What is TUPE?
TUPE (Transfer of Undertakings and Protection of Employment) is a complex piece of legislation which can be applicable when an organisation, or a part of it, transfers to another.
The primary aim of TUPE is to ensure that employees’ terms and conditions of employment are preserved when an organisation, or a part of it, is transferred to another.
Within the social sector we see TUPE transfers happening when another provider takes over commissioned services. Interestingly in recent months we have also seen some employers seeking to shut down their whole or part of their operation due to financial constraints. Usually, redundancy would follow as a result but sometimes the outcome has been that the organisation, or services that they provide, have been taken over by another organisation, resulting in a TUPE transfer of affected employees.
TUPE can create many pitfalls for employers. In this blog post, we will delve into what TUPE is, why it matters, and how it affects both employers and employees.
When Does TUPE Apply?
TUPE can apply in two key situations:
Business Transfers
This occurs when an entire business or a part of it is transferred from one employer (the transferor) to another (the transferee). It could be the sale of a business, the outsourcing of services, or a merger or acquisition that involves a transfer of assets and employees.
Service Provision Changes
TUPE also applies when there is a change in the provider of services. For example, if a company outsources its cleaning services to a new cleaning contractor, the employees of the previous contractor might transfer under TUPE to the new contractor.
When Does TUPE Not Apply?
TUPE doesn’t usually apply if the transfer is of assets only, like shares or equipment, or if there exists a contract for services at a single event (such as a fundraising event), or if there is a change of provider, but the provider only supplies goods or resources, i.e. they don’t provide services.
We recommend that you always take professional advice to determine whether there is a relevant transfer.
TUPE Regulations
Transfer of Employment Contracts
Employees’ contracts automatically transfer to the new employer, meaning they retain their contractual terms and conditions.
Continuity of Employment
Employees’ length of service with the previous employer counts toward their statutory rights.
Transfer of Collective Agreements
Collective agreements are also transferred, preserving negotiated terms, which may “freeze” at the date of transfer.
Changes to Terms and Conditions Post-Transfer
Any changes to employee terms and conditions post-transfer must not be directly related to the transfer itself and must be justified by valid Economic, Technical, or Organisational (ETO) reasons to ensure compliance.
Workplace Pensions
Workplace pensions do not transfer with employees. The incoming employer must enrol employees in a new pension scheme. However, exceptions may apply for public sector pension schemes, so employers should seek professional advice where necessary.
TUPE Process
TUPE is a complex process that will need to be adjusted depending on the situation and what/who is being transferred. Responsibilities are different for the outgoing and incoming employer, but the below will give an overview of what is expected.
Employers should seek professional advice if they are unsure how to conduct a TUPE transfer.
Due Diligence Checks:
The incoming employer will likely want to conduct a due diligence check to ensure they are fully aware of all the risks and T&Cs of the incoming employees. The outgoing employer must also comply with the requirement to provide Employment Liability Information (ELI) to the incoming employer.
Inform and Consult:
Both the incoming and outgoing employers are required to inform and consult with employee representatives or Trade Union reps about the transfer. Failure to do so can result in financial penalties of up to 13 weeks’ pay per employee.
Where there are no employee reps or a recognised Trade Union, employers may need to hold elections to select employee reps. However, there is no need for collective consultation if there are no existing employee reps or trade unions and either:
- there are fewer than 50 employees
- fewer than 10 employees are transferring
In this case, employers can start individual consultation immediately with the employees affected by TUPE. Individual consultation is important, especially where measures are proposed (these are terms and conditions that will change as a result of the transfer). In this case, it is recommended that both the incoming and outgoing employer consult together with the affected employees.
The outgoing employer should give employees sufficient notice that the TUPE transfer is happening by providing a date of the transfer.
Introduction:
The incoming employer should try and arrange a welcome event or session where they can ease the new employees into the organisation and arrange a meet and greet with the existing staff.
TUPE and Redundancy:
Should there be any redundancies proposed the responsibility for redundancies are usually with the incoming employer. It is for this reason that employees cannot be made redundant until after the TUPE transfer has taken place.
TUPE FAQ’S
How long does protection from TUPE Last?
The protection afforded by TUPE is indefinite. Any change to contractual terms can only be made if the reason for the change is not the transfer itself, and has valid Economic, Technical, or Organisational (ETO) reasons
Can a new employer change the salary of transferring employees?
Any change to contractual terms, including pay, can only be made if the reason for the change is not the transfer itself, and has valid Economic, Technical, or Organisational (ETO) reasons
How Long After TUPE can the new employer change terms and conditions?
Changes to contractual terms can be proposed at any point after the transfer, as long as the reason for the change is not the transfer itself, and has valid Economic, Technical, or Organisational (ETO) reasons.
However, a new employer can only renegotiate any previously agreed collective agreements with employees one year after the TUPE transfer.
How can you avoid a TUPE transfer?
TUPE is a mandatory law that protects employees when a business is sold or transferred to a new owner, employers can’t avoid TUPE if there is a relevant transfer.
Conclusion
TUPE is a key piece of legislation that ensures the rights and protections of employees during business transfers and service provision changes.
Employers should carefully navigate the TUPE process, seeking expert advice when necessary, to ensure compliance and maintain positive employee relations during these challenging transitions.
How can Roots HR help?
We have a fantastic FREE HR factsheet on TUPE, why not request your copy here?
Do you need support in managing a TUPE? We can help so do ring us on 01562 840060 or contact us to book a call with one of our consultants.
