The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006) is the main piece of legislation governing the transfer of a business, or part of one, from one owner to another. It also governs service provision changes.

The regulations are designed to protect the rights of the employees being transferred, so that they have the same terms and conditions, with continuity of employment, as before. Without this kind of legal protection for employees, their employment contracts would automatically end when the business changed hands and whether they were retained, and on what terms, would be at the complete discretion of the new owner (transferee).

TUPE 2006 was amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014. 

TUPE does not apply outside the UK and none of the 2014 amendments apply to Northern Ireland.

Both 2006 TUPE and its predecessor, the 1981 regulations, were introduced to comply with the EU Acquired Rights Directive. There have been various amendments to the UK regulations and a great deal of case law since then.

The Department of Business, Energy & Industrial Strategy published guidance on TUPE to cover developments since 2009, including the 2014 amendments. Acas has also published guidance on the changes.

These Q&As should be read alongside our Case law on Tupe.

TUPE applies to both:

  • Transfers of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the UK
  • Service provision changes, where an organised group of employees are situated in Great Britain before the service change, but with no limit as to where they are situated afterwards.

Where an undertaking, or a part of an undertaking, that fits the definition of a ‘relevant transfer’ in the Regulations occurs, all employees working in that business immediately before the transfer automatically transfer from the old employer (the transferor) to the new employer (the transferee). 

The transferee employer cannot pick and choose which employees to take on and the organisation takes over all rights and obligations arising from the transferred employees’ contracts of employment, except criminal liabilities (but see 'Do occupational pensions transfer under TUPE?').

Neither the new employer nor the previous one may dismiss an employee because of the transfer unless the dismissal is for an ‘economic, technical or organisational’ (ETO) reason entailing changes in the workforce (see ‘The ETO defence' below). If there is no such reason, the dismissal will be unfair. If there is an ETO reason, and it is the main cause of the dismissal, the dismissal will be fair provided that the employer acted reasonably in the circumstances.

Any liabilities relating to employees dismissed before the transfer (for a reason connected with it) also transfer to the transferee.

Employees’ rights

Transferring employees or their representatives have the right to certain information and to consultation on the transfer.

If the transfer involves a substantial, detrimental change in their working conditions, employees may object to the transfer, or resign and claim unfair dismissal (but not payment in lieu of notice). Employees can resign and claim constructive dismissal in the usual way if there is a repudiatory breach of their contract.

The new employer may not unilaterally worsen the terms and conditions of employment of any transferred employee, unless the employment contract allows such a variation (this only applies to transfers from 31 January 2014 following the most recent amendment to TUPE).

Tupe overseas

The Acquired Rights Directive, from which TUPE is derived, does not extend to transfers which take place entirely outside the EU and UK legislation does not usually apply to companies outside the UK. But employees working overseas for a UK undertaking should be caught by the UK provisions.

Most transfers of undertakings outside the UK but within the EU will be covered by the regulations of other EU countries who have implemented the Acquired Rights Directive.

This issue is complex, and employers should seek specialist legal advice.

Which transfers TUPE applies to is not straightforward and has been challenged on numerous occasions in the courts.

The relevant questions to ask when considering whether there has been a ‘relevant transfer’ are:

  • Has there been a transfer of an economic entity that retains its identity (a business transfer)?
  • Is there a service provision change?

The circumstances when service provision changes occur under Tupe are set out under a separate heading below. Some transfers will be both a business transfer and a service provision change.

It is important to remember that according to case law relating to business transfers, TUPE applies only to situations where a business or part of one ‘retains its identity’ after the transfer. If it does not retain its identity there is not a ‘transfer of a business or part of a business’ as envisaged by the Regulations. 

For example, if the organisation owning a shopping centre employs caretaking, security and cleaners, then the sale of the shopping centre is likely to constitute a TUPE transfer. If the new owner plans to run the complex as a shopping centre, then the identity will be retained, but if the new owner redevelops the property into residential flats, it is likely that the identity will not be retained and TUPE will not apply. 

TUPE protects employees:

  • Who are assigned to the undertaking or the part of the undertaking that is being transferred and who are employed immediately before the moment of transfer, or
  • Who would have been employed at the point of transfer but for the fact that they were unfairly dismissed for a reason connected with the transfer and there was not an economic, technical or organisational (ETO) reason for such a dismissal (see 'The ETO defence').

Service provision changes and ‘organised grouping’

Understanding which employees are assigned to the part of a business or service being transferred, and therefore protected by TUPE, can be difficult, especially where a service is changing hands under TUPE. There must be an organised structured team dedicated to the provision of services for the employer’s client or customer.

