TUPE Transfers: A Practical Guide for UK SMEs

Quick Answer: What is TUPE?

TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) protects employees when the business or service they work for transfers to a new employer. Employees automatically transfer to the new employer on their existing terms and conditions.

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When Does TUPE Apply?

Business Transfers

When a business or part of a business transfers from one employer to another as a going concern. Examples:

• Buying another company's business operations
• Merging with another organisation
• Taking over a franchise

Service Provision Changes

When a service is contracted out, brought in-house, or re-tendered to a new provider. Examples:

• Outsourcing cleaning, catering, or IT services
• Bringing an outsourced service back in-house
• Changing the provider of an outsourced service

When TUPE Does Not Apply

• Share purchases (buying shares in a company, not the business itself)
• Supply of goods only (no associated workforce)
• One-off or short-term tasks
• Transfer of assets without an organised grouping of employees

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What Transfers Under TUPE

Automatic Transfer

When TUPE applies, the following transfer automatically to the new employer:

• Employment contracts on existing terms (pay, hours, benefits, notice periods)
• Continuity of service (length of service is preserved)
• Accrued rights (holiday entitlement, redundancy rights, pension rights*)
• Collective agreements (if applicable)
• Trade union recognition (if applicable)

*Occupational pension rights do not fully transfer, but the new employer must provide a minimum level of pension provision.

What Does Not Transfer

• Criminal liabilities of the old employer
• Some occupational pension benefits (though minimum provision is required)

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Employer Obligations

Information and Consultation

Both the old and new employer must:

1. Inform affected employees (or their representatives) about:

   • The fact that the transfer is happening and why
   • When it will take place
   • The legal, economic, and social implications
   • Any measures the new employer envisages taking (changes to working conditions, restructuring)

2. Consult if either employer envisages taking measures that will affect the transferring employees

For businesses with fewer than 10 employees where there are no existing employee representatives, employers can inform and consult with affected employees directly.

Due Diligence: Employee Liability Information

The old employer must provide the new employer with Employee Liability Information at least 28 days before the transfer:

• Identity and age of transferring employees
• Employment particulars (as required by Employment Rights Act 1996)
• Information about disciplinary or grievance proceedings in the previous 2 years
• Details of any legal actions brought by employees in the previous 2 years
• Details of any collective agreements

Failure to provide this information can result in a tribunal awarding compensation of at least £500 per employee.

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Protecting Employee Rights

Dismissals Connected to TUPE

A dismissal is automatically unfair if the sole or principal reason is the transfer itself, unless there is an economic, technical, or organisational (ETO) reason entailing changes in the workforce.

An ETO reason might include:

• Genuine redundancy (where the role genuinely no longer exists)
• Restructuring that changes job functions
• Relocation that makes it impractical for the employee to continue

Changing Terms and Conditions

You cannot change employees' terms and conditions if the sole or principal reason for the change is the transfer itself. Changes are only permitted if:

• There is an ETO reason entailing changes in the workforce
• The employee agrees to the change, and the reason is not the transfer
• The change is permitted by a variation clause in the contract (and is unrelated to the transfer)

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Common TUPE Mistakes for SMEs

Mistake 1: Assuming TUPE Does Not Apply

Many SMEs assume TUPE only applies to large transfers. It applies regardless of size, including the transfer of a single employee providing a service.

Mistake 2: Failing to Consult

Not consulting with employees (or their representatives) is a breach that can result in compensation of up to 13 weeks' pay per affected employee.

Mistake 3: Changing Terms Immediately After Transfer

Attempting to harmonise transferred employees' terms with existing staff is unlawful if the reason is the transfer.

Mistake 4: Not Obtaining Employee Liability Information

The new employer should insist on receiving full ELI from the outgoing employer. Without it, you inherit liabilities you do not know about.

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How Grove HR Helps With TUPE

• Employee data management for clean transfer of records
• Document storage for TUPE consultation records and agreements
• Terms tracking to maintain transferred employees' original conditions
• Continuity of service preserved in employee records
• Reporting to compare terms across different employee groups post-transfer

Manage employee transfers smoothly with Grove HR.