TUPE and Administration Process Explained

Affected by Covid-19? Immediate Rescue Or Closure Options Available

FAST Free Director Advice & Support, With 100+ offices Nationwide our Licensed Insolvency Practitioners can Help Today.

Updated: 2nd May 2021

TUPE, or the Transfer of Undertakings (Protection of Employment) Regulations, ensures that the rights of employees are protected when a business is sold out of administration. It safeguards the current terms and conditions of employment, and provides for the safe transfer of contracts to the new employer.

Contracts cannot be varied or terminated apart from under certain conditions. The regulations can be complex, and both employers have specific duties and obligations.

As the outgoing employer, you’ll need to make sure that staff understand what is happening at every stage, and how the sale will affect them. TUPE rules don’t apply if the business is going to be liquidated and closed down.

What is the purpose of administration?

In company administration, the aim is to achieve one of the following outcomes:

  • Company rescue as a going concern – only if this is not possible can the following option be considered:
  • Achieving a better result for the creditors than if the company is wound up – if this is also not possible:
  • The administrator must realise one or more assets with a view to paying the associated secured/preferential creditors

What do TUPE regulations cover?

The terms and conditions of each contract are covered. This includes an employee’s length of service which transfers to the new employer. TUPE also covers an employee’s rights with regard to their working hours, as well as their entitlement to claim arrears of holiday pay and other monies.

The existing and new employer must let employee representatives know what will happen during the process, and the reasons why it is happening. If the business employs fewer than 10 people, they can communicate directly with the employees.

What should you tell your members of staff?

  • Why their employment contracts are being transferred to a new company
  • When the transfer will take place
  • How it will affect them as employees
  • Whether there are any plans for reorganising the business

The number of agency workers the company is using, and the type of work they are carrying out

Employee’s pension rights are protected up until the time of transfer, but the new employer is under no obligation to continue running the same pension scheme.

Employer Liability Information

As the outgoing employer, you must also provide the new company with certain information about your employees:

  • Details of their identity and age
  • Employment details including disciplinary records for the last two years
  • Any outstanding claims or grievances made against the old company during the previous two years
  • Details of any collective agreements

This is known as Employer Liability Information, and must be provided to the new employer at least 28 days before the transfer takes place. Employees should be given a statement of employment from their new employer once the transfer has completed, confirming that their terms and conditions of employment have not changed.

Unfair dismissal and contract variations

Directors sometimes leave themselves open to claims of unfair dismissal around the time of a transfer. This is a similar danger for the new company if they let employees go after taking on their contracts.

You must have specific reasons for dismissing a member of staff at this time. If it is proved to be for anything other than ‘economic, technical or organisational reasons entailing changes in the workforce’ (ETO), you could face an employment tribunal and a charge of unfair dismissal.

This is a complex legal area and it’s a good idea to get professional advice on this and on making variations in a contract. TUPE regulations allow for certain variations to be made - if they will help to reduce the number of job losses, for example.

Employees have the right to resign before the transfer takes place, in which case there is no need for them to give notice – they simply inform you of their intention as the outgoing employer.

The new employer and liability for staff payments

Members of staff may be eligible to claim payments from the National Insurance Fund. If they are unable to claim the full amount of arrears, the incoming employer becomes liable to pay the shortfall.

Real Business Rescue can provide detailed advice on all aspects of the TUPE process. Being such a complex area with a high potential for error, it’s a good idea to seek professional guidance as a priority. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 100 UK offices or a place of your convenience.

Julie Palmer

Regional Managing Partner

0800 644 6080
Director Support - Business suffering from Cash-Flow Problems?
If your company is financially distressed, we also offer the below services:
Business debt recovery

  • Recover Unpaid Invoices of £5k+
  • Expert Credit Control Services
  • Stop Late Payers & Bad Debts
Visit Site
Time to pay experts

  • Get Breathing Space with HMRC
  • Support with Business Tax Arrears
  • 35 Years HMRC Negotiation
Visit Site
UK Business Finance

  • Rejected for a CBILS Loan?
  • Get Emergency Business Funding
  • Supporting 1000+ UK Companies
Visit Site
Who we help
  • Company Directors
  • Finance Directors
  • Sole Traders
  • Accountants
  • Small Businesses
  • Large Businesses
  • Partnerships

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY