TUPE explained: What UK SMEs need to know

Running a small or medium-sized business in the UK often means dealing with change –whether it’s growth, restructuring, or taking on new contracts. One area that can catch business owners by surprise is TUPE.

If you’ve never heard of it, TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006. It’s a piece of UK employment law that comes into play when all or part of a business is sold, outsourced, or brought back in-house.

For SMEs, TUPE can feel daunting, but understanding the basics will help you stay compliant and protect your business.

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What Is TUPE?

TUPE is designed to protect employees when the business or service they work for changes hands. In simple terms:

• When a business (or part of it) is transferred to a new owner, the staff linked to that business usually transfer too.
• Their employment contracts, rights, and liabilities move across to the new employer.
• This includes things like pay, holiday entitlement, and length of service.

The purpose is to ensure employees aren’t unfairly disadvantaged just because a business changes ownership or management.

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When does TUPE apply?

TUPE can apply in several common situations for SMEs, such as:

• Business sales – e.g. if you sell your café to another owner, your staff transfer with it.
• Outsourcing – e.g. if you hire an external cleaning company instead of using in-house staff.
• Insourcing – e.g. bringing a previously outsourced function, like IT support, back in-house.
• Service provision changes – e.g. switching from one contractor to another.

Each case is slightly different, but the principle remains: employees’ jobs are protected, and you can’t simply dismiss them because of the transfer.

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Key Employer Responsibilities

If TUPE applies, there are legal steps both the outgoing and incoming employers must follow:

• Inform and consult with affected employees (or their representatives) about the transfer.
• Provide employee liability information – the outgoing employer must share key details about transferring staff with the new employer.
• Honour existing terms and conditions after the transfer, including recognition of unions where relevant.

Failure to comply with TUPE can lead to expensive claims at an employment tribunal, so it’s not something to leave to chance.

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Why Expert HR advice is essential

TUPE is one of the more complex areas of UK employment law. For SMEs without an in-house HR team, it can be difficult to:

• Work out whether TUPE applies in your situation.
• Manage the consultation process correctly.
• Understand the risks around redundancies or contract changes.
• Budget for any inherited obligations (such as outstanding holiday pay or ongoing disputes).

Getting expert HR or legal advice ensures you stay compliant and avoid costly mistakes. More importantly, it helps you manage the process in a way that keeps staff informed, reassured, and engaged.

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Final thoughts

TUPE doesn’t have to be intimidating, but it does require care and attention. For small and medium-sized businesses in the UK, the key is to:

1. Recognise when TUPE might apply.
2. Understand your legal responsibilities.
3. Get expert guidance to navigate the process smoothly.

Handled well, TUPE can protect employees’ rights, reduce risk to your business, and make transitions far smoother for everyone involved.

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FAQs

1. Does TUPE always apply when I sell or buy a business?
Not always, but it applies in most cases where a business (or part of it) keeps its identity after being transferred. If you’re unsure, get advice early – misjudging this could lead to costly claims.

2. Can I make redundancies after a TUPE transfer?
Yes, but only if they are for genuine economic, technical, or organisational (ETO) reasons – for example, if the new owner genuinely needs fewer staff. Redundancies purely because of the transfer itself are automatically unfair.

3. Can I change employees’ terms and conditions after TUPE?
In most cases, you cannot make changes to terms and conditions if the sole reason is the transfer. Even if employees agree, such changes may not be legally valid. Changes are only allowed if they’re unrelated to TUPE or if there’s an ETO reason and proper consultation takes place.

4. Do I have to match pay rises or bonuses the old employer promised?
Yes – any contractual entitlements move across with the employee. That means if the outgoing employer had agreed to a pay increase or bonus, you inherit that obligation.

5. What happens if I don’t follow TUPE properly?
Employees can bring claims to an employment tribunal. Compensation can be significant – up to 13 weeks’ uncapped pay per employee for failure to inform and consult. This is why expert HR guidance is strongly recommended.

6. How much notice do I need to give employees about a transfer?
There’s no set minimum time in the legislation, but you must inform and consult employees long enough before the transfer for it to be meaningful. In practice, the earlier you start the process, the smoother it tends to be.

Need help? Contact us to find out more.

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