TUPE (Transfer of Undertakings) – A Guide for Company Directors and Employers
Reviewed: 25th August 2017
TUPE regulation, or the Transfer of Undertakings (Protection of Employment) 2014 legislation, provides protection in law for employee rights when staff are transferred over to a new business.
This can occur when a company goes into administration, for example, and underlying business assets are sold to another company. TUPE also applies to service outsourcing, and when services are brought bank in-house.
Both old and new employers have obligations with regards to staff contracts, to reduce the detrimental effects of this change in business ownership. For the new employer, it’s vital to be aware of the contractual rights that are being transferred, and the liabilities they’re taking on, to avoid any unexpected financial outlay in the future.
What are TUPE transfers?
TUPE transfer protects the terms and conditions of employment in the event of a business sale, for relevant transfers of staff from one company to another. TUPE doesn’t apply if there is no change of employer.
The law surrounding TUPE is very complex, and it’s vital to seek professional advice if it’s believed these regulations might apply. Failing to do so leaves employers open to penalties and potential legal action by employees who may have the right to claim unfair dismissal, or for other issues including discrimination and redundancy.
The new employer, or transferee, should carry out thorough due diligence prior to a TUPE transfer, obtaining warranties as to the accuracy of the information provided to them, and indemnities from the transferor as necessary.
What do TUPE regulations mean in practice?
Under TUPE, the terms and conditions of employee contracts are safeguarded. Their length of service is continuous, and all obligations under the employment contracts are taken on by the new employer.
Transferring employers must adhere to strict rules surrounding TUPE consultation. Detailed information has to be provided throughout the process, to trade unions or employee representatives. If there are fewer than 10 employees, however, they can be consulted directly.
So what information needs to be passed on?
- When the transfer is taking place, and why
- How employees will be affected
- Details of any reorganisation
- If agency workers will be used, and if so, the work they will carry out
The new employer needs to be aware of all obligations and potential issues within the contracts that might cause problems at a later stage. They should receive information in writing from the old employer on all obligations and liabilities to be incurred on transfer of the contracts.
TUPE and redundancy in insolvency
Under TUPE regulations, redundancies made where the transfer is the sole or main reason, will be deemed unfair. Prior to making any staff redundant, employers must consider whether it’s for ‘economic, technical, or organisational’ (ETO) reasons.
The laws surrounding redundancy after TUPE are generally complex, and restrictive for the owners of the new company. In cases where the old company has become insolvent and is being sold on quickly during a pre pack administration, however, the rules of TUPE are slightly different:
- The new employer does not accept liability for some statutory payments, including redundancy
- Some changes can be made to employment contracts if they’re carried out with a view to rescuing the business.
Summary of TUPE obligations for company directors and employers
Outgoing business owner
- To provide comprehensive information to employees at every stage of the TUPE process
- To provide full and detailed information about employees to the new business owner. This includes any disciplinary issues or grievances made against the old company, as well as claims and collective agreements.
New business owner
- To take over all rights and obligations of employee contracts ‘tuped’ over
- To take over any collective agreements in place directly before the TUPE transfer
- To consult with, and provide information to, employees being transferred
- Within four weeks of the transfer taking place, to provide employees with new statements of their terms and conditions of employment. Included within this statement should be confirmation of the employee’s start date – i.e. the date they started work for the transferring employer.
Dealing with TUPE regulations is a complex process. Real Business Rescue provides the professional support needed when employment contracts are being transferred. We have extensive experience in this area, and offer a free same-day meeting to ensure that directors and employers understand the obligations involved. Our extensive office network comprises 75 offices across the UK with a partner-led service offering immediate director advice and support.
Further Reading on Advice for Directors
Free Guide for Limited Company Directors
Business Rescue Advice for Directors
- How to manage company cash flow problems
- Advice on dealing with HMRC
- Understanding rescue and closure options
- And much more...
Business Rescue Guide for Accountants
Dealing with your Insolvent Clients
- Helping you advise insolvent clients
- Spotting signs of client distress
- Exploring business rescue options
- And much more...
