TUPE & Employees

The Transfer of Undertakings (Protection of Employment) regulations safeguard employees’ rights if their employer’s business changes hands. In insolvency, TUPE legislation is relevant to you if you place your company into administration and it is subsequently sold as a going concern, or it undergoes a pre-pack administration.

TUPE rules apply to companies of all sizes. They help you protect the terms and conditions of your employees’ contracts, allowing you to avoid redundancies and ensure the continuation of trade.

TUPE and administration

TUPE applies to ‘relevant’ insolvency processes, which means those undertaken by a licensed insolvency practitioner (IP) with a view to business rescue or sale. The regulations do not apply to liquidation procedures, which are known as ‘terminal’ insolvency processes. The purpose of liquidation is to close down a business following the sale of its assets, and in these cases employees lose their jobs as no transfer of employment takes place.

Pre-pack administrations are not regarded as ‘terminal’ procedures, however, as underlying business assets are sold to a new company and employment contracts are safeguarded in transfer. A key feature of pre-pack administration is the prevention of job loss, which is facilitated by TUPE legislation.

Complying with complex TUPE regulations

TUPE is a complex piece of legislation and it is essential to seek professional guidance on what constitutes a ‘relevant’ transfer, as well as on your duties and obligations as an employer to protect employee rights.

UK Administrators are insolvency specialists and can provide independent reliable guidance on TUPE and employees. We will make sure you understand and comply with all requirements under the legislation on the sale of your business out of administration, or during a pre-pack process.

What is covered by TUPE?

TUPE regulations cover the terms and conditions of employment contracts, including but not limited to:

• Length of service
• Working hours
• Statutory entitlements, such as arrears of holiday pay and wages

They help you take care of your staff during transition to a new employer or a newly formed company that is to be run by yourself and/or other existing directors. There are instances where contracts can be varied, however, and these are called ‘permitted variations.’

Some alterations to employment contracts are allowable under TUPE if they are made to optimise the chances of business survival. These permitted variations must be agreed by the employee or their representative before being implemented.

TUPE and Coronavirus Job Retention Scheme

Updated guidance from the government confirms that where a company is being taken under the management of an administrator, the administrator will be able to access the Coronavirus Job Retention Scheme to cover the wages of employees where this is deemed applicable. This covers those who are being transferred via TUPE to a newco following a pre-pack administration sale.

This latest guidance makes business rescue much more likely as the purchaser is now able to carry a furlough approach into newco should this be needed. This applies even if the transfer occurs after 28th February 2020.

Considerations under TUPE rules

• You need to maintain open communications with your employees, whether you are a director of the old or new company, and there are specific requirements depending on the number of staff affected
• If you decide to dismiss one or more members of staff close to the transfer taking place you need to be able to present a strong business case to support your actions, otherwise you could face claims of unfair dismissal – job loss must be for economic, technical, or organisational reasons (ETO)
• You are not obliged to provide the same pension benefits if you are the new employer, although employee benefits up to the point of transfer are protected
• If your business is sold to a third party, you need to provide the new employer with details of your workforce, including any pending claims or disciplinary action or such issues that have taken place over the last two years

These are just some of the elements you need to take into consideration under TUPE. To further understand how you can look after your employees through this process and avoid redundancies, please contact our partner-led team at UK Administrators.

We can ensure any transfer is effected smoothly, and that you help your employees deal with an unsettling time. Please contact one of the team to arrange a free same-day consultation.