When preparing to sell your business, ensuring a smooth transition for your employees is equal to managing the financial and operational aspects of a sale. It is a people-centric process, with significant HR and legal implications.
One of the most critical areas to address is how the sale affects your employees, particularly under the TUPE (Transfer of Undertakings (Protection of Employment) Regulations.
Overlooking employee rights can lead to costly claims, tribunal action, and morale issues.
Does TUPE Apply to Your Sale?
TUPE applies when a business, or part of it, transfers to a new owner, or when a service is outsourced, insourced or switched to another provider. In such cases, employees automatically transfer to the employer with their existing contracts, terms and conditions of employment, and their continuity of service is preserved.
Legal Obligations Before the Transfer: Inform & Consult
Both the seller and the buyer must inform and consult affected employees or their representatives, even if there are no immediate changes planned.
This includes:
· That the transfer is happening and the proposed date.
· Any implications for the employees, which are referred to as measures.
Failure to consult properly can lead to claims worth up to 13 weeks’ pay per affected employee.
HR Considerations: TUPE
1. Identify affected employees early in the process.
2. Prepare employee liability information (ELI) for the buyer, including contracts, benefits, and disciplinary records. This must be done at least 28 days before the transfer date.
3. Communicate transparently to maintain trust and morale.
4. Support employees through the transition, including offering Q&A sessions.
5. Document everything by keeping records of written communications, consultation notes, and decisions.
Redundancy and Restructuring
If the buyer plans post-sale restructures, redundancies must be for genuine business reasons. Any redundancies relating to the transfer must be for at least one economic, technical or organisational reason. There must also be, for any redundancies irrespective of whether or not
they relate to the transfer, carried out with full and proper consultation with employees. . Poorly managed redundancies can lead to claims or reputational harm, so providing clear organisational charts supports responsible planning.
Beyond TUPE: Broader HR Considerations
Even when TUPE is handled correctly, there are other critical HR areas to address:
1. Employee Engagement & Retention: Uncertainty can lead to resignations or lower productivity. Mitigate this with clear, early communication, consider retention bonuses and provide opportunities for employees to raise questions or concerns.
2. HR Audit & Compliance: Ensure contracts, job descriptions, policies, benefits (with clarity on whether discretionary or contractual), and records of disciplinary or grievance matters are up to date. This avoids surprises in due diligence and reassures buyers.
3. Payroll, Pensions & Records: Verify payroll accuracy and tax compliance. Confirm pension schemes meet auto-enrolment rules and check historic liabilities, such as defined benefit commitments. Buyers will also expect well-maintained personnel files and HR systems.
4. Data Protection & Confidentiality: Employee information shared during due diligence must comply with GDPR. Initially, provide only anonymised, necessary data. Full details should follow once the sale is binding. Breaches risk ICO fines and loss of employee trust.
Selling a business isn’t just commercial; it is about the people. Protect your business and employees by contacting View HR to obtain expert HR and legal advice and support.
Get in touch with us today and book a confidential HR consultation with us if you are considering selling your business or perhaps buying a business. ViewHR can support you with the full process from the people and TUPE perspective.
