What is TUPE? Transfer of Undertakings Explained

TUPE is one of the most important protections for employees when businesses change hands. Understanding what it is and when it applies is crucial for both employers and employees.

TUPE Definition

Full Name

Transfer of Undertakings (Protection of Employment) Regulations 2006

Purpose

TUPE protects employees when:

• Businesses are sold or transferred
• Services are outsourced or move between contractors
• Organizational structures change

Core Principle

Employees transfer automatically to the new employer:

• On same terms and conditions
• With continuous employment preserved
• Cannot be dismissed for transfer itself
• "As if there had been no change"

When TUPE Applies

Two Types of Transfer

Type	Situation
Business transfer	Sale, merger, or transfer of business
Service provision change	Outsourcing, insourcing, or retendering

Business Transfers

TUPE applies when:

• Business or part of business sold as going concern
• Assets, staff, and activities transfer
• Economic entity retains its identity
• More than just asset purchase

Service Provision Changes

TUPE applies when:

• Services outsourced from client to contractor
• Services brought in-house from contractor to client
• Contract retend

ered from one contractor to another

Requirements:

• Activities carried out by organized grouping of employees
• Principal purpose is carrying out activities for client
• Activities don't consist wholly of supply of goods

What is an "Economic Entity"?

Definition

A stable economic entity:

• Organized grouping of resources
• Carrying out economic activity
• Whether or not main or ancillary
• Retains identity after transfer

Factors Considered

Courts look at:

Factor	Consideration
Type of undertaking	Nature of business
Tangible assets	Buildings, equipment transferred
Intangible assets	Goodwill, customer lists
Employees	Majority taken on by new employer
Customers	Transferred or retained
Activities	Similar before and after
Degree of similarity	Overall resemblance

Identity Must Be Retained

Key question:

• Is same business continuing?
• Or just assets being sold?
• Economic entity test

Business Transfer Examples

Clearly TUPE

• Selling restaurant as going concern with staff and premises
• Merging two companies
• Spinning off division to separate company
• Franchise transfer with staff and customers

Not TUPE

• Buying empty premises only
• Purchasing equipment without business
• Acquiring shares in company (different legal entity)
• Asset-only sale without employees or goodwill

Service Provision Changes

Outsourcing

Client transfers service to contractor:

Example: Hospital outsources catering to external company. Catering staff transfer to contractor under TUPE.

Insourcing

Contractor returns service to client:

Example: Council brings refuse collection back in-house. Contractor's staff transfer to council under TUPE.

Retender

Service moves from contractor A to contractor B:

Example: Cleaning contract changes from Company A to Company B. Company A's assigned staff transfer to Company B.

Requirements for Service Provision Change

Must show:

1. Organized grouping - identifiable group of employees
2. Principal purpose - main job is carrying out activities for client
3. Not goods - service provision not solely supplying goods

Who is Protected?

Automatically Transfer

• Employees assigned to transferring undertaking
• Full-time and part-time
• Permanent and fixed-term
• On maternity, sick leave, etc.
• Apprentices

Don't Automatically Transfer

• Employees not assigned to transferring part
• Self-employed contractors (though check status)
• Agency workers (employed by agency not client)
• Employees who object to transfer

Assignment Test

Factors:

• Where employee spends their time
• Who they're managed by
• What work they do
• Terms of their contract
• Degree of permanence

Can be assigned to multiple parts of business.

What Transfers?

All Terms and Conditions

Everything transfers:

• Employment contracts
• Salary and benefits
• Working hours and patterns
• Holiday entitlement
• Contractual rights
• Collective agreements
• Continuous service
• Accrued rights

Liabilities Transfer

New employer inherits:

• Outstanding wages and holiday pay
• Tribunal claims (even if not yet lodged)
• Discrimination claims
• Redundancy liabilities
• Contractual obligations

What Doesn't Transfer

Exceptions:

• Occupational pension schemes (special rules apply)
• Criminal liabilities
• Some share schemes
• Personal performance awards

Continuous Employment

Preserved

Employment continuity maintained:

• Start date remains same
• Service counts for all purposes
• Redundancy calculations
• Unfair dismissal qualifying period
• Holiday accrual
• Notice periods

Example

Employee starts with Company A on 1 Jan 2020. Business transfers to Company B on 1 July 2024. For redundancy calculation in 2026, continuous service is from 1 Jan 2020 (6+ years), not from transfer date.