‘Principal purpose’

For employers to decide if there is a service provision change under Tupe, it is necessary to decide if the grouping had, as its ‘principal purpose’, the carrying out of the activities concerned on behalf of the client.

If the principal purpose involves activities which are not the subject of the service provision change, then TUPE may not apply. To decide this matter, an employment tribunal will look at the actual activities being carried out.

Points to remember

  • Organisations must determine if there is an organised grouping of employees with the principal purpose of carrying out activities for the client.
  • Organisations must consider whether the employee in question is assigned to that grouping.
  • Percentages of work undertaken can be a practical indicator of where the employee is assigned. The higher the percentage of work undertaken, the harder it is to argue that they are not assigned to that part of the undertaking. Other factors, such as the cost and value of the employee to each part of the business and any managerial responsibilities, are relevant too.

Transferors are obliged to give the transferee written information about the employees who are to transfer and all the associated rights and obligations towards them. 

This includes:

  • The identity and age of the employees who will transfer.
  • Information contained in the employees’ written particulars of employment under section 1 of the Employment Rights Act 1996.
  • Information on any collective agreements affecting the employees that will apply after the transfer.
  • Details of any disciplinary or grievance proceedings taken by, or against, the transferring employees to which the Acas Code of Practice applies. 
  • Any claims brought by the employees against the transferor in the last two years.
  • Any claims that the transferor reasonably believes might be brought.

Failure to supply information

The information supplied must be no more than two weeks old, and the obligation is a continuing duty to provide changes in information as well. The transferee employer will have rights to compensation if the transferor provides incorrect information or fails to notify the information listed above. However, not all failures to supply detailed information will give rise to compensation. The remedy includes compensation paid by the transferor, based on any loss sustained by the transferee.

Agency workers

Employers must specify:

  • How many temporary agency workers the organisation has
  • Which part of the organisation they work in
  • What type of work they are carrying out.

Either the transferor or the transferee must inform the appropriate representatives of any affected employees of the fact the transfer is happening and:

  • Approximately when it is happening
  • The reasons why it is happening
  • The legal, social and economic implications for the affected employees
  • The measures the employer intends to take in relation to those employees (if any) if the employer is the transferor, the measures the transferee envisages taking in relation to those employees who are to be assigned on the transfer (if any).

The written information to be given to employee representatives about the transfer includes certain details about temporary workers.

If an employer recognises an independent trade union, the appropriate representatives to consult over a TUPE transfer will be trade union representatives. In the event there is no recognition agreement, or any other elected consultation forum for consultation, an employer will be required to make arrangements for employees to elect representatives for consultative purposes.

Micro businesses (those with 10 or fewer employees) can inform and consult with employees directly where there is no trade union. 

There is no specified time in which consultation has to take place. The only obligation to consult is where the transferor or transferee envisages it will take measures in relation to any of the affected employees. It must then consult with the appropriate representatives with a view to reaching agreement on the measures to be taken.

The employees who are 'affected' by the transfer must be consulted. There is no obligation to consult with the whole of the workforce or everyone in the workforce who might apply for a job in the part transferred.

Any redundancy consultation which begins before the transfer takes place can count towards collective redundancy consultation, provided the transferor agrees (this change was brought in by the 2014 amendments). This consultation will then count towards the 30 (or 45) day collective redundancy consultation period (see our Redundancy Q&As).

Failing to consult

Where there is a failure to consult the employees affected, trade union or employee representatives may bring a complaint. Both the transferor and the transferee can be liable for the failure to inform or consult which may lead to each affected employee being awarded a protective award of up to 13 weeks' pay. The complaint must be lodged with the tribunal within three months of the date of the transfer.

All rights and liabilities transfer under TUPE, apart from criminal liability and some pension rights. Pensions are not governed by TUPE but by the Pensions Act 2004 (see 'Do occupational pensions transfer under TUPE?').

TUPE ensures that transferring employees are protected by assigning their contracts to the transferee organisation. The date of commencement of employment for continuity of employment purposes will be preserved from the date of commencement of employment with the transferor. The transferee inherits all civil liabilities and obligations, including:

  • Liability for personal injury claims against the transferor
  • Liability for age, sex, sexual orientation, race, religion and disability discrimination claims against the transferor
  • Liabilities for any breach of contract
  • All statutory rights and liabilities, for example, unfair dismissal claims
  • An equivalent to profit shares of a cash payment or award of shares
  • Equal pay claims.

