Ministers Launch Call for Evidence over Future of TUPE

Why It Matters

Reforming TUPE will directly affect due‑diligence costs and liability for companies acquiring businesses, while reshaping employee rights during mergers and outsourcing. The changes could shift the balance between labour protections and commercial flexibility across the UK market.

Key Takeaways

• Government seeks evidence to reform TUPE ahead of Employment Rights Act 2025
• Proposed changes could raise liability for transferees via longer unfair dismissal protection
• Fire‑and‑rehire bans may limit post‑transfer contract alterations after Jan 2027
• Two‑tier workforce rules aim for parity in outsourced public‑sector contracts by Oct 2026
• Law firms call for removing ETO redundancy test to simplify pre‑transfer layoffs

Pulse Analysis

The consultation marks the most coordinated effort in a decade to overhaul TUPE, a set of rules that dictate how employee rights survive business sales, mergers and outsourcing. By inviting evidence from a broad cross‑section of the economy, ministers hope to pinpoint ambiguities—such as the definition of multiple‑employer transfers and the strict "economic, technical or organisational" (ETO) test for redundancies—that have long frustrated dealmakers. The feedback will feed into policy proposals that could be codified alongside the Employment Rights Act 2025, a legislative package already slated to tighten unfair‑dismissal thresholds and ban fire‑and‑rehire practices after January 2027.

For corporate lawyers and M&A teams, the stakes are tangible. Extending the qualifying period for unfair dismissal to six months means that acquiring firms may inherit greater exposure to claimants for grievances that arose before the transfer. This shift will force a recalibration of due‑diligence models, with higher contingent liabilities factored into purchase price negotiations. Moreover, the anticipated prohibition on post‑transfer contract changes—known as fire‑and‑rehire—will limit a common strategy for aligning terms after a deal, prompting buyers to seek alternative integration pathways.

Public‑sector outsourcing is another flashpoint. The upcoming two‑tier workforce provisions aim to eliminate disparate terms for workers on the same contract but employed by different entities, a move that could reshape how councils and NHS bodies structure service contracts. Legal experts warn that the parity requirement may extend beyond the moment of transfer, influencing contract management throughout the service lifecycle. If the ETO test is relaxed or re‑engineered, it could streamline redundancy planning, reducing the tendency to postpone layoffs until after a transfer. Overall, the evidence‑gathering phase will set the tone for a TUPE regime that balances employee security with the agility needed for modern business transactions.