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TUPE Transfers and Employee Benefits

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According to conciliation service ACAS, TUPE regulations “protect employees’ rights when the organisation or service they work for transfers to a new employer”.

The full name of this set of regulations is the Transfer of Undertakings (Protection of Employment) Regulations 2006.

These were updated and amended in 2014 by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014.

There are two main situations when the TUPE regulations may apply and they are split out into business and service provision transfers:

  • Business transfers involve a business or part of a business moving to a new owner or merging with another business to make a brand new employer.
  • Service provision transfers apply in situations where there is a change in the delivery of the service between contractor(s) and/or a client whether that be outsourcing, in-sourcing or re-tendering.

What are TUPE Regulations?

TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006. It sees employees of a previous employer automatically become employees of a new employer at the point of transfer.

New employees carry with them all of the employment terms, conditions and rights, as well as their continuous service history, from the old employer across to the new one.

The employees moving should continue to enjoy the same employment terms as they previously did under the old employer.

How Long Does TUPE Last After a Transfer?

This can lead to a situation where, after a transfer, the new employer finds that they have employees working for them with very different terms and conditions and, in some cases, a new employer will want to harmonise the terms and conditions between the new and existing employees.

Yet changes to the working conditions of the new workers compared to their previous conditions are not permitted under TUPE, which protects against such harmonisation for an indefinite period if the sole or principal reason for the change is the transfer.

Preparing for a TUPE Transfer

Employers must inform / consult with employees through “appropriate” elected representatives. If there’s a trade union, this may include representatives from the union.

Without a trade union, these representatives would be formally elected employee representatives voted to do the job by their colleagues.

Employers must give certain information about the transfer in writing, including:

  • That the transfer is taking place, why it is doing so, and approximately when it is happening
  • Any social, legal or economic implications for the affected employees, e.g. a working location change or risk of lay-offs
  • All measures that both the ‘old’ (outgoing) employer and the ‘new’ (incoming) employer expect to take regarding their employees, even if this is no measures at all
  • If agency workers are used, the number of agency workers employed, the departments they are working in and the type of work they are doing
  • The outgoing employer must provide information about any measures which the incoming employer is considering taking in respect of affected employees.
Nadeem Farid Head of Employee Benefits at Drewberry

The emphasis when undertaking a TUPE transfer is on dialogue between the employers (old and new) and the employees. Although much of this dialogue is a legal requirement, it’s important to really make sure the workforce on both sides of the transfer are as engaged as possible to ensure a smooth process.

Nadeem Farid
Head of Employee Benefits at Drewberry

What Can Be Transferred Under TUPE Rules?

  • Terms and conditions of employment
    E.g. pay, commission, bonuses, allowances, overtime pay, sick leave and pay and holiday leave and pay, including holiday carry-over arrangements and contractually-enhanced annual leave
  • Insurance-based benefits
    E.g. Group Income Protection, Group Life Insurance, or Group PMI.
  • Certain pensions and early retirement
    Existing early retirement provisions may transfer over and should be handled by the new employer just as they would have been under the old one. There may not be a legal requirement to transfer pension rights over exactly, but the law is complicated in this area and employers should seek specialist pensions advice.
  • Continuity of employment
    All previous continuous employment under the old employer will transfer to the new employer.
  • Financial obligations and liabilities
    E.g. arrears of pay or unpaid bonuses. This might occur where the old employer would pay a bonus for the previous tax year (say 2017/18) at the start of the new tax year (2018/19) and the new employer takes over in January 2018. This would make the new employer liable for the bonus related to performance under the previous employer come April 2018.
  • Discipline and grievance records
    Records of active disciplinary and grievance procedures for the 2 years leading up to the TUPE transfer must be provided to the incoming employer.
  • Court claims
    Existing / potential employment tribunal or court claims, or any other outstanding claims against the outgoing employer.
  • Restrictive covenants 
    Providing that the covenant is still relevant and enforceable post-transfer, these will be moved across under TUPE.
Nadeem Farid Head of Employee Benefits at Drewberry

At Drewberry, we’re experienced in offering TUPE advice to those wanting to transfer over new employees with existing insurance or pension rights. If you need help then please don’t hesitate to pop us a call  on 02084327333. We can organise suitable insurance that meets your company’s obligations.

Nadeem Farid
Employee Benefits Consultant at Drewberry

Can I Reduce TUPE Employee Benefits?

This is a very difficult area. The answer depends largely on whether the benefits are ‘contractual’, i.e. written into the employees’ contracts as an intrinsic part of their working rights.

If so, it’s not generally possible to reduce employee benefits, such as Group Medical Insurance, after a TUPE transfer. This applies even where it may be expensive to provide these benefits and where you do not offer such benefits to existing staff.

Removing a contractual benefit post-TUPE may, if the employee can prove that it was the sole or principal consequence of the transfer, be deemed unfair. This could allow the employee to resign and make a claim for constructive unfair dismissal.

Removing discretionary benefits after a TUPE transfer

If the benefits are ‘discretionary’, i.e. the power to vary or remove them is written into your new employees’ contracts, you may be able to reduce or remove their benefits. However, you should think carefully before doing so as this could significantly impact on the morale and productivity of the new staff members.

Moreover, even where there is no contractual breach, the proposed withdrawal of a benefit from a employee that gives rise to a substantial change in the working conditions to an employee’s material detriment may entitle an employee to treat him or herself as dismissed under clause 4(9) of TUPE.

Such a claim is similar to a standard constructive unfair dismissal claim, although there is no need to establish a fundamental breach.

TUPE Advice and Employee Benefits Help

If you need to replicate an employee benefit schemes for newly transferred employees, please don’t hesitate to pop us a call on 02084327333 for fee-free advice.

Nadeem Farid Head of Employee Benefits at Drewberry

One of my recent clients was taking on six employees who had Death in Service built into their contract.

This had to be replicated under the TUPE regulations, so they came to us for some help and we were able to find the most competitive way to provide these benefits and meet their legal obligations.

Nadeem Farid
Head of Employee Benefits at Drewberry

Drew was incredibly helpful all the way along and very responsive and patient with any questions I had (which were many). He was able to get me a much better deal on my new health insurance than I had been able to get online. A success all round!

Francesc Sale
07/06/2019
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