When you’re planning major changes to your business like buying or merging with another company, it’s crucial to consider the impact on your employees. The TUPE regulations (Transfer of Undertakings (Protection of Employment)) are designed to protect employees’ rights during such transitions.
Here we break down what this means for you as a business owner.
What is TUPE?
TUPE stands for Transfer of Undertakings (Protection of Employment). It is a regulation that safeguards employees’ rights by maintaining their existing employment terms when a business, or a portion of it, changes ownership. Essentially, it acts as a safety net, protecting employees from losing their current working conditions during the handover.
When does TUPE apply?
TUPE applies where there is a ‘relevant transfer’, and typically applies in the following circumstances:
Business transfers:
- When a business or part of it is sold or transferred to a new owner
- When two companies merge and the identity of the employer changes
Service provision changes:
- When a client outsources services to a contractor for the first time
- When a contract ends and is given to a new contractor
- When a client takes services back in-house that were previously outsourced
Change of service providers:
- This covers cases where one contractor stops providing a service, and another starts, such as in cleaning, catering, or security services.
As a business owner, it’s important to identify if your upcoming change falls under TUPE’s umbrella.
What does TUPE mean for a business owner?
Under TUPE, the employees’ jobs usually transfer over to the new company, with their existing terms and conditions intact. Here’s what you need to know:
Employee rights: You must inform employees about the transfer and consult with them on any changes that may affect their employment.
Informing and consulting: Employees have a right to be informed about the transfer. They also have the right to be consulted on any measures that might affect them.
Liabilities and obligations: Be prepared to inherit any employment-related liabilities from the previous owner. This could include any ongoing or past disputes or claims made by employees.
Complying with TUPE: Advice for business sellers and buyers
Whether you’re buying or selling a business, it is advised that guidance from an experienced employment or commercial solicitor is obtained to ensure full compliance with TUPE.
Here’s a breakdown of what each party needs to do:
For sellers:
Inform and consult: Sellers must communicate with the Trade Union, employee representatives, or directly with employees about the transfer. It’s important to clearly explain the transfer process and how it affects the employees.
Provide employment liability information: Sellers need to give the buyer detailed information about the employees’ rights and any associated liabilities, such as contracts and ongoing disputes, in a timely manner. This helps avoid potential penalties.
For buyers:
Due diligence: Buyers should thoroughly review all the information provided by the seller, including employment liabilities and any risks involved. This ensures that all aspects of the transfer are understood and accounted for.
TUPE regulations: Any changes to employment terms or decisions to dismiss employees must comply with TUPE regulations. Buyers should be aware that TUPE protects employees’ rights during the transfer, and any deviation must be legally justified.
TUPE in insolvency
In insolvency cases, TUPE rules are adjusted to encourage rescuing failing businesses by reducing the new owner’s burden. This means the responsibility for certain employee payments, like redundancy, does not shift to the buyer. It also allows for changes in employment terms, with proper agreement, to save the business.
This approach aims to keep businesses running and save jobs, making it more attractive for someone to take over a struggling business.
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