If your business is undergoing a transfer or merger with another organisation there’s a set of regulations you need to know about:
The Transfer of Undertakings (Protection of Employment) Regulations 2006, or TUPE. And its purpose is to protect employee rights.
TUPE law vs TUPE regulations
TUPE regulations are a major part of employment law. The purpose is to transfer existing employees (and employment liabilities) from one company to another.
What is the difference – is there a TUPE law?
When you hear someone refer to “TUPE law”, they’re simply referring to TUPE itself.
A new employer takes responsibility for transferred staff—they take ownership of:
- All terms & conditions in employees’ contracts.
- Any failure to meet employee rights from previous employer.
- All previous holiday entitlement.
- The same employee start date.
- Collective agreements.
We’ll go into specifics a little later, but it’s important to note that if you fail to meet the pre-established terms, it’s a breach of TUPE law. Transfers are fraught with potential employment law issues, which is why it’s vital to get every step right.
TUPE law change of contract,
One of the main questions that gets asked is, “Can I change an employee’s contract after TUPE?”
Generally, the answer is no. You can’t change employees’ terms and conditions. But there are exceptions.
If you have an economic, technical, or organisational (ETO) reason, you may be able to make changes. This includes company performance, company equipment and processes, or organisational reasons concerning the company structure.
Other potentially lawful reasons include:
- The change is completely unrelated to the transfer.
- The variation is favourable to the employee, and they agree to it.
- Limited insolvency situations.
Redundancy and TUPE law
Sometimes, an employee isn’t a good fit. However, you can’t make employees redundant just because they’re transferred from another employer.
But, provided the old employer (transferor) agrees, you can make employees redundant after the transfer. Redundancy can actually take place during the transfer, but usual redundancy procedures need to take place
An employee can also refuse to transfer. In this case, it’s effectively a resignation, and you should treat it as such.
Following a transfer, there are some legitimate reasons for making an employee redundant.
Again, there must be an ETO reason for the redundancy. For example, if there are large numbers of duplications of staff. That means employees can face redundancy.
These employees have entitlement to redundancy payment if they meet the normal qualifying conditions, such as length of service.
TUPE law and pay
Following a transfer, you should ensure you pay all employees the same in their previous position. If an employee had pay rise shortly before the transfer, you should honour this change.
The same rules apply beyond basic pay. For an employee up for a bonus or on a commission scheme, you’re probably going to have to pay that as well.
In some cases, these added payments are discretionary—but not always. If it’s in an employee’s contract, you have to pay it.
TUPE law and holidays
Annual leave can be a real sticking point for some employees during a transfer. As transferee, you must honour the terms and conditions the transferor’s employees have. And so, you cannot change their holiday entitlement. But there are exceptions.
An ETO reason for changing terms and conditions might be applicable.
Incoming employees will accrue annual leave, so you must allow the employee to take the balance of leave entitlement before the end of their annual leave year. So, if an employee has 10 days left to take before the end of their annual leave year, you must let them have it.
A reduction in employees’ annual leave entitlement is unlikely to be fair under TUPE.
TUPE service provision change law
Another instance when TUPE applies, is in cases of a service provision transfer. This means you either:
- Outsource an internal service.
- Make an outsourced service internal.
- Swap providers for an outsourced service.
So if a group of employees is “essentially dedicated” to carrying out a business activity, they’ll receive all the protections TUPE offers.
Secondment law TUPE transfer
As all employee contracts transfer over to you, any employees on secondment are transferred too. That’s assuming the part of the organisation they normally work at/for is also set for transfer.
If only part of the business is moving over, and the section of the business the seconded employee is working at isn’t, they wouldn’t transfer.
Similarly, employees who are on long-term sick leave, or maternity leave, transfer as well.
TUPE law and company vehicles
This all comes down to whether the employee has entitlement to a company vehicle in their contract. If they are, you need an ETO reason for why you can’t provide a vehicle.
This rule also applies to car allowance.
TUPE law summary
Every transfer, merger, acquisition and service provision change is different. TUPE law in the UK helps regulate the process and protect employees, but unforeseen problems can still occur. TUPE covers everything from pay and contracts to the minutiae, such as company cars and pending holiday days.
Once the transfer happens, you’re responsible for any issues or mistakes. Just one slip can end in an employment tribunal and costly fines. Find out how Croner can stop these slips from happening here or speak to an expert today on 01455 858 132
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