Employees transferring from one employer to another is extremely common these days. In fact, according to a survey by Prudential, 20% of workers in the United States changed careers during the pandemic. Moreover, 58% of those who changed their career did so while still being employed.
In many cases, businesses merge or acquire others, essentially moving employees to work for new employers. In the UK, this is where TUPE regulations come in to help protect employees as they move from one organization to another. Whether this transfer happens upon the request of the employee or the employer, TUPE regulations are there to ensure a seamless transition for all parties involved.
In this guide, we’ll explore the details of TUPE regulations in the UK and how they protect employees while transferring to other organizations, including those made internationally. We’ll break down what a TUPE transfer is and emphasize the rights and responsibilities of all parties to remain compliant.
What is a TUPE Transfer? The Basic Definition of a TUPE – Transfer of Undertakings (Protection of Employment)
TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations of 2006. It refers to the UK equivalent of the EU Transfer of Undertakings Directive of 2001. As such, while there may be differences in the wording, TUPE regulations are largely comparable to those found around the EU.
TUPE regulations protect employee rights when the situation calls for the transfer of employees to another employer. They also provide a new employer with a period of stability where the rights and protections of employees remain unchanged. This then allows both employee and employer to begin their new employment relationship with clarity.
A TUPE transfer occurs when an individual or team is transferred from one employer to another or when a service is transferred to a new provider. An example of this final circumstance could be when another company takes over the contract for office supplies.
Who Has Rights Under TUPE Regulations? When Do TUPE Transfers Apply to Workers?
Employee rights under TUPE remain the same as long as they’re legally an employee and are part of the organization with a legal base in or transferring into the United Kingdom. This means that TUPE potentially affects workers in other countries so long as the company has its main entity in the UK.
In some cases, temporary or part-time employees may also be protected by TUPE regulations if they’re classified as a worker. However, this is a developing area of regulation, so expert legal advice can help.
It’s important to note that the size of your organization does not play a role in your protection under TUPE. These rules apply to multinational enterprises and SMEs in largely the same way.
Public Sector Transfers
TUPE regulations apply to public sector transfers when the employee is moving from the public sector to another form of public authority. However, this does not apply if an employee is moving departments within the same public authority.
Business transfers refer to when a business or part of a business, moves from one employer to another. This can include mergers, where multiple businesses come together to form a new entity. This is because the employer changes to the new entity being created.
Service Provision Changes
Service provision changes are when contracts are being taken over by a new company. This could be a service that was previously done in-house and is now taken over by a contractor or a contractor that is now becoming in-house. Additionally, this kind of change can occur at the end of a contract during a process known as retendering.
Service provision changes often include contracts to provide labor-intensive services such as catering, security, rubbish collection, maintenance, and office cleaning. It’s important to note that TUPE does not apply for contracts dealing with the supply of goods or any short-term tasks like staffing a conference or corporate event.
TUPE is part of the labor regulation framework of the United Kingdom. This means that these regulations apply whether you work within the United Kingdom or abroad. As long as the registered employer is based in the United Kingdom, employees are protected by TUPE.
What Happens During a TUPE Transfer? The Basic Transfer Process
Each TUPE transfer is unique, but they generally follow the same process. The transfer process starts by identifying the old and new employers affected by the transfer. The old and new employers must then inform and consult employees who are transferring.
The old employer provides the new employer with all essential information regarding the employee. This set up the employee to be transferred to the new employer along with their employment contract and other vital paperwork.
Transferring to a New Employer
It’s important to understand what happens during the process of transferring to a new employer. This process should be explained to all employees to help make the transition seamless.
What happens before the transfer?
- If transferring from one employer to another, an employee’s contract remains the same for the new employer. This is due to the fact that a contract is being transferred and not ending. The current employer must provide the new employer with all relevant employee information. This is known as ’employee liability information’ or ELI.
- This information includes an employee’s identity, age, terms of their contract, disciplinary records, trade union affiliations, and any claims made against the employer for the last two years.
What if the employee doesn’t want to transfer?
- If the employee does not want to transfer to the new employer, that employee loses the right to claim redundancy pay or claim for unfair dismissal. Employees can notify their current employer in writing, stating the fact that they don’t want to transfer. This will serve as a notice of resignation.
What happens when the transfer is completed?
- On the date of the transfer, the new employer will automatically take over the existing employment contract. This means that the contract continues without the need for establishing a new one with the new company.
- The terms of the contract remain the same. This includes:
- overtime pay
- contractual bonuses
- sick leave
- holiday pay
- insurance-based benefits
- If the previous employer owes the employee any wages or bonuses, this liability transfers to the new employer.
