Article
June 28th, 2024

Understanding TUPE: What Employers and Employees Need to Know

The Transfer of Undertakings (Protection of Employment) Regulations 2006, or simply TUPE, are the UK’s implementation of the EU’s Transfer of Undertakings Directive. First implemented in 2006, they are a crucial part of the process taking place when a business changes owner, but however important, they can be tricky to follow.

What is TUPE and how does it work? What rights do you, as an employee, have when the business you work for changes owner? And reversely – how can you, as a new business owner, make sure you’re following TUPE to avoid legal action, compensation claims and reputational damage?  We’ll have a closer look and try to reply to some of these questions in the article below.

What is TUPE?

When it comes to employment, there are a variety of legal agreements and contracts that exist to protect both the employer and the employee. The Transfer of Undertakings (Protection of Employment) Regulations – also known as TUPE –  is a set of regulations that are designed to protect employees in the event that the business they are employed by changes hands or ownership.

Essentially, it ensures that any current employees and associated liabilities are transferred to the new employer.  These regulations can apply to a variety of scenarios which will be explored, further in this article.

How Does TUPE Work?

Whenever a business changes owner, it is common that a number employees stays with the business to continue working in the same role as before, but for a new employer. In these situations, TUPE ensures that agreements made between the employee and the previous owner stay intact through the transition, and that the employees’ contracts, terms and employment conditions are transferred from one employer to the next. The latter then has to honour these agreements and ensure that any employee(s) affected by the transition are well informed and involved throughout the process. It should be noted that TUPE can also be relevant for changes in service provider.

In other words, TUPE enables employees to change employer without changing job title, nor any of their terms and conditions, including salary and benefits. However, there are a few exceptions; and if the new owner is unable to honour the agreements the employee made with the previous employer, this must be explained with a valid reason.

Why is TUPE important?

One of the most important aspects of TUPE is that it is designed to protect the employee in the event of a business transfer, allowing for fair treatment and giving peace of mind both to the concerned employee, but also the business owner, as it provides legal guidelines to follow, and protects them from making mistakes or breaking any legal requirements.

What’s more, it encourages business transaction as it provides businesses and their employees with tools to navigate the complex landscape of a business transfer and organisational change.

In what situations does TUPE apply?

TUPE is applicable in a wide range of business transfers, including the sale of a business, contracting out services, and changing service providers. It can also come into play in the event of a merger or acquisition. Whether the transfer is the whole business or part of it, TUPE safeguards the affected employees’ rights.

For transfers on or after 1 July 2024, the requirement to elect employee representatives for the purpose of consultation is removed for some businesses and employers, such as:

  • Employers with fewer than 50 employees; and
  • Employers of any size, involved in a transfer of fewer than ten employees.

In either of the above situations, employers will be able to inform and consult directly with the employees if there are no existing employee representatives already in place.

Who is affected by TUPE?

TUPE applies to businesses of all sizes, whether they have just a few employees or hundreds of employees. The regulations apply equally to all employees who are directly employed by the business or service that is being transferred, regardless of their seniority or length of service. This includes full-time, part-time, and fixed-term employees, as well as those who are on maternity or paternity leave, sick leave, or any other form of leave.

TUPE may also apply to employees who are not directly employed by the business or service, but who work on behalf of the business or service. This includes agency workers, contractors, and self-employed individuals.

How does TUPE impact the employee?

TUPE arguably holds the greatest significance for the employee. The regulations provide protection from unfair dismissal and discrimination, whilst preserving many of their previous entitlements, such as accrued benefits and contractual terms/conditions. As such, the employee will maintain their specific job role and responsibilities, significantly reducing the amount of upheaval and reducing the precarity for them. Therefore, it could be argued that one of the primary impacts of TUPE on the employee is that it ensures employment continuity.

Another of the stipulations of TUPE is that it upholds the employee’s rights to be consulted on the matter of the transfer, enabling them a platform to voice any concerns and better understand the implications of the situation.

How does TUPE impact the employer?

The new business owner or employer is required to follow TUPE during and after the business transaction. In the event that a business does not adhere to the regulations, they are likely to face serious consequences. The ramifications would be in the form of legal action, compensation claims  and reputational damage. As such, it is imperative that businesses know how to fully comply.

In terms of the financial implications of TUPE, these can be substantial. Simply adhering to the regulations and ensuring compliance can be costly as you must factor in any potential restructuring costs and redundancy payments. Furthermore, a business transfer can often be a lengthy process and employers may face challenges in adapting to the new employees existing terms, conditions and benefits and, therefore, causing a negative impact on overall productivity and operational efficiency.

However, whilst adhering to TUPE can be a financial burden, failure to adhere to the TUPE regulations could lead to further, more costly, financial ramifications. Failure to comply will often lead to the business facing significant legal fees, compensation claims and penalties. Ultimately, failing to adhere to the regulations could leave employers open to claims large enough to overshadow the actual business transaction.

If you have any questions or are concerned about how TUPE might impact you following changes within your business please contact marketing@goodwille.com