TUPE and redundancy: what UK employers must get right

What TUPE is and when it applies

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) protect employees when the business they work in moves to a different employer. Two situations are covered. The first is a business transfer, where an economic entity that keeps its identity passes from one employer (the transferor) to another (the transferee). The second is a service provision change, where a client outsources a service, brings it back in-house, or moves it between contractors, and there is an organised grouping of employees whose principal purpose is carrying out that service.

When TUPE applies, three things follow automatically. Employees assigned to the transferring entity move to the new employer on their existing terms and conditions. Their continuity of employment is preserved, which matters directly for redundancy pay and unfair dismissal rights. And most rights, duties and liabilities connected with their contracts pass to the transferee, including accrued holiday, live grievances and, in many cases, existing claims. Occupational pension rights are treated differently and are subject to separate rules.

Why a TUPE transfer changes the redundancy analysis

Redundancy is a specific form of dismissal: it arises where the employer’s need for employees to do work of a particular kind has ceased or diminished, or is expected to. In an ordinary reorganisation you assess pooling, selection and consultation against that definition. A TUPE transfer overlays a second question on top: was the real reason for the dismissal the transfer itself?

That question matters because Regulation 7 makes any dismissal automatically unfair where the sole or principal reason is the transfer. Unlike some automatically unfair dismissals, a TUPE-related unfair dismissal is not a “day one” right, so an employee generally still needs the usual qualifying period of continuous service (currently two years) to bring a claim. The practical effect is that you cannot simply dismiss people because a transfer is happening, label it redundancy, and expect it to stand.

Redundancy dismissals and the ETO defence

There is a lawful route to redundancy around a transfer, but it is narrow. Regulation 7 allows a transfer-connected dismissal to be potentially fair where the reason is an economic, technical or organisational reason entailing changes in the workforce, known as an ETO reason. Three elements must all be present:

• Economic, technical or organisational: the reason relates to the running of the business (for example, falling demand, new technology, or a restructured management layer), not simply the wish to complete the transfer.
• Entailing changes in the workforce: there must be a change in the numbers employed or in the functions performed by the workforce, not merely a change to individuals’ terms.
• Held by the employer who dismisses: the ETO reason must belong to the party actually making the dismissal, whether that is the transferor before completion or the transferee afterwards.

Where a genuine ETO reason exists, redundancy can be a fair reason for dismissal, but the employer still has to follow a fair process: a fair pool, objective selection criteria, meaningful individual consultation, and consideration of suitable alternative employment. Skipping those steps turns a defensible restructuring into an ordinary unfair dismissal even if the ETO threshold is met.

Consultation obligations before and after a transfer

Two separate consultation regimes can run at the same time, and confusing them is a frequent and expensive error.

The first is TUPE information and consultation under Regulation 13. Both transferor and transferee must inform appropriate representatives (a recognised trade union or elected employee representatives) about the transfer, its likely timing, the reasons, and the legal, economic and social implications. Where either party envisages taking measures in connection with the transfer, such as redundancies or changes to terms, it must consult representatives with a view to reaching agreement. A failure can lead to a protective award of up to 13 weeks’ pay per affected employee.

The second is collective redundancy consultation under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. This is triggered where an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. It carries minimum consultation periods (30 days before the first dismissal where 20 to 99 redundancies are proposed, and 45 days where 100 or more are proposed) and a separate protective award of up to 90 days’ pay for breach. Since the 2014 amendments, a transferee’s proposed post-transfer redundancies can, with the transferor’s agreement, be consulted on before the transfer completes, which can save time but must be documented carefully.

Smaller employers have a lighter route: where there is no recognised union or existing representatives, a business with fewer than 10 employees may inform and consult affected staff directly under the micro-business provisions.

Who is liable, and common mistakes that create claims

Liability usually follows the automatic transfer principle. If the transferor dismisses an employee before completion for a reason connected to the transfer and without an ETO reason, liability for that unfair dismissal generally passes to the transferee. A buyer who assumes the seller will quietly handle the leavers can therefore inherit the very claims it thought it had avoided. This is why transfer agreements allocate risk through warranties and indemnities, and why due diligence on headcount and any planned redundancies is essential.

Recurring mistakes include:

• Labelling a transfer-driven dismissal as redundancy without a genuine ETO reason.
• Running redundancy selection before the transfer to make the workforce cleaner for the buyer, which is a classic automatically unfair dismissal.
• Forgetting that TUPE Regulation 13 consultation is owed even where no redundancies are planned, simply because the transfer is a relevant event.
• Trying to harmonise transferred employees onto the buyer’s terms shortly after completion; changes for a reason connected with the transfer are void unless an ETO reason applies.
• Treating the two consultation clocks as one, and missing the collective redundancy minimum periods.
• Failing to preserve continuity of service, which understates redundancy pay and unfair dismissal exposure.

A practical checklist before you act

Before any redundancy decision around a transfer, work through the following:

• Confirm whether TUPE applies at all (business transfer or service provision change), and identify which employees are assigned to the transferring grouping.
• Establish who is proposing the dismissals and when, transferor pre-transfer or transferee post-transfer, because that determines whose ETO reason is tested.
• Document the genuine economic, technical or organisational rationale and how it entails a change in numbers or functions.
• Map both consultation duties: Regulation 13 information and consultation, and section 188 collective consultation if 20 or more redundancies are proposed.
• Elect representatives in good time where none exist, and diarise the minimum consultation periods.
• Run a fair redundancy process: pool, criteria, individual consultation, and a search for alternative employment.
• Check the transfer agreement for warranties, indemnities and the allocation of employment liabilities.
• Preserve continuity of service and calculate statutory redundancy pay on the correct figures.

Bringing it together

TUPE and redundancy is one of the areas where the paperwork and the timeline decide the outcome. The obligations live inside the transfer agreement, the consultation records, the selection documents and the individual contracts, and a single missed clause or date can convert a routine reorganisation into layered tribunal claims. Disciplined contract management keeps those threads visible: knowing which agreement carries the employee liabilities, which indemnity responds, and when each consultation period expires.

This is where a reviewer benefits from Pactolane’s CLM platform and its PactAI copilot. PactAI can spot TUPE and employment clauses across a transfer agreement, extract the warranties, indemnities and key dates into a summary, and score exposure so nothing hides in the schedules, while renewal and deadline alerts keep consultation timelines on the radar. PactAI prepares the ground by surfacing the issues; the human, advised by employment counsel, still makes every decision. This guide is general legal information, not legal advice.