TUPE: protections and contract terms
What is TUPE and when does it apply?
The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect employees when a business or part of a business is transferred to a new employer, or when there is a service provision change such as outsourcing, insourcing, or a change of contractor. TUPE applies to ‘relevant transfers’, which include business sales (excluding share sales) and service provision changes where an organised grouping of employees is dedicated to the activities being transferred and those activities remain fundamentally the same post-transfer. TUPE does not apply to asset-only sales, supply of goods contracts, or one-off short-term projects. The regulations are mandatory and apply regardless of business size, provided the undertaking or organised grouping is situated in the UK immediately before the transfer. Recent case law and government policy indicate that ‘workers’ may also be covered, though this is not yet settled law, and employers should take a risk-averse approach by including workers in the process where appropriate.
Protections granted to employees by TUPE
TUPE provides for the automatic transfer of employees’ contracts of employment, meaning all terms and conditions—including pay, hours, benefits, and continuity of service—move to the new employer unchanged. All rights, powers, duties, and liabilities connected to the employment contract also transfer, including outstanding claims or grievances. Employees are protected against dismissal if the sole or principal reason is the transfer itself; such dismissals are automatically unfair unless there is an economic, technical, or organisational (ETO) reason entailing changes in the workforce. Any attempt to change contract terms because of the transfer is void unless justified by a valid ETO reason and following proper consultation and agreement. Employees must be informed and, where measures are proposed, consulted in advance of the transfer, either through recognised trade unions, elected employee representatives, or directly in small businesses (fewer than 50 employees or fewer than 10 transferring, with no existing representatives). Failure to comply with these obligations can result in tribunal claims and compensation of up to 13 weeks’ pay per affected employee.
Contract terms and changes post-transfer
The new employer must maintain all contractual terms and conditions for transferring employees. Changes to terms are only permitted if the reason is wholly unrelated to the transfer, the change is beneficial to the employee, the contract expressly allows it (e.g. a mobility clause), or there is a valid ETO reason involving changes to the workforce. Even with an ETO reason, fair procedures and consultation are required. Harmonisation of terms with existing staff is not a valid reason under TUPE. Any attempt to reduce pay or worsen terms solely due to the transfer is unlawful and may lead to claims for breach of contract or unfair dismissal. Collective agreements may be renegotiated after one year, provided the changes are not less favourable overall. The period of protection is indefinite—changes linked to the transfer remain void regardless of how much time has passed, though the connection may be harder to prove over time.
Additional employee rights and employer duties
Employees retain their continuity of service and all accrued rights, including holiday entitlement and redundancy rights. The outgoing employer must provide detailed employee liability information to the incoming employer at least 28 days before the transfer. Both employers must inform and consult affected employees about the transfer, its timing, reasons, implications, and any proposed measures. Employees may object to transferring, but this is treated as a resignation without entitlement to redundancy pay unless the objection is due to substantial detrimental changes in working conditions. Special rules apply to occupational pensions, which are not fully protected under TUPE, but minimum pension provision must be offered by the incoming employer. Failure to comply with TUPE can result in significant legal and financial liabilities for both employers.
Footnote: Workers and TUPE. The 2019 ET decision in Dewhurst v Revisecatch Ltd suggested that the Regulations extend to “limb-(b) workers”, but the ruling is not binding on higher courts. The Government’s May 2024 “Smarter Regulation – Employment Law Reform” consultation proposes amending TUPE reg 2 to state expressly that only employees (not workers) are covered; legislation is still awaited as at 4 July 2025. Pending clarity, prudent employers should continue to include any limb-(b) workers in information and consultation exercises.
Refusal to transfer, dismissal, insolvency, redundancy
Can an employee refuse to transfer under TUPE?
Employees assigned to the transferring business or service can object (preferably in writing) to either the outgoing or incoming employer before the transfer date. If an employee objects, their employment terminates on the transfer date and is treated as a resignation, so they are not entitled to redundancy pay or to claim unfair dismissal, unless their objection is due to a substantial detrimental change in working conditions. There is no legal requirement to inform employees of this right, but it is best practice to do so to avoid disputes and ensure clarity for all parties involved.
If the employee objects because the transfer would involve a substantial change in working conditions to their material detriment, the objection is treated as a dismissal by the transferor, and the employee may be entitled to claim unfair dismissal or redundancy pay. The transferor should handle such objections with care, as liability for dismissal will rest with them, and they should consider seeking indemnities from the transferee in the commercial agreement.
TUPE transfers and employee dismissals
Dismissals are automatically unfair if the sole or principal reason is the TUPE transfer itself, unless there is an economic, technical, or organisational (ETO) reason entailing changes in the workforce. Dismissals for a valid ETO reason must still follow a fair process, including consultation and selection, and must not be used simply to harmonise terms or reduce headcount for the sake of the transfer. If a dismissal is found to be automatically unfair, the employee may bring a claim for unfair dismissal against the employer responsible at the time of dismissal.
