The Transfer of Undertakings (Protection of Employment)
\nRegulations 2006 (TUPE) and previous versions of the regulations
\nhave been in force in the UK since 1981. The purpose of TUPE is to
\nsafeguard employee rights in the transfer of a business.<\/p>\n
This inbrief summarises the main aspects of TUPE, how and when
\nit applies, and the obligations of the outgoing and new
\nemployers.<\/p>\n
Please click ‘download files’ to read the full
\ninbrief.<\/p>\n
Inside<\/p>\n
What is TUPE?<\/p>\n
The purpose of TUPE is to protect employees’ rights when the
\nbusiness in which they work changes hands. Its general thrust is to
\nswitch staff and liabilities from the transferor (the
\nemployees’ employer before the transfer) to the transferee (the
\nentity that acquires the business or takes over providing
\nservices). In outline, if TUPE applies:<\/p>\n
\nstaff employed in the undertaking or assigned to the grouping
\nproviding the services transfer automatically to the transferee on
\ntheir existing contracts and their continuous service with the
\ntransferor is preserved
\n
\nliabilities in respect of staff transferring (e.g. for unpaid
\nwages or claims such as for injuries or harassment) pass over to
\nthe transferee
\n
\ndismissals because of a transfer are unfair unless they are
\njustified by an economic, technical or organisation reason
\nentailing a change in the workforce (an “ETO reason”).
\nThe transferee is liable even if the transferor carries out the
\ndismissal
\n
\nthe transferor (and, in some cases, the transferee) has a duty
\nto give information to elected staff representatives and must
\nnormally consult over the implications of the transfer
\n
\nthe transferor is required to give the transferee information
\nabout the staff transferring, their contracts of employment and any
\nassociated liabilities
<\/p>\n
When does TUPE apply?<\/p>\n
TUPE applies to any:<\/p>\n
\ntransfer from one employer to another of an economic entity (an
\norganised grouping of resources which has the objective of pursuing
\nan economic activity)
\n
\nservice provision change, when there is an organised grouping
\nof employees whose principal purpose is carrying out activities
\nwhich are switching from one employer to another
<\/p>\n
A transfer of an economic entity occurs most clearly when there
\nis a sale of business, which typically comprises assets such as
\npremises, equipment, customers, staff and goodwill. In determining
\nwhether TUPE applies, it is necessary to identify the operation and
\nwhat it comprises and then to consider whether it has transferred
\nwith its identity retained. In general, if the activities are the
\nsame, the customers are the same and staff are still required (even
\nif not the same staff) that will often be enough for there to be
\nretention of identity. However, all relevant factors will be taken
\ninto consideration when assessing each case and the weight given to
\ndifferent factors will depend on the nature of that particular
\nbusiness.<\/p>\n
In practice, a service provision change is more common and
\neasier to identify. A service provision change occurs when: (a) a
\nservice is contracted out from a client to a contractor for the
\nfirst time (outsourcing); (b) a service is moved from one
\ncontractor to a new contractor (second generation outsourcing); or
\n(c) the service is brought back “in house” by the client.
\nAfter identifying the service and whether it is actually
\ntransferring, it is then necessary to identify the organised
\ngrouping of employees (which must be situated in Britain), identify
\nits principal purpose, consider whether that organised grouping
\nprovides the whole of the service, and whether the services being
\nperformed by the organised grouping are transferring in their
\nentirety. After that it is necessary to identify which employees
\nare permanently assigned to the organised grouping and whether they
\nwill transfer.<\/p>\n
A “one-off” buying-in of services from a contractor
\n“of short-term duration” will not normally be covered.