Equal pay claims relating to employment before the transfer have to be brought within six months of the transfer. Transferee organisations can be liable for up to six years’ worth of equal pay claims resulting from unequal pay practices adopted by the transferor. To minimise exposure to such claims, transferees must:

  • Attempt to determine any inequalities in the pay levels of relevant employees before agreeing to the transfer
  • Try to obtain indemnities and warranties from the transferor to cover equal pay claims
  • Try to obtain the evidence necessary from the transferor to defend any claims should the need arise.

Any collective agreements made with recognised trade unions, and any recognition agreements where the business retains a distinct identity following the transfer, will transfer.

It became slightly easier to change collective agreements post transfer following the 2014 amendment. From 31 January 2014, only the terms and conditions in a collective agreement applying to the transferring employees at the time of the transfer will continue to apply to their employment with the new employer. 

Transferee organisations will also be able to change terms and conditions provided for in collective agreements one year after the transfer, provided that overall the change is no less favourable to employees.

Public-private outsourcing

Some complex issues about changing terms and conditions can arise where private sector employers take over businesses and staff formerly in the public sector. In such cases employees may have terms and conditions which are provided for in collective agreements. It is possible to change collective agreements one year after the transfer.

Where employees have terms and conditions provided for in collective agreements, only the terms and conditions in the collective agreement existing at the time of the transfer will apply to the new employer.

This is of benefit to private employers who offer services to the public sector, because collective agreements made in the public sector will not bind the private sector employer who was not involved in the collective agreement negotiations.

Transferees can change terms and conditions provided for in collective agreements one year after the transfer provided that overall the change is no less favourable to employees and the transfer took place after 31 January 2014.

The European courts have also addressed this issue. A transferee is bound only by the terms and conditions incorporated by the collective agreement at the time of the transfer. Attempts by employees to rely on collective agreements amended after a transfer were unsuccessful.

Employers should always clarify what collective agreements (if any) are in force at the time of any transfer and what terms are incorporated into the contracts of employment.

Service provision changes covered by TUPE occur when an organisation:

  • Contracts out or outsources services previously undertaken by the client to a contractor for the first time
  • Re-tenders or transfers services from one contractor to a new contractor
  • Brings services back in house to be performed by the client titself (known as contracting in or in-sourcing).

There will be no service provision change where:

  • 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.

For there to be a service provision change the activities being carried out by the transferee must be ‘fundamentally the same’ as those carried out by the transferor before the transfer.

TUPE applies to changes in service provision which involve an ‘organised grouping’ of employees whose principal purpose is to carry out the activities concerned on behalf of the client. A single employee can be an organised grouping of employees and the activities must be fundamentally the same after the transfer as previously. However, the whole of a service does not have to transfer for there to be a service provision change (see Arch Initiatives v Greater Manchester West Mental Health NHS Foundation Trust, 2016).

If there is no identifiable grouping of employees, and it is unclear which employees should transfer in the event of a change of contractor, there may be no ‘service provision change’ and TUPE may not apply.

The service provision change can constitute just one person, for example, a cleaning company which sends just one employee to clean an office. Other examples include contracts to provide such labour-intensive services as workplace catering, security guarding, refuse collection, and machinery maintenance.

Subcontracting and second-generation outsourcing

Sub-contracting or second-generation outsourcing can be complicated. This can occur when an employer contracts work out to a service provider, and later decides to change to another service provider.

For example, company A may agree that company B will provide its security guards but then changes to security company C. In this situation Company C has won the contract but will inherit any employees whose principal purpose is carrying out the activities that are transferring.

In a subcontracting situation, employers should not assume that the ‘client’ of the subcontractor getting the employees back will always be the contractor. TUPE protection may extend to transferring the employees of subcontractors to the original company (notwithstanding that the original client may have no contractual relationship with the sub-contractor). In subcontracting situations, there can be more than one client. TUPE may effectively ‘jump’ over a contractor and transfer the employment of an employee direct from a sub-contractor to the original client.

For example, a local council contracts out the operation of its car parking services at an ice rink to Company A which then subcontracts the management of the car park to Company B. If the Council resumes management of the car park taking it back 'in-house' it may inherit some of the Company B employees although it had no contractual relationship with that company (see Jinks v London Borough of Havering, EAT 2015)


Employers should consider obtaining appropriate indemnities from contractors to cover liabilities including those relating to a subcontractor’s employees. Depending on the bargaining position, different companies in the chain of transactions may find that their options are limited. The original client company may be asked to give indemnities to a new service provider in respect of the transferring employees or may agree to an increase in the price for the contract to compensate the incoming service provider for the liabilities they are taking on. If there are a lot of long-serving employees with significant employment benefits, such as final-salary pension schemes or enhanced redundancy terms the potential exposure is significant. Incoming service providers are exposed to potential liabilities from outgoing service providers and will want adequate contractual protection from the customer before committing to the contractual price. 

