Business transfers and protected employees in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
When a business or part of a business transfers to a new owner in the UK, the employees who work in it transfer automatically on their existing terms and conditions. The Transfer of Undertakings (Protection of Employment) Regulations 2006 — universally known as TUPE — is the legal framework that makes this happen.
What TUPE actually covers
TUPE applies in two main situations:
Business transfers. A business, or an identifiable part of one, moves from one employer to another as a going concern. The key test is whether an economic entity retains its identity after the transfer — courts and tribunals look at whether assets, customers, staff and activities carry across.
Service provision changes. A client brings a service back in-house, outsources it for the first time, or switches it from one contractor to another. This is particularly relevant in cleaning, catering, IT support and facilities management. The 2006 Regulations extended protection explicitly to cover these situations, going further than the original 1981 rules.
TUPE does not apply to a simple share sale, because in that case the employing legal entity does not change — the company itself is sold, not its business.
What "protected" actually means for employees
Employees who are assigned to the transferring business or service automatically become employees of the new employer (the transferee) from the moment the transfer completes. Their continuity of employment is preserved as if they had always worked for the new employer. Crucially, their contractual terms — pay, hours, holiday entitlement, seniority — transfer across intact.
Dismissal connected to the transfer is automatically unfair unless the employer can demonstrate an economic, technical or organisational reason entailing changes in the workforce (an ETO reason). Even with a valid ETO reason, normal unfair dismissal rules still apply, so process matters.
Employees also have a right not to have their terms varied simply because a transfer has taken place. Contractual changes made solely because of the transfer are void in most circumstances, even if the employee agrees to them. There is limited scope to harmonise terms if there is a genuine ETO reason or if the change is in the employee's favour, but employers should treat any post-transfer variation with caution.
Informing and consulting before a transfer
Both the outgoing employer (the transferor) and the incoming employer (the transferee) carry obligations. Long enough before the transfer to allow meaningful consultation, employers must inform appropriate representatives — elected employee representatives or recognised trade union representatives — of:
- the fact that a transfer is happening and when
- the legal, economic and social implications for affected employees
- any measures the employer envisages taking in relation to those employees
If the employer envisages taking measures (redundancies, role changes, new shift patterns), it must consult with a view to reaching agreement. Information alone is not enough where measures are planned.
There is a small-employer exception: where the transferor employs fewer than ten people, it may inform and consult employees directly rather than through elected representatives.
Failure to inform and consult can result in a protective award of up to 13 weeks' gross pay per affected employee. Both transferor and transferee can be held jointly liable.
Pensions and collective agreements
Occupational pension rights do not fully transfer under TUPE in the way other contractual terms do. The transferee is not obliged to replicate the exact pension scheme, but it must provide a minimum level of pension provision for transferred employees. Auto-enrolment obligations continue regardless — employer minimum contributions of 3% of qualifying earnings still apply from day one with the new employer.
Collective agreements in force at the time of transfer do transfer. Terms incorporated from a collective agreement into individual contracts of employment carry across. However, ongoing collective bargaining arrangements are more complex and specialist advice is worth seeking where a recognised union is involved.
Practical steps for employers managing a transfer
Map the assigned employees early. Identify which employees are assigned to the transferring entity or service. This is often straightforward but can be contested where staff split their time across multiple activities.
Exchange employee liability information. The transferor must provide written employee liability information to the transferee at least 28 days before the transfer. This covers identity, terms and conditions, disciplinary and grievance records, and details of any relevant legal actions. Missing or inaccurate information can itself give rise to a tribunal claim.
Align payroll and reporting. The transferee takes on the payroll obligations from the transfer date. Under Real Time Information rules, a Full Payment Submission must be made to HMRC on or before the first payday after the transfer. Set up the transferred employees correctly from the outset — incorrect tax codes or missing starter declarations create problems that are time-consuming to unwind.
Document everything. Record the information and consultation process, the dates, the representatives involved and any responses received. If a dispute arises later, this documentation is your primary evidence.
The Employment Rights Act 2025 has strengthened day-one employment rights more broadly, which reinforces why getting TUPE compliance right matters — transferred employees arrive with full continuity of service and, in most cases, immediate access to those rights from day one with the new employer.
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