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.
Within the social sector we see TUPE transfers happening when commissioned services are taken over by another provider. 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.
What is TUPE?
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.
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.
Key Provisions of TUPE
Under TUPE, the new employer effectively steps into the shoes of the old employer. The employment contracts of affected employees automatically transfer to the new employer; this means that employees retain their terms and conditions of employment, including salary and benefits. Employees’ continuity of employment is also maintained, so their length of service with the previous employer counts towards their entitlement to statutory rights like redundancy pay and maternity leave.
Where there are collective agreements, these are transferred too, preserving any negotiated terms and conditions.
During, or following a TUPE transfer, terms and conditions can only be changed if the changes are not because of the transfer and the new employer has an Economic, Technical or Organisational (ETO) reason to do so. Employers should be careful when relying on an ETO reason as employees may challenge this. ETO changes could include a change to the work location, new technology or ways of working etc.
Workplace pensions do not currently transfer as the employee will be expected to join a pension scheme arranged by the incoming employer.
What is the process of TUPE
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.
Individual consultations should also take place, especially where measures are proposed (these are things 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.
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.
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 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.