Step 5: Transfer terms and conditions
On the date of the transfer, employees will automatically transfer to the new employer, along with their:
- length of service ('period of continuous employment')
- employment contract, including their terms and conditions of employment
This means an employee's start date is the same as it was before the transfer and they do not get a new employment contract, it just continues.
Inform employees about a change of employer
The new employer must inform the transferred employees in writing that there's been a change of employer.
The new employer should confirm in writing:
- the employer has changed
- the employee's length of service and contractual rights are the same as before the transfer
The new employer might want to add these details to their written terms ('written statement of employment particulars').
The new employer should talk with staff soon after they transfer to keep them informed and listen to any concerns they may have. This will help to reassure and integrate staff, as well as build good working relationships.
Which terms and conditions transfer
Employees' terms and conditions of employment may include:
- job title and role
- pay, including any overtime pay
- contractual bonuses
- commission
- sick leave and pay
- holiday leave and pay, including any outstanding holiday pay or any arrangements to carry over holiday from previous leave years
- allowances
- insurance-based benefits
- contractual enhanced redundancy pay
- any terms agreed through 'collective agreements' (agreements between an employer and a trade union)
- any contractual terms from other sources ('incorporated terms'), for example from a staff handbook or an agreement affecting many employees
- any terms that may not be found in an employment contract, for example a lorry driver needing a valid driving licence to work
The new employer should assume all employee terms and conditions transfer unless they get different legal advice.
The new employer must meet the terms of the transferring employment contract. If not, it would be a breach of contract and an employee might be able to make a claim to an employment tribunal.
Find out more about what's included in an employment contract
Pensions
An employee's pension built up to the date of the transfer is protected.
Their pension may transfer to the new employer depending on if they have:
- a personal pension – a pension that employees arrange themselves
- a workplace pension – a pension arranged by the old employer
If they have a personal pension which the old employer was contractually obliged to contribute to, their pension rights will automatically transfer to the new employer. The new employer must pay the same amount into personal pensions as before the transfer.
If they have a workplace pension, it's unlikely to transfer to the new employer because it is exempt from TUPE. This means the new employer does not have to continue the same pension. But you must provide a reasonable alternative scheme.
Early retirement terms may also transfer to the new employer. This is a complex area of law so it's a good idea to get specialist pensions advice.
Find out more information from The Pensions Regulator
Collective bargaining
On the date of the transfer, the new employer becomes responsible for:
- any collective bargaining agreements, for example agreed changes to pay and benefits
- any collective bargaining arrangements, for example how often meetings take place and who represents employees in negotiations
Collective bargaining agreements are agreements between the old employer and a trade union that affect employees' terms and conditions.
Many collective agreements continue for an indefinite period. For example, if employees' holiday (annual leave) is increased or a shorter working week is agreed, it is likely to continue indefinitely.
Some collective agreements may only cover a specific period. For example, an agreed change to employees' pay may only be for one year.
After one year, the new employer can renegotiate terms and conditions in collective agreements if overall it does not make an employee's employment contract worse.
Trade union recognition
Trade union recognition is when an employer agrees that their employees can be represented collectively by a trade union.
Under TUPE, trade union recognition only transfers to the new employer if the transferring employees keep a separate identity within the new employer's organisation.
If recognition transfers to the new employer, it will transfer with the same terms as with the old employer.
If the transferring employees do not keep a separate identity, the recognition agreement will end but the trade union could try and negotiate a new one.
Example where recognition transfers
Clothes Union is the recognised trade union for ShoppingCo's team of security staff. ShoppingCo decides to 'outsource' (transfer to a contractor) its security service and transfers its security team to Security Limited. Although they are now employed by Security Limited, the security staff continue to work at ShoppingCo and keep a separate identity to Security Limited's wider security workforce. Recognition of Clothes Union as the trade union for the security staff transfers to Security Limited.
Example where recognition does not transfer
Power Union is the recognised trade union for ElectricsCo's team of electricians. ElectricsCo merges with Sparksnet to form a new organisation, E-Spark. All of the staff transfer to E-Spark. The electricians from the old organisations become one workforce. The employees from ElectricsCo no longer have a separate identity from the other E-Spark employees so recognition of Power Union does not transfer.
Outstanding holiday and pay
On the date of the transfer, the new employer becomes responsible for:
- any outstanding wages or unpaid bonuses
- any outstanding holiday
- any arrangements to carry over holiday from previous leave years or 'enhanced' holiday (if employees get more than the legal minimum)
The new employer is still liable for any outstanding holiday and pay even if they are unaware of these entitlements.
If any ELI provided by the old employer is inaccurate, the new employer may want to make a claim to an employment tribunal against the old employer.
Example – outstanding bonus
An employee is transferred to a new employer in January. Their old employer previously paid a performance-related bonus in March. Their new employer is now responsible for paying them the bonus in March every year.
Example – outstanding holiday
An employee's holiday year starts on 1 January and ends on 31 December. They have 10 days' holiday left when they transfer on 1 October. Their new employer must allow them to take this holiday before the end of their leave year, if the employee wants to.
Changing employees' terms and conditions
The new employer must be careful when agreeing changes to transferred employees' terms and conditions. This is because there are other things to consider if the main reason for changing an employment contract is the transfer.
Find out more about changing an employment contract after a TUPE transfer