A change of ownership, a new contractor or a reorganisation can create immediate uncertainty for everyone involved. Employees may be concerned about their job, pay and length of service. Employers need to understand the liabilities they may inherit. The central question is: when does TUPE apply? The answer depends on the reality of the transfer, not simply the labels used in the commercial agreement.
The Transfer of Undertakings (Protection of Employment) Regulations 2006, usually called TUPE, protect employees when the business or service they work in moves from one employer to another. Where TUPE applies, employment normally transfers automatically to the new employer on the transfer date, with continuity of employment preserved.
When does TUPE apply?
TUPE can apply in two main situations: a business transfer or a service provision change. Both require careful assessment of the facts. A transaction may be described as an outsourcing, insourcing, sale or contract change, but that description does not decide the legal position.
Business transfers
A business transfer occurs when an economic entity retains its identity after moving to a new employer. An economic entity is an organised grouping of resources that carries out an economic activity, whether or not it operates for profit.
This often arises where a business, part of a business, shop, care home, department or operational unit is sold. It can also arise where assets, staff, premises, customer relationships, goodwill or operational responsibility pass to a new operator. No single factor is decisive. The question is whether what transfers is recognisably the same economic activity.
For a labour-intensive business, the transfer of a substantial part of the workforce may be particularly significant. In an asset-heavy operation, such as manufacturing or transport, the transfer of key equipment and assets may carry more weight. The courts look at the overall picture.
A share sale will not usually trigger TUPE. Although the ownership of the company changes, the employer remains the same legal entity. TUPE may still become relevant if the share sale is followed by a genuine transfer of part of the business to another employer.
Service provision changes
TUPE may also apply where services move between contractors, or between an organisation and a contractor. This is known as a service provision change. It can include outsourcing services for the first time, changing from one contractor to another, or bringing an outsourced service back in-house.
Common examples include a cleaning, catering, security, facilities management or IT support contract changing hands. However, a change of contractor does not automatically mean TUPE applies.
For service provision change rules to apply, there must usually be an organised grouping of employees whose principal purpose is carrying out the relevant activities for the client. The activities carried out after the transfer must also be fundamentally the same as those performed beforehand.
TUPE may not apply where the client changes significantly, the work is divided between several providers, or the new contract involves materially different activities. It may also fall outside TUPE where the contract is for a single specific task or a short-term event. These cases often turn on detailed evidence about how work was organised in practice.
Which employees transfer under TUPE?
TUPE does not necessarily transfer every employee working for the outgoing employer. It generally protects employees who are assigned to the business, service or organised grouping that transfers.
Assignment is a factual question. Relevant considerations can include the employee’s role, the work they actually perform, the proportion of time spent on the transferring activities, their contractual duties and how the employer allocates them within the organisation. An employee temporarily covering work in the transferring service may not be assigned to it. Equally, an employee whose contract is broadly drafted may still transfer if their day-to-day role is primarily connected to that service.
Disputes often arise where an employee divides their time between several contracts or teams. Employers should not rely solely on job titles, payroll codes or a convenient last-minute reallocation of duties. A clear record of work patterns, reporting lines and contractual responsibilities will be far more persuasive.
What happens when TUPE applies?
On the transfer date, the assigned employees’ contracts move automatically to the incoming employer. Their continuity of employment is preserved as though they had always worked for the new employer.
The incoming employer generally takes on the rights, powers, duties and liabilities connected with those contracts. This can include pay, holiday entitlement, notice rights, contractual benefits, ongoing grievances, disciplinary matters and potential employment claims. Liability for many pre-transfer breaches can therefore pass to the new employer.
The outgoing employer must provide prescribed employee liability information to the incoming employer at least 28 days before the transfer. This information covers matters such as the identity and age of transferring employees, their contractual terms, disciplinary or grievance action, collective agreements and certain legal claims. Inaccurate or late information can create significant risk for both parties.
Occupational pension rights are more complicated. TUPE does not generally transfer rights under an occupational pension scheme in full, but separate pension protections can require the incoming employer to provide a minimum level of pension provision. Specialist advice may be needed where enhanced pension benefits are involved.
Can terms and conditions be changed after a TUPE transfer?
An employer cannot use TUPE simply as an opportunity to reduce pay, remove benefits or harmonise contracts. A contractual change will usually be void if the sole or principal reason for it is the transfer itself.
There are limited exceptions. A change may be possible where there is an economic, technical or organisational reason involving changes to the workforce, often called an ETO reason, and the proper legal requirements are met. A change may also be valid where the reason is genuinely unrelated to the transfer. The distinction is important and can be difficult to establish.
For example, a genuine post-transfer restructuring caused by a reduction in available work may justify some changes if it entails workforce changes. By contrast, changing annual leave or sick pay purely to make inherited contracts match the buyer’s existing workforce is unlikely to be lawful simply because it is administratively convenient.
Dismissals, redundancies and resignations
A dismissal will be automatically unfair if the sole or principal reason is the transfer, unless there is an ETO reason entailing changes to the workforce. Redundancies can therefore take place around a transfer, but the employer must show a genuine redundancy situation and follow a fair process.
Employees can object to transferring. In most cases, this ends their employment on the transfer date without a dismissal. That can be a serious decision because it may mean there is no entitlement to notice pay or a redundancy payment.
There are different considerations where the transfer involves a substantial change in working conditions to the employee’s material detriment, such as a damaging relocation or major alteration to duties. The employee may be treated as dismissed in some circumstances. The facts, the contractual position and the timing of any objection all matter.
Consultation duties for employers
Both the outgoing and incoming employer have duties to inform affected employees or their representatives about the transfer. Where either employer proposes measures in connection with the transfer, such as changed work locations, restructuring or redundancies, meaningful consultation is required.
There is no universal minimum consultation period under TUPE. The requirement is to provide information and consult long enough before the transfer to allow genuine discussion. Leaving communication until the deal is complete or the transfer date is close can expose employers to claims and undermine staff confidence.
Employers should identify potential TUPE issues early, carry out due diligence, establish who is assigned to the transferring activities and agree a clear process for employee information. Employees should ask direct questions about whether their role will transfer, who their employer will be, and whether any measures are planned.
Practical steps where TUPE may apply
For employees, keep copies of your contract, payslips, holiday records and communications about the proposed change. Ask for confirmation of your assignment, transfer date, terms and any planned changes. Do not assume that a new employer can simply impose a new contract because the service has moved.
For employers, early legal analysis is often the best protection. It helps determine the potential workforce, inherited liabilities, consultation obligations and contractual risks before commercial commitments become difficult to reverse. It also supports clear, consistent communication with the people affected.
TUPE decisions can have lasting consequences for jobs, liabilities and workplace relationships. If a proposed transfer affects you or your organisation, timely advice can turn a confusing change into a managed process with clear choices and protected interests.