The Question of Rights and Representation – How Should Employers Consult and Inform Their Employees During TUPE?
Employers must inform staff or staff representatives about transfers in advance. If there are no staff representatives, such as trade unions, appropriate employee representatives must be notified. In many cases, employees must also consult with staff on any changes they are proposing to make.
What Does Inform and Consult Mean?
The process of informing is when your current employer notifies you of the facts regarding the transfer. It’s vital that this happens before the transfer itself.
The process of consulting is when an employer asks for and considers employee feedback on the transfer, along with any changes that may impact working practices. This process is essential for the employer to make the decision about going through with the transfer.
The consultation process will not discuss the fact that the transfer is happening but will include details such as the change in location of work, payroll details, and hours of work. In this way, the employer can gauge employee feedback and take that into consideration before the transfer.
Who Should Employers Inform and Consult?
Employers must consult with any recognized trade union or the appropriate employee representative before the transfer. If there is no clear representative, an election should be held for employees to determine an appropriate representative.
If the company has less than 10 employees, employers can consult directly with staff. Before employers make a decision, they should discuss changes, listen to suggestions, and attempt to reach an amicable agreement for all parties involved.
What Information Should Employers Provide?
If an employee(s) is transferring from their current employer to a new company, they must be told that the transfer is going through. They must also receive a copy of the measures letter explaining the changes.
If some employees are transferring, but not all, the employer must tell everyone that the transfer is happening and consult both groups of workers on the changes to working practices.
How Employees are Represented During a TUPE Transfer
As mentioned above, employees are represented by trade unions or any other recognized representative. These representatives will talk to individual employees about the transfer proposal and share all necessary information.
These representatives will also ask for views and opinions to help align with the official position of all employees. In many cases, the representative will also host open discussions to try to solve problems that employees raise.
During the transfer, employee representatives must have a reasonable amount of paid time off and reasonable access to workplace facilities.
When Should Employees be Informed and Consulted?
There is no fixed time period for informing and consulting employees. However, the law does state that enough time be given to have informed discussions before the transfer so that all employees understand the changes that are about to come.
This time depends entirely on the size of the organization, how many staff are affected, and the overall complexity of the changes being made.
An Employee’s Right to Notice Under TUPE
While there is no set length of time for notice, it’s within an employee’s rights to be notified of a TUPE transfer before the transfer takes place. Since an employer is not ending their relationship with the employee, they are not held by the same notice period for dismissal.
Under TUPE regulations, all current terms and conditions for employees automatically transfer from the old employer to the new company on the transfer date.
What Happens if Employers Don’t Inform and Consult Their Workers?
If an employer fails to notify employees of a transfer, the employees may be able to make a claim to the employment tribunal. This option is available if there was no recognized trade union or representative notified of the transfer.
Additionally, if the employee representative was not properly consulted or if the employer of a small business did not notify its employees directly, a claim can be made.
If the claim is successful, employees could receive up to 13 weeks’ pay as compensation.
TUPE and Employee Benefits
Transferring Employee Pension Funds
When transferring to a new company, all built-up pension is protected, and personal pension plans will automatically transfer to the new employer. This means that the new employer is expected to contribute the same amount to the pension every month.
If you have a workplace pension, it’s exempt from TUPE transfers. This means that the new employer does not have to continue on the same pension. However, they must provide a reasonable alternative scheme and match your contributions up to 6% of an employee’s monthly salary.
Changing Your Employment Contract After a TUPE Transfer
After a TUPE transfer, employees can alter and change their contract by following the usual process. Employees can’t change the nature of their contract due to the transfer itself. Instead, in most cases, they must wait and can then make changes based on circumstances that occur after the transfer.
However, there are a few exceptional circumstances that could open the door to altering a contract as a result of a TUPE transfer.
If the transfer is the main reason for the contract change
- A new employer can make changes to the contract if they improve an employee’s working terms and conditions. This could be an increase in holiday entitlement or sick leave.
- Additionally, changes can be made if there is a provable economic, technical, or organizational reason involving a change in the workforce.
Improving terms and conditions to match existing staff
- If the employee contract is not up to the standard of existing staff, the contract can be amended to put all employees on the same level. This is acceptable because it harmonizes terms and conditions for all employees in the new company.
Employee Redundancy Rights Under TUPE
Employees are entitled to the usual employee rights to a fair redundancy process, even after a TUPE transfer to a new employer.
Before a TUPE Transfer
- Before the transfer, your employer can’t make your position redundant if the new employer asks them to. This would be unfair dismissal and makes the new employer liable for a labor dispute.
