A TUPE transfer in a business sale automatically moves your employees to the buyer, on their existing terms and continuous service, whenever your company is sold as a going concern. TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006 — the law that protects staff when a business, or part of one, changes hands. For a director selling a struggling company, understanding TUPE matters because it decides who takes on your workforce, and what employment liabilities travel with them.
This article covers when TUPE applies, which staff transfer, your duty to inform and consult, and what happens to redundancy and other liabilities — including in a pre-pack administration sale.
What TUPE is and when it applies to a business sale
TUPE selling business scenarios fall into two broad categories: a business transfer (selling the whole company, part of it, or its assets as a going concern) and a service provision change (a contract moving from one provider to another). Most director-led business sales fall under the first category.
For TUPE to apply, there must be an "economic entity" — an organised grouping of resources with the purpose of carrying out an activity — that keeps its identity after the sale. In practice, this usually means:
- The buyer continues the same or similar trade, using broadly the same staff, premises, or customer base.
- The sale is of the business itself (shares or assets used to run it), not simply the company's shares changing hands without any change in the trading entity.
- There is a clear transfer of an activity from you (the seller) to the buyer, even if trading pauses briefly around completion.
A pure share sale, where the company itself is simply bought by new owners and continues trading exactly as before, does not usually trigger TUPE — the employer stays the same. TUPE is most relevant to asset sales, business sales, and pre-pack administrations. The full legal test sits in the Transfer of Undertakings (Protection of Employment) Regulations 2006, and the government's own guidance on what happens to staff when a business changes hands sets out the same principles in plainer terms.
Which employees automatically transfer to the buyer
Employees "assigned" to the part of the business being sold transfer automatically to the buyer on their existing contractual terms, continuous service, and accrued employment rights. This happens by operation of law — neither you nor the buyer can simply choose to leave staff behind or offer them different terms as a condition of the sale.
Key points on who transfers:
- Assignment matters, not job title. An employee who spends most of their time working in the part of the business being sold will usually transfer, even if their contract covers other duties too.
- Continuous service carries over. The buyer inherits length of service, which affects notice periods, redundancy entitlement, and unfair dismissal protection.
- Existing terms are protected. The buyer cannot unilaterally worsen pay, hours or other core terms because of the transfer itself.
- Employees can object. A staff member can refuse to transfer, which usually ends their employment with you, but this is treated as resignation rather than dismissal in most cases.
Your duty to inform and consult before the sale
As the employer, you have a legal duty to inform — and where relevant, consult — affected employees, or their representatives, in good time before the transfer completes. This is one of the most commonly missed steps in a rushed business sale, and it carries real financial risk if ignored.
You must tell affected employees (or their representatives):
- That the transfer is happening, and roughly when.
- The reasons for it.
- The legal, economic and social implications for them.
- Any measures the seller or buyer envisages taking regarding those employees (for example, restructuring plans).
Where you envisage taking measures affecting employees, or there is no recognised trade union or existing staff representative body, you may need to arrange elections for employee representatives so consultation can take place properly. Consultation should happen "long enough before" the transfer to be meaningful — there is no fixed statutory number of days, but leaving it to the week of completion is a common and costly mistake.
What redundancy and accrued liabilities transfer vs stay
Most employment liabilities relating to transferring staff pass to the buyer along with the employee, because the buyer effectively steps into your shoes as employer. This typically includes:
- Accrued holiday pay and continuous service.
- Ongoing disciplinary, grievance or tribunal claims connected to their employment.
- Contractual entitlements such as pension obligations (subject to specific TUPE pension rules) and any collective agreements.
Liabilities relating to employees who do not transfer — for example, staff who are made redundant before completion because they are not assigned to the part of the business being sold — generally remain with you as the outgoing employer, unless the sale agreement says otherwise. Redundancy pay, notice pay and any pre-transfer breaches of contract for non-transferring staff are usually your responsibility to settle, and this is exactly the liability position addressed in our guide to What Are Employees Owed When a Company Closes?, which covers what happens when staff aren't kept on by a buyer at all. Statutory redundancy pay rates and eligibility rules are set out in the government's redundancy pay guidance.
