Responsibilities to employees if you buy or sell a business

Buying a business - dismissals and privatised business

If you buy a business or part of a business, or acquire it through a change of contractor, you must honour continuity of employment for all those employed in the undertaking immediately before the transfer.

Any employee who would have been employed if they had not been unfairly dismissed for a reason connected with the transfer is not treated as having transferred, but will be able to make a claim for unfair dismissal against the new employer.

This includes employees who were employed by the employer when negotiations for the sale of the business began with the eventual purchaser, but not those made redundant before that date.

If you dismiss employees who have one year's employment or more because of the transfer or a reason connected with it, they will automatically be held to have been unfairly dismissed.

However, if there is an economic, technical or organisational (ETO) reason entailing changes in the workforce, then you may be able to dismiss fairly, provided you follow a fair procedure. ETO reasons are narrow in practice and effectively amount to a genuine redundancy situation, eg insolvency of the transferred undertaking.

If you change employees' terms and conditions for the worse simply because of the transfer, employees can resign and claim constructive dismissal, which would be deemed automatically unfair, before an employment tribunal. However, if the proposed change was unconnected with the transfer, you would be able to handle it in the same way as any other change. See our guide on how to change an employee's terms of employment.

Privatised businesses

If you are buying a privatised (previously public sector) business, the government expects you to provide pension provision that is broadly comparable with that enjoyed by the previously public sector employees who you are taking on board. Read guidance on staff transfers in the public sector on the Cabinet Office website.

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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