The Transfer of Undertakings (Protection of Employment) regulations (TUPE) exist to protect employee rights when the business they work for changes owner. If your organisation is due to be partially or completely sold to another employer, or you are switching service providers in a manner that will involve transfer of employees, you have a statutory responsibility to ensure the TUPE regulations are met throughout the transaction. Failure to do so could result in transferred employees taking legal action against you at an employment tribunal.
The regulations apply to businesses of all sizes in the UK. The transfer in question may involve several thousand members of staff, or even a single employee. In all cases, TUPE provisions are designed to ensure that a new or ‘incoming’ employer cannot change:
- The employee’s contracted hours and rate of pay
- Bonuses, commissions, benefits and reward schemes
- Holiday and sickness day allowances
- Other terms and conditions within the transferee’s employment contract
When does TUPE apply?
Before setting the wheels of any transfer in motion, employers must consider the specifics of the situation to ensure that TUPE transfer rules apply. This would be the case during:
- Relevant business transfers: when a business (or part of a business) is bought by another company, or merges with another company.
- Service provider transfers: when a previously outsourced service is brought in-house or vice versa; when outsourced services are switched from one contractor to another. For TUPE to apply, this must involve actual services provided by employees, not just goods. TUPE also would not apply during one-off or short-term contracts.
How to manage a TUPE transfer: employer checklist
No matter the size of your upcoming TUPE transfer, it is important to follow a comprehensive transfer plan to ensure legal compliance, as well as minimal disruption to employees and smooth continuation of workplace activities. Utilising the Advisory, Conciliation and Arbitration Service (ACAS) recommendations to manage a TUPE transfer will help ensure productivity, efficiency and customer satisfaction are maintained throughout the process.
This TUPE checklist will explore those recommendations to help employers meet their legal obligations and keep their businesses running smoothly while managing a transfer of staff. Keep in mind that much of the information provided here is for general guidance only and may need to be adapted to suit different circumstances.
1. Identify affected employees
Once the proposed transfer has been agreed, your first task will be identifying the employees included in the transfer. This is relatively straight-forward in business TUPE transfers which involve the selling or merging of companies, as all employees within the business being sold (or the specific part of the business being sold) will be transferred to the new employer. Identifying affected employees in TUPE transfers which involve service providers can prove trickier, as employees involved in the provision of that service may have other responsibilities within the business. In such cases, it is generally accepted that any employee who spends more than 50% of their time performing tasks relating to the transferred service will be included in the transfer.
It is worth noting at this stage that employees who are not included in the transfer may still be affected by the transition. As a conscientious employer, you must consider who among your remaining workforce may be negatively affected during the transfer and take steps to mitigate any anticipated problems.
2. Inform and consult
Step two of the TUPE transfer is arguably the most important. Employers have a legal obligation to inform their employees of the scheduled transfer and consult with them about its implications. You are not bound by a set time scale in which the consultation must be completed. The priority during this stage of the TUPE transfer should be making sure all relevant parties have accurate and complete information – transparency is key. Whom the outgoing employer must consult with will depend on the size of the organisation and whether their employees are members of trade union.
During this stage of the transfer you must consult with one of the following:
- Trade union representatives: if any of the affected employees are members of a recognised trade union.
- Employee representatives: if the affected employees are not members of a union. These representatives may be chosen for the sole purpose of participating in the TUPE transfer consultation.
- The affected employees themselves: if there are fewer than ten employees working for the organisation and they are not members of a union.
During the consultation stage, it is essential that the following information in included in discussion and passed on to the affected employees:
- Formal notice that the transfer will go ahead.
- The date or predicted date that the transfer is due to take place.
- The reason the decision to transfer was made.
- What effect the transfer will have on employees, including financial, social and legal implications.
- Measures the outgoing employer will take that may affect remaining employees, if this is applicable.
- Measures the incoming employer will take post-transfer, that may affect transferring employees, if these measures are known.
Failure to meet the requirements outlined in this stage of the TUPE transfer could result in serious financial repercussions for the employer, should the employee bring a case before an employment tribunal. The old and new employers can be held jointly or individually responsible and may be ordered to pay every affected employee up to 13 weeks’ wages in compensation.
3. Employee liability information
Outgoing employers have a legal responsibility to pass employee liability information on to the incoming employer prior to the TUPE transfer. This is also known as ‘due diligence’ and applies in all service contract negotiations and business sales, even when the TUPE regulations do not apply.
The employee liability information must be submitted:
- In writing.
- No less than 28 days prior to the date of the transfer.
The information passed on to the new employer should include:
- The names and ages of transferring employees.
- The transferring employees’ complete contracts of employment.
- Details of all formal disciplinary action taken against transferring employees, within the two years prior to the transfer.
- Details of all formal grievances raised by transferring employees, within the two years prior to the transfer.
- Details of any legal action taken against the old employer by any transferring employees, within the two years prior to the transfer.
- Details of any legal action which the old employer has reason to believe will be taken against them by any transferring employees.
Should you fail to pass this information on to the new employer before the 28-day deadline, they may take legal action against you to pursue compensation. Penalties for failing to submit employee liability information to a new employer start at £500 per employee and have no maximum limit.
4. Post-transfer measures
The new employer must take steps to ensure all transferred employees understand and can comfortably perform their duties post-transfer. Once the transfer is complete, the new employer may wish to implement the measures discussed at the consultation stage. Measures may be minor changes to working arrangements which do not affect the transferred employees’ contracts of employment. With the exception of pensions, all the employees’ previous employment conditions are protected by the TUPE transfer.
The measures implemented at this stage may include:
- Relocating employees to a different workplace
- Making redundancies
- Changing shift patterns
- Amending pension provisions
- Altering staff pay dates
Incoming employers should not seek to ‘harmonise’ their new employees’ contractual terms and conditions with those of their existing workforce, unless there is a valid reason for the adjustments which has nothing to do with the transfer itself. Arbitrarily changing a transferred employee’s terms and conditions would be a breach of TUPE transfer regulations.
A change to employment terms and conditions may be permitted under TUPE, if one or more of the following situations apply:
- The reason for the change is valid and not related to the transfer
- The change would create a better situation for the affected employee
- Permission for variation in terms and conditions is written into the employee’s existing contract (e.g. they have a mobility clause)
- The changes are necessary to accommodate vital economic, technical or organisational adjustments within the business AND broader changes to the workforce are also being made (i.e. the number of employees or the roles they fulfil)
Unless there is an extremely strong justification for adjustments to the new employees’ terms and conditions, incoming employers should avoid making any changes immediately following the transfer, as this would likely be viewed as a breach of TUPE regulations.
DavidsonMorris are experienced employment law specialists, with expertise in TUPE transfers and all associated risks.
We can advise from the initial stages of the process and how to meet your responsibilities under the provisions, while ensuring focus on the commercial objectives of the transfer.
We can provide practical guidance on the implementation process to follow and measures to mitigate the risks for your business of falling foul of the legislation.
If you have a question or need advice on any aspect of the TUPE regulations, contact us.
TUPE checklist FAQs
What documents do I need for TUPE transfer?
The documents needed will depend on the type of transfer that is taking place and whether you are the outgoing or incoming employer.
What are the steps in a TUPE transfer?
A TUPE transfer should involve identifying and consulting with affected employees, sharing any relevant employer liability information and ensuring post-transfer legal compliance.
Last updated: 17 May 2023