The TUPE effect

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protects employees if the business in which they are employed changes ownership.

It applies to employees of any size of business in the UK regardless of where the head office is located. In addition, employees of a UK business who are based outside the UK can still be protected in certain circumstances.

The effect of TUPE (except when the business is insolvent) is that the employee’s job transfers to the new company along with their existing employment terms and conditions.

If the employer is insolvent and the business is being transferred to or taken over by another company, the protection employees get is different from a normal transfer. The employees are unlikely to be protected under TUPE if the business is closing down, there are however specific provisions available depending upon the circumstances and the requirement to consult will still apply, even if a company becomes insolvent at very short notice.

TUPE can be complex in nature and we strongly advise that employers seek professional advice before they proceed.

There are two types of TUPE transfer under the regulations:

  • Business transfers – where a business or part of a business moves from one employer to another. This can include mergers where two companies close and form a new one.
  • Service provision changes – where an in-house service (e.g. cleaning or workplace catering) is outsourced to a contractor or a current contract ends and is given to a new contractor or the work is transferred in-house by the former customer. Employees are not protected under TUPE if the contract is for the supply of goods for the company’s use (e.g. a restaurant changing food suppliers) or for a single event/short-term task (e.g. a catering company being used for a corporate event). Only the employees who can be clearly identified as providing the services being transferred are protected.

A good example of a sector that is subject to frequent service provision change is cleaning and facilities and TUPE becomes a factor when a client retenders and appoints a new cleaning or facilities provider. TUPE will usually apply, even if only one employee undertakes work for that particular client.

If there’s a trade union in the workplace, the employer must inform and consult with the representatives from the union. Employers with less than ten employees can inform and consult directly with employees. Otherwise, employee representatives must be informed and consulted. If there are no representatives they must be specially elected in accordance with TUPE for the purpose of the transfer.

Employee’s representatives must be consulted about anything that will affect employees and new Employers should try to gain agreement about any proposed changes, often referred to as “measure items”.

Four weeks before the transfer the existing employer must provide the new employer with information about employees. This normally includes:

  • name
  • age
  • main details of employment
  • disciplinary action taken against employees in the last two years
  • grievances raised by employees in the last two years
  • legal action taken by employees against the employer in the last two years
  • potential legal action the employer thinks employees might raise

TUPE regulations mean employees shouldn’t lose their existing employment rights. The new employer takes over employees’ employment contracts, including all the previous terms and conditions of employment, holiday entitlement, period of continuous employment and any collective agreements previously made. It’s a breach of contract if the new employer doesn’t meet the terms of the previous employment contract. Any failures of the previous employer to observe employees’ rights may enable employees to make a retrospective claim for discrimination against the new employer, even if the failure took place before the transfer, it is therefore usually the case that an indemnity is sought by the new employer from the existing employer prior to the transfer taking place.

Employees can refuse to work for the new employer. This is the same as resigning – they won’t normally be able to claim unfair dismissal or redundancy pay. Notice isn’t required. The employee simply tells the employer, or the new employer, that they do not wish to transfer before the transfer happens. Employment then ends at the time of transfer. But be aware that if an employee’s proposed working conditions are significantly worse because of the transfer, they can object to the transfer, or resign and claim unfair dismissal.

If an employer knows that an employee is transferring to another company, they can’t normally change the employee’s terms and conditions to make them the same as those of the new company – even if the employee agrees to the change. Also, the new employer can’t change the terms and conditions if the reason is the transfer itself.

The new employer can change an employee’s terms and conditions by agreement if it is for an ‘economic reason’ (to do with how the company is performing), a ‘technical reason’ (to do with the equipment or processes the company uses) or an ‘organisational reason’ (to do with the structure of the company) involving changes in the workforce or workplace, such as a result of redundancies or a move from a managerial to a non-managerial position.
After the transfer employers can improve employees’ terms and conditions only with agreement. For example, an increase in the amount of holiday to achieve equity.

Employees can be dismissed for an economic, technical, or organisational reason involving changes in the workforce (redundancies) and the normal rules around fair dismissal apply.