Employers involved in outsourcing or re-tendering exercises, where activities are redistributed to a number of different contractors, will usually attract the consequences of TUPE.

Incoming contractors may be able to avoid TUPE if the activities are fragmented, particularly if they are split between different new contractors. The more fragmented an activity is, and the greater the number of contractors post-transfer, the more likely it is that TUPE will be avoided by those incoming contractors.

Each of the two (or more) new employers providing the service will inherit liability for the employees who were wholly, or mainly, assigned to the transferor’s activities that have been taken over. Liabilities for employees cannot be divided between two or more transferees on a percentage basis.

The key test remains whether an organised grouping (which has the principal purpose of carrying out the relevant activities) has transferred. Since 31 January 2014, the activities must also be 'fundamentally or essentially the same' after the purported transfer.

Whether an employee is assigned to the activities after a service provision change will depend on establishing a link between the employee and the work performed, including the amount of time spent on the work. The terms of the employment contract showing what the employee could be required to do, and how the cost of the employee's service has been allocated between the different parts of the business, would also be relevant.

In the tendering process, the potential transferee will need to consider if their organisation will acquire the greater part of the activities to which the employees are assigned (this may be hard to determine). 

Organisations that acquire new employees following a TUPE transfer may wish to harmonise the new employees' terms. Deciding whether this is legally possible following a TUPE transfer is tricky. Straightforward, post-transfer harmonisation is simply not possible without risk. Parties cannot contract out of TUPE, so even employees who agree to changes could later seek to rely on their previous terms.

Under TUPE, any purported variation of an employment contract is void unless there is an economic, technical or organisational reason for the variation, entailing changes in the workforce (known as the ‘ETO defence’ – see below) or the terms of that contract permit the employer to make such variations.

As transfer-related changes to terms and conditions of employment are void under TUPE, it is highly risky to put transferred employees on the same contractual terms as the existing workforce. Employers can safely harmonise employment terms only if:

  • There is an economic, technical or organisational (ETO) reason (see 'The ETO defence ') or
  • The terms of the employment contract permit the employer to make such variations for transfers (eg a mobility clause).

To show an ETO reason the employer must, at the same time, establish a change in the workforce (normally a workforce reduction). Measures designed only to harmonise the terms and conditions of employment will not be sufficient.

TUPE 2006 confirms that a change for an ETO reason can be valid, provided that the employees consent and a change in the workforce is necessary. Later regulations in 2014 then changed the 2006 TUPE Regulations to allow slightly greater freedom to vary the terms and conditions of transferred employees.

Location changes  

One of the 2014 changes to TUPE expressly dealt with changes in the location of the workforce. The phrase ‘entailing changes in the workforce’ now includes ‘a change to the place where employees are employed by the employer to carry on the business of the employer or to carry out work of a particular kind for the employer’.

A change in location is therefore effectively incorporated into the ETO reasons.

Reducing or increasing benefits 

If the reason for the change to the transferred employees’ terms and conditions is the transfer and no other reason, it will be void and unenforceable – even if the employees agree to the change.

This difficulty often arises where the transferor wishes to dispose of an unprofitable undertaking. The transferee will take it, on but needs to rationalise to make it profitable. The transferee wishes to make changes to harmonise terms with those of the transferee’s existing workforce, for example, by reducing the remuneration packages of some employees. This rationalisation is not permitted unless there is an ETO reason for the variations entailing changes in the workforce (see ‘The ETO defence').

A reduction in salary is a change because of the transfer itself and is therefore void. The fact that profit would increase if the employees were paid less does not fall within the definition of an ETO reason anyway.

The provisions protecting workers cannot be waived by them if the changes are due to the transfer. This remains the position even after the 2014 reforms. If employees agree to transfer connected terms and conditions on a transfer, they can later change their minds and rely on their previous terms (see British Fuels v Meade and Baxendale and Wilson v St Helens Borough Council, House of Lords, 1998).

Any detrimental changes made following a transfer will be unenforceable. However, changes to contracts agreed by the parties and which are entirely beneficial are not prevented. Transferred staff can choose between enforcing the rights that transferred with them under TUPE or any new rights granted by the transferee (see Power v Regent Securities, CA, 2008).

The government’s TUPE: guide to 2006 regulations, updated in 2014, confirms that:

  • The underlying purpose of the Regulations is to ensure that employees are not penalised when a transfer takes place 
  • Changes to terms and conditions agreed by the parties which are entirely positive are not prevented by the Regulations.

