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A Guide for Overseas Companies Employing in the UK:  How TUPE Can Help Transfer Your Employees to Outsourced Employment

If you are a multinational with a branch or office in the UK, you should be aware of the laws that can affect any attempt to transfer your UK entity.  Basically, your employees have rights in the UK surrounding the terms of their employment in the event of a business transfer or branch closure, where you still intend to continue business activity in the UK.

1.    What is TUPE?

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) is a UK law that protects employee rights in the event that a business has a transfer of ownership to a new company.  TUPE applies to transfers of all or part of any going concern, to ensure that employment terms are transferred at the same time for affected employees.

The purpose of TUPE is to make sure that an employee’s current status, compensation and applicable benefits will not change when there is transfer of the business. The employee is transferred whole to the new business entity, and the new employer effectively steps into the shoes of the old employer as though they originated the employment contract.  One important exception to TUPE is when an existing company simply has a new owner, and there is no ‘TUPE transfer’. 

TUPE is triggered in the common situation where a company outsources some part of its business to a third-party supplier, and the employees are given the choice to be a part of the transfer. They can opt out of course and choose to resign if they don’t want to be a part of the transfer.

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2.    In What Circumstances Does TUPE Apply?

TUPE does not apply to every ownership change in a business and requires that there be at least a partial transfer or outsourcing to a new organization.  This can take several forms, including:

  • The sale or purchase of all or part of a business by another company
  • Initial outsourcing of a service and in-house employees are outsourced to the contractor/external supplier (this would be the most common type for a company wanting to outsource the employment/payroll function)
  • Transfer of employees from the current outsourced supplier to a new supplier
  • Outsourcing of the service is terminated, and the employees of the supplier are transferred back in-house

Regardless of the type of transfer, TUPE provides the same protection equally for employees of either entity that are affected. 

3.    Transferring an Employee Under TUPE

What Should Employers Do?

  1. The first thing for the current employer to do is to inform staff and explain the transfer process and their rights. It is important that they understand that although there is a business transfer, their employment terms will continue uninterrupted. 
  2. In some cases, there might be a change in location or some re-organization of work roles, which could impact the employee and require some adjustment of terms which is allowable under TUPE.
  3. Next, the outgoing employer informs incoming employer about employee details including terms, collective agreements and grievances. All contractual benefits will transfer including compensation, holidays, allowances and health insurance, so the incoming employer needs to have all of this information prior.  (note: some pension benefits or profit sharing may not transfer under TUPE)

4.    The TUPE Transfer Process:  UK Employees to GEO Outsourced Employment

Companies with UK employees that want to outsource employment can use TUPE to transfer existing employees to a GEO employer of record (EOR).  There may be several reasons a company wants to do this, for example multinationals with an existing branch in the UK that want to downsize or cut costs, or reorganization issues surrounding Brexit.

The EOR as a separate UK entity qualifies as an outsourcing supplier under TUPE, and every aspect of employment can be seamlessly transferred to the EOR along with all current terms of employment.  This gives employees the assurance that their employment contract and compensation will be unchanged, and that administration of employment will be serviced by UK experts through the local EOR.

Similarly, this move simplifies the employment process for employers, and gives them the peace of mind that they are in full compliance with TUPE and other UK regulations.  Shield GEO’s local partner will assist with setting up the new employment to mirror the former employment contract, along with any necessary adjustments.  In this way, the employer can continue with business activity uninterrupted, using current staff, without the administration of formal employment through their own entity.

Please contact Shield GEO with any questions about outsourcing employment in the UK or in any other country where you assign staff.  We make international employment simple for our clients in over 90 countries.

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