\nFor example, the hiring of security staff to protect athletes
\nduring a major sporting tournament would be a short-term buying-in
\nof services and so excluded from TUPE, whereas a contract for the
\nprovision of security advice to the event organisers over a period
\nof several years would potentially be covered.<\/p>\n
In addition, activities mainly related to the supply of goods
\nrather than services will not normally be covered. Examples are a
\ncontract where a business purchases components for machinery it is
\nproducing or buys sandwiches for re-sale in its canteen.<\/p>\n
Who and what transfers?<\/p>\n
TUPE applies only to employees who are permanently assigned to
\nthe relevant undertaking or organised grouping of employees – this
\nis not a simple percentage utilisation test. The question of
\nwhether an employee is “assigned” will depend on the
\nparticular facts including, for example, whether the employee was
\nintentionally or formally allocated to the grouping (for example in
\nthe job description), how the costs of employment are allocated,
\nwhether the employee could work or does work on other activities in
\npractice (and the importance of such activities), physical
\nproximity to other employees in the grouping, whether the employee
\nis permanently or temporarily allocated to the grouping, and other
\nevidence of organisation into that grouping such as team lists,
\nemail groups, meeting attendances, etc.<\/p>\n
Changing terms and conditions<\/p>\n
TUPE restricts the ability of employers to change employees’
\nterms and conditions in the context of a transfer, even where the
\nemployees consent to the variation. The basic rule is that no
\nvariation of any contractual term is permitted where the reason is
\nthe transfer. However, the variation is permitted if:<\/p>\n
\nmade for an ETO reason and agreed by both employer and
\nemployee
\n
\nthe contract expressly permits the change
\n
\nthe change is entirely unconnected with the transfer
<\/p>\n
TUPE does not prevent changes to terms incorporated from
\ncollective agreements if the change is made more than one year
\nafter the transfer and the changes leave the employee in no worse
\nposition overall.<\/p>\n
Notwithstanding these exceptions it is still necessary to
\nconsider whether the variation to any contractual terms would be
\neffective anyway under normal legal principles (which will usually
\nrequire employee consent). Variations made with the intention of
\nharmonising terms and conditions will normally be viewed as
\n“by reason of the transfer” and therefore void. The
\nemployer must be able to point to some extenuating circumstances to
\ndistance its reasons as far as possible from the transfer.<\/p>\n
The ETO exemption is rarely helpful in the context of
\ncontractual variations given the need for the employer’s reason
\nto “entail changes in the workforce”. This requires the
\nexistence of a clear link between the contractual variations and
\nother changes to the numbers, functions or workplace locations of
\nthe affected employees.<\/p>\n
An economic reason may be a reason relating to the profitability
\nor market performance of the new employer’s business. A
\ntechnical reason may relate to the nature of the equipment or
\nproduction processes operated by the new employer. An
\norganisational reason may relate to the management or organisation
\nor structure of the new employer’s business.<\/p>\n
In many cases employers will be unable to make legally binding
\nchanges to terms and conditions following on from a TUPE transfer,
\neven if employees would agree to the changes – although in practice
\nchanges which benefit the employee or which are broadly neutral are
\nunlikely to be challenged.<\/p>\n
Dismissals because of a transfer<\/p>\n
Where the sole or principal reason for an employee’s
\ndismissal is the transfer, TUPE deems the dismissal to be
\nautomatically unfair. An employee is still required to have the
\nnecessary qualifying service to bring such a claim and the normal
\ncompensatory award limits still apply.<\/p>\n
A dismissal occurring in the context of a transfer will not be
\nautomatically unfair when either:<\/p>\n
\nthe reason for it is entirely unconnected with the transfer
\n(e.g. misconduct)
\n
\nthe sole or principal reason for it is an ETO reason entailing
\nchanges in the workforce (e.g. redundancy caused by a change of
\nworkplace location)
<\/p>\n
However, even when the dismissal is not automatically unfair, it
\nmay still be unfair if the employer does not have a good reason and
\ndoes not follow a fair process.<\/p>\n
Information about employees and liabilities<\/p>\n
TUPE requires transferors to give transferees employee liability
\ninformation. This is information on:<\/p>\n
\nthe identity and age of the employees within the scope of the
\ntransfer
\n
\nthe statutory “statement of employment particulars”
\n(i.e. all the information an employer is obliged to give an
\nemployee in a statement of terms and conditions of employment)
\n
\nany relevant collective agreement
\n
\nany disciplinary action or grievances instigated within the
\npreceding two years
\n
\nany legal proceedings brought by the relevant employees against
\nthe transferor in the preceding two years
\n
\nany legal claim which the transferor has reasonable grounds to
\nbelieve an employee may bring
<\/p>\n
Although this does not require a transferor to provide as much
\ninformation as would be normal on a due diligence exercise before a
\ntransfer, it goes a long way to requiring disclosure of the most
\nimportant information. Transferors will be required not only to
\nidentify who will transfer, but also many of their contractual
\nterms.<\/p>\n
The transferor must supply employee liability information at
\nleast four weeks before completion of the transfer, unless there
\nare “special circumstances” which make it not reasonably
\npracticable to provide it in this time frame (a very limited
\nexception in practice). It can be given in instalments and must be
\nupdated if there are changes.<\/p>\n
If a transferor fails to comply with the rules on providing
\nemployee liability information, an Employment Tribunal may order it
\nto pay the transferee compensation. In deciding how much
\ncompensation to award, a tribunal will take into account various
\nfactors including any loss sustained by the transferee. The award
\nmust be a minimum of \u00a3500 per employee, unless the Tribunal
\nconsiders it just and equitable to award less than this.<\/p>\n
Obligations to inform and consult<\/p>\n
TUPE requires the transferor to inform and (if appropriate)
\nconsult “appropriate representatives” of employees who
\nare affected by a transfer. These are either recognised trade union
\nor elected employee representatives.<\/p>\n
The transferor must supply the following information:<\/p>\n
\nthe fact that the transfer is to take place, when it will occur
\nand the reasons for it
\n
\nthe implications of the transfer for the affected
\nemployees
\n
\nany “measures” (i.e. material changes) that it is
\nenvisaged will be taken in connection with the transfer in relation
\nto the affected employees. This might include any unavoidable
\nchanges to incentive arrangements, payroll date or benefit
\nproviders, consequential redundancies, a change to the workplace
\nlocation, participation in a different pension scheme, the fact
\nthat the transferee’s policies will apply in future, etc
\n
\nthe transferor’s use of agency workers.
