TUPE Explained: What UK Employers Need to Know

TUPE Explained: What UK Employers Need to Know

If your business is buying, selling, outsourcing, or bringing a service back in-house, there's a good chance TUPE applies — and getting it wrong can be expensive. The Transfer of Undertakings (Protection of Employment) Regulations 2006 exist to protect employees when the organisation they work for changes hands, but the rules trip up a surprising number of otherwise well-run SMEs. Here's what you actually need to know.

What is TUPE?

TUPE protects employees' jobs and terms and conditions when there's a "relevant transfer." This isn't limited to full business sales. It also covers:

• Business transfers – selling all or part of a business as a going concern

• Service provision changes – when a contract moves from one supplier to another, is brought in-house, or is outsourced for the first time (for example, switching your cleaning contractor or payroll provider)

If a transfer is caught by TUPE, affected employees move across to the new employer automatically, on their existing terms and conditions, and with their continuity of employment preserved. The new employer effectively steps into the shoes of the old one, taking on the accrued rights, liabilities and obligations that go with those employees.

When does TUPE apply?

TUPE most commonly comes up in situations SME owners don't always associate with "employment law," such as:

• Selling the business, or a distinct part of it

• Switching contractors for outsourced services (cleaning, security, catering, IT support, payroll)

• Bringing an outsourced service back in-house

• Group restructures where a function moves between related companies

A useful test for service provision changes: is there an organised group of employees whose main purpose is carrying out the activities for the client, and does the activity remain fundamentally the same after the change? If yes, TUPE is likely in play.

What TUPE means for employers

Automatic transfer of employment. Affected employees transfer to the new employer with their existing contracts intact — pay, holiday, length of service, and most other terms carry over unchanged.

Dismissal protection. Dismissing someone because of the transfer, or substantially changing their terms because of it, is automatically unfair unless there's an "economic, technical or organisational" (ETO) reason entailing changes in the workforce — and even then, the bar is high.

Information and consultation duties. Both outgoing and incoming employers have a legal duty to inform, and often consult, affected employees or their representatives before the transfer. This has to happen "long enough before" the transfer to allow for meaningful consultation — leaving it to the last fortnight is a common and costly mistake.

Employee liability information. The outgoing employer must give the incoming employer specific information about the transferring employees — including terms, disciplinary and grievance history, and any relevant claims — at least 28 days before the transfer.

Common pitfalls

• Leaving consultation too late in the process. Consultation needs to start as soon as the transfer is realistically on the table, not once contracts are signed.

• Attempting to harmonise contracts immediately after transfer. Changing terms shortly after a TUPE transfer, even with good intentions, can be void if the transfer is the reason for the change — this catches out acquirers who want to bring new starters onto standard company terms straight away.

• Incomplete due diligence on incoming employees' terms and liabilities. Buyers who don't properly review employee liability information can inherit disputes, enhanced contractual terms, or outstanding grievances they didn't know existed.

• Assuming TUPE only applies to full business sales. Many employers are caught out by service provision changes — switching a supplier is a TUPE event just as often as a company sale is.

• Ignoring pension obligations. While TUPE doesn't require like-for-like transfer of occupational pension schemes in most cases, there are minimum requirements the incoming employer must meet, and this is frequently overlooked.

What good practice looks like

1. Identify TUPE risk early — as soon as a sale, restructure, or contract change is being discussed, assess whether TUPE is likely to apply.

2. Start consultation in good time, with clear, honest communication about what is and isn't changing.

3. Exchange employee liability information promptly and review it properly rather than treating it as a box-ticking exercise.

4. Take specific advice before changing any terms, even ones that seem sensible or minor, in the period around a transfer.

5. Document everything — the information provided, the consultation carried out, and the reasoning behind any decisions.

FAQs

Does TUPE apply to businesses with only a handful of employees? Yes. There's no headcount threshold for TUPE itself, though the information and consultation obligations are less onerous for "micro businesses" (fewer than 10 employees) where there's no existing employee representative body.

Can employees refuse to transfer? An employee can object to the transfer, in which case their employment simply ends and they're not treated as dismissed — but they also won't usually be entitled to redundancy pay in that scenario. Employees also have the right to resign and claim constructive/unfair dismissal if the transfer involves a substantial change to their working conditions to their detriment.

Who's liable for TUPE claims — the old employer or the new one? Generally, liability transfers to the new employer along with the employees. However, both employers can face liability for failures around information and consultation, which is why due diligence and cooperation between the parties matters on both sides.

Get it right from the start

TUPE situations move quickly and the risks sit on both sides of a transfer — whether you're the business being sold, the incoming contractor, or the client switching suppliers. Getting experienced HR input early, before contracts are signed and consultation timelines are set, is the difference between a smooth transfer and a costly dispute.

If you've got a transfer, restructure, or contract change on the horizon, talk to Maarifa Consultancy about getting the process right from day one.

This article is general guidance and does not constitute legal advice. For advice specific to your situation, please get in touch.