What is TUPE? The Ultimate Guide to TUPE Transfers

TUPE, or the Transfer of Undertaking (Protection of Employment), is mainly for employee protection. The process occurs when all or part of a company is transferred to a new owner, or when two companies merge together to form a new entity. 

For those who have employees in the United Kingdom or other parts of the EU, you will need to know what TUPE means in order to comply with the laws and regulations and protect your employees during major business transactions. 

What is TUPE? 

TUPE mainly helps with moving employees from the old employer to the new employer. 

TUPE was first introduced in 1981 in the UK.The law regulates and helps manage the transfer of businesses to a new employer or manager, while still protecting previous employees’ rights. 

For most TUPE transfers, there is normally a change of management. However, the full ownership of the company does not always change. 

When does TUPE apply? 

Knowing when TUPE applies can be complex. TUPE covers any type of business transfer for an entity that still stays true to its original identity after the merger, sale, or acquisition. 

Many different specific stipulations determine whether a TUPE transfer is necessary. However, here are some basic situations where TUPE regulations apply, including:

• When tangible assets, like property, are involved

• When intangible assets are being transferred, depending on their value

• When a majority of employees are being transferred to a new employer

• When the buyer plans to carry out the same business activities as the seller

• When customers are transferred from the seller to the buyer 

The length of time that business activities were suspended during the transfer also dictates whether or not TUPE applies. 

Anytime your company plans to transfer or sell to a buyer in the UK or the EU, you should always hire a specialized legal team in that country to help you follow all of the proper regulations that surround TUPE transfers. 

Transferring under TUPE

During TUPE transfers, one of the main requirements is that the new employer is obligated to take on existing employees and assure the continuity of employment, as well as the continuity of service. If the transfer is the sole or principal reason for a dismissal, it is automatically unfair. 

The old employer's terms and agreements with the existing employees will still apply following the transfer and with the new employer. 

This includes: 

• Those under contracts, including apprenticeships 

• Those employed by an agency 

What happens if TUPE applies? 

When TUPE applies, all affected employees will automatically be transferred from the outgoing employer to the incoming employer. All of the transferring staff will be entitled to the same pay that they received from the original employer and maintain all of their existing employment rights based on the conditions of their employment contracts. This can even include employees who were dismissed before the transfer, as long as they were not let go for financial reasons.

All of the rights, duties, and liabilities remain the same for employees transferred under TUPE, including any trade union membership or recognition. 

Any employees who are not informed or consulted about TUPE, or who are let go outside of economic reasons alone, will be considered an unfair dismissal by either the outgoing or incoming employer. 

It is the employer's duty to inform all employees of any changes that may occur during the transfer, including their working conditions or technical and organization changes. New employers should consult representatives of the employees and understand all liability information before the relevant transfer. Failure to inform employees about any changes or improper management of the transfer can be penalized. Affected employees can bring a claim of a 13-week mandatory payment.

Employees rights under TUPE 

Once a TUPE business transfer occurs, employees are still classified as part of the staff. The size and scope of the organization does not matter. The transferring staff will retain their same Collective Bargaining Agreements with their new employer. Length of service might also impact the contracts. In many cases, the employer might be required to consult with employees who are affected. 

Disciplinary and grievance procedures 

For new employees that want to bring a claim against their new employer for breaking regulations under TUPE, it would be wise to contact a law firm for advice.

For example, if the previous employer had mentioned that issues arose over an employee's absences prior to the transfer of undertaking with the new employer, the new employer may still be protected under TUPE if the previous employer had already documented these disciplinary problems prior to the transfer. But, if the incoming employer used this as an excuse to let go of an existing employee without cause or justification, then they will likely be violating TUPE regulations. 

TUPE transfers have a lot of sticky situations, so contacting an experienced labor lawyer will be of utmost importance for employees before they file a grievance with an employment tribunal. 

What happens to holiday entitlement during a TUPE transfer? 

All employment contracts are transferred and honored under TUPE transfers, including holiday pay and paid time off. As the employer, you are obligated to honor the terms and conditions of the employee's annual leave during a TUPE transfer. The employer is unable to change any holiday entitlement under TUPE. 

In general, incoming employees are entitled to their accrued annual leave. Under TUPE, the incoming employer must honor the employee’s previous annual leave under the outgoing employer. Any reduction in the transferred employees holiday or vacation time will usually be deemed unfair during a TUPE transfer. 

What are employer obligations under TUPE? 

Both the seller and the buyer need to know what obligations they have when it comes to informing their employees, as well as determine which employees are going to be affected. 

The following employees need to know about the transfer service:

• Those who will be transferred under sale or merging

• Those whose job may be at risk under the transfer

• Employees with pending job offers or applications 

The old employer must also inform these employees in a written statement when: 

• The transfer will happen 

• Tentative date of transfer 

• Legal, social, and economic implications of transfer

• What measures will be taken to protect employees during transfer

Each country in the EU has their own regulations for employer obligations, so make sure you do research about specific TUPE laws wherever the transfer will take place. 

Do employees have to agree to the transfer? 

One thing that you might be curious about is whether employees have to agree to the transfer. The short answer is no.

In every country regulated by TUPE laws, employees do not have to agree with the transfer, especially if they don’t think that the company should participate in a merger or be bought by new management. 

While an employee may not agree with the transfer and wish for it to stay with the original employer, it is generally within the employers' rights to keep the transfer moving forward.

Most countries do not allow objections from employees, although some countries do take them into consideration. In Austria, for instance, employees can refuse special protection in their employment agreement.

There are a few other countries that allow employee objections, including: 

• Spain

• Switzerland

• The United Kingdom

However, if an employee objects to TUPE, they are likely going to lose their protection against termination, as stipulated in their Collective Bargaining Agreement. 

Do research on the latests TUPE laws in specific countries 

Some countries do have different rules and regulations outside of the basic guidelines for TUPE transfers. Germany, for instance, allows delays of transfer, depending on breaches of council rights. 

In Austria, new employers can change the pension plan for existing employees, depending on the employment contract. 

In Denmark, new employers have the ability to change the Collective Bargaining Agreement, with the employee's consent. 

For Hungary and Ireland, there is even more leniency for TUPE laws. The new employer can terminate employees due to poor performance or specific economic reasons. 

How does an EOR differ from TUPE? 

Although a global EOR service like Via can’t help you make the sale and transfer of your business abroad, we still have legal experts that can give you inside knowledge about how to stand up a team in a new country. 

During a TUPE transfer, you will need to hire a legal team to advise you in the specific country where you already have an established entity. TUPE is meant to protect your employees' rights.

An international EOR service like Via helps manage the hiring and onboarding process, payroll, benefits, and compensation in a legal and efficient manner. Compliance is our responsibility. When hiring abroad, we make sure that all labor laws are followed and that your employees are being fairly compensated for their hard work. 

Why companies choose Via

Many businesses want to expand internationally, but are unsure of how to navigate the global marketplace. Via makes hiring international talent seamless. With our-easy-to-use hiring and employment platform, Via manages the local HR processes for employment such as work visas and permits, benefits, payroll, background checks, employee contracts, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-or-record/entity, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team. 

With Via’s transparent pricing, you can pay full-time employees or contractors across borders with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace. You can get started in 1-2 business days.