When Does TUPE Apply? What to Know

When a business or undertaking, or part of one, is transferred to a new employer; or when a ‘service provision change’ takes place, The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) usually protects the rights of the workers in question. 

The first step toward completing a TUPE transfer seamlessly is knowing whether it applies, to whom, and what that entails.

Below, we’ll walk through when TUPE applies, when it doesn’t, and what rights need to be protected when it does—everything you need to do to stay compliant throughout the TUPE process.

Situations Where TUPE Applies

TUPE is a broad and widely applicable set of regulations. Generally speaking, if a worker or employee is being transferred between businesses, or if a business is switching providers for a specific service, there is a very strong chance that TUPE applies. In an effort to protect workers and ensure fair business practices, the UK government enforces TUPE as widely as it can.

It should also be noted that TUPE applies to business in the UK, whether or not the companies involved are headquartered in the UK. As long as the segment of the business that workers are transferred to/from is located or operates in the UK, workers may be protected under TUPE. 

With these general points in mind, there are two main categories where TUPE applies (below).

Business Transfers

TUPE exists primarily to protect employees who, as a result of a merger or other deal, are transferred to a different company. This includes any time a piece of one organisation (even a unit of just one individual) is taken on by a second one. Any workers moved are protected, ensuring the stability of transferring employees and the employee’s contract.

In addition, the UK government has clarified that the identity of the employing entity must change for TUPE to apply—but that it can be a completely new entity, such as in situations where two merging companies have closed to form a completely new organisation.¹

Service Provision Changes

TUPE also protects workers who provide services to a company in a third-party engagement, assuming the agreement is not purely about providing goods or a special case (see below).

The three kinds of service provision changes (SPCs) outlined in TUPE Regulation 3 include:

• A service that was previously provided in-house is taken over by a contractor ( alsoknown as 'outsourcing')
• A contract ends and the work is transferred in-house (also known as 'insourcing')
• A contract ends and is taken over by a new contractor (known as 'retendering')

As these scenarios illustrate, there are many cases where TUPE protections apply outside of a company’s own staff. Contractors, especially long-standing ones, need to be protected to ensure smooth transitions and the continuation of their contracts. 

But they also beg the question: when do TUPE regulations not apply?

When TUPE Does Not Apply

Although TUPE applies widely, there are certain scenarios in which workers are not protected. In business transfers and SPCs in the public sector, for example, TUPE itself normally does not apply—however, public sector workers are often covered under other, similar protections.²

Other notable exceptions apply to SPCs specifically. Namely, TUPE is reserved for service providers, so relationships relating solely or primarily to the provision of goods (i.e., vendors) aren’t protected. In addition, contracts that pertain to a single, isolated event or other short-term task (e.g., an emergency arrangement) are also not protected under TUPE, impacting the affected employee.

With respect to third parties more broadly, TUPE protections are reserved for regular contractors whose relationship to a company approximates that of an employee.

Employee Rights and Employer Obligations

When TUPE applies, organisations transferring and receiving workers need to be aware of the rights they are protecting and the steps they need to take to uphold those responsibilities.

Some of the most important considerations throughout the process include:

Contract Continuity 

Broadly speaking, TUPE transfers all rights, powers, duties and liabilities related to a contract of employment to the new employer. 

These include:

• Statutory rights
• Continuity of employment
• Employees’ right to bring a claim against their employer for unfair dismissal
• Redundancy or discrimination claims
• Unpaid wages
• bonuses
• holidays
• personal injury claims

The only exceptions to this are criminal liabilities and certain occupational pensions rights. 

Effectively, the employees who do not object to the transfer, will automatically transfer to the transferee employer on their existing employment terms. It is as if their contracts of employment had originally been made with the transferee employer. Continuity of service is also preserved.

Generally, these ensure that employees are not disadvantaged when they move employer.

However, the regulations provide some limited opportunity for the transferee or transferor to vary the terms and conditions of employment contracts in a range of stipulated circumstances. 

Information and Consultation 

Original employers must notify workers impacted by transfers well in advance of the deal, consult with them, and address their concerns in the lead-up to the deal. Information about the workers, especially employee liability related to them (e.g., past disputes) must also be shared with their prospective new employers.

Workers’ Rights Post-Transfer 

After a TUPE transfer, employers can agree with employees to change an employment contract following the usual process. But there are other things to consider if the main reason for changing the contract is the transfer.

For example, employers could make changes due to:

• An improvement in an employees’ terms and conditions
• An ‘economical, technical or organisational’ change in the workforce (e.g. the company is restructured). 

If the change to the employment contract is not related to the transfer, there’s nothing stopping an employee or employer from making changes to the employees’ terms and conditions. The employment contract must then be changed in line with UK employment laws. 

Understanding an Employer’s Redundancy Rights

It’s important for employers to understand their employer’s redundancy rights during the transfer. For example, before the transfer, the current employer cannot comply with any request from the new employer to make an employee redundant. 

Likewise, after a TUPE transfer, there are only a limited number of scenarios where an employer can make redundancies. For example, a genuine redundancy situation could arise from a need to reduce the workforce for economic, technical or organisational reasons. 

In practice, all parties should begin preparing for transfers well in advance of the actual closing date, gathering and sharing information to keep all processes transparent and fair for workers. This information is critical for both the incoming employer and the outgoing employer.