Collective agreements in place before the date of the transfer must be honoured, but the terms and conditions in the agreement can be renegotiated after one year if the change isn’t less favourable to the employee.

Employees’ company pension rights earned up to the time of a transfer are protected, but the new employer doesn’t have to continue an identical pension.

When the transfer is complete, employees should get an up-to-date written statement of employment, giving the name of the new employer and a statement that their terms and conditions haven’t changed. If their tax records are being updated, they will get a P45.

The new employer can’t make employees redundant just because they were transferred from another employer. However, the new employer can consult about redundancies before the transfer if the old employer agrees. If an employee is made redundant for an ‘economic, organisational or technical’ reason involving changes to the workforce, they may be entitled to a redundancy payment.

HR Wise provides an employee handbook and employment contracts (incorporating a statement of particulars). They are regularly updated by an industry expert, so you don’t have to worry about keeping on top of things. If you use our handbook and employment contracts, we help you navigate potential TUPE situations.

Please get in touch if you would like to enjoy affordable peace of mind.

Contains public sector information licensed under the Open Government Licence v3.0.

Changing employment terms?

As your business develops you may consider changing your employment terms to take account of changing roles, customer needs, working conditions or salary for example. We advise you to go about this in a structured way, explaining your rationale and communicating and engaging with your employees to ensure that they feel they have had a chance to contribute to the nature of the change and how it is applied. If you approach change in a positive manner, you are more likely to gain agreement to a change and, even if the change is not a popular one, avoid unnecessary conflict and potentially a legal challenge.

By law, every employee in the UK has an employment contract. Contractual terms may be written or implied including what is considered to be “custom and practice” i.e. how things actually happen. It does not matter if it is not in writing or was not even discussed.

An employer can make a change (‘variation’) to an employment contract if:

  • there’s something in the contract that allows the change
  • the employee agrees to the change
  • the employee’s representatives agree to the change (for example, a trade union)
  • An employer can force a new contract on employees, by dismissing with notice and e-engaging the employee on the new terms and conditions without a break in service, although this should be a last resort and could lead to legal action.

Generally, where a right to make, changes are referred to in the contract, the change can only be minor or reasonable in nature. To make significant changes such as reducing pay, changing hours, or changing the place of work, you will need to consult. Where you formally recognise trade unions or a staff association by way of a collective agreement, you will also need to consult with staff representatives before you start to consult with individual employees.

You should ensure that you are aware of historical agreements with your employees. If an employee was transferred into your business under specific terms and conditions (TUPE) you will need to understand the implications of the proposed change as the employees’ terms and conditions may still be protected in law.

It is important to be clear about your reasons for making the change. What is driving the change? What will the change achieve? What will happen if the change is not made? Think about how you can go about communicating the change in a positive way, considering mitigation for the change if it is contentious and explaining to employees how they can be involved and suggest alternatives. Mitigation does not have to be pay-related, for example, appropriate mitigation might be extra leave or help with travel costs for a time if employees will have to travel further to get to work.

Once your consultation has concluded and your final solution has been determined you will need to write to the affected employees within a month to tell them exactly what has changed and where they can find information about the change.

Imposing change without reasonable efforts to seek agreement can lead to conflict, loss of great employees, falling morale and productivity and/or a claim resulting in damages for loss because of your breach of contract. In some situations, the change could be construed as constructive or unfair dismissal and/or direct or indirect discrimination if you have not fully considered the impacts of your proposed change.

It is better and less stressful to have good employment contracts backed by a suitable employee handbook so that everyone is clear from the start. This is what HR Wise offers.

The Importance of an Employee Handbook

Why should your business have an employee handbook?

In the HR Wise January blog, the focus was on the Employment Contract. Many employers choose to support their contract of employment with an employee handbook. Although not explicitly required by law, having an employee handbook is something a good number of employers, whether  large  or small, adopt as a matter of course. Drafted properly, handbooks can form a useful tool for the promotion of a healthy workplace and create a framework for positive working relationships.