Positive changes to employees’ packages may therefore be enforceable and employees are less likely to challenge these anyway. The guidance also gives some indication of when the reason for a change is transfer-connected and when it isn’t.

For further explanation of the limited options for employers on post transfer changes see the Q&A below ‘Can employees’ terms and conditions be harmonised post-transfer?’.

A dismissal of an employee by either the transferor or transferee because of the transfer will be automatically unfair unless there is an economic, technical or organisational (ETO) reason for it entailing changes in the workforce.

The Regulations do not define what this phrase means, but over the years the courts have interpreted it to mean:

Economic – reasons related to company performance (not just profit).

Technical – reasons related to the equipment, systems or processes.

Organisational – reasons related to the company’s structure. 

The most obvious example of an ETO reason is redundancy, which may affect the number of employees or the job functions performed.

Other examples of ETO reasons include:

• The demand for output has fallen to such an extent that profitability of the entity is unsustainable without dismissing staff (economic reason).

• The transferee wishes to use new technology and staff employed by the transferor in the entity do not have the requisite skills (technical reason).

• The transferee is overstaffed and it is not practical to retrain staff (organisational reason).

Fair dismissal

Even if the organisation can show there is an ETO reason, entailing changes in the workforce, for a dismissal, it will still have to justify any dismissals, but only in accordance with the normal requirements for unfair dismissal.

TUPE 2006 sets out three different categories of dismissal:

1. Dismissals where the sole or principal reason is the transfer itself, and not for an ETO reason, are automatically unfair.

2. Dismissals where the sole or principal reason is not the transfer itself, but an ETO reason, are potentially fair, subject to the normal test of reasonableness under the unfair dismissal legislation.

3. Dismissals where the sole or principal reason is unconnected with the transfer. These fall outside TUPE as they are unrelated to a relevant transfer, and the usual unfair dismissal principles will apply even if the dismissals are made around the time of the transfer.

Employees must still have one year's service to bring a claim under TUPE 2006 (or two years if employment started on or after 6 April 2012) unless they can argue unfair dismissal for asserting their statutory rights (see Unfair dismissal Q&As).

TUPE protection will always apply to transfers of business from companies in administration. In such situations, employers may make transfer-related changes to the employees’ terms and conditions, subject to certain specified safeguards. The TUPE provisions which apply are designed to make it easier to rescue aspects of insolvent businesses. Changes may be agreed even where there are no economic, technical or organisational (ETO) reasons that would render them potentially lawful. The agreed changes must comply with national law and practice, with a view to ensuring the survival of the business and thereby preserving jobs.

The transfer must take place after the date on which insolvency proceedings start. This happens once the insolvency practitioner has been appointed at the creditors’ meeting and not before.

An administrative receivership, or other receivership, or members’ voluntary winding up, is not included.

Full liquidations/bankruptcies

In some insolvency proceedings, the TUPE protections usually afforded to employees will not apply. If there are bankruptcy or similar proceedings, with a view to the liquidation of the transferor’s assets, under TUPE the contracts of employment will not transfer to the purchaser and the employees will have no effective protection against dismissal. However, the state will cover certain sums owed to employees in these situations.

Administrations and voluntary arrangements

Some insolvencies involving administrations are treated differently from full liquidations. There may be insolvency proceedings, which are not with a view to liquidation of the assets, supervised by an insolvency practitioner. 

These include:

  • Administration
  • Voluntary arrangement
  • Creditors’ voluntary winding up.

Debts to employees

When an employer acquires all or part of an insolvent business, special rules apply to debts to employees:

  • Certain existing debts to employees will be paid by the National Insurance Fund, rather than pass to the transferee in the same way as if the employees had been dismissed on insolvency.
  • The debts include eight weeks’ pay arrears, holiday pay for up to six weeks, statutory notice entitlement, statutory redundancy pay and unfair dismissal basic awards (see Statutory rates and compensation limits).
  • Debts to employees in excess of the limits referred to above will transfer to the transferee.

Variation of terms

Subject to certain conditions, there is greater scope to vary employment terms in connection with relevant insolvency proceedings. 

The transferee may change terms and conditions made because of the transfer, even where there are no ETO reasons, provided that the conditions below are met. The changes must:

  • Be designed to safeguard employment opportunities by ensuring the survival of the undertaking
  • Be agreed with appropriate employee representatives (union representatives or, if none, elected representatives) 
  • Not contravene UK law.

There appears to be no requirement for the employees themselves to agree the above changes. However, if the employees are represented by non-union representatives, the agreement must be in writing and signed by each representative. Prior to signature, a written copy of the changes, together with guidance on them, must have been given to each affected employee.

