Can my employer change the way I’m paid after a TUPE transfer?
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The way you are paid will automatically transfer when TUPE applies.
TUPE – transfer of undertakings – is tricky. If employees transfer to a new employer under TUPE, they transfer with all their terms and conditions intact, including how much, when and how frequently they are paid. It’s automatic – if the transaction meets the criteria, TUPE applies.
What happens during TUPE?
The seller must inform employees of a TUPE transfer. They should also ask the buyer if they intend to take any “measures” in relation to the transfer. If the buyer does intend to take “measures”, the seller must also consult employees on those measures (to the extent they can, given that it’s the buyer who intends to take them). The buyer must consult employees on their measures, though often this can’t happen in full until after the transfer. Consultation should be with all affected employees – not just those obviously impacted, and including affected existing employees of the buyer.
I’m generalising here: it’s hard to be specific about who does what and when – it will depend on the nature of the transaction, what the buyer intends to do or change, how many employees are affected and so on.
It can be very expensive to get it wrong so it’s best to get advice on how to proceed before rushing ahead.
What are the measures in a TUPE transfer?
There’s no definition of “measures”. It’s a case of you know one when you see one. Measures are basically any change to working arrangements or practices.
Contracts of employment should include the date on which salary is paid, as well as the frequency of payment (weekly, monthly, four-weekly…), and what period is covered by each payment. As such, any change to how, when, and what period employees are paid will be a change to their contracts. And a “measure” for the purposes of TUPE.
So, when the buyer brings transferring employees on to their payroll, they should keep them on the same pay arrangements pending consultation on any changes. If they’ve consulted with the transferring employees about pay arrangements prior to the transfer, great, they’ve already done the work, and nothing will come as a shock.
However, if the buyer imposes changes without having consulted with transferring employees, and those changes are because of the TUPE transfer, that will be a failure to comply with the consultation obligations under TUPE. It will also be a breach of the employees’ contracts.
What happens if you fail to comply with TUPE?
If changes are imposed without compliance by the seller and/or buyer with their obligations to inform and consult with affected employees, each employee could be entitled to an award of 13 weeks’ gross actual pay. It could prove an expensive omission.
An employer can be penalised if changes to your pay are imposed.
Who is liable for TUPE claims?
By way of example, let’s say the buyer hasn’t told the seller that they plan to change the pay arrangements for transferring employees. After the transfer, the buyer brings the transferred employees into its payroll (which it needs to do), but starts paying them weekly rather than calendar monthly. That’s a measure.
Let’s say this means employees are paid less that month, without any warning, and some are put to financial difficulties. Maybe they’re put on the emergency PAYE code and more tax is deducted than they expect.
That measure has led to considerable disruption, worry, financial costs (overdraft interest, late payment penalties…) and so on. That it’s unexpected illustrates that consultation didn’t take place.
Not only is this a failure to inform and consult under TUPE, it’s an “ordinary” breach of contract (ordinary as in, if any employer did this it would be a breach, there’s no need for TUPE to have been involved).
It’s a grievance waiting to happen. Not a great welcome from the new employer.
Worst case, depending on the seriousness of the failure and the problems caused, it could hand the employees a statutory constructive dismissal claim under TUPE, or an “ordinary” constructive dismissal claim.
So, who is liable for those potential claims? Employment Tribunals can find that the buyer and/or the seller are liable, or set percentage liabilities.
If the buyer didn’t tell the seller they were going to change pay arrangements, the seller can probably escape liability. It looks like the buyer in this scenario will bear the responsibility for failing to consult with the affected employees.
As to what the employees might be awarded, if a claim for failure to inform and consult is successful, each employee can be awarded 13 weeks’ gross pay. In this example you’d also expect to get compensation for any additional costs incurred like penalty fees or interest. PAYE should unravel in subsequent months once employees are on their correct PAYE codes but it should be checked that correct deductions and payments are made for PAYE, employer’s and employee’s National Insurance, pension and anything else.
TUPE is definitely a situation where prevention is better than cure: spending some time planning ahead and checking your obligations and entitlements is well worth doing.
If you need help with the employment law aspects of a TUPE transfer, or if changes made following a TUPE transfer have impacted on you, just get in touch at employment@Qlaw.co.uk to arrange an exploratory chat about how we can help.
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