Transfer of undertakings (TUPE)
This factsheet was last updated January 2016.
What is a transfer of an undertaking?
A transfer of an undertaking falls into one of two broad categories, either a business transfer or a service provision change. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006) apply to protect UK employees when one of these ‘relevant transfers’ takes place and the business changes to a new owner.
TUPE 2006 applies if there is a transfer of an ‘economic entity that retains its identity’ (known as a stable economic entity). This can be determined by asking:
- Is the type of business being conducted by the ‘transferee’ (the new owner, or the employer who is receiving staff) the same as the ‘transferor's (the old owner, or the employer who is transferring staff)?
- Has there been a transfer of tangible assets such as building and moveable property (although this is not essential)?
- Are there intangible assets (such as such as patents, trademarks, copyright, goodwill or brand recognition) transferred at the time of the transfer?
- Have the majority of employees been taken over?
- Have the customers been transferred?
- Is there a high degree of similarity between the activities carried on before and after the transfer?
If the answer to several of the above questions is 'yes', then TUPE regulations are likely to apply. In some cases only one of those factors has been enough for TUPE 2006 to apply.
Service provision changes
A ‘service provision change’ occurs when a client who engages a contractor to do work on its behalf is either:
- reassigning such a contract (whether by contracting out, outsourcing or re-tendering and in some cases subcontracting), or
- bringing the work ‘in-house’ (where a contract ends with the service being performed in-house by the client themselves).
In addition, the activities undertaken must be essentially the same after the transfer as they were before it.
It will not be a service provision change if:
- the contract is wholly or mainly for the supply of goods for the client’s use, or
- the activities are carried out in connection with a single specific event or a task of short-term duration.
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