First off, what is TUPE transfer? A Transfer of Undertakings (Protection of Employment) or TUPE is a regulatory requirement that protects a worker’s terms and conditions of employment. The UK regulations were first passed in 1981, updated in 2006, and further amendments were made in 2014.
TUPE happens when changes to employment occur due to the sale of a business or a change in service, for example, services outsourced to contractors. It gives employees certain protections around annual leave, pay entitlements, redundancy and unfair dismissal.
That said, TUPE law is notoriously difficult to understand. This article will help make sure your organisation remains compliant with TUPE rules and regulations, allowing for a smooth transfer. We’ll cover:
- When do TUPE transfer regulations apply?
- What are the exceptions to TUPE transfer?
- TUPE law for employers
- TUPE law for employees
- 7 key stages of the TUPE process
- Accessing help and support
- Improve your strategy with Factorial’s HR software
As TUPE agreements are designed to preserve certain employee rights, employers have legal and moral obligations to meet if their business is sold or there is a change in service provision.
When a business is sold
Selling a business is stressful for everyone involved. Not only do businesses have to finalise the details of the sale, but they also have to navigate and comply with a raft of employment regulations, such as the Data Protection Act and the Equality Act.
TUPE regulations apply when a company sells all or part of its business. This includes a merger where two businesses shut down and set up a new one together. All employees are automatically transferred to the newly-acquired employer and protected against having their employment terms and conditions changed by their new company.
When there is a change in service provision
TUPE also applies to businesses when there is a change in the services they offer. This could be from a contract ending, awarding services to a new contractor, or the service being transferred in-house.
When service provision changes take place, employees of the business automatically transfer to the new employer immediately before the transfer.
Working out exactly when TUPE applies and doesn’t can be challenging for employers. Individual employer circumstances and reasons for the business change can result in HR teams wading through muddy waters.
There are some specifics to be aware of. People aren’t protected under TUPE if:
- Transfers within the public sector are made where the employer doesn’t change. For example, transfers within certain government organisations.
- A contract is for the supply of goods only, such as a kitchen manufacturer getting their sink units from a different supplier.
- A contract is for a single event or short-term activity, for example, a security company being used for a one-off sports event.
- There is a change in the supply of resources, such as a school changing its stationery supplier.
Businesses in the UK must comply with employment law and legislation. In fact, there are hefty penalties for not complying with TUPE regulations. According to the Ministry of Justice, the number of employment tribunal claims increased in 2022, costing businesses around £8500 for each case.
Reduce the risk of an employment tribunal by making sure you understand how employment terms and conditions are protected within the move to a newly-acquired company. Affected people such as those on apprenticeships, with pending job applications during the transfer period, and employed through an employment agency are all affected by TUPE regulations.
Plus, managing redundancies related to a TUPE transfer can be incredibly difficult. Employees have a right to apply for redundancy during the transfer period. The incoming employer and the employer making the transfer are unable to make any redundancies before a TUPE transfer if the reasons are connected to the transfer. However, as soon as people have transferred, both employers can only make redundancies if both of these circumstances apply:
- An ‘economic, technical or organisational’ (ETO) reason that affects a change in the workforce, such as a complete restructure or a change to job types due to the implementation of new technology.
- An actual redundancy situation where part or all of a business is moving location or closing down.
Finally, TUPE regulations are relaxed for businesses that are becoming insolvent and can’t pay their debts. If changes to employment terms and conditions are designed to save a failing business and are agreed upon with trade union representatives or employee representatives, an ETO reason won’t apply. The aim here is to make the transition for the new employer smoother and less complex, potentially saving jobs as a result.
Staff members affected by TUPE have the legal right to transfer their existing employment terms and conditions to the new employer, for example:
- Pension rights. All pension contributions paid under the previous employer are protected. The new employer may even continue to contribute to a pension scheme, however, future pension rights after the date of the TUPE transfer are excluded from the TUPE regulations.
- Employment terms and conditions. Access to benefits, such as statutory sick pay, annual leave, and maternity leave pay remain the same.
- Continuous service. Affected people may keep their length of service when transferred to a new employer. However, benefits such as long service awards may not be upheld by the incoming employer.
- Paid time off for employee representation duties. Employees who are elected to represent affected TUPE employees get paid for tasks associated with the TUPE transition. This could mean paid time to attend staff or trade union meetings.
- TUPE regulations apply for an indefinite period. Incoming employers must need a valid reason to change employment terms and conditions even long after the TUPE transfer is completed.
As you can see, managing a TUPE transfer can be demanding. Get it right and your organisation can come through the other side with staff members who feel safe and secure with their new employer–and an unharmed business reputation.