Organisations may be fined up to £20,000 per illegally employed worker unless they can prove they checked the prospective worker’s right to work in the UK following a TUPE transfer. If an employer knows that an employee is not permitted to work, the fine is unlimited, and carries with it a possible sentence of two years’ imprisonment.

Although TUPE provides that right to work checks carried out by the transferor are considered to have been carried out by the transferee, the new owner of the business should conduct its own checks.

Although the transferee employer ‘inherits’ any statutory excuse acquired by the transferor when it conducted its checks, this cannot be safely relied upon from a legal viewpoint.

For more information, see our guide on what employers need to know about immigration law changes post-Brexit. The government provides an Employer’s guide to right to work checks, which includes advice on TUPE. The Home Office has an employer’s helpline for checking an employee’s right to work.


Yes, employees’ contracts can be split so they transfer to multiple employers following a TUPE transfer. This applies to both a business transfer and a service provision change.

It used to be thought that if work became fragmented after a transfer this would avoid the application of TUPE. However, three cases namely ISS Facility Services v Govaerts, McTear Contracts Ltd v Bennett and Mitie Property Services UK Ltd v Bennett and others have now confirmed the legal position. Where there is a TUPE transfer to multiple transferees, employees can now transfer from working full time for one employer to working part time for multiple employers. Alternatively, employees can be split between the transferees in proportion to the work undertaken by them. This means that transferee’s previous tactic of arguing that fragmentation means TUPE does not apply is less likely to work to avoid TUPE liabilities.

For example, in the case of McTear Contracts Ltd v Bennett and Mitie Property Services UK Ltd v Bennett and others some kitchen installation contracts were re-tendered and split it into two discrete groups based on geographical location (North and South). The outgoing employer produced a spreadsheet identifying which employees would be transferred to one of two new transferees based on the North and South locations. The Employment Appeal Tribunal held that the employment of each employee was effectively split in two, so transferred to each of the new companies in proportion to the tasks performed.

Employers should bear in mind that in a service provision situation involving more than one transferee, employees may either:

  • split into different groups so that they are working 100% of their time for one transferee; or
  • be split with the service provision so that employees work part-time for more than one new employer.

Employers should try and agree which employees transfer to which transferee company, and if any remain with the transferor. It is preferable for employees to be organised into groups to avoid splitting employment contracts because, under TUPE, the legal analysis may mean that employees transfer to two or more transferees simultaneously.

Potential problems

There could be many problems if contracts are divided between multiple transferees. For a start, there is no clear legal mechanism for calculating how employment contracts should be split between different new employers. Transferee employers (or employees) may try and argue that the activities allegedly transferring do not remain fundamentally the same and that TUPE therefore doesn’t apply at all. Points to consider include:

  • Following a transfer, an employee could have two or more contracts of employment with different employers at the same time, provided the work attributable to each contract is clearly separate from the work on the other.
  • Transferor employers should try and clarify at the negotiation stage which employees will transfer to which transferee. This may help to avoid splitting contracts between multiple transferees.
  • If an employee's contract can’t be split, or the transfer results in detrimental changes to an employee's rights or working conditions, the changes may be automatically unfair under TUPE, unless the transferee can show an economic, technical or organisational reason for the change entailing changes to the workforce (an ETO reason).
  • Transferees could end up being responsible for redundancy costs for employees with more than two years’ service. New employers should budget for this when negotiating allocation of liabilities in contracts.
  • Some employees may remain with the transferor, and some employees will be transferred to one or other transferee. Splitting service provision contracts will be tricky and costly and employers should budget for claims resulting from this.
  • If an employee's contract can’t be split, or the transfer results in detrimental changes to an employee's rights or working conditions, the changes may be automatically unfair under TUPE, unless the transferee can show an economic, technical or organisational reason for the change entailing changes to the workforce (an ETO reason).
  • Transferees could end up being responsible for redundancy costs for employees with more than two years’ service. New employers should budget for this when negotiating allocation of liabilities in contracts.
  • Employees may object to impermissible changes to their contracts, or companies may be seen as illegally contracting out of TUPE. Even if the employees agree to new terms, they can still raise an automatically unfair claim later.
  • If there are two or more competing businesses, the one that wins a new contract may not want to employ someone if they are also working for a competitor.

As part of the arrangements, the old and new employers should negotiate warranties and indemnities to cover liability if employees make claims.

Post-transfer harmonisation is difficult. 

It is core principle of contract and employment law that a contract, including a contract of employment, can only be changed with the agreement of both parties. Any attempt to impose a unilateral variation of a contractual term is a repudiatory breach of contract, entitling the employee to resign and claim constructive dismissal.

