What is TUPE?
TUPE (the Transfer of Undertakings - Protection of Employment - Regulations) is designed to protect employees if the business which they work for changes hands, enabling employees and any liabilities associated with them from the previous employer to be transferred to the new employer by law.
TUPE was first passed in 1981 but was overhauled in 2006. On January 31 2014, new regulations on TUPE came into effect that updated the 2006 regulations.
It is essential that employers of all shapes and sizes are aware of TUPE and understand the sort of employment liabilities that can arise. TUPE can seem like a tricky and complex legislation to understand and, as a result, the words "TUPE transfer" can cause panic amongst organisations that are looking to take over a business. However, once you understand how the legislation works, you will soon get to grips with it.
The first thing to remember is that TUPE applies to organisations of all sizes. The regulations ensure that employees bring with them their length of service and terms and conditions to their new employer, and that there is a rigid structure for the transfer process. Essentially, it is designed so that these are maintained under the new employer. However, the previous employer's benefits in relation to invalidity, old age or survivors under occupational pension schemes, are not always transferred on identical terms, or transferred at all.
The obligations a business will face depend largely on whether you are the transferor (the business transferring employees to another business) or the transferee (the business taking on the employees). The sort of business transfers that are affected by TUPE include:
- When a company buys another (not by way of share transfer)
- When a partnership or sole trader transfers to another
- When two businesses cease and combine to form another new company
- When a contract to provide services or goods is transferred, resulting in a transfer of a business. Prime examples here include security, catering and cleaning contracts.
TUPE does not apply when there has been a transfer by share take over (this is because there is no transfer of the business itself; only new shareholders), transfer of assets only, transfer of a service provision contract where this does not involve part of a business, and transfers located outside of the UK.
Because TUPE regulations apply to the transfer of an undertaking, there has to be the transfer of an 'economic entity', which keeps its identity both before and after the transfer. The undertaking does not have to be a commercial or professional business; TUPE also applies to charities.
Once you have broken TUPE down into segments – what it means legally, when it is likely to apply and what you need to do to comply – it is not as complex as it may have initially seemed.
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