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Understanding TUPE for employees when a company enters administration

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Understanding TUPE for employees when a company enters administration

Reviewed: 10th March 2017

The Transfer of Undertakings (Protection of Employment) (TUPE) Regulations may apply when a company, or part of one, is taken over by another organisation. So what exactly does this mean for the employees affected?

What is TUPE and what does it mean for me as an employee?

TUPE aims to protect employees’ rights in the event of the company they work for being taken over or sold out of administration. TUPE is there to help smooth the transition from one owner to another by providing reassurance and certain safeguards to employees. The TUPE regulations also apply to mergers, where two companies are brought together to form one new one, so long as there is a change of employer. The size of the company you work for is irrelevant - TUPE applies to all businesses, from small limited companies, right up to national conglomerates.

One of the major benefits of TUPE for employees is that continuity of employment is maintained, as current employees automatically become employees of the new company on the day of the transfer. TUPE also protects employees from being dismissed (as a direct result of the transfer) when the new owners of the company takes charge, and also sees that existing terms and conditions of employment are upheld. The contract is transferred between the outgoing and the incoming company in its existing form, meaning salary, holiday entitlement, working hours etc., all remain exactly as they were before the takeover. Once the transfer is complete, employees will be provided with a statement of employment from the new owners attesting to the fact that all terms and conditions of employment have been preserved.

Furthermore, under TUPE regulations, any company liabilities will also be inherited by the new owners. So if, for example, your old company was struggling financially and consequently failed to pay your wages at any time, the responsibility for reimbursing these missed payments will lie with the new employer.

What if I am a contractor? Does TUPE apply to me?

TUPE will also apply to contractors under the following conditions:

  • If a client outsources activities they used to do to a contractor.
  • If a new contractor takes over previously outsourced activities from another contractor (also known as re-tendering).
  • Or if a client takes previously outsourced activities back in-house from a contractor (also known as sourcing).

In these instances it is crucial that the activities remain fundamentally the same following the transfer. For example, if a contract is retendered to provide an identical service then TUPE would apply and the winners of the contract would have to take on the staff already assigned to the contract; if however the requirements of the contract had been updated, such as additional services now being required, then TUPE would not apply.

Agency workers or self-employed contractors are not covered by TUPE regulations.

What happens to my workplace pension?

While the terms and conditions of your employment contract remain the same after the takeover, an element which may undergo a change is in regards to any occupational pension benefits you are currently entitled to. The pension benefits you have already built up will be protected, however, the new owners of the company do not have to provide you with a pension scheme which matches the one you are currently enrolled in. However, there are certain legal requirements all employers must adhere to through the auto enrolment scheme. 

What if I do not want to work for the new owners?

If an employee does not want to work for the new owners for whatever reason, then they can simply resign. In this instance, the usual notice period does not need to be given; the employee simply should make their decision known before the transfer takes place, and their employment will cease on the day of the takeover. Employees who choose to do this will not be eligible to claim redundancy pay as they have voluntarily chosen to leave their job.

If, however, the employee feels their working conditions have been made worse as a direct result of the takeover, they can resign and potentially claim for constructive unfair dismissal depending on the circumstances and their length of service. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 55 UK offices or a place of your convenience.


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