Responsibilities to employees if you buy or sell a business

Buying a business - your responsibilities to employees

Employees who transfer to your employment when you buy a business or part of a business - or acquire it by taking over a contract - do so on exactly the same terms and conditions they had previously, and with their continuous employment preserved. Their employment with you does not count as a new employment. This also applies to employees who have already transferred on a previous transfer.

You take over the contracts of employment of all employees in the undertaking immediately before the transfer, unless employees inform either you or the previous employer that they object to being transferred. In this case, the transfer of undertaking terminates their contract with the previous employer, but they aren't considered to have been dismissed.

You also take over responsibility/liability for:

• employment rights of employees - including most potential employment tribunal claims, except some occupational pension rights
• collective agreements - including those in force at time of transfer and recognition of the recognised trade union of staff transferring

Occupational pension rights earned up to the sale are protected by social security law and pension trust arrangements. From 6 April 2005, new employers are required to offer pension provision to transferred employees on transfer. This applies where the employees had access to an occupational pension scheme with an employer contribution before the transfer.

As an employer, you can opt to provide an occupational pension scheme or a stakeholder pension scheme. If you choose a stakeholder or a defined contribution scheme, you will have to match the employee's contributions up to 6 per cent. This can be increased if both parties agree. Read more about pension protection on transfer of employment on the Department for Work and Pensions website.

If you don't take control over the previous business' shares, you won't be able to provide such shares to your staff. If the previous employer had share or share option schemes, you must provide schemes of substantial equivalence.

Changes to terms and conditions

Don't try to change transferred employees' terms and conditions if the reason for the change is the transfer, eg to match those of your existing staff. Any such change would be a constructive dismissal entitling the employee to claim automatically unfair dismissal.

Information and consultation

You are required to inform and consult officials of a recognised trade union, if there is one, or other employee representatives.

You must also provide information to the old employer on any action you intend to carry out that will affect their employees - this must be long enough before the transfer to give adequate time for consultation.

Subjects covered in this guide

• Introduction
• What is meant by a transfer and who is affected
• Selling your business - your responsibilities to employees
• Buying a business - your responsibilities to employees
• Buying a business - dismissals and privatised business
• Informing and consulting employees
• Transfers and employee relations

 

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