TUPE compliance: An HR management guide

Published: 13 February 2025 | by Brightmine | Reviewed by Robert Shore, HR Markets Insights Editor at Brightmine

TUPE is a UK law that’s designed to provide stability and fairness in the labour market. It can help to minimise disruption for employees during business takeovers or mergers while requiring employers to respect their existing rights.

TUPE is an essential mechanism for maintaining workforce confidence and continuity in the event of business transitions. Organisations that are considering a change of ownership should ensure their compliance with TUPE at all times, as the financial penalties for not doing so can be severe.

What is TUPE and how does it work?

TUPE is an acronym for the Transfer of Undertakings (Protection of Employment) regulations. It is a UK employment law designed to protect employees when a business changes ownership. The TUPE process ensures that workers’ rights are preserved during the transition to a new employer. This applies regardless of the business’s size or whether its head office is located outside the UK, as long as the transferring part of the business operates within the UK.

When does TUPE apply?

TUPE applies when a business transfers legal ownership, typically through a sale, management takeover, or merger. Under TUPE, employees’ jobs typically transfer to the new owner along with their existing terms and conditions of employment. This means aspects such as salaries, benefits, and working hours remain intact. Importantly, employees’ length of service is also preserved, ensuring continuity of employment.

However, TUPE protection has some exceptions. Employees’ jobs may not transfer if they are made redundant or if the business is insolvent, although even in insolvency cases, certain protections may still apply.

Public sector transfers

TUPE also applies to public sector transfers if the transfer is from the public sector into the private sector or from one public authority to another. For example, from the NHS to a local authority.

TUPE does not apply to transfers within the public sector where the employer does not change. For example, transfers within the Civil Service.

Types of transfers where TUPE applies

Under TUPE, there are two types of transfers that provide protection to employees: business transfers and service provision changes. Both types ensure that employees’ rights are upheld during specific scenarios of business restructuring or outsourcing.

Business Transfers

A business transfer occurs when ownership of a business, or part of it, moves from one employer to another. For TUPE to apply, the employer’s identity must change.

Example: If a company is acquired or its operations are handed over to a different employer, the affected employees are safeguarded under TUPE, preserving their jobs, terms of employment, and continuity.

Service Provision Changes

Service provision changes typically involve outsourcing, re-contracting, or in-housing of services. For example, TUPE applies when:

• An in-house service (e.g., plant maintenance) is outsourced to a contractor.
• A service contract is moved from one contractor to another.
• A contract ends, and the service is brought back in-house by the original client.

TUPE does not apply to contracts for goods supply or tasks meant for single events or short-term purposes. Only employees specifically associated with the transferring service are covered.
Examples:

1. A janitor employed by a company that outsources building maintenance to a contractor is likely protected under TUPE.
2. A courier working alongside multiple other couriers on an ad-hoc basis is not covered, as they cannot be directly identified with the transferred service.

What are an employer’s responsibilities under TUPE?

Under TUPE, employers have specific responsibilities to ensure a smooth business transfer and to protect employees’ rights:

Which employees transfer under TUPE?

All employees assigned to the business, or part of the business, that’s transferring will automatically transfer with it.
An employer cannot choose which employees they want to transfer.

What is the 50% rule?

The 50% rule in TUPE helps to determine whether an employee is covered during a service provision change. If more than half of the employee’s work is tied to the service or business being transferred, they are typically protected under TUPE. This means their employment rights and terms will transfer to the new employer. The 50% rule is often used to identify eligible employees during situations such as outsourcing, insourcing, or changes in service contracts. It ensures that those employees primarily engaged in the transferred work retain their protections and continuity of employment.

What rights do employees have under TUPE?

Transferring employees have specific rights and protections under TUPE:

What is the two-year rule for TUPE?

The two-year rule under TUPE refers to the period of continuous employment transferring employees must have before they can claim for unfair dismissal – (if they are dismissed before or after the business transfer and there are valid grounds for making such a claim).

However, this rule only applies to transferring employees if they were employed on or after 6 April 2012. If they were employed before this date, the qualifying period to claim for unfair dismissal is one year’s continuous employment.

Can an employee reject TUPE?

Yes. If employees do not want to transfer to the new employer, they can refuse. However, if an employee refuses to transfer, they cannot usually claim for:

• Redundancy pay
• Unfair dismissal

If an employee does not want to transfer, they must tell their current employer in writing. This could be by letter or electronically.

The impact of TUPE on…

TUPE significantly affects various aspects of employment, including contracts, pensions, collective agreements, and trade union recognition.

Contracts of employment

Under TUPE, employees’ contracts transfer to the new employer with all terms and conditions intact. This includes salary, benefits, holiday entitlements, and other contractual rights. The new employer cannot unilaterally change these terms unless there is a valid economic, technical, or organisational (ETO) reason.

Employee pensions

TUPE does not fully protect occupational pension rights. While accrued pension benefits remain with the original scheme, the new employer must provide a comparable pension scheme if one was offered by the previous employer.

The new employer is not obligated to offer transferring employees the same pension benefits as employees who already work for the new employer.

Collective agreements

Any collective agreements in place at the time of transfer are binding on the new employer. These agreements transfer automatically and remain effective until renegotiated.

Trade union recognition

If the transferring employees are unionised, their union recognition transitions to the new employer. The new employer must continue engaging with the union on employment matters, maintaining existing agreements and practices until any formal changes are agreed upon.

What are the consequences of TUPE non-compliance?

Employers who fail to meet their duty to consult and inform under TUPE regulations can face significant financial penalties. Compensation of up to 13 weeks’ gross pay may be awarded to each affected employee, with no cap on the amount. The liability for compensation can fall on either the outgoing or incoming employer or be shared between them.

Additionally, if the outgoing employer fails to provide required employee information to the incoming employer, the latter can seek compensation through a tribunal. The penalty, paid to the new employer, starts at a minimum of £500 per affected employee for incomplete or missing information, with no maximum limit.

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