Responsibilities to employees if you buy or sell a business

What is meant by a transfer and who is affected

When an organised group of people, eg employees, and assets - known as a stable economic entity - is transferred from one business to another and retains its identity after the transfer, the transfer falls under the scope of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE).

In other words, if the people and assets that form the transferred stable economic entity continue to perform their role under the new owner, then the TUPE regulations must be adhered to.

TUPE applies equally to relevant transfers of large and small businesses, and to public and private undertakings. This means there would be a relevant transfer if you sold your business or partnership or if your business bought and operated another business.

Not all transfers are relevant transfers. TUPE does not apply in the following instances:

• Transfer by share takeover. When a company's shares are sold to new shareholders, there is no transfer of the business - the same company continues to be the employer.
• When a business transfers assets only, eg if equipment is sold.
• When a business transfers a contract to provide goods or services that doesn't involve the transfer of a business or part of a business.
• Transfers of undertakings situated outside the UK - although similar provisions apply in the EU.
• Change of business identity, eg if the work or organisational structure changes radically.

Whether TUPE applies in any particular case depends on all relevant circumstances. In the event of a dispute, only an employment tribunal or, on appeal - a higher court, can decide this.

Where TUPE applies, existing employees of the undertaking transferred automatically become employees of the person who takes it over.

If you intend to buy or sell a business - or part of one - you should consider obtaining legal advice to help you comply with these regulations, which can be complex.

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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