TUPE - Transfer of Undertakings (UK)
UK regulations that protect employees when the business they work for (or a service they deliver) transfers to a new employer, automatically moving their employment contracts, terms, and continuity of service to the incoming employer.
What Is TUPE?
Key Takeaways
- ✓TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It's the UK's implementation of the EU Acquired Rights Directive (2001/23/EC).
- ✓When a business or service transfers from one employer to another, affected employees automatically become employees of the new employer on their existing terms and conditions.
- ✓The transfer happens by operation of law. Neither the employee's consent nor a new employment contract is required.
- ✓Dismissing an employee because of a TUPE transfer is automatically unfair unless the employer can show an 'economic, technical, or organisational' (ETO) reason entailing changes in the workforce.
- ✓Both the outgoing employer (transferor) and the incoming employer (transferee) have legal obligations to inform and consult affected employees or their representatives.
TUPE exists to answer a simple question: what happens to employees when their employer changes? Without TUPE, a business acquisition or outsourcing contract could leave workers without jobs, or force them to accept worse terms with the new employer. TUPE prevents that by treating the employment relationship as though it runs continuously through the transfer. The new employer steps into the shoes of the old one. Every right, obligation, and liability under the employee's contract transfers automatically. Length of service, pay, benefits, holiday entitlements, restrictive covenants: all of it carries over. For HR teams, TUPE is relevant in three main scenarios: when your company acquires another business, when your company loses a contract and the work moves to a different provider, or when a function is outsourced (or brought back in-house). In each case, employees connected to the transferring work move to the new employer on existing terms.
The Two Types of TUPE Transfer
TUPE covers two distinct types of transfer, each with its own legal test.
Business transfers (Regulation 3(1)(a))
A business transfer occurs when an 'economic entity' (an organised grouping of resources that has the objective of pursuing an economic activity) is transferred from one employer to another, and the entity retains its identity after the transfer. This covers the classic acquisition scenario: Company A buys Company B (or a division of Company B), and the employees working in that entity transfer to Company A. The key question is whether the entity retains its identity. If Company A buys Company B's assets but completely changes the business model, workforce, and operations, it might not be a TUPE transfer. If the entity continues recognizably after the transfer, TUPE applies.
Service provision changes (Regulation 3(1)(b))
This type was added by the 2006 regulations and is unique to the UK (it goes beyond what the EU Directive requires). A service provision change occurs when activities are outsourced from a client to a contractor, when a contract moves from one contractor to another (re-tendering), or when activities are brought back in-house. The test is whether there's an 'organised grouping of employees' whose principal purpose is to carry out the activities in question. This type of TUPE is extremely common in sectors like facilities management, IT outsourcing, catering, cleaning, and security, where contracts change hands regularly.
What Transfers with the Employee
TUPE transfers significantly more than just the employment contract. Understanding the full scope is critical for both employers.
| Category | Transfers | Does NOT Transfer |
|---|---|---|
| Terms and conditions | Pay, hours, holiday entitlement, notice periods, contractual benefits, restrictive covenants | Terms from collective agreements can be renegotiated after one year (since 2014 amendment) |
| Continuity of service | Full length of service carries over for unfair dismissal, redundancy pay, and other statutory rights | Nothing: continuity is fully preserved |
| Outstanding liabilities | Unpaid wages, accrued holiday, personal injury claims, discrimination claims | Criminal liabilities remain with the transferor |
| Collective agreements | Any collective agreement in force at the time of transfer binds the transferee | Recognition of the trade union may not transfer (depends on whether the entity retains distinct identity) |
| Pension rights | Occupational pension schemes don't transfer automatically, but the transferee must provide a minimum pension provision | Old-age, invalidity, or survivor's benefits under occupational pension schemes are excluded from automatic transfer |
Information and Consultation Obligations
Both the transferor and transferee must inform and consult 'appropriate representatives' of affected employees long enough before the transfer to allow meaningful consultation.
Who must be consulted
If a trade union is recognized for the affected employees, the union representatives must be consulted. If there's no recognized union, employers must consult elected employee representatives. Since the 2014 amendments, employers with fewer than 10 employees can inform and consult employees directly if there are no existing representative structures. Affected employees include not only those who will transfer but also any employees of the transferor or transferee who may be affected by the transfer (for example, existing staff of the new employer whose roles might change).