<\/p>\n
When there are measures envisaged in connection with the
\ntransfer, the employer must consult appropriate representatives of
\naffected employees with a view to seeking their agreement to
\nthem.<\/p>\n
Note that employers with fewer than 10 employees may consult
\nwith them directly if there are no existing employee
\nrepresentatives. Where a transfer will take place on or after 1
\nJuly 2024, employers may also consult with affected employees
\ndirectly (provided there are no existing employee representatives
\nin place) where either:<\/p>\n
\nthe business employs fewer than 50 employees, irrespective of
\nthe size of the transfer; or
\n
\nthe proposed transfer involves fewer than 10 transferring
\nemployees, irrespective of the size of the business.
<\/p>\n
It should be noted that “affected employees” are any
\nemployees – of either of the parties to the transfer – who may be
\naffected by the transfer or measures taken in connection with it.
\nThis may include staff who do not transfer. Importantly, the
\ntransferee must supply to the transferor information about any
\nmeasures it is proposing to take post transfer, long enough before
\nthe transfer to enable effective consultation with representatives
\nto take place.<\/p>\n
Where a transferor or transferee fails to comply with the rules
\non information and consultation, a tribunal can order a penalty of
\nup to 25% of the annual payroll costs of employees affected by the
\ntransfer (i.e. 13 weeks’ pay per affected employee).<\/p>\n
Claims may be brought against either or both of the transferor
\nand the transferee for failure to inform and consult and they will
\nbe jointly as well as individually liable to pay any penalty
\nincurred, whichever party was at fault. (In practice, it is likely
\nthat a claim will be made against the person with the deepest
\npocket).<\/p>\n
Provided the transferor agrees, the transferee may begin
\ncollective redundancy consultation with transferring staff even
\nbefore the transfer. However, TUPE stops short of allowing the
\ntransferee to actually give notices of termination before the
\ntransfer nor does it sanction the transferor doing this on the
\ntransferee’s behalf.<\/p>\n
Transfer of insolvent businesses<\/p>\n
The government is committed to promoting a “rescue
\nculture” for businesses that are or are likely to become
\ninsolvent. Consistent with this, TUPE contains two specific
\nmeasures, known as the “rescue provisions”, to encourage
\nthe sale of insolvent businesses as going concerns:<\/p>\n
\ncertain of the transferor’s debts will not transfer to the
\ntransferee transferors or
\n
\ntransferees and employee representatives – including union
\nrepresentatives, if a union is recognised – may agree changes to
\nterms of employment (which would otherwise be void under normal
\nTUPE rules) if agreed with a view to safeguarding employment
\nopportunities by ensuring the survival of the business
\n(“permitted variations”)
<\/p>\n
These provisions will only apply if insolvency proceedings were
\nentered into under the supervision of an insolvency practitioner
\nand with a view to survival of the business or part of it, as
\nopposed to liquidation of assets. If the insolvency was instituted
\nwith a view to liquidation, then the provisions of TUPE which
\nprovide for automatic transfer of employees on existing contracts
\nand automatic unfair dismissal for transfer-related dismissals do
\nnot apply. However, a transferee who employs the employees of a
\nbusiness it has bought out of insolvency may find that those
\nemployees still have continuity of service (and so unfair dismissal
\nrights) preserved under the Employment Rights Act 1996.<\/p>\n
Future developments<\/p>\n
Legislative change is on the horizon. The Employment Rights Act
\n2025 includes new powers to introduce regulations and a statutory
\ncode of practice to ensure equitable employment terms between
\nworkers transferring from the public sector and those working
\nalongside them. The aim is to avoid a two-tier workforce, with a
\nfocus on provisions to be included in relevant outsourcing
\ncontracts.<\/p>\n
This could have significant implications for private sector
\nemployers taking over public sector services. Consultation is
\nexpected, followed by detailed regulations which are expected to
\ntake effect in October 2026.<\/p>\n
Other possible areas of reform include:<\/p>\n
\nChanges to who is in scope: Labour have said they will consult
\non plans to remove the distinction between employees and workers.
\nWhether TUPE currently applies to workers is an area of uncertainty
\nbut, should Labour proceed with their plans, all workers could be
\nin scope to transfer under TUPE.
\n
\nMore radical reform: Labour have also promised to launch a Call
\nfor Evidence to examine issues relating to TUPE and how it works.
\nThis is arguably long overdue and could include, for example, a
\nreview of the issues raised by the European Court of Justice ruling
\nin ISS Facility Services v Govaerts which held that an employment
\ncontract of a transferring worker can be split between transferees
\nin proportion to tasks performed.
<\/p>\n
The extent of any changes and potential impact therefore remains
\nto be seen.<\/p>\n