Making contractual changes in the context of TUPE is even harder because transfer-related changes to terms and conditions of employment are void unless the employer can show an economic, technical or organisational (ETO) reason (see 'The ETO defence ') and, at the same time, establish a change in the workforce, normally a workforce reduction. Measures designed only to harmonise the terms and conditions of employment will not be sufficient. (For further information on the situations where the terms of the employment contract may permit variations see ‘Post-transfer changes to terms and conditions’ above.

Organisations that wish to try and change transferred employees’ contractual terms have the following limited options.

Change unconnected to the transfer

If the reasons for the terms and conditions changes are entirely unconnected to the transfer, they will be permissible. For example, the transferee acquires a number of employees as a result of a TUPE transfer and then discovers the employees had been incorrectly paid in the past. The mistake needs correcting, whether or not the transfer takes place. The reason is not exclusively connected to the transfer and the change is therefore permissible.

Delaying harmonisation 

Organisations could wait until a considerable period of time has passed since the transfer or, better still, until some non-transfer related event occurs which requires changes, before making them. 

However, there is nothing in the legislation saying when the link between the variation and the transfer is no longer effective. The length of time is difficult to gauge and, as each case depends on its own facts, there is little available guidance from existing case law. Some cases suggest that the link can still be effective after two years (see Taylor v Connex South Eastern Ltd, EAT, 1999). 

The mere passage of time is not enough to ensure the changes are not transfer related, but the longer the period of time that’s elapsed before the variation is made, the less likely the changes are to be connected to the transfer. 

Establishing an ETO reason 

The transferred staff can agree with the new employer to vary the employment contract if there is an ETO reason (see ‘The ETO defence') provided this involves a change in numbers, or the job functions, of the workforce as a whole. But a proposal to vary terms and conditions to achieve harmonisation will be by reason of the transfer and is very unlikely to entail a change in the workforce. An employer cannot therefore usually rely on an ETO reason for harmonisation.

For example, an insurance broker takes over another small company which has five employees, all of whom transfer. All five are needed but three of them receive monthly salaries which are £500 more a month than those of their counterparts already working at the broker. The transferee managing director is concerned about the impact on profit and morale by the discrepancy between the salaries, so seeks to reduce the pay of the acquired company’s employees in line with the pay offered to the existing employees.

In this situation, the employer cannot say there is an ETO reason. The reason behind the plan is arguably economic (there is a concern about profitability) and organisational (the brokerage wants uniform terms and conditions); the big ‘but’ is that there was no change or reduction to the number of employees needed to do the work after the transfer. There is therefore ‘no change to the workforce’. If the broker had been able to show that improved software had necessitated a reduction in the number of employees, there may have been an ETO reason.

The most likely situation where the ETO reasons will be met is a situation involving redundancy.  If there is a genuine restructuring of the business which reduces job numbers, or a genuine change in job functions, then agreed contractual changes may be effective.

Agreeing variations

The most direct way to change contractual terms is with the consent of the employee. Lump sum incentives can be offered in return for the employees agreeing to the less favourable terms. This can be highly risky. Whilst in a normal variation scenario this may be binding, in a TUPE context there may still be a risk of a tribunal claim.

Organisations can try to make agreed variations that are unconnected with the transfer. However, as discussed, any pure harmonisation is likely to be transfer-related. 

The usual employment law rules prohibit employers from unilaterally changing contractual terms (see Terms and Conditions of Employment Q&As).

Dismissal and re-engagement

One option some employers use to harmonise terms is to dismiss employees with proper notice, enter into settlement agreements with them to waive claims, and then re-engage them on new terms. Organisations should take legal advice before doing this, as it exposes an employer to automatically unfair dismissal claims if any employees decide not to agree, or to subsequently argue that the agreement is void. 

There is doubt as to whether such agreements are effective because they attempt to contract out of TUPE, but employees who have signed an agreement and accepted new terms are perhaps unlikely to challenge the position later. They may not know the agreement has dubious validity and think the agreement can be used to prevent any future tribunal claims but it is a risky strategy. If there is a change as a result of the transfer that is a ‘material detriment’ to the employees, they will be able to resign and claim unfair dismissal.

If the number of employees to be dismissed and re-engaged is more than 20, then collective redundancy consultation applies (see Redundancy collective consultation Q&As).

Red circling

The transferee employer may red-circle the terms and conditions of the transferred staff, for example, by leaving them on the same terms without awarding an annual pay rise until there is equalisation with existing staff.

