TUPE, staff transfers, and risk when exiting in UK

TUPE protects employees when an undertaking or service transfers to a new employer in the UK. For owners planning an exit, understanding when TUPE applies, what must be shared with buyers, and how to manage consultation can reduce disruption and legal exposure. Well‑structured timelines, clear messaging, and targeted warranties and indemnities are essential to avoid inherited claims, costly disputes, or delays to completion.

How TUPE applies when you sell business

TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006, as amended) applies to two broad scenarios: a business transfer where an economic entity retains its identity, and a service provision change such as outsourcing, insourcing, or re‑tendering of a service. If TUPE applies, employees assigned to the transferring entity or organised grouping move automatically to the buyer on their existing terms, with continuity preserved. All rights, liabilities, and most claims transfer. Pensions under occupational schemes are largely excluded, but there can be related obligations. Micro‑businesses may consult directly with staff if no representatives exist.

Protect staff when you sell your business

Sellers must inform and, where appropriate, consult with recognised trade unions or elected employee representatives about the transfer, proposed measures, and timing. Dismissals where the sole or principal reason is the transfer are generally automatically unfair unless there is an economic, technical, or organisational (ETO) reason entailing changes in the workforce and a fair process is followed. Sellers must also provide Employee Liability Information to the buyer at least 28 days before transfer, covering identity, terms, claims, and disciplinary records. Early, accurate data minimises price chips and post‑completion disputes.

Sell business compare: asset vs share deals

In an asset sale, employees assigned to the business typically transfer to the buyer under TUPE. In a share sale, the employer entity remains the same, so TUPE normally does not apply, though any post‑completion restructuring may still trigger collective consultation and redundancy duties. For service provision changes, TUPE may apply if there is an organised grouping with the principal purpose of carrying out the relevant activities. Buyers often seek warranties on compliance, consultation, holiday accruals, equal pay, and working time, alongside indemnities for pre‑transfer liabilities. Comparing transaction routes should include TUPE impact, timeline, and risk allocation.

Key risks and mitigation

Common risks include failure to consult in time, attempting unlawful changes to terms because of the transfer, incomplete Employee Liability Information, and underestimating legacy liabilities such as equal pay, working time, or discrimination claims. Mitigations include mapping who is assigned to the undertaking, clarifying agency worker use, auditing holiday and overtime records, and confirming collective agreements. Plan data sharing under UK GDPR with a lawful basis, minimising personal data until necessary. Engage unions or representatives early, prepare a measures log, and align HR communications with the sale and integration plan to maintain continuity and morale.

People planning and post‑transfer changes

Changes to terms because of the transfer are highly constrained. Variations are more defensible if there is a genuine ETO reason and proper agreement, or if terms would have changed regardless of the transfer. Location moves, harmonisation, or shift pattern changes should be risk‑assessed with alternatives considered. Where redundancies are contemplated, comply with collective consultation thresholds, selection criteria, and notice/pay rules. Build a realistic timeline that sequences consultation, ELI delivery, onboarding, payroll cutover, and benefits administration. Allocate responsibility in the sale agreement for late ELI, unpaid wages or bonuses, and tribunal claims discovered after completion.

Advisory costs and provider comparison (UK)

Professional advice helps scope whether TUPE applies, structure consultation, and allocate risk. Costs vary by provider type, complexity, headcount, union presence, and deal timetable. The estimates below reflect typical UK market ranges and may differ in your area or based on the precise scope agreed with advisers.

Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.

Practical steps before completion

• Decide early whether the deal route (asset, share, outsourcing) engages TUPE and define who is “assigned.”
• Prepare and quality‑check Employee Liability Information well before the 28‑day deadline; update for new starters, grievances, or claims.
• Draft and align employee communications, measures notices, and Q&A packs; train managers to maintain consistent messaging.
• Build a data room with redactions until later stages; use appropriate data‑sharing agreements and secure transfer tools.
• Negotiate targeted warranties/indemnities for known or suspected liabilities; address holiday pay calculations and working time records.
• Plan payroll, benefits, and IT access cutover to protect continuity for staff and customers.

Conclusion Handled well, TUPE enables continuity for employees while allowing ownership or service changes to proceed. For UK sellers, clarity on whether TUPE applies, disciplined consultation, accurate ELI, and robust contractual protections help manage risk and preserve deal value. Early planning across legal, HR, and integration workstreams reduces the likelihood of disputes and smooths the transition for the workforce.