Responsibilities to employees if you buy or sell a business

Selling your business - your responsibilities to employees

You have important responsibilities to your employees when selling your business.

Information and consultation

You must inform and, where necessary, consult either representatives of a recognised trade union or elected representatives of the employees about the transfer and also about any measures you or the new employer plan to take concerning affected employees.

If you don't consult your employees, you may be ordered by an employment tribunal to compensate them.

Businesses with more than 150 employees are subject to the Information and Consultation of Employees Regulations from 6 April 2005, which will affect all business with 50 or more employees from April 2008. Under these regulations, employees have a statutory right to information and consultation about such substantial changes to their employment as a transfer of ownership.

You can find out more about the Information and Consultation of Employees Regulations on the DTI website.

If an employee refuses to transfer with a business, they are not regarded as dismissed but, rather, as having effectively resigned. This means they are not entitled to a redundancy payment.

Dismissals

If you dismiss employees who have been employed for one year 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, providing 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.

Subsequent transfers

You may sell a business or part of a business that you previously bought, or relinquish a contract that you previously took over. The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) generally apply to second and subsequent transfers of the same undertaking. The effect of this is that the employees you took over will now transfer to a new employer.

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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