What are the effects of transfer of undertakings (TUPE)?

Last updated: 21 Jul 2020

TUPE means that if there is a transfer of undertakings, employees’ contracts are transferred to the new employer.

What transfers?

After the transfer is completed, all the transferor’s responsibilities in connection with contracts of employment transfer to the new employer.

The new employer has to take on all existing contractual terms. These include expressly agreed and implied terms, such as:

  • pay
  • allowances
  • hours
  • redundancy entitlement
  • holidays
  • sick pay arrangements.

Where it is not possible to transfer a contractual term to the new employer, for example, a profit sharing scheme, the new employer must offer a scheme of ‘substantial equivalence’.

Full pension rights do not transfer under TUPE. Redundancy payments, however, are covered by TUPE and will transfer to the new employer, even where they are linked to pension provisions.

Union recognition agreements also transfer to the new employer.

Liability for past breaches of contract also transfers to the new employer. For example the transferee will be responsible for arrears of pay that accrued before the transfer. Liability for accidents at work should also transfer.

Employment between the two employers will be continuous.

In calculating the length of continuous employment, years with the transferor will be added to time with the transferee.

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