Staff transfers under TUPE in a small advice firm
When a business changes hands, employment law can move your staff to the new owner on their existing terms. How it works, and what you have to do.
When a business changes hands, employment law can move your staff to the new owner on their existing terms. How it works, and what you have to do.
The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as TUPE, protect employees when the business they work in moves to a new employer. For the principal of a small advice firm, TUPE decides whether your staff move with the business, on what terms, and what you have to tell them and when. Take advice from an employment solicitor on your own transfer.
TUPE applies when a business, or part of one, transfers from one employer to another and keeps its identity. A sale of an advice firm's business and assets to another firm is likely to be a transfer under TUPE. TUPE can also apply where a service provided by one organisation moves to another.
TUPE does not apply to a sale of shares. If a buyer buys the shares in your company, the company remains the employer, and employees' contracts continue with it unchanged.
Whether a particular arrangement is a transfer under TUPE can depend on detail. Ask your solicitor early, before the structure of the deal is fixed, because the answer affects the timetable and the obligations on both sides.
Employees who are assigned to the business or part of the business that transfers move to the new employer automatically, on the date of the transfer. In a small advice firm where the whole business transfers, that is likely to be everybody employed in it.
Where only part of the business transfers, the question is which employees are assigned to that part. A member of staff who works across several parts of the business may or may not transfer, depending on how their time is spent. Agree the list of transferring employees with the buyer and confirm it with your solicitor.
Self-employed advisers and consultants are generally outside TUPE, although the position of some workers is less settled. Their contracts need dealing with separately, and your solicitor should confirm how each one is treated.
Transferring employees keep their existing terms and conditions: pay, hours, holiday, notice periods and other contractual rights. Their continuity of employment is preserved, so years of service with you count with the new employer.
The employer's rights and liabilities under those contracts transfer too. That includes claims employees may have for unpaid wages or discrimination arising before the transfer. A buyer will ask about any disputes and will want warranties and indemnities in the sale agreement covering them.
Occupational pension rights are treated differently. The old-age benefits under an occupational pension scheme do not transfer in the same way as other terms, but the new employer may have to provide a minimum level of pension provision where the old employer contributed to a scheme. Workplace pension auto-enrolment duties continue to apply to the new employer. Take advice on how this applies to your scheme.
TUPE limits what can change. A change to an employee's contract is void if the sole or principal reason for it is the transfer, unless it is for an economic, technical or organisational reason entailing changes in the workforce, or the contract allows it.
A dismissal is automatically unfair if the sole or principal reason is the transfer, unless there is an economic, technical or organisational reason entailing changes in the workforce. Where a buyer plans to reduce or change roles after the transfer, it needs to show such a reason and follow a fair process. These rules protect employees, and they shape what a buyer can plan.
An employee can object to transferring. If they do, their employment ends on the date of the transfer, and in general they are not treated as dismissed. Employees who object should take advice before doing so.
Both the old employer and the new employer have a duty to inform representatives of affected employees about the transfer. The information includes the fact of the transfer, the date and the reasons, its legal, economic and social implications for employees, and any measures either employer expects to take in connection with it.
Where measures are envisaged, such as changes to roles, location or working practices, the employer has to consult the representatives about them with a view to seeking agreement.
Representatives are a recognised trade union or elected employee representatives. Where there are no existing representatives, an employer with fewer than 50 employees, or a transfer of fewer than ten employees, can inform and consult the affected employees directly. For a small advice firm, that is the route most likely to apply.
The information has to be given long enough before the transfer to allow consultation to take place. Failing to inform or consult can lead to an award of up to thirteen weeks' pay for each affected employee, and both employers can be liable for it.
The old employer has to give the new employer written information about the transferring employees at least twenty-eight days before the transfer. It includes each employee's identity and age, the particulars of their employment, any disciplinary or grievance action in the last two years, any claims or likely claims, and any collective agreements. Agree the format with the buyer and prepare it early. Staff records that are incomplete take time to put right.
For a small advice firm where the whole business transfers, the timetable might run as follows. Your solicitor will adjust it to your deal.
Take advice on whether TUPE applies, which employees would transfer, and what the buyer plans for them.
Agree with the buyer what each of you will tell staff, and when. Agree who will prepare the employee liability information.
Tell affected employees about the transfer and the information they are entitled to. If either employer envisages measures, start consulting.
Give the buyer the employee liability information.
Employees move to the new employer on their existing terms. Payroll, pension contributions and benefits move with them.
Any changes the buyer proposes follow the limits set out above, with a fair process and consultation.
If you are an employee of your own company, TUPE may apply to you too. If you plan to stop on the date of the transfer, or to work for the buyer for a period afterwards, agree the terms in writing as part of the deal. A consultancy arrangement, a fixed-term contract or a continuing employment contract each have different consequences for tax and for your rights.
Keep a written record of what employees were told, when, and by whom, and of any consultation meetings and the responses given. If a claim is made later, the record shows that the duty to inform and consult was met. Keep it with the employee liability information and the sale documents.
The legal duty to inform and consult sets a minimum. Your staff will want more than that. They will want to know who they will work for, whether their jobs are safe, whether their pay and hours change, where they will work, and who they will report to.
Plan the conversation with the buyer so both of you give the same answers. Tell staff before you tell clients. Staff who learn about a transfer from a client, or from a rumour, are more likely to look for another job, and the people best placed to keep clients through a transition are the people clients already know.
Be clear about what is decided and what is not. If roles will change, say so and say when staff will know more. Do not promise what the buyer has not agreed in writing.
Before any transfer, check that every member of staff has a current written statement of their terms, that pay records and holiday records are complete, and that any disciplinary or grievance matters are documented. Check whether anyone has a contractual right, such as a bonus or a profit share, that a buyer would need to honour. Write down any informal arrangements, such as working from home or flexible hours, because they may have become part of the contract over time.
Advisers and others in regulated roles need to be covered by the new firm's permissions and supervision from the day of the transfer. Their certification and conduct records move with them in practice, and the new firm will need to confirm they are fit and proper. Plan this alongside the employment transfer so nobody is left unable to advise.
Under Securo your team's position is settled in writing on joining, before anything else starts. Whether TUPE applies, and when, depends on how your firm joins the programme and how the exit is structured. Ask how each member of your team is affected, what their role will be, and who they will report to, before you join. Then take advice from your own employment solicitor on the answers.
When and how to tell your staff about succession plans, and what to agree about their positions.
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How a buyer values the ongoing advice fees of your firm, and what reduces that value.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.