TUPE for small businesses: when staff transfer with the work
When TUPE applies, who transfers, what transfers with them, informing and consulting (including the direct route for small employers), employee liability information, changing terms, and dismissals.
Reviewed September 2026. Guidance, not legal advice: employment law moves, so check the current position before relying on any of it.
The Transfer of Undertakings (Protection of Employment) Regulations move employees from one employer to another when a business, or a contract for services, changes hands. The employees go with the work, on their existing terms, with their service intact, and neither employer can use the transfer as a reason to change that. It catches small firms most often when a contract is won or lost: the cleaning contract, the maintenance contract, the security contract.
This guide covers when TUPE applies, who is in scope, what the outgoing and incoming employers each have to do, and the traps around changing terms and dismissing.
When TUPE applies
Two situations:
- A business transfer: an economic entity (a business, or a part of one that has its own identity) moves to a new owner and keeps its identity. Selling a company's shares is not a transfer (the employer is the same company); selling its business and assets is.
- A service provision change: a client outsources an activity to a contractor, brings it back in house, or moves it from one contractor to another, and before the change there was an organised grouping of employees whose principal purpose was carrying out that activity for that client. Winning a contract from a rival is the classic case; the rival's staff on that contract may become yours.
Who transfers
Employees assigned to the organised grouping that is transferring. Someone who spends most of their time on the contract transfers; someone who occasionally helps out generally does not. Assignment is a question of fact, and it is argued more than anything else in TUPE. Both employers should agree the list early and share it with the people on it. Employees can object to transferring, in which case their employment ends on the transfer date without a dismissal, so no notice or redundancy pay.
What transfers with them
Everything: the contract of employment, continuity of service, pay, hours, holiday, notice, any collective agreement, and all liabilities (arrears, claims, grievances, disciplinary history). Occupational pension rights relating to old age do not transfer, but the new employer must provide a minimum level of pension. The new employer inherits the old one's failures, which is why due diligence and indemnities matter in the commercial agreement.
Employee liability information
The outgoing employer must give the incoming employer, in writing, at least 28 days before the transfer: the identity and age of each transferring employee, their written particulars, any disciplinary or grievance action in the last two years, any claims or potential claims, and any collective agreements. Failure carries a tribunal award to the new employer, with a minimum per employee. If you are the incoming employer, ask for it in writing and chase.
Inform and consult
Both employers must inform appropriate representatives of their own affected employees, long enough before the transfer to allow consultation: the fact of the transfer, when and why, its legal, economic and social implications, and any measures (changes) either employer envisages. Where measures are envisaged, they must consult with a view to agreement. Representatives are a recognised union or elected employee representatives.
Since 1 July 2024, employers with fewer than 50 employees, and employers of any size where the transfer involves fewer than 10 employees, may inform and consult the affected employees directly where there are no existing representatives, instead of arranging an election. That covers most small business transfers. Failure to inform and consult carries a protective award of up to 13 weeks' pay per affected employee, with liability shared between the two employers.
Changing terms after a transfer
A change to terms is void if the sole or principal reason is the transfer, even with the employee's agreement, unless it is for an economic, technical or organisational reason entailing changes in the workforce and the employee agrees, or the contract permits the change. Harmonising the new staff onto the existing team's terms is the thing every incoming employer wants to do and TUPE is designed to stop. Changes unconnected with the transfer, made later and for genuine reasons, are treated normally, but the longer the gap and the clearer the reason, the safer.
Dismissals
A dismissal where the sole or principal reason is the transfer is automatically unfair. A dismissal for an economic, technical or organisational reason entailing changes in the workforce (a genuine redundancy because the new employer needs fewer people, or a change of location) can be fair, following a fair process. Dismissals by the outgoing employer just before the transfer to "clean up" the workforce are treated as the incoming employer's problem, because liability transfers.
The checklist
- Identify early whether the change is a business transfer or a service provision change; take advice if unsure.
- Agree the list of assigned employees between the two employers and tell the people on it.
- Outgoing employer: employee liability information to the incoming employer 28 days before.
- Both: inform representatives or, if fewer than 50 employees or fewer than 10 transferring, the employees directly, in writing, in good time.
- Measures envisaged by either side put in writing and consulted on.
- No changes to terms because of the transfer; no dismissals because of the transfer.
- Records, holiday balances and payroll handed over cleanly on the date.
What the law says
- Transfer of Undertakings (Protection of Employment) Regulations 2006: reg.3 (scope), reg.4 (effect and changes to terms), reg.7 (dismissal), reg.11 (employee liability information), regs.13 to 16 (information and consultation, protective awards), reg.13A (direct consultation, as extended by the 2024 amendment regulations).
- Pensions Act 2004 ss.257 and 258 and the Transfer of Employment (Pension Protection) Regulations 2005: pension protection on transfer.
Questions people ask
We have won a contract and the outgoing contractor says none of their staff transfer. Are we safe?
Not on their say-so. If there was an organised grouping of their employees whose main purpose was that contract, those employees transfer whether or not the outgoing contractor accepts it, and they will bring claims against whoever they think is their employer. Ask for the employee liability information and take advice.
Can transferring employees be put on our standard contract?
Not because of the transfer. Their existing terms come with them. Over time, for genuine business reasons unconnected to the transfer, changes can be agreed like any other variation, but harmonisation immediately after the transfer is the change TUPE exists to void.
What if an employee refuses to transfer?
They can object, and their employment ends on the transfer date without a dismissal. They get no notice or redundancy pay from either employer. Make sure they understand that before they object; most people, once they do, transfer.
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