligation applies to any employee affected by the transfer itself or by any measures taken in connection with it. This will usually include the transferring workforce, but may also extend to non-transferring employees whose roles or working arrangements are impacted by the transaction.

Employers must also identify the appropriate representatives for the affected employees. Where a recognised trade union exists in respect of the affected employees, consultation must take place through the trade union representatives. Where there is no recognised trade union, employers must invite affected employees to elect employee representatives specifically for the TUPE process.

If employees are invited to elect representatives but fail to do so within a reasonable time, the employer is permitted to provide the required information directly to the affected employees. In addition, where the business employs fewer than ten employees, known as a micro-business, the employer may consult directly with affected employees without the need to appoint or elect representatives.

The information provided to employee representatives or affected employees should be given in writing and in a clear and accessible form. This may be delivered by hand, provided electronically or sent by post, depending on the circumstances and any existing workplace arrangements. Where trade unions are involved, information should be sent to the union’s main or head office or to the address notified by the relevant representatives.

Providing clear, timely and accurate information is critical to reducing legal risk. Failures in the information and consultation process are a common cause of TUPE-related tribunal claims and can significantly increase the costs and disruption associated with a business sale.

When should employees be informed of a decision to sell the business?

Where the obligation to inform and consult under TUPE is triggered, the prescribed information must be provided long enough before the transfer to enable meaningful consultation to take place. There is no fixed statutory timetable for consultation. Instead, the requirement is that consultation is carried out “in good time”, taking into account the nature and scale of the transaction, the number of affected employees and the complexity of any proposed measures.

In practice, the larger and more complex the transaction, and the greater the number of employees affected, the longer the consultation process is likely to take. Where employee representatives need to be elected, additional time must be allowed for the election process to take place and for representatives to be given sufficient opportunity to understand the proposals before consultation begins.

For consultation to be meaningful, employees or their representatives must be provided with adequate information and given sufficient time to respond to it before the transfer occurs. Employers must consider and respond to any representations made, although they are not obliged to agree to them. Consultation should therefore begin while proposals are still at a formative stage and before decisions are irrevocably finalised.

In some cases, employers may choose to inform employees and representatives about a potential sale before a binding agreement has been reached. While this can help manage uncertainty and identify workforce issues at an early stage, the legal duty to inform and consult only strictly arises once the transfer is envisaged and the employer’s proposals are sufficiently developed to allow meaningful engagement.

Following completion of the sale, the outgoing employer must continue to inform and consult with any employees who remain employed in the business, where applicable. The incoming employer must inform and consult with the transferring employees, including in relation to any post-transfer measures it proposes to take, such as organisational changes or potential redundancies.

Where the incoming employer is proposing to make redundancies following the transfer, it may be appropriate to run collective redundancy consultation in parallel with TUPE consultation. Where 20 or more redundancies are proposed at a single establishment within a 90-day period, the statutory rules on collective consultation will apply, requiring consultation with appropriate representatives and compliance with minimum consultation periods.

TUPE allows, in limited circumstances, for pre-transfer collective consultation about post-transfer redundancies to be carried out by the outgoing employer on behalf of the incoming employer, provided certain conditions are met and both parties agree. However, no individual redundancy dismissals can take effect before the transfer, and individual consultation with affected employees must still take place after the transfer has completed.

Managing legal risks

Where the TUPE Regulations apply, the parties to a business sale cannot opt out of their statutory obligations. This includes the duty to inform and consult affected employees and their representatives, as well as the automatic transfer of employees and associated liabilities. TUPE therefore represents a mandatory legal framework that must be factored into both transaction planning and workforce strategy from an early stage.

Although TUPE obligations cannot be avoided, employers can manage and allocate legal and financial risk through the transaction documents. In practice, this is achieved by negotiating appropriate contractual warranties and indemnities between the outgoing and incoming employer. These provisions are commonly used to allocate responsibility for pre-transfer liabilities, ongoing employment risks and any financial exposure arising from failures to comply with TUPE obligations, including failures relating to information and consultation.

A failure to comply with TUPE’s information and consultation requirements can give rise to employment tribunal claims. Complaints may be brought by:

• affected employees, in relation to failures concerning the election of employee representatives
• employee representatives, where the failure relates to them in that capacity
• recognised trade unions, where the failure relates to trade union representatives
• affected employees generally, in any other case.

