HR rules that apply when acquiring a second business.

Alan Price – CEO at BrightHR

April 30 2015

The first issue you need to consider when buying a business is whether the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) will apply to your specific situation. Commonly, the Regulations apply when a business is bought (other than by share transfer) and where services are contracted in/out or there is a change of contractor.

Assuming the TUPE Regulations do apply, a mindful employer will be aware of his responsibilities. This article summarises some main issues arising under TUPE to ensure you stay on the right side of the law.

The TUPE regulations were introduced to maintain employees’ continuity of employment and enable them to enjoy the same terms and conditions under the new employer as under the old one when a business changes hands.

You will automatically inherit the employees of the ‘old’ employer as they transfer to your employment on the date of the transfer. You will also inherit outstanding employee liabilities incurred by the transferor (the old employer). It may therefore be wise to negotiate appropriate indemnities in the commercial contract between yourself and the transferor.

The transferring employees will retain their existing terms and conditions of employment which may well be different from your existing staff. Many employers wish to harmonise the terms and conditions across the board. However, you need to be aware that variations to terms and conditions where the sole or principal reason for the variation is the transfer itself are likely to be deemed void if challenged.

The Regulations do not, however, prohibit dismissals or a variation to terms and conditions in the circumstances of a transfer where there is an economic, technical or organisational reason for your actions which entails changes in numbers or job functions of the workforce, such as redundancies. Fair procedures must still be followed.

Continuity of employment is preserved for employees who transfer over to you. This is important to remember because some employment rights are dependent upon the employee having accrued a prescribed amount of service e.g. unfair dismissal, statutory redundancy pay. Therefore, when you are calculating an employee’s length of service for these, or any other purposes, you should look back to the date their continuous service began with the transferor rather than the date that you took over.

This is a complex piece of legislation and we advise you seek advice when dealing, contact the Peninsula Advice Service on 0844 892 2772.

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