Mergers And Acquisitions On The Rebound - The Role of HR in all Things TUPE

For the latter half of 2021, experts across the M&A disciplines are predicting a continued-up turn in confidence levels as a result of the following conditions: a more stabilised global political status; the vaccine roll out; and improvement in capital markets. These are all  underlying factors which drive deals across the corporate space and encourage SMEs to focus on succession plans for management or private equity buy ins/ buy outs and/or a combination of both.

This coupled with an increase in distressed sales and opportunistic takeovers as businesses run out of pathway on government funding, not to mention the ongoing fall out of Brexit are all creating a favourable climate for Mergers and Acquisitions. The ongoing digitalisation of business and new tech has gathered momentum during COVID 19 and will also undoubtedly  drive new M&A strategies.

The Transfer of Undertakings Protection of Employment (TUPE) is a complex and technical process aimed at protecting employees.  The regulations apply when employers are  transferring a business or in a service provision change scenario.

If you are on the acquisition trail or about to divest or merge with a business or in the midst of service provision changes, this checklist will serve as a guide to ensure you have covered all the necessary steps involved in the process.

The specific steps involved in the TUPE process will vary depending on the circumstances. Are you transferring the whole business? Is it just certain service provisions? Are you the incoming or outgoing employer?

Whatever the case may be, it is a risky business if not handled correctly. There are a number of pitfalls you will need to be prepared for and   problems and disputes may arise early. You are required to consider the following key areas:

• Identifying impacted employees
• Gathering information and consultation
• Employee liability information (and due diligence)
• Terms and conditions

This checklist aims to assist in ensuring you comply with your obligations under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). Watch out for difficult scenarios such as staff refusing to transfer, inability to offer the exact same benefits and having to source equivalents, challenges, and disputes and hidden TUPE situations.

1. Identify all impacted employees

This is quite often the most difficult part of the process. It involves identifying the staff members to transfer to the incoming employer.

The decision will depend on their roles before the transfer. You’ll need to consider your staff on short-term absences as well as those on fixed contracts.

If you’re selling the whole business, then all employees will transfer. If you’re transferring a service provision, you’ll need to consider the employees working within that part of the business.

Other considerations at this stage include:

• Informing and consulting with employees about the transfer.
• Engaging with trade union officials or elected representatives.
• If no appropriate representative is in place, arrange for the election of an employee representative.
• Using your existing communication channels to provide information directly to employees (or through their representatives).
• Providing communication mechanisms to answer questions and address any employee concerns. 

2. Gathering information and consultation

After establishing the employees affected by TUPE, you will need to provide certain information to the incoming employer and the transferring employees. You should provide employees (or their representative(s)) with information relating to:

• The fact that the transfer is taking place
• The proposed (or actual) date of the transfer
• The reason for the transfer
• The implications (legal, economic and social) of the transfer to affected employees
• Any proposed measures connected with the transfer that’ll affect the employees If no measures in place, you must also make that clear

 While there’s no set time limit for providing this information, you should complete it in ‘sufficient’ time for a consultation to take place. Failure to comply with this obligation can result in compensation for each employee of up to a maximum of 13 weeks’ pay.

3. Employee liability and due diligence

As well as the information employers should provide to their employees, you’re also obligated to provide the incoming employers with certain information.

Regardless of if TUPE applies, any organisation buying a business or bidding for a contract to provide a service must undertake due diligence. It allows for financial forecasting and determining the terms and conditions of the transferring staff.

You must provide the buyer with information relating to the rights and obligations of the transferring employees in writing and before 28 days before the date of the transfer. Failure to supply this information or for providing incorrect information can result in compensation by a tribunal.

Terms and Conditions

As part of the employee liability information, you should also provide full details of the employment terms and conditions of all transferring employees to the incoming employer.

It should include information relating to the terms and conditions that can be transferred during the process.

Double check the following:

• Have you sent copies of relevant company policies including those in your employee handbook?
• Have you included any recently agreed-upon changes to the terms and conditions that you haven’t added to the employment contract?
• Are there any orally agreed-upon terms and conditions that the incoming employer will need to know about?
• Do you have any terms and conditions that aren’t in writing but established over time by customs and practices?
• Do the transferring staff have any trade unions recognised for bargaining purposes?
• Has any of the transferring employees agreed to a variation of the standard terms and conditions? This includes flexible working options, reasonable adjustments, etc.

If you are about to acquire, divest or merge or manage a service provision change, Think People Consulting can help you conduct a detailed HR Audit to identify gaps and potential risks, and manage the TUPE process.