Guide

Responsibilities to employees if you buy or sell a business

Your responsibilities to employees transferred into your business

Employees who transfer to your employment do so on their pre-existing terms and conditions and with their continuous employment preserved. This also applies to employees who have already transferred on a previous transfer.

You also take over responsibility/liability for any:

  • outstanding disciplinary and grievance situations
  • ongoing industrial tribunal claims
  • any potential legal actions which may be brought
  • collective agreements in force at the time of the transfer, which means that you must continue to recognise the recognised trade union(s) that the staff transferring are members of

Occupational pension and share-option schemes

You do not have to offer transferred employees who are members of - or eligible to join - an occupational pension scheme (OPS) exactly the same pension rights.

However, you must still offer those employees a minimum level of occupational pension provision.

You can opt to provide access to an OPS or make employer contributions to a stakeholder pension scheme. If you choose a stakeholder or a defined contribution scheme, you will have to match the employee's contributions up to 6 per cent. This can be increased if both parties agree.

Stakeholder pensions only apply to those employers with five or more employees and the employee would need to have started employment with you before 1 October 2012.

In addition, all employers will have to provide their employees with a workplace pension scheme over the next few years. To read more about these obligations, see automatic enrolment into a workplace pension.

If you don't take over the previous business' shares, you won't be able to provide such shares to your staff. If the previous employer had share or share-option schemes, you must provide equivalent schemes.

Note that if you buy a privatised (previously public sector) undertaking, or win a contract to provide a service to a central or local government organisation, the government expects you to have pension arrangements that are broadly comparable with that enjoyed by the previously public-sector employees.

Changes to terms and conditions

Don't change transferred employees' terms and conditions if the reason for the change is either the transfer itself, eg to match those of your existing staff, or reasons connected to the transfer.

If you change an employee's terms and conditions in this way, this could amount to a breach of contract. The employee may then be able to resign and claim constructive dismissal.

If, however, the change is unconnected with the transfer, you should handle it like any other change of contract where there is provision for change in the contract or where change has been brought about by mutual agreement. For more information, see changing terms and conditions after a transfer and how to change an employee's terms of employment.

Labour Relations Agency (LRA) advice on agreeing and changing contracts of employment.

Information and consultation

Even if you are taking on transferred employees, you must still inform and consult representatives of your existing employees who may be affected by the transfer.

In addition, you must give details to the previous employer of any action, step or arrangement you intend to take that will affect the transferring employees. You must do this before the transfer takes place with adequate time for consultation.

See informing and consulting employees about business transfers.