A change in the place of employment after a TUPE transfer is a justifiable reason for dismissal. This means that employers can rely on the relocation of roles as an economic, technical or organisational reason that entails changes in the workforce (see ‘The ETO defence’ above). The notice of dismissal (or, if no notice is given, the effective date of termination) must have taken place on or after 31 January 2014, following reforms to TUPE effective from that date.

Any dismissal will have to be handled fairly, following all the usual procedures (see Unfair dismissal Q&As).

Transferee organisations should still protect themselves by including warranties and indemnities in contractual negotiations with the transferor against any claims made by employees.

The transferor organisation is exposed if it dismisses employees in anticipation of a TUPE transfer and then seeks to justify the dismissals by relying on the transferee’s ETO reasons (see 'The ETO defence'). Transferors should ensure the transferee agrees to indemnify the transferor against any liability.  Employees dismissed before a business transfer will normally sue both the new and former owners.

Transferee organisations may make dismissals post-transfer if a valid ETO reason exists but must follow a fair overall procedure, which will often entail pooling the transferred employees with their existing workforce before selecting the redundant employees.

The simplest way to avoid TUPE is to structure the transaction differently. Selling a business by way of a share sale means that TUPE doesn’t apply as it does where assets and goodwill are sold.

In a service provision change situation, where services are being put out to tender, changes may be made to avoid TUPE. If the nature of the service is so significantly changed that the same activities are not resumed by the next contractor, this may successfully avoid TUPE.

Otherwise, the issue of whether TUPE applies can be a complex one and those involved in a transaction should take detailed legal advice. Employers cannot generally avoid TUPE. The Regulations exist to protect employees, regardless of whether the transferee wants them or not.

Two main ways the parties may address the impact of TUPE are to:

  1. Ascertain whether there is an economic, technical or organisational (ETO) reason for any proposed dismissals or variations to terms and conditions (see ‘The ETO defence’).
  2. Negotiate warranties and indemnities, a variety of which may be negotiated under TUPE.

It will be necessary is to obtain details of the employees who are not required by the new business owner, and that information could be used to negotiate the sale price with a reduction for any potential exposure. It is common for the transferor to agree which employees transfer and there would then be mutual warranties and indemnities. It is also possible for transferee organisations to retain an amount of the sale price of the business pending any potential claims.

Warranties and indemnities in the transfer agreement should cover the obligation to inform and consult as TUPE 2006 introduced joint and several liability for failure to do this for transferors and transferees. Where inadequate information is supplied, a transferee with well-drafted warranties and indemnities may make a claim against the transferor.

Yes, a service provision change can constitute just one person, for example, a cleaning company which sends just one employee to clean an office. Other examples include contracts to provide such labour-intensive services as workplace catering, security guarding, refuse collection, and machinery maintenance.

It helps if that employee has been instructed by the employer to carry out all the activities necessary to provide the services for the client.

TUPE appears to apply where the employer has deliberately set out to create a grouping of a single employee, rather than where it has arisen by accident or chance. In practice, it will often not be immediately obvious how the organised grouping has come about, so an employment tribunal will look very carefully at the particular facts of a case before making a finding on this point.

Technically, they do not.

TUPE expressly says that contractual provisions relating to old age, invalidity or death benefits in connection with an occupational pension scheme do not transfer. Other regulations protect employees following a TUPE transfer in this regard.

Although pension rights do not transfer under TUPE, a right to some early retirement benefits does transfer. Any rights outside the benefits classed as 'old age, invalidity or survivors' may transfer under TUPE. This applies to benefits that are paid on dismissal, such as the right to be considered for early retirement on reaching age 55.

The government’s TUPE: guide to 2006 regulations provides information on pensions.


It is hard to predict what will happen to TUPE once the UK leaves the EU. Some of TUPE is entirely UK legislation and some is based on the EU Acquired Rights Directive.

A complete wholesale repeal of TUPE seems unlikely because the rationale is based on employee protection, and completely removing employees’ rights so they would become unemployed when a business transfers would be unpopular.

It is possible that modifications could be made to TUPE. For example, the government has wanted employers to be able to harmonise, or make changes to employees’ terms and conditions, more easily after a transfer. This may be implemented following the severance of links with the EU.

Other previously proposed attempts to change TUPE which may be revisited post-Brexit include repealing the service provision change rules, or increasing the scope of ETO reasons to include the dismissal of employees before a transfer. The law would have to be modified so that a transferor could rely on the transferee’s ETO reasons for dismissing an employee prior to a transfer.

Another possible change could be reduction of the information and consultation obligations, for example, by dispensing with the need for collective consultation, or limiting this obligation to larger businesses.

For more information on what Brexit may mean for employment law, visit our Brexit resource hub.

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