One of the main problems many business owners (and even HR people) get confused about in respect of TUPE is when it actually applies. What the legislation specifies is that TUPE applies when there is what is called a “relevant transfer”.
But what is a “relevant transfer”? Many would realise that TUPE applies if a business is sold, but there are several other situations which may also count as a relevant transfer so it’s worth understanding what these are so you can keep a look out for changes in your business that might trigger TUPE obligations.
Selling a business
If a business is sold, or part of a business (one branch in a chain, for example), then TUPE will apply. The most common situation we’ve come across with people being ‘caught out’ is when new business owners without much or any experience of employing people look into purchasing an established business.
They sometimes assume that when they’ve bought the business they’ll be able to employ who they like and are just purchasing the name/physical assets/client lists. Not so. If you buy an established business which has employees then you are taking them on as well, and all the liabilities/obligations and responsibilities that involve.
This is a fairly common example with SMEs – if, as your business grows, you decide to outsource a particular function, then TUPE will apply. It needs to be replacing a function currently being performed in house – for example if you have been managing with no HR support, and decide you need to engage a regular external HR provider, that wouldn’t involve TUPE.
If you do have in-house HR support but want to engage external HR advice to supplement the internal provision you currently have, again TUPE wouldn’t apply.
But if you have employees who provide HR support to the business as their main role, and you decide that you’d rather the function be performed by an outside provider instead, then TUPE will apply to those individuals.
Change of provider
Again this is commonly relevant to SMEs. If you already outsource, say, the cleaning of your offices to a cleaning company and you decide you are not happy with them and would prefer to engage an alternative provider, then TUPE may apply.
If the first provider has an employee/employees who spend all or most of their working hours providing the service to your company, they will transfer to the new provider.
It’s not that you as the client will have TUPE responsibilities, but you need to be aware that your providers both have obligations and should satisfy yourself that they are fulfilling them. It’s also worth knowing that if your concern with the first provider is the quality of the individuals providing the service to your business, changing provider may not resolve this issue!
If you are the provider of outsourced services and are tendering for a contract, you should ensure that before you complete your bid you have found out whether there are any employees working for the existing provider who would come under TUPE legislation and therefore transfer to you. This may obviously have an impact on the details of your bid, or indeed whether you wish to bid for the contract at all.
Insourcing is where a service which has previously been provided by an external third party is taken back in-house. Many small businesses outsource services initially but then as they get bigger, decide they would prefer/can support an in-house department covering that particular function.
But taking an outsourced service in-house doesn’t just mean terminating the agreement you have with a supplier and recruiting the employees you want – if there are individuals working for the outsourced supplier who work completely or mostly on the contract the company has with you, then TUPE will apply to them and they will transfer to your employment when the contract with their employer is terminated.
You should always ensure you don’t rely on the other party in the transfer to identify whether TUPE is relevant – we have had more than one situation where a client has notified us that the other party didn’t think TUPE applied, but in fact it did. If you are at all in doubt about whether a situation comes under TUPE legislation, seek professional advice before proceeding.
If you are not sure whether TUPE will apply to a business transaction you are considering and would like some advice, do get in touch.