1. Make sure you are prepared
As Benjamin Franklin’s famously said, “Failing to prepare is preparing to fail”. It’s essential that no matter how knowledgeable you may be about TUPE regulations, time spent preparing for such a significant event is critical.
Gather as much information as possible. Key metrics give you valuable insights to manage each stage of TUPE. Employee turnover rates, payroll and overtime expenses allow you to evaluate employee information and start putting plans in place.
2. Involve team members in decision-making
Employee involvement in decision-making can have many advantages for both employers and affected employees. When employees are involved in decisions about changes to their employment, they are more likely to better understand why changes are needed.
That said, you still have a business to run. Involving staff members in decision-making leads to greater productivity and increased engagement – two of the most critical aspects of any successful business.
Start involving staff early. Share key information with employee representatives at every stage of the TUPE process.
3. Identify staff affected by TUPE
Old and new employers, trade unions, or employee representatives will often negotiate about which people should transfer.
It may be fairly obvious who these people are, but not always. Further exploration may be needed to look at how much time different people spend in different areas of your business or on different tasks.
Certain staff members may elect to hand in their notice or claim unfair dismissal if their working conditions are considerably worse because of the transfer. Usual notice periods stated in existing employment contracts apply to those employees wishing to resign.
4. Carry out meaningful consultations with all staff members
TUPE law states new and old employers have an obligation to inform and consult representatives of affected employees. People must be told when and why the transfer is happening and how it will affect them. Employees should understand the reasons for the TUPE transfer and feel involved in finding a mutual solution.
A minimum of 45 days’ notice must be given to people. However, you can extend this further to give people the opportunity to attend meetings and ask questions about the TUPE transfer.
5. Provide the necessary information to the incoming employer
Outgoing employers must provide detailed information to the incoming employer about the identity of employees who will transfer. This includes:
- Their personal details, for example, full name, date of birth, national insurance number, and home address.
- Contractual information such as HMRC payroll and PAYE, leave, and access to any other employment benefits, such as paid parental leave or access to healthcare.
- Information about anygrievance or disciplinary action raised by an employee in the last two years.
- Details of any legal action within the last two years or any potential legal action. Make sure you comply with HR legislation and GDPR when giving information to the incoming employer.
6. Manage the transition
You only have to search for TUPE employment tribunals on the internet and a number of court cases crop up. All the more reason to ensure that TUPE transfers are managed well.
Keep lines of communication open. Make sure staff members are well supported by managers who understand TUPE regulations and are sensitive to employee needs.
Maintain accurate records of individual and whole team meetings. This could decrease the risks of employment tribunals and unnecessary court costs.
7. Monitor the post-transfer effects
For some people, the aftermath of a TUPE transfer can have negative effects. Incoming employers who monitor the impact well can improve employee relations by making sure staff members are listened to and their feelings acknowledged.
That said, employees between both businesses can suffer from low staff morale. Tackle feelings of displacement and insecurity by leading by example. Reinforce the positive aspects of the transfer, but be patient – it can take time for employees to feel settled with changes.
There’s no doubt there are significant implications for organisations who misunderstand TUPE, but many benefits for those employers who understand and manage it well.
Given the fact that TUPE regulations are complex, it’s essential to seek specialist legal advice and guidance to reduce the risks of employment tribunals. Further advice and support can be obtained from Acas or from the government website.
Improve Your Strategy with Factorial’s HR Software
Meet your TUPE obligations with a people-first software solution from Factorial HR, allowing you to:
- Make smarter business decisions with HR analytics. Have access to real-time data to help you make informed decisions.
- Provide employee liability data, such as particulars of employment, disciplinary, and grievance records with complete core HR automation.
- Integrate with existing platforms, such as Slack and Gmail to share regular TUPE updates with team members. Send team emails to announce meetings or encourage staff to support each other with a dedicated Slack channel.
- Allow employees to access personal information and key documents, such as their employment contract with a simple, easy-to-use employee portal.
- Send and receive important TUPE documents for signature with electronic signature software. Upload new employment contracts or minutes of meetings and store in one central location.
When incoming and outgoing employers manage a successful and compliant TUPE transfer, there’s no reason why organisations can’t have a strong, integrated workforce.
Understand how staff members are affected by TUPE and how to mitigate some of the potential difficulties. Streamline TUPE administrative tasks at human level with access to customisable tools, allowing you to accurately track, analyse, and monitor your TUPE transfer.
✅ Find out how Factorial HR can support your organisation with our free 14-day trial.