Guide to TUPE Transfer - Wurkplace Blog

What is a TUPE Transfer?

The business world is full of acronyms. It’s hard to learn them all and it’s even harder to remember them all. To make it easier, we’re hear to answer the question: What is a TUPE transfer?

The Transfer of Undertakings (Protection for Employees) Regulations 2006 safeguards employees’ rights when there is a transfer of a business or service from one organisation (the transferor) to another organisation (the transferee). A TUPE transfer then is a process which transfers business undertakings in a way which adheres to these regulations. TUPE transfers apply in two different situations. They apply either when a business transfers – when a business (or part of one) is transferred to a new employer – or when a service provision change takes place.

 

When does TUPE apply in a business transfer?

TUPE applies to a business transfer if there is the transfer of an economic entity which retains its identity. For example, if Prezzo take over Pizza Hut – it is still the same industry and type of business.

Deciding on whether TUPE transfer applies can be broken down into two parts:

  • Is there a stable economic entity that is capable of being transferred?
  • Will the economic entity retain its identity after the transfer in question?

Examples of a business transfer include sales of business, sale of assets, change of franchise and a transfer of a lease.

 

When does TUPE apply in a service provision?

Many organisations contract out services, invite tenders and assess bids to undertake services, and many of these situations will be TUPE transfers.

Service provision changes arise where contracts are reassigned:

  • A contractor takes over activities from a client (outsourcing)
  • A new contractor takes over activities from the old contractor (retendering)
  • A client takes over activities from a contractor (insourcing)

Common examples of a service provision include office cleaners, caterers, construction work and accountancy work.

 

When does TUPE not apply?

TUPE will not apply when it is just the sale of a company’s shares as the identity of the employer does not change. It may also be that TUPE does not apply when only limited assets or equipment are transferring to the new owner.

TUPE will not apply to a service provision change if there is only a supply of goods for the client’s use, the service provided is a single event or task of short-term duration, activities carried out by the original contractor are fragmented following a retendering or transferred services no longer retain their identity.

 

What transfers in a TUPE?

The employee’s contract of employment terms and conditions will remain the same as if the contract was originally made between the new employer and the employee. Also transferred are:

  • Employee’s continuity of service
  • Any collective agreement incorporated into the employment contract
  • Similar private medical insurance and health insurance
  • Liabilities including all statutory and contractual rights transfer. So, if the old employer did something to trigger claims, liability will pass to the new employer.
  • Indemnities under employer’s liability insurance
  • Redundancy payments, both statutory and contractual
  • Arrears of pay, holiday pay and sick pay, and any accrued holiday entitlement

 

Pensions

Most occupational pension scheme rights are completely excluded from TUPE, so pension rights do not automatically transfer however, the new employers must provide a reasonable alternative and match an employee’s contributions to a scheme up to a minimum of 6%.

 

Variation to the contract

There may be times where a variation can be acceptable. These are:

  • The variation is completely unrelated to the transfer
  • The variation is favourable to the employee
  • There is an economic, technical or organisational (ETO) reason
  • The employer and employee agree the variation
  • The terms of the employment contract permit variation
  • Insolvency situations
  • A collective agreement

 

Who is included in the transfer?

Employees on short-term absences, holiday and parental leave are likely to be included in the transferring group. Along with employees on fixed-term contracts and casual staff.

Seconded employees and those on sick leave may transfer but it will depend on the circumstances, including the length of the secondment or absence.

Agency workers are not included in the transfer.

 

What happens if an employee does not want to transfer?

If an employee does not want to transfer, then their contracts would simply end as they have effectively resigned and cannot claim a redundancy payment.

If the employees are objecting because of changes to their terms and conditions that are not permissible under TUPE, they will have an automatically unfair dismissal claim.

 

Consultations

The new and old employer must consult with the employees. The incoming employer will need permission from the outgoing employer to consult with any recognised trade union or elected representatives about the transfer.

Consultations must be meaningful and conducted with a view to seeking agreements and cover measures the new employer is envisaging in relation to the employees.

Employers must respond to any representations and explain any rejections.

Tribunals can award up to 13 weeks’ pay per employee for a failure to consult.

 

Information needed

Employers should provide certain information to the effected employees. This includes:

  • the fact that the transfer is to take place
  • the date or proposed date of the transfer
  • the reasons why it is to take place
  • the legal, economic and social implications of the transfer for the affected employees
  • any measures / changes proposed in connection with the transfer that will affect the employees; it must also be made clear if there are no measures to take. E.g. job descriptions & pay date

If any employer doesn’t comply with these requirements, they could be ordered to pay compensation to each affected employee of up to a maximum of 13 weeks’ pay each.

Either the old or new employer can be liable to pay the compensation, or it could be split between them.

 

Employee Liability Information

The old employer must provide the new employer with certain information in writing within 28 days before the sale. This includes:

  • Employee identities and their ages
  • Terms and conditions of contracts
  • Information about any collective agreements
  • Details of any formal disciplinary action taken against any transferring employees in the previous two years
  • Details of any formal grievances raised by any of the transferring employees in the previous two years
  • Any legal action brought against the old employer by any of the transferring employees during the last two years
  • Any potential legal action that the old employer reasonably believes may be brought
  • The total number of temps and agency workers working temporarily

 

Redundancy

Employers can make redundancies after the transfer, but only if there is a genuine redundancy situation and an ETO reason. Fore example, the reason could be changes to the workforce.

The new employer can start consulting about redundancies before the transfer with the old employer’s co-operation. This may be a positive for the new employer if they do not want the existing employees. The old employer may comply in order to achieve the sale. This is when you negotiate the sale price.

However, there must be an ETO reason and the reasons must relate to the future conduct of the business however, the outgoing employer might not know enough about the future conduct of the business. The new employer then takes on any liabilities and so the best way to handle redundancies is to do after the transfer.

 

Transferring part of an employee’s contract

It is possible to transfer part of an employee’s employment to a transferee when their working time is split. Case law supports this.

Employers should consider:

  • How you will split the employment contract
  • How much transfers to which transferee
  • Which responsibilities each transferee will inherit
  • Whether this split is practicable or there are easier alternatives
  • Would this split be detrimental to the employees?

The contract should be split in proportion to the tasks performed, unless a proportionate division of work is impossible.

Discuss this with your employees to ensure that the split is practicable. Then, employers must work out how much of each employee’s contract transfers to which transferee.

 

How Wurkplace can help

We have specialised HRCs who have a vast knowledge and experience with TUPE’s. Our HRC has a strong legal background and can help you with every step of the process.

We also offer training on change management which is extremely useful for not just before the transfer but after when employees are settling into a new work environment and existing ones have to adapt to new people coming in.

If you would like any information on this, please contact us or just give us a call on: 0330 400 5490.

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