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When your employer is taken over or transferred

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When your business is transferred or taken over

If the business you work for changes from one owner to another, you need to know how it will affect you. Find out what it means for you if there's a transfer of the business to a new employer, and your employer's responsibilities to you.

What it means

If the business you work for changes hands, your terms and conditions are protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (known as 'TUPE'). The existing terms and conditions of your contract of employment will transfer automatically to your new employer. This means that you will normally carry on working for the new employer as before.

If the new employer refuses to meet the terms of your contract, this will amount to a breach of contract. It may also amount to a breach of TUPE.

How your other employment rights are protected

Other employment rights as well as your terms and conditions are protected. These include any holiday you've built up and any outstanding claims you've made against the original employer (e.g. under discrimination laws).

If you don't want to work for the new employer

You can refuse to work for the new employer. You must let your current or prospective employer know that you object to the transfer. You'll be regarded as having resigned and will have no right to claim unfair dismissal or to a redundancy payment.

What happens if you're employed by a contractor?

If you're employed by a contractor (e.g. in catering or cleaning) who loses a contract to another contractor, you should, unless you're told otherwise, turn up for work as usual. You and your contract of employment will usually transfer automatically to the successful contractor.

If you find there's no job for you, you can consider making a claim for unfair dismissal against both employers in an Employment Tribunal. You may also have a claim for failure to inform and consult with appropriate employee representatives before a TUPE transfer.

Rights to consultation

Your employer and their potential purchaser must inform (and if appropriate consult with) the representatives of the workforce about the transfer. This will either be with trade union officials (if you have a union) or employee representatives who are usually elected by the workforce.

The representatives must be told:

  • When and why a transfer of business is happening
  • What the impact on employees will be
  • Whether any measures like reorganisation will be taken, and how they'll affect you
The information must be given in good time and the consultation must be carried out with the aim of coming to an agreement. If any reorganisation is planned, your representative can put forward your views. Your employer must reply to these and say why if they reject them.

Your representative can complain to an Employment Tribunal if the employer fails to inform and consult. The complaint should succeed unless there were exceptional circumstances preventing your employer from informing and consulting (for example, events outside their control).

What happens if you're dismissed as a result of a business transfer?

If you are dismissed in connection with the transfer, this is automatically unfair unless there's what is known as an 'economic, technical or organisational (ETO)' reason involving changes (i.e. in numbers or roles) in the workforce. Redundancy is an example of an 'ETO' reason.

Rights to redundancy payments

After the transfer, your new employer may want to cut the number of employees. If you're selected to leave, or if you're dismissed for an economic or technical reason, you may have the right to a redundancy payment.

Pensions

The effect of a transfer is that if the previous employer provided a pension scheme, the new employer will have to provide some form of pension arrangement for employees who were members of (or eligible for membership of) the old scheme. It will not have to be the same as the arrangement provided by the previous employer but will have to be of a certain minimum standard.

Following the transfer, the transferring employees must be offered access to either a final salary, money purchase or stakeholder scheme. This applies to all members and eligible members of the transferring business's scheme.

Where the new employer offers a money purchase or stakeholder scheme, if the employee contributions are less than 6%, the new employer must match the employee contributions. If the employee contributions are 6% or more, the new employer must contribute at least 6%.

If the new employer offers the transferring employees access to a final salary scheme, the scheme must meet certain requirements set out in a Reference Scheme Test (RST) if the transferor's scheme exceeded the RST requirements. However, if the transferor's scheme did not meet the RST requirements, the new employer could provide, as a minimum, benefits that are of an equivalent value to those provided under the transferor's scheme.

What to do next

Once the transfer has taken place, make sure you're given an up-to-date written statement of employment. This should give the name of your new employer and say that your terms and conditions haven't changed.

Don't be alarmed if you receive a P45 - this often just means your tax records are being updated, not that you're out of a job.