Dismissing employees specifically because of the transfer is usually automatically unfair under TUPE, unless there is a genuine "economic, technical or organisational" (ETO) reason involving changes to the workforce, such as a real redundancy situation unrelated to the transfer itself.
TUPE in a pre-pack administration sale
TUPE still applies when a business is sold out of a pre-pack administration — a sale of the business agreed before the company enters formal insolvency, then completed immediately afterwards by the appointed administrator. This is a common route for a struggling business, but it does not remove employee protections.
Two features are specific to insolvency situations:
- Certain debts can transfer to the government rather than the buyer. Some sums owed to employees at the point of insolvency (such as certain arrears of pay, up to statutory limits) may instead become claims against the National Insurance Fund, easing the burden on the buyer and helping deals get done.
- ETO reasons are interpreted more flexibly in genuine insolvency. Where a company is in relevant insolvency proceedings, there is slightly more scope for restructuring workforce terms or numbers, but this is a specialist area and depends on the exact insolvency process used.
Because pre-pack sales move quickly and the consultation timetable is compressed, the administrator and buyer usually need specialist employment and insolvency advice from the outset to keep the process compliant.
Getting employee liability information (ELI) right
Before completion, you as the seller are legally required to give the buyer "employee liability information" — written details of the transferring employees at least 28 days before the transfer (or as soon as reasonably practicable if that is not possible). This should include:
- Identity and age of each transferring employee.
- Their terms and conditions of employment.
- Information about any ongoing or potential disciplinary, grievance, or tribunal matters involving them.
- Details of collective agreements that apply to them.
Getting this wrong, or handing it over late or incomplete, can expose you to a claim from the buyer after completion — separate from any claim an employee might bring. It is one of the most practical, and most overlooked, parts of a staff transfer business sale UK process, and worth getting right well before heads of terms are signed.
Penalties for failing to consult
If you fail to properly inform or consult, an employment tribunal can award a "protective award" of up to 13 weeks' pay per affected employee, uncapped by the usual statutory weekly pay limit. This applies whether or not any employee actually loses out financially — the award is for the failure to inform and consult itself.
Common triggers for a successful claim include:
- Consulting too late for it to be meaningful, or not at all.
- Failing to arrange employee representative elections where needed.
- Providing incomplete or misleading information about the transfer's implications.
Both the seller and buyer can be found jointly and severally liable, which is why TUPE consultation obligations are usually addressed early in any sale process, not left as paperwork to finish after heads of terms are agreed. A claim is brought at the employment tribunal, within strict time limits from the date of the transfer.
Frequently asked questions
Does TUPE apply to every business sale?
Not always. TUPE applies where there's a transfer of a business, part of a business, or a service provision change that keeps its identity with the new owner. A straightforward share sale, where the company itself is simply bought and continues as before, usually does not trigger TUPE.
Can a buyer refuse to take on transferring staff?
Generally no. Employees assigned to the transferring part of the business move across automatically by law. A buyer can later consider genuine redundancies for an ETO reason, but cannot simply refuse to take staff on as a condition of the deal.
What happens to my staff if the business is sold through a pre-pack administration?
TUPE still applies in a pre-pack sale. Employees assigned to the business transfer to the buyer, though some pre-transfer debts owed to them may become claims against the National Insurance Fund rather than the buyer's responsibility.
Do I have to consult employees even in a small business sale?
Yes. The duty to inform, and to consult where measures are envisaged, applies regardless of company size, though how consultation is organised (directly with staff, or via elected representatives) can vary.
What if an employee doesn't want to transfer to the new employer?
An employee can object to the transfer. This usually ends their employment with you by operation of law, treated broadly as resignation, so they would not typically be entitled to redundancy pay purely for objecting.
This article is general information, not legal or insolvency advice, and every business sale involves facts specific to your company. If you're planning a sale and want to understand your TUPE and wider employment obligations properly, Harbourfirst can introduce you to a regulated insolvency practitioner or employment solicitor — start an enquiry.