What information must be provided
The employer must inform representatives about the fact that a transfer is going to happen and the approximate timing, the reasons for the transfer, the legal, economic, and social implications for affected employees, and any measures the transferor or transferee envisages taking in connection with the transfer (such as planned redundancies or changes to working arrangements). This information must be delivered 'long enough before' the transfer to allow consultation. There's no specific minimum period, but tribunals expect genuinely meaningful engagement, not a last-minute notification.
Penalties for failure to consult
If an employer fails to inform and consult properly, the Employment Tribunal can award up to 13 weeks' pay per affected employee. This can be jointly and severally awarded against both the transferor and transferee. For a transfer involving 200 employees, a maximum award could exceed 500,000 GBP. The penalty is a strong incentive to get consultation right, even when the transfer timeline is tight.
Dismissals in Connection with TUPE Transfers
TUPE creates special rules around dismissals that are connected to a transfer. Getting this wrong is one of the most common and costly mistakes in UK employment law.
Automatically unfair dismissal
If the sole or principal reason for a dismissal is the transfer itself, the dismissal is automatically unfair. This applies to dismissals by both the outgoing and incoming employer. It doesn't matter how long the employee has worked there. There's no minimum service requirement for automatic unfair dismissal, and the normal two-year qualifying period for ordinary unfair dismissal doesn't apply.
The ETO defense
A dismissal connected to a TUPE transfer is not automatically unfair if the employer can show an 'economic, technical, or organisational' (ETO) reason entailing changes in the workforce. 'Changes in the workforce' means changes in the number of employees or the functions they perform. A genuine redundancy situation, a reorganization that changes job roles, or operational restructuring that reduces headcount can qualify. Simply wanting to cut costs by offering worse terms isn't an ETO reason, because it doesn't entail changes in the workforce itself.
Timing of dismissals
The protection isn't limited to the exact date of transfer. Dismissals before the transfer (by the outgoing employer) and after the transfer (by the incoming employer) can both be connected to the transfer and therefore automatically unfair. Tribunals look at the substance, not the timing. A transferor that dismisses employees the week before transfer to make the deal more attractive to the buyer is likely committing an automatically unfair dismissal.
Changing Terms and Conditions After a Transfer
TUPE severely restricts the incoming employer's ability to change transferred employees' terms and conditions, even if the employees agree to the changes.
The general rule
Any variation to an employee's contract is void if the sole or principal reason for the variation is the transfer itself. This means the new employer can't reduce pay, change hours, remove benefits, or alter any contractual term because of the transfer. Even if the employee signs a new contract agreeing to worse terms, the variation is legally unenforceable if it's connected to the transfer. The employee can later claim the difference.
When changes are permitted
Changes are lawful if the sole or principal reason isn't the transfer. If there's an ETO reason entailing changes in the workforce, and the employee agrees to the variation, it can be enforceable. Since the 2014 amendments, terms derived from collective agreements can be renegotiated one year after the transfer, provided the overall terms are no less favorable. The employer can also make changes that the original contract already permitted (for example, exercising a contractual right to relocate the employee).
TUPE Due Diligence for Employers
Whether you're buying a business, winning a contract, or outsourcing a function, TUPE due diligence should happen early in the process.
- Request and review Employee Liability Information (ELI) from the transferor. Since the 2014 amendments, ELI must be provided at least 28 days before the transfer (previously 14 days).
- ELI must include the identity and age of each transferring employee, their terms and conditions, any disciplinary or grievance actions in the past two years, any legal claims or pending claims, and any applicable collective agreements.
- Audit the transferring employees' pension arrangements. While occupational pension benefits don't automatically transfer, the incoming employer must offer a minimum pension provision.
- Assess the cost of inheriting the transferring employees' terms. If they're on significantly better terms than your existing workforce, this affects your commercial calculations and may create internal equity issues.
- Check for any TUPE-related dismissals by the transferor. If the transferor has dismissed employees to 'clean up' the workforce before transfer, those dismissals may be automatically unfair, and the liability transfers to you.
- Plan your information and consultation process early. Don't wait until the deal is signed to start engaging with employee representatives.
TUPE Statistics [2026]
Data reflecting the prevalence and impact of TUPE transfers in the UK.
Frequently Asked Questions
Can an employee refuse to transfer under TUPE?
Does TUPE apply to share sales?
What happens to employees on maternity leave or sick leave during a TUPE transfer?
Can the new employer harmonize terms between existing and transferred staff?
How does TUPE interact with redundancy?
Written by Adithyan RK