A man buys a garage in Bolton. The deal covers the premises, the ramps, the diagnostic kit, the stock and the customer list, and he has haggled every line. Four staff come with it. He assumes he can put them on his own contracts, which are less generous on overtime, because they now work for him.
They do not go on his contracts. They keep theirs, including the overtime rate agreed in 2009 and a contractual bonus nobody mentioned in the negotiation. One of them has a grievance about his previous manager that is now the new owner's grievance. Another has been off sick for two months and is owed pay. None of it was on the balance sheet.
The rules apply more often than buyers expect
The Transfer of Undertakings (Protection of Employment) Regulations 2006, amended in 2014, catch two distinct situations.
The first is a business transfer: a transfer of an economic entity retaining its identity, meaning an organised grouping of resources with its own objective. Buying a going concern is the obvious case. Buying only the assets of a business that has already closed is usually not, because there is no entity left to retain its identity.
The second is a service provision change, which is the part people forget. Where a client outsources work to a contractor, changes contractor, or brings the work back in house, and there is an organised grouping of employees whose principal purpose is carrying out that work for that client, TUPE applies. Winning a cleaning contract or a haulage contract from a competitor can transfer their staff to you whether or not you wanted them.
TUPE applies automatically. It is not something the parties agree to and it cannot be contracted out of. An asset purchase agreement that says the employees are not included does not make them not included.
Buying the shares of a company is different. In a share sale nothing transfers, because the employer is still the same company. You have simply bought the company, along with everything that was already inside it.
Everything comes across, including the things you cannot see
Employees assigned to the transferring entity move automatically to the buyer on their existing terms and with continuity of service preserved. Their start date for statutory purposes is the date they started with the seller, not the date you bought the business.
What transfers with them is broader than the contract. Accrued holiday. Unpaid wages, commission and bonuses. Liability for acts and omissions of the seller before the transfer, which means a discrimination claim arising from something a previous manager did becomes your liability. Existing disciplinary and grievance matters. Personal injury claims. Collective agreements with a union.
There are limited exceptions. Rights under an occupational pension scheme relating to old age, invalidity and survivors do not transfer, though there is a separate statutory obligation on the buyer to provide a minimum level of pension provision, and auto-enrolment duties apply in any event. Criminal liabilities do not transfer.
An employee who objects to the transfer does not move, but they are generally treated as having resigned rather than been dismissed, which leaves them with very little. An employee who resigns because the transfer involves a substantial change to working conditions to their material detriment can claim they were dismissed.
What you cannot do is change the terms
This is the rule that catches new owners. A variation of contract is void if the sole or principal reason for it is the transfer itself. That is true even where the employee agrees to it, and even where you offer something in exchange. Harmonising the transferred staff onto your existing contracts because it would be tidier is exactly the reason the regulation exists to prevent.
The 2014 amendments allow variation where the contract permits it, or where the sole or principal reason is an economic, technical or organisational reason entailing changes in the workforce and the employer and employee agree. There is also a limited route to renegotiate terms derived from a collective agreement after twelve months, provided the changed terms are no less favourable overall.
Dismissal follows the same logic. A dismissal is automatically unfair if the sole or principal reason is the transfer. It may be fair if the reason is an economic, technical or organisational reason entailing changes in the workforce, which covers genuine redundancy or a genuine restructure, and which still requires a fair procedure.
The practical consequence for a buyer is that a period of two identical roles on two different sets of terms is normal and has to be lived with. The safest route to harmonisation is time, a genuine and documented business reason unconnected with the transfer, and advice before you start.
The consultation duty is short, specific and easily missed
Both the seller and the buyer must inform, and in some cases consult, representatives of affected employees. This is one of the most commonly breached parts of TUPE, usually because the transaction is confidential until the last minute and nobody wants to tell the staff.
The information to be given covers the fact that a transfer will take place, when and why, the legal, economic and social implications for affected employees, and any measures the employer envisages taking in relation to them. It must be given long enough before the transfer to allow consultation to take place. Where measures are envisaged, there is a duty to consult with a view to reaching agreement.
Representatives are normally a recognised union or elected employee representatives. Since 2014, micro-businesses could consult employees directly where there were no existing representatives, and that was widened from 1 July 2024 so that direct consultation is available to employers with fewer than fifty employees or where fewer than ten employees are transferring. That is a genuine simplification for most small deals.
Failure to comply can produce a protective award of up to thirteen weeks' actual pay per affected employee, and liability can fall on either party. On a transfer of twenty staff, thirteen weeks' pay each is a number that dwarfs most of what was argued over in the negotiation.
The seller must also provide employee liability information to the buyer at least twenty-eight days before the transfer: identities, ages, particulars of employment, disciplinary and grievance records from the previous two years, any claims brought in the previous two years, and details of collective agreements. Ask for it early, use it in the price, and treat a seller who is reluctant to provide it as a seller who knows what is in it.
Where this shows up in the game
Business Baron lets you buy businesses as well as build them, and the staff arrive with the keys. Their contracts are what they were, their length of service is what it was, and the grievance the previous owner was ignoring is now an item in your inbox. Skip the consultation and the bill arrives months later, from a tribunal, as a set of obligations spread over a year rather than a single deduction. Buying somebody else's problem at a good price is one of the quicker ways to learn it.