Summary
- TUPE can transfer employees and employment liabilities to the buyer in a care business asset purchase.
- Buyers must share planned workforce changes so sellers can meet their duties to inform and consult affected staff.
- Buyers face restrictions on changing employment terms, while pension obligations need a separate review.
- This guide explains TUPE for care business buyers in England and Wales.
- LegalVision’s business lawyers specialise in advising clients on employment matters and business purchases.
Tips for Businesses
Request employment records before agreeing your purchase timetable. Compare contracts with actual rotas, allowances and holiday balances. Record proposed staffing changes before consultation begins. Speak to an employment lawyer at LegalVision about transferring care staff and checking inherited employment liabilities.
On this page
- What Does TUPE Mean for Care Business Buyers?
- How Does the Workforce Affect a Care Home Purchase?
- When Can TUPE Apply to a Care Business Acquisition?
- What Employment Records Should You Check?
- How Should You Plan the Employee Information Handover?
- Who Must You Inform and Consult Before Transfer?
- Can You Change Contracts or Dismiss Staff After Completion?
- What Pension and Collective Agreement Duties Can Transfer?
- What Should You Resolve Before Agreeing the Purchase?
- Key Takeaways
- Frequently Asked Questions
TUPE refers to employment protections that apply when a business changes employers. You may also take responsibility for employment debts and claims arising before the purchase. Staff usually keep their existing employment terms and continuous service. Continuous service means their employment history continues without a break. Buying the business does not give you unrestricted freedom to change contracts or dismiss staff. This guide focuses on England and Wales. Northern Ireland has different rules in some areas, including those related to consultation. This article explains how TUPE applies specifically in the context of a care business asset purchase.
What Does TUPE Mean for Care Business Buyers?
TUPE protects employees when ownership of a business, or part of it, changes. It can also apply when a service changes provider. Employees should not lose their jobs or existing terms simply because a buyer takes over.
When TUPE applies, certain employees assigned to the transferring business automatically transfer to the buyer. Their employment continues on their existing terms and conditions, and they keep their continuity of service, subject to limited exceptions.
TUPE also restricts dismissals and changes to employment terms where the transfer causes the change. Plan any restructuring with these limits in mind.
How Does the Workforce Affect a Care Home Purchase?
Your workforce shapes the care you can provide and the cost of running the home. A care home may employ managers, nurses, senior carers and care assistants. It may also employ catering, housekeeping, administration and reception staff.
Where TUPE applies, large parts of that workforce may transfer with their existing terms and employment history.
Identify likely transferring staff early and compare their roles with your plans for the home. Include support teams when reviewing employees affected by a business merger or purchase.
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When Can TUPE Apply to a Care Business Acquisition?
TUPE does not apply to every care business acquisition. It applies only where specific legal conditions exist, and it applies automatically when those conditions arise. Buyers and sellers cannot agree to exclude it.
An asset purchase can qualify when an identifiable business transfers and retains its identity. The result depends on the facts of the transaction.
Buying Shares
TUPE does not usually apply to share purchases because the employer remains the same legal entity and employment does not transfer.
Allocating Employment Risk
Although parties cannot avoid TUPE, they can use the sale documents to allocate employment risk between them. Buyers and sellers usually use warranties and indemnities for this purpose.
Warranties are contractual promises about the business. Indemnities allocate responsibility for specified losses. Your lawyer can explain how each protection applies to the employment risks you identify.
What Employment Records Should You Check?
Employment due diligence means checking workforce records before buying. It helps you identify employment risks and assess their effect on the purchase price. It also helps you plan how to run the home after completion.
In an asset purchase where TUPE applies, most employment liabilities connected with transferring employees move automatically from the seller to the buyer. These are employment debts and legal responsibilities.
They can include unpaid wages, holiday pay and equal pay claims. They can also include breaches of employment contracts and existing or potential Employment Tribunal claims. An Employment Tribunal decides workplace disputes.
Reviewing Records and Staffing
Sellers usually provide employee information through a data room, a secure place for sharing transaction documents. They may remove identifying details at the early stages. The information should still help you assess roles, seniority, working patterns and employment costs.
Review employment contracts, policies, grievance and disciplinary records, and existing or potential claims. Check training records, supervision arrangements and staffing levels against residents’ care plans and the relevant care requirements.
Where TUPE applies, the seller must also provide employee liability information before completion. This means specified details about transferring employees and employment obligations.
How Should You Plan the Employee Information Handover?
Build the employee information deadline into the purchase timetable before agreeing the completion date. Government guidance on employee information says the seller must usually provide it at least 4 weeks before transfer. Ask for an earlier delivery date so you can investigate gaps.
Employee liability information includes identities and ages, main employment terms and relevant collective agreements. Collective agreements are agreements between an employer and a trade union.
The seller must also disclose specified disciplinary matters, grievances and employment claims from the preceding 2 years. They must include potential claims they reasonably believe employees may bring.
This information gives you a starting point for checking the workforce you expect to inherit. Compare it with contracts and payroll records. Ask the seller to explain differences in names, roles or employment dates before you finalise your cost assumptions.
Checking Changes Before Completion
Agree who will answer follow-up questions and how the seller will report changes before completion. Keep a dated record of the information received. Separate unanswered questions from points the seller has confirmed in writing.
Ask about agreed working arrangements that do not appear in the standard contract. For a care home, these might concern shift patterns or an individual employee’s hours. Check the supporting records rather than assuming everyone works on the same terms.
Preparing Payroll and the First Rota
Give the payroll team enough time to check pay rates, allowances and outstanding holiday balances. Identify who will authorise the first payroll after completion. Arrange a secure handover of the records that team needs.