Where a complaint is upheld, the employment tribunal may make a protective award of up to 13 weeks’ uncapped gross pay per affected employee. The level of the award is determined by what the tribunal considers just and equitable in all the circumstances, having regard to the seriousness of the employer’s failure. In most cases, both the outgoing employer and the incoming employer will be jointly and severally liable for any award made, leaving it to the parties to determine how liability is apportioned under the terms of their commercial agreement.

In addition to TUPE-specific risks, employers should also consider wider employment law exposure when planning a business sale, including the risk of unfair dismissal claims, redundancy-related liabilities and disputes arising from changes to working arrangements. Careful coordination of TUPE consultation, redundancy consultation and broader restructuring plans is essential to minimise legal risk and operational disruption. Guidance on reorganisation and redundancy and broader restructuring can be particularly relevant where workforce changes are anticipated following a transfer.

Given the complexity of TUPE and the significant financial exposure that can arise from non-compliance, seeking specialist advice at an early stage can be critical. Proper planning, realistic timetables and clear communication with employees can significantly reduce the likelihood of disputes and help ensure that business objectives are achieved without unnecessary legal risk.

Need Assistance?

Navigating a business sale where TUPE applies requires careful coordination between legal compliance, workforce strategy and commercial objectives. Missteps in the handling of employee consultation, dismissals or post-transfer changes can expose employers to significant financial and reputational risk.

DavidsonMorris’ employment lawyers advise employers on all legal aspects of company reorganisations and business sales, including compliance with the TUPE Regulations and related obligations such as the provision of employee liability information. Our advisers work closely with HR teams to support employers through consultation, restructuring and redundancy processes, helping to reduce the risk of claims while maintaining employee engagement during periods of change.

Specialist advice is particularly important where employers are considering post-transfer measures, workforce reductions or contractual changes, or where collective consultation obligations may apply. Early input can help employers structure transactions and timelines in a way that aligns legal compliance with operational and commercial priorities.

Notice to Employees When Selling a Business FAQs

What is TUPE and how does it apply to business sales?

TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It applies where a business or part of a business transfers to a new owner as an economic entity that retains its identity, which commonly occurs on an asset sale. Where TUPE applies, employees assigned to the transferring business automatically move to the new employer on their existing terms and conditions, with continuity of employment preserved.

When should employees be notified about a business sale?

Employees or their representatives must be informed and consulted once the transfer is envisaged and proposals are sufficiently developed to allow meaningful consultation. There is no fixed statutory timeline, but information must be provided in good time before the transfer takes place. In practice, earlier engagement reduces legal risk and helps ensure consultation is meaningful rather than a formality.

Do I need to notify all employees or just certain ones?

The duty to inform and consult applies to all employees who may be affected by the transfer or by any measures taken in connection with it. This includes employees who will transfer, as well as non-transferring employees whose roles, working arrangements or job security may be impacted by the sale.

What should be included in the notification to employees?

Employers must provide prescribed information, including the fact of the transfer, the date or proposed date and the reasons for it. They must also explain the legal, economic and social implications for affected employees and outline any measures the outgoing or incoming employer envisages taking in connection with the transfer, or confirm that no measures are planned.

Is it necessary to consult with employee representatives during a sale?

Yes. Where a recognised trade union exists, consultation must take place through union representatives. Where there is no recognised union, employers must invite employees to elect representatives. Direct consultation with employees is only permitted in limited circumstances, such as where employees fail to elect representatives or where the employer is a micro-business with fewer than ten employees.

What happens if I fail to properly notify or consult with employees?

A failure to comply with TUPE’s information and consultation obligations can result in an employment tribunal claim and a protective award of up to 13 weeks’ uncapped gross pay per affected employee. Liability is commonly joint and several between the outgoing and incoming employer, meaning both parties may be responsible for the full award.

Can employees refuse to transfer to the new owner?

Employees have the right to object to the transfer. If they do so, their employment terminates by operation of law on the transfer date and they will not transfer to the new employer. In most cases, this does not give rise to a redundancy payment. However, where the transfer would involve a substantial detrimental change in working conditions, an employee may have potential claims, depending on the circumstances.

What support should be offered to employees after notification?

Clear communication and ongoing engagement are key. Employers should be prepared to provide further information, answer questions and consult on any proposed measures. In some cases, access to HR support or employee assistance services can help manage uncertainty and maintain morale during the transition.

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