What is TUPE?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protects employees when the business or service they work for transfers to a new employer. TUPE ensures that:
- Employees transfer automatically to the new employer
- Their existing terms and conditions of employment are preserved
- Dismissals connected to the transfer are automatically unfair (unless for an ETO reason)
- The new employer inherits all rights and liabilities connected to the transferred employees
TUPE implements the European Acquired Rights Directive (2001/23/EC) into UK law. Post-Brexit, TUPE remains part of retained UK law.
When Does TUPE Apply?
TUPE applies in two situations:
1. Business Transfers (Regulation 3(1)(a))
A transfer of an economic entity that retains its identity after the transfer. This covers:
- Sale of a business or part of a business
- Mergers and acquisitions
- Transfer of a going concern
Factors the courts consider:
- Is there a transfer of tangible assets (equipment, premises)?
- Is there a transfer of intangible assets (goodwill, customers)?
- Are the majority of employees taken on?
- Is the activity being carried on post-transfer?
- Was there a break in the activity?
2. Service Provision Changes (Regulation 3(1)(b))
This covers outsourcing, insourcing, and changes of contractor:
- Outsourcing: An organisation contracts out an activity to a third party
- Insourcing: An organisation brings a contracted-out activity back in-house
- Re-tendering: A contract moves from one contractor to another
Conditions: the activities must be fundamentally the same before and after the change, and there must be an organised grouping of employees whose principal purpose is carrying out those activities.
Employee Rights Under TUPE
Automatic Transfer
Employees assigned to the transferring business or service automatically become employees of the new employer. They do not need to agree to the transfer or sign new contracts.
Preservation of Terms
All terms and conditions transfer, including:
| Transfers | Does Not Transfer |
|---|---|
| Salary and pay rates | Occupational pension scheme rights (with exceptions) |
| Holiday entitlement and accrued holiday | Criminal liabilities |
| Continuous service | Some collective agreements (after 1 year) |
| Contractual benefits | |
| Sickness and absence rights | |
| Restrictive covenants |
Protection from Dismissal
A dismissal is automatically unfair if the sole or principal reason is the transfer itself.
Exception -- ETO Reason: A dismissal connected to the transfer is not automatically unfair if there is an Economic, Technical, or Organisational reason entailing changes in the workforce. Examples:
- Genuine redundancy of roles (economic)
- Restructuring requiring different skills (technical)
- Reorganisation of the workforce (organisational)
Even with an ETO reason, the employer must still follow a fair procedure.
Information and Consultation Duties
Duty to Inform
Both the old and new employer must inform affected employees (or their representatives) about:
- The fact of the transfer and the approximate date
- The reasons for the transfer
- The legal, economic, and social implications for employees
- Any measures the employer envisages taking
This information must be provided long enough before the transfer to allow for consultation.
Duty to Consult
If either employer envisages taking measures affecting transferred employees, they must consult with employee representatives. Consultation must be undertaken with a view to reaching agreement.
Employee Representatives
- If there is a recognised trade union, consultation is with the union
- If not, elected employee representatives must be consulted
- Failure to consult can result in a tribunal award of up to 13 weeks' pay per affected employee
Changing Terms After Transfer
Changing transferred employees' terms and conditions is restricted:
- Changes because of the transfer are void, even if the employee agrees
- Changes for an ETO reason are permitted if the employee agrees
- Changes unconnected to the transfer follow normal contract variation rules
Practical Steps for Employers
For the Outgoing Employer (Transferor)
- Identify which employees are assigned to the transferring activity
- Provide Employee Liability Information (ELI) to the new employer at least 28 days before transfer
- Inform and consult employee representatives
- Continue to manage employees normally until the transfer date
For the Incoming Employer (Transferee)
- Review Employee Liability Information carefully
- Plan for integration (without changing terms)
- Inform and consult on any envisaged measures
- Set up payroll, pensions, and benefits for transferring employees
- Honour all existing terms and conditions
How Grove HR Helps
Grove HR manages TUPE transfers with employee assignment tracking, automated ELI data generation, consultation timeline management, contract term preservation, and post-transfer integration checklists that ensure no employee's terms are inadvertently changed.
Frequently Asked Questions
Can I refuse to transfer under TUPE?
Employees can object to a TUPE transfer, but this is not a resignation -- it terminates their employment with the old employer without entitlement to redundancy pay or unfair dismissal rights (unless the transfer would involve a substantial detrimental change to working conditions). In practice, most employees transfer because objecting means losing their job.
Does TUPE apply to small businesses?
Yes. TUPE applies regardless of the size of the business or the number of employees involved. Even a transfer involving a single employee is covered if the legal criteria are met.
What happens to pensions under TUPE?
Occupational pension scheme rights do not transfer automatically under TUPE. However, the new employer must offer transferring employees access to a pension scheme that meets certain minimum standards (broadly equivalent to auto-enrolment). Contractual pension contributions that are not part of an occupational scheme do transfer.