For example, a buyer might receive contracts showing basic hours while payroll records include regular night allowances. The buyer should clarify the difference before budgeting for the first month. This is an illustrative check, not a conclusion about any particular employee’s entitlement.
Keep the staffing handover connected to the home’s care timetable. Record who will brief transferred staff on reporting arrangements and answer their practical questions. Check that any proposed change to working practices has reached the people managing consultation.
Who Must You Inform and Consult Before Transfer?
Both employers must inform the appropriate representatives of their affected employees about the transfer. Employers must consult about measures they envisage taking, with a view to seeking agreement. Measures are proposed changes affecting staff.
Sharing Planned Changes
If the buyer plans any measures affecting transferring employees after completion, the buyer must communicate those measures in advance. Measures can include changes to working practices, reporting lines, workplace location or staffing structures.
The seller usually leads communication with transferring staff. Give the seller accurate information about your proposed changes early enough to support its consultation duties.
Consulting Employees Directly
For transfers completing from 1 July 2024, some employers can inform and consult employees directly. This option applies only when no appropriate representatives are already in place.
Under government consultation guidance, an employer may use this option if it employs fewer than 50 employees. It can also use it if fewer than 10 employees are transferring. Otherwise, employers without appropriate representatives must arrange an election.
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Can You Change Contracts or Dismiss Staff After Completion?
You face limits on changing employment terms after the purchase. Check the reason for each proposed change before discussing replacement contracts or restructuring.
Changing Employment Terms
A contract change is usually invalid if the transfer is its sole or main reason. An exception can apply for an economic, technical or organisational reason involving workforce changes. Lawyers call this an ETO reason.
An ETO reason may concern business finances, equipment or organisational structure. The reason must involve workforce changes, and the employee must agree to the contract change. The transfer itself is not an ETO reason.
Other permitted routes can include changes allowed by the existing contract or agreed improvements to terms. Separate rules apply to some collective agreements. Check the relevant exception before changing pay, hours or duties.
Making Redundancies
TUPE does not prevent redundancies altogether. Dismissal is normally automatically unfair if the transfer is its sole or main reason. A genuine ETO reason involving workforce changes may allow dismissal, but you must still follow a fair process.
Employees generally need 2 years of continuous service to bring this TUPE unfair dismissal claim. Service with the seller counts towards that period.
The government has announced shorter qualifying service for unfair dismissal from 1 January 2027. Check the government’s dismissal guidance before acting on a later dismissal.
What Pension and Collective Agreement Duties Can Transfer?
Pension obligations need a separate review. Occupational pensions are workplace pension schemes established by employers. Their old-age, disability and survivor benefits are generally excluded from automatic transfer under TUPE.
Employees keep pension rights already earned. Some early retirement or redundancy benefits may transfer. Separate pension protection duties can also apply, alongside automatic enrolment duties for eligible workers.
Review the scheme documents before choosing pension arrangements for transferred staff. Government guidance on employment transfers explains that you do not necessarily have to continue an identical pension.
Checking Union Agreements
Existing collective agreements generally transfer with employees. Later agreements may not bind you if you did not participate in the negotiations.
After 1 year, you can renegotiate transferred collective terms if the employee’s contract is no less favourable when considered as a whole.
“Ask the seller to explain differences between the staff list, payroll and the rota before you agree the handover. Those answers give your payroll and care managers a shared basis for preparing the first week”
What Should You Resolve Before Agreeing the Purchase?
Identify unresolved workforce questions before you commit to the purchase timetable.
| What to Resolve | What to Do |
|---|---|
| TUPE and transferring employees | Confirm whether TUPE applies and which employees are likely to transfer. Use the findings to assess staffing costs and the home’s operational needs. |
| Deadlines and responsibilities | Coordinate the employee information deadline with consultation and completion. Keep responsibilities clear between your transaction team, the seller and the people running the home. |
| Employment risks | Ask your employment lawyer to check the proposed allocation of employment risks in the sale documents. |
| Contract changes and staffing plans | Review planned contract or staffing changes before committing to savings that depend on them. |
These checks help you assess the purchase on realistic employment costs.
Key Takeaways
TUPE can transfer care business employees on existing terms, with their employment history and associated liabilities. Buyers and sellers cannot exclude it by agreement. Share purchases usually leave the employer unchanged.
Buyers face restrictions on transfer-related contract changes and dismissals. An ETO reason must involve workforce changes, and a contract change through that route needs employee agreement. Employees generally need 2 years of continuous service for a TUPE unfair dismissal claim. Pension obligations and collective agreements require separate checks. Some pension benefits can transfer despite the general exclusion for ordinary occupational pension benefits.
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Frequently Asked Questions
Does TUPE always apply when buying a care business?
TUPE does not apply to every care business purchase. It commonly applies to an asset sale when the business transfers and retains its identity. The transaction’s facts determine whether the conditions apply.
Does TUPE apply to share purchases of care businesses?
TUPE does not usually apply to share purchases because the employer remains the same legal entity. Employees continue working for that company.
Can a buyer change staff contracts after a TUPE transfer?
A buyer faces restrictions on changes whose sole or main reason is the transfer. A qualifying ETO reason involving workforce changes can permit an agreed change. Other limited exceptions may apply.
Do all occupational pension rights stay with the seller?
No. Some early retirement and redundancy benefits may transfer, although ordinary occupational pension benefits are generally excluded. Employees keep pension rights already earned. Buyers should also check their separate pension protection and automatic enrolment duties.
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