TUPE or
not TUPE?

 

So, you’ve heard the term- but what does it really mean? And when does it apply? Confusion can arise easily around this subject, since the circumstances in which a Transfer of Undertakings (Protection of Employment) happens are typically quite complex. This is alongside what are undoubtedly major changes in the business, making it all the more difficult to give sufficient time to getting right.
 

So, you’ve heard the term- but what does it really mean? And when does it apply? Confusion can arise easily around this subject, since the circumstances in which a Transfer of Undertakings (Protection of Employment) happens are typically quite complex. This is alongside what are undoubtedly major changes in the business, making it all the more difficult to give sufficient time to getting right.

To understand why TUPE exists and what it’s for, we should take the employee’s view. When a company sells part of its business to a new owner an employee is faced with major risks if it weren’t for TUPE regulations. Without them the new business could immediately make drastic changes and decisions much to their detriment. This could include the removal of valued contractual promises made by the employer, such as the employee benefits they receive. Protecting these employees from losing out is the purpose of TUPE regulations. After all, it’s outside their control.

TUPE applies in two situations1:

  1. When a business (or part of one) is transferred to a new employer.
  2. When a service provision change takes place.

In either situation there are legal obligations to which an employer must abide and these responsibilities are mandatory under TUPE:

  • All employees employed immediately before the transfer are automatically transferred to the buyer.
  • Employees are protected against having their terms and conditions changed in connection with the transfer.
  • Employees can claim automatically unfair dismissal if they are dismissed on account of the transfer.
  • The seller and the buyer both have an obligation to inform and consult representatives of affected employees.

When considering employee health and protection benefits this means that provisions such as private medical insurance and life assurance need to be replicated as far as possible by the new owner of the contract.

Now, that’s very easy to say, but not so easy to do. If you aren’t an expert in group benefits how can you be sure you are meeting the needs of these regulations? The penalties for a mistake or inconsistency between the previous and replacement provisions could be significant. Nobody wants action to be taken against their company for non-compliance when they were only trying to do the right thing.

A big challenge for employers experiencing TUPE is the scope of cover available in the market. Often the group of employees transferring is small and there may be only a couple or more individuals involved in the move. Where the move is from a larger organisation to a smaller one it’s often quite challenging to find a fit for the type of benefits the employees previously had in place.

Our schemes at Elect are designed for smaller groups and offer benefits that are ordinarily only available to much larger companies, making it easier to access like-for-like designs. The terms available through Elect for Medical History Disregarded underwriting on our Private Medical Insurance plans for groups as small as one employee are a great example of this.

TUPE transfers happen all the time; it’s a part of the day to day world of business and it’s important you work with the right company to help satisfy them. Elect can help you find the right products and the right design to help you satisfy your obligations. Please contact us to find out more.

Author:
Samuel Bain, Consultant

 


Sources:

CIPD “A Guide to TUPE Transfers”

 


Disclaimer:

This article is for information only and is not specific advice. It is based on our current understanding of the attributed research which may change in the future.


 

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