What is TUPE in company administration?

The TUPE regulations safeguard employees’ rights when their company undergoes an administration process. If the company is sold during the exit from administration, existing employee contracts move to the new company, guaranteeing both ongoing employment and the maintenance of current terms, conditions, and periods of continuous service.


TUPE for employees when a company is in administration

TUPE, known as the Transfer of Undertakings (Protection of Employment) Regulations, ensures the protection of employees’ rights during the sale of a business out of administration. It secures the current terms and conditions of employment and facilitates the safe transfer of contracts to the new employer.

Contracts cannot be altered or terminated except under specific conditions. The regulations can be intricate, and both employers bear specific duties and obligations.

As the outgoing employer, it is essential to ensure that staff comprehend each stage and how the sale will impact them. TUPE rules do not apply if the business is destined for liquidation and closure.


The objective of the administration

In company administration, the objective is to attain one of the following outcomes:

  • Achieving a superior outcome for the creditors compared to liquidation – if this is also not feasible.
  • Rescuing the company as a going concern – only if this is unattainable should the following option be explored.
  • The administrator must sell one or more assets to settle the associated secured/preferential creditors.

What do TUPE rules cover?

The terms and conditions of every contract are included. This encompasses an employee’s length of service, which moves to the new employer. TUPE also addresses an employee’s rights concerning working hours, along with their entitlement to seek unpaid holiday pay and other dues.

Both the current and new employer must inform employee representatives about the forthcoming changes and the reasons behind them. If the business has fewer than 10 employees, direct communication with the employees is permissible.


What should you inform your members of staff?

  • The timing of the transfer
  • The reason for the transfer of their employment contracts to a new company
  • The impact on them as employees
  • Any potential plans for reorganising the business

The quantity of agency workers employed by the company and the nature of their tasks.

Employee pension rights are safeguarded until the transfer, but the new employer is not obliged to maintain the existing pension scheme.


Employer Liability Information

As the outgoing employer, you must furnish the new company with specific details about your employees:

  • Their identity and age particulars
  • Employment information, encompassing disciplinary records from the last two years
  • Any ongoing claims or grievances filed against the former company in the preceding two years
  • Information regarding any collective agreements

This is termed Employer Liability Information and should be supplied to the new employer at least 28 days before the transfer. 

Once the transfer is finalised, employees should receive a statement of employment from their new employer, affirming that their terms and conditions of employment remain unchanged.


One-sided dismissal and contract variations

Directors may expose themselves to unfair dismissal claims during a transfer, and the new company faces a similar risk if they terminate employees after acquiring their contracts.

Dismissal of staff at this juncture requires specific justifications. If the grounds are proven to be anything other than ‘economic, technical, or organisational reasons entailing changes in the workforce’ (ETO), it may lead to an employment tribunal and a charge of unfair dismissal.

Navigating this legal area is intricate, and seeking professional advice on dismissals and contract variations is advisable. TUPE regulations permit specific variations if they contribute to reducing job losses.

Employees hold the right to resign before the transfer without notice, merely informing the outgoing employer of their intention.


Read More: 


The new employer and liability for staff payments

Employees may qualify to seek payments from the National Insurance Fund. If they cannot claim the entire arrears, the new employer becomes responsible for covering the shortfall.

Vanguard Insolvency can offer comprehensive guidance on all facets of the TUPE process. Given its intricate nature and the risk of errors, it is advisable to prioritise seeking professional advice.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.