- If 20 or more employees are at risk, a redundancy consultation can start before the transfer.
After a TUPE Transfer
- Once a transfer has taken place, your new employer can only initiate redundancies linked to the transfer so long as two specific conditions are met:
- Firstly, there must be a bona fide redundancy situation. This indicates that the roles in question are genuinely no longer needed due to shifts in business requirements or other valid reasons.
- Secondly, there must be a clear need to make workforce changes grounded in economic, technical, or organizational (ETO) considerations.
- However, if the rationale behind the proposed redundancies is unrelated to the transfer itself, your employer can proceed with standard redundancy procedures without the ETO considerations.
Redundancy Pay and TUPE
If an employee is made redundant after a TUPE transfer, the new employer is liable for redundancy pay.
This pay must reflect the length of service, including time spent with the previous employer before they transferred.
The Redundancy Consultation Process
If redundancy will affect an employee, the employer must first consult them or an accredited representative. The employer must consult with a trade union if the redundancy affects more than 20 people or if the redundancies are in one establishment.
Redundancy Rights if an Employee Doesn’t Want to Transfer
If an employee doesn’t wish to transfer with the rest of the staff, you can notify the employer. This would serve as official notice of your resignation from the company.
TUPE Transfers for Insolvent Employers
Transfers may also take place if the current employer is insolvent and cannot pay their debts. In these cases, employee rights will depend on the type of insolvency and whether insolvency occurred before or after the transfer.
If an employer is insolvent and is being rescued, employee rights will be protected under TUPE. If the organization is closing down, employee rights will not be protected under TUPE. An insolvency practitioner may deal with the situation on a case-by-case basis.
Claiming money owed for transfers made before insolvency
- If an employer owes their workers money before the transfer, then the new employer is liable to pay for all incurred debts. This includes overdue wages and holiday pay.
Claiming money owed for transfers made after insolvency
- If an employer owes their workers money after the transfer, they can claim some of the money they owe from the Redundancy Payment Service. This includes wages, holiday pay, commission, and bonuses.
What’s the difference between Employer of Record and TUPE Regulations? How EOR Services Can Guarantee Employment Compliance During a Transfer
TUPE is a legal framework in the United Kingdom that protects the rights of employees who are transferring from one organization to another. These regulations include responsibilities for employers to ensure that the rights of employees remain safe as they transfer.
An Employer of Record (EOR) in the UK is an outsourcing service provider that can take on the legal responsibility of employers on behalf of organizations. These services essentially outsource HR functions, payroll, and legal compliance. In this way, UK EOR services ensure that you’re always compliant with the latest labor regulations, including TUPE.
When an employee agrees to transfer from your organization to another, UK-based or global EOR services can step in to ensure that the working conditions are compliant with TUPE regulations.
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More Frequently Asked Questions (TUPE FAQ)
What is a TUPE transfer?
TUPE is a legal framework in the United Kingdom that protects the rights of employees as they transfer from one employer to another. Whether the employee or employer requests the transfer, TUPE protects the rights of the employee.
What happens if a company is taken over?
If your current organization is being sold as a going concern, you will automatically be transferred to the new owner. Your new employer will retain your employment contract but could make changes to the terms and conditions later.
What happens to employment contracts if a company closes?
When the organization is closing down, affected employees will not automatically transfer to a new employer. If the current employer goes into liquidation or becomes bankrupt, employees may become redundant.
When do TUPE transfers apply to business sales or mergers?
TUPE transfers apply when there is a transfer of an entire business or department of a business to a new owner. This can occur during a sale, merger, acquisition, or similar transactions. Employees associated with the transferred business become employees of the new business automatically.
Additionally, TUPE also applies when a service provision changes hands. This is when a client decides to outsource a service and switches service providers.
Do employers have to consult with employees before TUPE transfers?
Yes. It’s essential for employers to notify employees if they are transferring or if the transfer will impact them in any way. In some cases, the employer should also consult with the employee or Human Resources organization representing particular employees.
Can an Employer of Record help with TUPE transfers?
An Employer of Record effectively helps manage HR responsibilities during a transfer, including both payroll, terms of employment, contract management, and compliance. In this way, an EOR service can step in to handle TUPE transfers. They do this while ensuring that your business is always compliant with the latest regulations in your market.
Can you change your contract after a TUPE transfer?
When an employee transfers to another organization, the their conditions of employment must not change for the sole reason of the transfer. However, employers may amend a contract at a later date for other reasons, such as a promotion.