Where the employment contract provides the specifics for an individual employee, the handbook provides details that are relevant to every employee, regardless of their role in the company. It is for that reason that handbooks and contracts will often state that the contract will supersede the handbook where expressly stated in an individual’s letter of appointment or contract of employment, to recognise any personalised arrangement.

An employee handbook is helpful in that it can bring together all of your relevant policies and procedures into one document which can then provide a useful reference point for managers and employees. An employee handbook provides a company with the opportunity to define in words the company culture, vision, values, and mission and describe the types of behaviours the company expects from their employees. The handbook can be used to remind employees of all the company benefits and entitlements which the company has chosen to invest in and provide a brief company history and other interesting information.

A good handbook will be comprehensive but balanced.  Ensuring your handbook is easy to use and accessible is important or employees and managers may be put off from referring to it. However, producing a handbook is not a once only activity, a handbook is a living document which must be maintained to ensure it continues to reinforce your strategy and practices and to ensure it reflects any changes to your policies and procedures.

Contractual or Non-contractual?

  • A handbook can be classed as part of the employment contract however, if a handbook is expressed to be contractual, it will be treated as though all of its policies were included within the employee’s contract, so the employee will be strictly bound by them and if the employer fails to adhere to its own policy, it may be liable for breach of contract, opening the door for constructive dismissal claims.
  • A non-contractual handbook allows for more flexibility – policies can be altered and changed, within reason, without requiring explicit employee consent, and to quickly accommodate any change in the law. Your handbook should explicitly state whether it is or is not contractual (or in some cases which policies are, or are not, contractual).

Employers can use the policies in an employee handbook to provide guidance on the ethical and legal treatment of employees. A handbook should provide direction for employees planning annual or parental leave, reporting sickness, expectations of conduct etc., explaining exactly how the company will deal with an issue and what an employee can expect.

A handbook is a useful tool for orienting new members of staff. Many employers use the handbook to help new members of staff familiarise themselves with the company. An employee handbook can  cover key policies areas including:

  • Expectations of staff – raising grievances, facing disciplinary procedures and behavioural standards.
  • Avoiding Conflict of Interest – Anti-corruption/bribery/tax evasion – employers have a duty to take reasonable steps to prevent these offences.
  • Valuing Diversity & Dignity at Work – it’s vital to make sure a commitment to equal opportunities is stated clearly in the handbook, not only to promote a positive working environment but also because employers can be liable and vicariously liable for discrimination against employees (or even prospective employees).
  • Leave & Absence Arrangements – Annual leave, sickness absence, maternity, paternity, parental, shared parental and adoption leave – ensure your employees are aware of the different leave options and what they are entitled to.
  • Health and Safety – employers with more than five employees have a statutory duty to create a written statement of health and safety policies and to bring this to the attention of employees.
  • Enabling performance at work – induction, probationary support, appraisal and where an individual is unable to fulfil their role in spite of support, capability procedure.
  • Protection of business interests – for example, where intellectual property applies.
  • Leaving employment – retirement, resignation and processes which apply when an employee leaves the company.

The employee handbook helps to ensure employees understand what is acceptable and what is expected, if key policies and procedures are not expressly stated, it can lead to potential conflict, for example, your social media policy or data protection policies. For that reason, we would advise you ask your employees to sign and acknowledge that  they have reviewed the handbook and have understood and agreed to follow the polices.

To summarise, an employee handbook provides a useful tool for maintaining an open and transparent relationship between employees and management.

The HR Wise package provides a legally compliant employment contract and an employee handbook that is comprehensive and easy to digest. This can support your company to  affirm company policies and procedures and demonstrate “reasonable care” towards your employees.  We will ensure your handbook is up to date, and that it reflects any legislative changes thereby remaining compliant with the law.  The handbook we provide is instantly accessible online, through the HR Wise portal, saving unnecessary printing costs and ensuring your managers and employees are always able to refer to the current version.

Please get in touch if you would like to enjoy affordable peace of mind in this respect.