Automatic Transfer

No Choice for Employer

New employer must take on:

• All assigned employees
• On their existing terms
• Cannot pick and choose
• Cannot refuse transfer

No Choice for Employee

Employees automatically become:

• Employed by new employer
• On transfer date
• Whether they like it or not
• (But can object - see below)

Exceptions

Employee can:

• Object to transfer (employment ends)
• Claim constructive dismissal if substantial change
• Resign for other reasons

Key Principles

Employment Continues

As if no change occurred:

• Same employer (legally)
• Same terms
• Same rights
• Seamless transition

Cannot Worsen Terms

Changes void if:

• Sole or principal reason is transfer
• Makes terms less favorable
• Even if employee agrees

Cannot Dismiss for Transfer

Dismissal automatically unfair if:

• Sole or principal reason is transfer
• Unless ETO reason (economic, technical, organizational)

Common Misconceptions

"We're Just Buying Assets"

If you're taking on:

• The business activity
• Staff to run it
• Customers and goodwill

Then likely TUPE applies, not just asset purchase.

"Employees Can Choose"

No:

• Transfer is automatic
• Employee objection ends employment
• Cannot negotiate which employer
• Cannot cherry-pick better terms

"We Can Harmonize Terms"

No:

• Cannot change terms because of transfer
• Even to match new employer's structure
• Must wait and have valid reason
• Or get genuine agreement (carefully)

TUPE in Practice

Before Transfer

Both employers must:

• Identify which employees transfer
• Provide information to representatives
• Consult on implications
• Exchange employee liability information

On Transfer Date

• Employment transfers automatically
• Contracts novate to new employer
• Continuity preserved
• Old employer released from obligations

After Transfer

New employer:

• Honors existing terms
• Cannot immediately change them
• Inherits all liabilities
• Becomes responsible employer

Who TUPE Protects

Primarily Employees

Strong protection for:

• Job security
• Terms and conditions
• Rights and continuity
• Against dismissal

Also Protects Employers

By providing:

• Clear legal framework
• Certainty about process
• Rules for all parties
• Predictable outcomes

When TUPE Doesn't Apply

Share Sales

Buying company shares:

• Company remains same legal entity
• Employees already employed by same company
• No transfer of employment
• TUPE not needed

Genuine Asset Only

If truly just buying:

• Equipment
• Premises
• Intellectual property
• Without taking on the business itself

Insolvency Situations

Special rules apply:

• Administration
• Liquidation
• Some protections reduced
• Seek specialist advice

Checking If TUPE Applies

Key Questions

1. Is there a transfer of an economic entity?
2. Does it retain its identity?
3. Are employees assigned to it?
4. Is it a service provision change?
5. Do the SPC conditions apply?

Seek Advice Early

TUPE is complex:

• Assess each situation carefully
• Get legal advice if unsure
• Consequences of getting it wrong serious
• For both employers and employees

Summary

What TUPE Is

• Regulations protecting employees during transfers
• Automatic transfer of employment
• Preservation of terms and conditions
• Protection from transfer-related dismissal

When It Applies

• Business transfers (sale, merger)
• Service provision changes (outsourcing, insourcing, retender)
• Where economic entity retains identity

Core Protections

• Jobs protected
• Terms cannot worsen
• Continuity preserved
• Dismissal restricted

Key Points

• Transfer is automatic
• New employer inherits everything
• Old terms continue
• Cannot dismiss for transfer itself

For Employees

• Your job is protected
• Terms stay the same
• Service continues
• Strong rights if dismissed

For Employers

• Must identify if TUPE applies
• Follow process carefully
• Inform and consult
• Cannot avoid by restructuring

TUPE is powerful employee protection designed to prevent job losses and worsening terms when businesses change hands. Both employers and employees should understand when it applies and what their rights and obligations are.