TUPE Transfers: Redundancy Rules and Employee Rights

Redundancy and business transfers often intersect under UK employment law, especially when a business or part of it changes hands. In England and Wales, the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protect employees when their employer changes due to a sale, transfer or service provision change. Understanding how redundancy rights operate alongside TUPE is essential for employees, employers and legal practitioners. This article explains the interaction between redundancy and TUPE, setting out when redundancy can occur, how employee rights are protected, employer responsibilities, consultation requirements, relevant legal processes and practical guidance.

What Is a TUPE Transfer?

A TUPE transfer occurs when a business, part of a business, or certain services move from one employer to another. This change may result from a commercial sale, outsourcing, insourcing or reorganisation. The purpose of TUPE is to protect employees' contracts and employment rights when the identity of the employer changes. Under TUPE:

• Employees retain their existing terms and conditions of employment including pay, holidays and continuity of service.
• The new employer inherits contractual obligations and liabilities, including past breaches such as unpaid holiday or discrimination.
• Continuous service is preserved for redundancy and other legal rights.

This framework ensures that employees are not disadvantaged simply because the business they work for has a new owner.

How Redundancy and TUPE Interact

Redundancy can arise before or after a TUPE transfer, but the timing and reason for redundancy affect employee rights and employer liabilities:

Before a Transfer

Employers cannot make employees redundant if the sole or principal reason for dismissal is the TUPE transfer itself. Such dismissals are automatically unfair. Redundancies can only occur before a transfer if there is a genuine redundancy need unrelated to the transfer process (for example, restructuring for commercial reasons separate from the transfer).

After a Transfer

Once employees have transferred under TUPE, the new employer may make redundancies if:

• There is a genuine redundancy situation (such as closure of a site or reduced need for particular roles); and
• The dismissal is for an economic, technical or organisational (ETO) reason that involves a workforce change (for example, duplication of roles after combining two workforces).

This ETO requirement applies when redundancy relates directly to the transfer's consequences. Where redundancies are unrelated to the transfer, the normal redundancy process applies without the ETO requirement.

Because continuous service carries across a TUPE transfer, an employee's length of service for redundancy pay purposes includes time with the previous employer before the transfer.

Redundancy Pay and TUPE

Under TUPE, redundancy pay responsibility depends on when redundancies occur:

• If redundancies are made before the transfer, the original employer is responsible for paying redundancy entitlements.
• If redundancies occur after the transfer, the new employer is responsible for redundancy pay, including statutory redundancy and any contractual or enhanced redundancy terms carried across by TUPE.

Redundancy pay is calculated based on continuous service, which includes all qualifying service with both the old and new employers. This means employees are generally entitled to redundancy pay based on their full length of continuous employment from the original start date.

Consultation and Procedural Fairness

TUPE transfers trigger additional consultation obligations. Employers must inform and consult employees or representatives about the transfer itself and about any proposed redundancies connected with the transfer:

• The old employer must inform affected employees about the impending transfer and provide required employee liability information to the new employer.
• Both old and new employers should consult where planned redundancies are likely. In collective redundancy situations (typically 20 or more employees at one site within 90 days), formal consultation must begin at least 30 days before the first dismissal.

Consultation should cover reasons for redundancies, selection criteria, measures to avoid redundancies, and alternatives to dismissal. Even where redundancies are unrelated to the transfer, employers must follow fair redundancy procedures for both existing and transferring employees.

Changing Terms and Conditions After TUPE

TUPE protects employees' terms and conditions at the point of transfer. Neither the old nor the new employer can alter terms simply because of the transfer. The only lawful exceptions are changes for ETO reasons involving workforce change, such as redundancies or reorganisations. Any other changes must be agreed with employees.

This protection extends to contractual entitlements such as enhanced redundancy pay or specific benefits agreed before the transfer; these continue to apply unless validly renegotiated under the law's permitted conditions.

What Happens If an Employee Objects to TUPE

An employee may choose to refuse to transfer under TUPE by objecting in writing before the transfer takes effect. In such cases:

• The employment contract ends at the point of transfer as if the employee resigned.
• The employee normally cannot claim statutory redundancy pay or unfair dismissal rights because they have effectively chosen to leave employment.

However, if the employee's working conditions are significantly worsened by the transfer, they may have grounds to claim constructive dismissal or discriminatory treatment at a tribunal, depending on the circumstances.

Practical Considerations and Employer Obligations

Early Planning and Communication

Employers should plan TUPE transfers and any related redundancies well in advance. This includes determining whether redundancies are genuinely necessary, identifying roles that may be at risk, and engaging in early and meaningful consultation with employees and representatives.

Maintaining Fair Processes

Whether redundancies occur before or after a transfer, employers must follow fair selection, consultation and dismissal processes that meet statutory and contractual requirements. Failure to do so may result in tribunal claims for unfair dismissal or breach of TUPE protections.

Record Keeping

Employers should maintain clear documentation of decisions, communications, consultation outcomes, redundancy calculations and reasons for any ETO decisions. These records are essential in defending potential tribunal claims.

Common Questions

Does TUPE automatically stop redundancies?
No. TUPE does not prevent all redundancies; it prevents dismissals solely because of the transfer. Redundancies can proceed if there is a genuine need and, where required, an ETO reason involving workforce change.

Who pays redundancy if a business is sold?
If redundancies occur after the transfer, the new employer is responsible for statutory and contractual redundancy pay. If redundancies occur before the transfer, the original employer is usually responsible.

Is continuity of service preserved?
Yes. TUPE ensures continuity of service is preserved for redundancy purposes and other rights, so employees do not lose service accrual due to the transfer.

Can terms be changed after transfer?
Terms cannot be altered solely due to TUPE. Changes are only lawful if linked to ETO reasons or with employee agreement.

Key Takeaways

Redundancy and TUPE transfers intersect where a business or part of it changes ownership or control. Employees benefit from strong protections: continuity of service and contractual terms carry over, and dismissals solely because of a transfer are automatically unfair. Redundancies can still occur but must be based on genuine organisational needs and fair processes, and consultation must involve transferring and existing employees. Responsibility for redundancy pay depends on the timing of redundancy relative to the transfer, and terms and conditions are protected unless lawful exceptions apply. Clear communication, early planning and attention to statutory requirements help both employers and employees manage redundancy and TUPE transitions with confidence and legal certainty.

James William Steven Parker

James is the founder of UKLegalGuides.com and a former agent at the Ministry of Justice (UK). With a background in processing legal claims, he launched this platform to make the laws of England and Wales accessible to everyone.