Buying a business
Buying a business with staff: what TUPE means for the price and your loan
TUPE when buying a business: which staff contracts, holiday and claims move across to you, and how to reflect them in the price and your loan.
When you buy a business with staff, TUPE usually moves their jobs across to you. Their contracts, holiday, years of service and any unresolved claims come too. That history can carry a cost. Find it before you agree the price and the loan, because the seller's staff problems become yours on completion day.
This guide explains what TUPE means when buying a business, what to ask the seller for, and how a lender will look at the staff.
Section 01
When does TUPE apply when you buy a business?
TUPE is short for the Transfer of Undertakings (Protection of Employment) regulations. It protects employees when a business changes owner. The size of the business does not matter.
It applies when the employer changes. That is usually the case when you buy the business and its assets from the owner, known as an asset purchase.
In a share purchase, you buy the company itself. The company stays the employer, so the staff contracts never move. Their history stays with the company, and you now own it. Our guide to asset sales and share sales explains the difference.
Either way, the staff and what is owed to them usually come with the business. Ask your solicitor which route applies to your deal.
Section 02
What moves across to you under TUPE
According to GOV.UK, the new employer takes over the employees' contracts. That includes:
- All their existing terms and conditions.
- Their holiday entitlement.
- Their period of continuous employment. A start date stays the same, so years of service carry over.
- Any collective agreements already in place.
- Any failure by the previous owner to respect employees' rights. An employee could bring a discrimination claim against you for something that happened before you bought the business.
You cannot simply change their terms afterwards, either. GOV.UK says the new employer cannot change terms and conditions if the reason is the transfer itself.
Pensions work differently. Pension rights earned up to the transfer are protected. But the new employer does not have to continue an identical pension. Ask your solicitor what you will need to offer instead.
Section 03
The staff costs to price in before you sign
Staff history can carry a real cost, and the price you agree should reflect it. Check these four things.
Holiday owed
Holiday that staff have built up moves across with them. Ask how many days are owed, and who pays for them.
Claims and disputes
A claim about something before the sale can land on you. Ask about any grievances, disciplinary cases and legal action.
Years of service
Years of service carry over. That affects any future redundancy pay, so a long-serving team is a bigger commitment.
Pay and pension promises
Read what each contract promises. You will usually have to honour it.
Known costs can go into the deal in a few ways. You can agree a lower price. The seller can give you an indemnity, which is a promise to cover a named cost if it arises. Or the amounts can be settled in the completion accounts. Ask your solicitor which suits your deal.
Section 04
What the seller must tell you, and what your lender will ask
The seller has to give you information about the staff at least four weeks before the transfer. According to GOV.UK, this normally includes each employee's age and main employment details. It also covers disciplinary action, grievances and legal action in the last two years, and any claims the seller thinks staff might bring.
Ask for it early, not four weeks before completion. It is the evidence behind the price.
The seller also has to inform and consult staff before the sale. For transfers completing on or after 1 July 2024, a smaller employer with no employee representatives can do this directly with its staff. That applies if it has fewer than 50 employees, or is transferring fewer than 10.
Your lender will look at the staff for a different reason. The loan is repaid from the profits the business makes after you buy it. If key people leave, or an old claim lands, those profits can fall. Our guide to due diligence when buying a business covers what else a lender checks.
So have your answers ready. Know who the key staff are, what they are paid and whether they plan to stay. A clear picture of the team can make the deal easier to fund. A broker can look at it across a wider range of lenders. Find out more about business acquisition finance with us.
This guide is general information, not financial advice. Applications are subject to status, affordability and lender criteria.
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