If an employee objects to transfer without a substantial detrimental change, their employment ends by operation of law and is not a dismissal. However, if there is a substantial detrimental change and the employee objects or resigns, this is treated as a dismissal, and the transferor is liable for any claims arising.
Exemptions to TUPE protections
TUPE does not apply to all scenarios. Exemptions include share sales (where the employer does not change), supply of goods only (not services), one-off or short-term projects, and where there is no organised grouping of employees assigned to the relevant activities. Agency workers are not protected, and the position of “workers” (as opposed to employees) is currently unsettled, though a 2019 tribunal decision suggested workers may be covered; employers are advised to take a risk-averse approach and include workers in the process where possible.
Redundancy and TUPE
Redundancies made because of a TUPE transfer are automatically unfair unless there is a genuine redundancy situation and a valid ETO reason involving changes in the workforce. Redundancies can only be made after the transfer, unless the reason is unrelated to the transfer. Employers must follow fair redundancy procedures, including consultation with affected employees or their representatives, fair selection, and consideration of alternatives. Collective consultation is required if 20 or more redundancies are proposed within 90 days at one establishment, and statutory redundancy pay is due for employees with two or more years’ service.
If redundancies are necessary post-transfer, the incoming employer is responsible for the process and any redundancy payments, though costs may be apportioned contractually between the parties. Enhanced redundancy terms may apply if included in contracts or collective agreements.
TUPE and insolvency
Where the transferor is insolvent, TUPE protections are modified to encourage business rescues. Some employee liabilities (such as redundancy, notice, and certain other payments) may be met by the National Insurance Fund rather than transferring to the new employer. Incoming employers may agree changes to terms and conditions with employee representatives to safeguard employment, even without an ETO reason, provided the changes are designed to save the business and are agreed collectively. TUPE does not apply if the business is closing down rather than being rescued or transferred as a going concern.
If employees are owed money at the point of transfer, they may claim from the National Insurance Fund, with the new employer liable for any shortfall. Any changes to terms must not breach statutory minimum rights, such as the National Minimum Wage.
Documentation and consultation duties
Both outgoing and incoming employers must inform and, where appropriate, consult with recognised trade unions or elected employee representatives about the transfer, its timing, reasons, legal and economic implications, and any measures envisaged. Failure to comply can result in a protective award of up to 13 weeks’ pay per affected employee. Employee liability information must be provided at least 28 days before the transfer.
Union relations and collective agreements
Collective agreements and union recognition post-transfer
When a business transfer occurs (such as under TUPE), any existing collective agreements and union recognition arrangements generally transfer to the new employer. The transferee must maintain the terms and conditions derived from collective agreements in force at the time of transfer, and employees’ rights under those agreements are preserved. The transferee is not bound by collective agreements negotiated after the transfer unless they become a party to those agreements. After one year, the transferee may renegotiate terms derived from collective agreements, provided the overall terms are no less favourable to employees, but must continue to recognise the union for collective bargaining unless and until derecognition is lawfully achieved.
Employers must inform and consult recognised trade unions about the transfer and any measures envisaged, including changes to terms and conditions or redundancies. Failure to consult can result in financial penalties and claims for protective awards. The obligation to consult applies even if the transferee does not intend to make immediate changes, and consultation must be meaningful and timely. Micro businesses (fewer than 10 employees) may consult directly with employees if there is no recognised union or elected representatives.
Union recognition for collective bargaining purposes transfers to the new employer only where the transferred undertaking (or its bargaining unit) retains an identity distinct from the rest of the transferee’s organisation. This means the transferee inherits the duty to negotiate with the union on matters such as pay, hours, and holidays for the relevant bargaining unit. The scope of recognition and the bargaining unit should be reviewed promptly post-transfer. If the transferee wishes to change or terminate voluntary recognition, this must be done in accordance with the agreement and statutory procedures, but statutory recognition may be re-applied for by the union if support remains strong.
Employers must not make direct offers to employees to induce them to forgo collective bargaining or bypass the union, as this constitutes an unlawful inducement and can result in significant financial penalties per affected employee. Before making any changes to terms and conditions for employees covered by a collective agreement, the collective bargaining process must be exhausted, including any dispute resolution steps specified in the agreement. Legal advice should be sought before communicating directly with staff on matters subject to collective bargaining.
All communications, agreements, and consultation processes should be carefully documented. This includes records of information provided to unions, minutes of consultation meetings, and any correspondence regarding changes to collective agreements or recognition status. Proper documentation will support compliance in the event of a challenge or claim.
