How do TUPE transfers work?

If you are going through the process of buying or selling a business, there will be countless thoughts going through your mind: Have you done your due diligence? Will the customers stick around? Do the numbers stack up?

Well, if employees are involved there are four important letters you should factor in too: T.U.P.E.

Transfer of Undertakings (Protection of Employment), or TUPE regulations, protect employees if their employment changes hands. They are a mandatory consideration and failure to comply means your business could face reputational damage and penalties imposed by the Workplace Relations Commission.

Here is a look at how TUPE transfers work.

When does TUPE apply?

TUPE typically impacts organisations if two criteria are met when they change ownership:

First, they retain their identity after the transfer. In other words, they are run in a similar way to before.

Second, they engage in the same economic activity as they did previously.

In practice, whether TUPE applies is informed by case law and it may not always be black and white. However, key signifiers of TUPE coming into play include:

A change of entity occurs – a new individual or company becomes responsible for the business.
The new employer performs the same economic activities.
The business remains a going concern at the time of transfer.

Businesses which face compulsory liquidation or where there is simply a service change (a new contractor takes over the service previously offered by an employer), are not automatically subject to TUPE.

In the case of a straight sale of a business that will continue trading as is and just under new owners, there is no TUPE as the new owner is automatically the new employer and all responsibilities attach to them.

Who has what obligations during a TUPE transfer?

Whatever your role is within a TUPE transfer, you’ll want to ensure you’re fulfilling all the necessary obligations.

The buyers and sellers will have to work together, with the outgoing party sharing all the relevant employment information. This includes terms and conditions of employment, personal data of employees like age and length of continuous service; personnel files and payroll information.

If you are taking on the staff you will be required to continue with these terms and conditions, unless agreed otherwise by all parties, or it will be considered a breach of contract.

As well as continuity of employment under the existing terms and conditions, employees are protected from dismissal solely because of the transfer (although if there are valid economic, technical or organisational reasons dismissals are justified).

There is a duty to inform and consult with elected representatives or a recognised Trade Union. Both the existing and transferring staff must be involved. If an employee representative is not in place, you should facilitate one being chosen.

During consultation the new company has to set out any changes that may happen. These might be economic, technical or organisational.

For example, when the companies combine, there may be an economic need for a reduction in certain staff, but you cannot simply make the transferees redundant. You have to pool them with the existing staff and make a decision using fair criteria. An example of organisational change may be a relocation of work. Everything must be consulted upon and explained fully, as well as set out in writing.

Where employees feel you have not followed TUPE rules they can make a complaint to the Workplace Relations Commission within six months (or longer if there is a reasonable cause for the delay.

Tips for smooth TUPE transitions

As a well-intentioned, thorough business owner, you’ll want to ensure the TUPE transfer experience is as smooth as possible. Here are some tips to help:

Get organised ahead of the transfer

Make the process easier by conducting due diligence ahead of the transfer. Reviewing all of the contracts before a transfer will put you on the front foot – preventing any last-minute stress. Allow transferring staff to have meetings with the new management to reassure them.

Communicate effectively

Consulting staff about transfers is not only a legal requirement, but an opportunity to build trust and boost morale. Communicating with your team clearly will help manage expectations: reducing uncertainty and maintaining trust. This helps with workplace morale and productivity.

Terms and conditions cannot change

Once staff have transferred, terms and conditions cannot be changed. However, while accrued pensions to date are protected (the new employer must properly maintain the scheme), there is no obligation for a new or similar benefit to be provided.

It ain’t over ‘til it’s over

We often see problems relating to TUPE come out of the woodwork after the transfer is complete, especially if the organisational changes are significant or redundancies were involved. Because of the rigidity of the rules, you can end up with quirks such as transferring staff having longer continuous service than you as the new employer have been in business. So as well as getting organised up front, don’t lose concentration towards the end.

Seek HR advice and support

TUPE transfers are a highly complicated piece of legislation and advice needs to be taken at the earliest stage. Our TUPE management service provides specialised support tailored to you and your business.

Get in touch today to see how we can support you and your business.