Transfer of undertakings

'TUPE' refers to the Transfer of Undertakings (Protection of Employment) Regulations 2006. The TUPE rules protect employees' rights when the organisation or service they work for transfers to a new employer.

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When does TUPE apply?

The TUPE regulations can apply when a company is sold or its activities are:

  • Outsourced
  • Brought in-house
  • Transferred

or a contract for services is moved from one service provider to another.

Business transfers

Under TUPE, a business is not judged by its name but by the use made of its assets, such as the:

  • Premises;
  • Equipment;
  • Work in progress;
  • Goodwill (eg the value of a brand name or a customer base);
  • Intellectual property; and
  • Employees.

To test whether a business has transferred, ask yourself whether the core assets of the business have transferred to the incoming employer and are being used in essentially the same kind of business activity as previously. TUPE will not apply if there are just shares, limited assets and/or equipment transferring to a different owner.

Service provision changes

The TUPE regulations apply in the following situations:

  • A contractor takes over activities from a client (i.e. those activities are 'outsourced').
  • A new contractor takes over activities from another contractor (known as 're-tendering').
  • A client takes over activities from a contractor (i.e. those activities are 'in-sourced').

The service provision change rules under TUPE will not apply if there is just a supply of goods. The transfer must include a supply of services as well. TUPE will also not apply if the service is for single-event activities/activities of short-term duration (eg an exhibition/conference).

Who's impacted by TUPE?

  • The outgoing employer - the employer making the transfer, i.e. the former employer.
  • The incoming employer - the employer taking on the transfer, i.e. the new employer.

TUPE process

Stage 1 - Before committing to the transfer

When an incoming employer has the opportunity to take on a business or service, they must assess whether it is the right decision for them, i.e. is it value for money? Do the benefits of the transfer outweigh the risks? It is important that the outgoing employer informs employees of a potential transfer at this stage.

Stage 2 - Prepare for the transfer

Employers must inform/consult employees about the transfer and identify those who will transfer.

Stage 3 - The transfer

At this stage, the incoming employer gains the transferring staff and must inform/consult them about the transfer. Staff must be managed, settled and clear about their duties. The outgoing employer, on the other hand, loses the transferring staff and must inform or consult with the remaining staff about the transfer. The employer should ensure that all remaining employees are managed, settled and clear about their duties.

Stage 4 - After the transfer

After the transfer, the incoming employer must inform/consult employees about potential redundancies (if any). They should inform/consult employees and ensure allowances are made while employees adjust and integrate. Any relevant procedures should also be reviewed. The outgoing employer must inform or consult employees about potential redundancies and in general, preserve good morale. The employer should address employee concerns, so as to avoid falls in performance and quality of work.

TUPE measures

After the transfer, incoming employers often have plans to make changes to employment arrangements. Under TUPE, these are called “measures” and can include:

  • Redundancies
  • Relocation
  • Changes to staff pay dates
  • Different working patterns
  • Different pension arrangements

Minor changes to employees' employment contracts also constitute measures, although there are tight restrictions on when they may be altered, for example, the change cannot be brought about if the sole or principal reason for that change is the transfer itself.

TUPE and dismissal

If an employee is dismissed by either the outgoing or incoming employer before or after a transfer and the sole or principal reason for the dismissal is the transfer, it will be automatically unfair. If the reason for the dismissal isn't the transfer, it may not be automatically unfair, but it may still be an unfair dismissal if the employer hasn't followed the proper procedure.

TUPE and redundancy

Where a potential redundancy situation arises as a result of a transfer, employers must consult directly with affected employees when the incoming employer is making (or intending to make) 20 or more redundancies within a 90 day period. Where there are fewer than 20 employees being made redundant within a 90 day period, there is still a requirement to consult with employees, however, there are no limits in which to do so.

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