TUPE in Public Sector Contracts: What Suppliers Need to Know

What is TUPE?

TUPE stands for Transfer of Undertakings (Protection of Employment) Regulations 2006. It is a piece of UK employment legislation that protects employees when the business, undertaking, or service they work for transfers to a new employer. The core principle is continuity: employees should not lose their jobs, or suffer worse employment terms, simply because their employer changes.

When a TUPE transfer occurs, all employees who are assigned to the transferring business or service automatically become employees of the new employer. They transfer on their existing terms and conditions of employment — including pay, hours, holiday entitlement, pension contributions (within limits), and any other contractual benefits. The incoming employer inherits these obligations in full.

TUPE also imposes obligations around information and consultation. Both the outgoing and incoming employer must inform and, in certain circumstances, consult with affected employees or their representatives (a recognised trade union or elected employee representatives) before the transfer takes place. Failure to comply with TUPE information and consultation obligations can result in employment tribunal claims for up to 13 weeks' pay per affected employee.

TUPE was originally derived from the EU Acquired Rights Directive. Following the UK's departure from the EU, TUPE remains in force as retained UK law and continues to apply in full. Any future changes to TUPE would require specific UK parliamentary legislation.

When TUPE applies in public procurement

TUPE can be triggered in two distinct ways, both of which are relevant in public sector contracting.

Whether TUPE applies in a specific procurement is ultimately a legal question. Buyers are expected to indicate in the procurement documents whether they consider TUPE to apply, and to provide the basis for that view. If the procurement documents state that TUPE is not expected to apply but the facts suggest it might — for example, the contract involves taking over a service currently delivered by a named incumbent — seek legal advice before pricing. Incorrectly assuming TUPE does not apply can result in inheriting staff you did not price for.

Information the incumbent must provide

The outgoing employer is legally required to provide Employee Liability Information (ELI) to the incoming employer at least 28 days before the transfer date. In practice, for public sector procurements, buyers are expected to facilitate the disclosure of this information to all bidders at ITT stage so that accurate pricing is possible.

The statutory minimum content of ELI is: the identity and age of each employee in scope; their statement of employment particulars (contract terms); details of any disciplinary action taken against any employee within the two years prior to transfer; details of any grievance raised by any employee within the two years prior to transfer; details of any legal proceedings brought by any employee against the outgoing employer within the two years prior to transfer, and details of any such proceedings the outgoing employer reasonably anticipates; and information about any collective agreements in force that will transfer.

Beyond the statutory minimum, bidders should also request — via clarification questions if necessary — data on pension arrangements (particularly any defined benefit scheme obligations), current salary and grading structures, bonus or incentive schemes, shift patterns and overtime arrangements, and sickness absence history. These factors directly affect the cost of employing transferred staff and should inform your commercial model.

If the buyer or incumbent does not provide ELI in a timely and complete manner, this should be raised formally during the clarification period. Bidding without adequate ELI is commercially dangerous — you are pricing obligations you cannot fully see. In extreme cases, where ELI is withheld or deliberately incomplete, this may constitute misrepresentation that you can rely on post-award.

Pricing TUPE into your bid

Pricing TUPE obligations accurately is one of the most commercially critical tasks in a public sector bid where staff transfer applies. The temptation to underprice TUPE staff costs in order to submit a competitive price is real — but the consequences of winning a contract priced on unrealistic TUPE assumptions can include sustained losses and contract failure.

Your cost model for TUPE staff should include: the base salaries of all transferring employees; employer National Insurance contributions; employer pension contributions at the level required by existing terms (including any enhanced employer contributions under defined contribution or defined benefit schemes); holiday pay at the contractual rate (which may exceed statutory minimums); other contractual benefits (company car allowances, health insurance, enhanced sick pay, etc.); and any potential redundancy costs for staff you do not expect to need or who are at risk of redundancy for ETO reasons.

If the ELI reveals that transferring staff are on terms materially more expensive than your standard employment model — for example, legacy defined benefit pension obligations or significantly above-market salaries — model this explicitly in your commercial case. A TUPE cost premium over your standard staffing model is a genuine commercial risk that should be reflected in your price, not absorbed silently.

Some buyers now include a TUPE cost assumption in the procurement documents, or provide a cost schedule that bidders are required to complete. Where this is provided, complete it accurately and use the buyer's framework — but also maintain your own parallel model to verify that the buyer's assumptions are consistent with the ELI data provided.

Employment liability risks

Employment liabilities are one of the less-discussed but potentially significant risks in a TUPE transfer. When employees transfer, their employment history transfers with them — and that history may include pending claims, disciplinary matters, and grievances that become your responsibility as the incoming employer.

Employment tribunal claims in particular can transfer under TUPE. If an employee has an ongoing discrimination, unfair dismissal, or wages claim against the outgoing employer at the point of transfer, and that claim arises from the employment relationship that is transferring, you may inherit the liability for it. The ELI disclosure requirement exists precisely to surface these risks before transfer — but claimants may not have lodged formal tribunal proceedings by the transfer date, leaving the liability undisclosed.

TUPE does not prevent you from seeking indemnities from the outgoing employer (or from the buyer, where the client is the transferring party) for pre-transfer liabilities. Building an indemnity for pre-transfer employment liabilities into your contract negotiations is standard practice and should be pursued on every transfer. The strength of any indemnity depends on the financial position of the counterparty and the specificity with which it is drafted.

Any dismissal connected to the transfer is automatically unfair under TUPE, unless the dismissal is for an ETO reason entailing changes to the workforce. Post-transfer restructuring that reduces headcount among TUPE staff therefore requires careful legal advice and, typically, a genuine redundancy process with individual assessments. Cutting transferred staff costs by dismissal immediately post-transfer is legally very high risk.

Handling TUPE in your tender response

For service contracts where staff transfer applies, your approach to TUPE is frequently a scored quality criterion — not a box-ticking compliance exercise. Evaluators want to see that you have a credible, well-organised plan for managing the transition: protecting employees' rights while integrating them effectively into your organisation.

A strong TUPE section in a tender response typically covers the following areas. First, confirmation that you have reviewed the ELI provided and understand the profile of transferring staff — buyers want to know you have done the work. Second, your mobilisation timetable and the point at which you will begin formal employee information and consultation — under TUPE, information must be provided long enough before the transfer for meaningful consultation to take place, and the statutory process must be completed before the transfer date. Third, how you will communicate with transferring staff during the mobilisation period, including any welcome communications, briefing sessions, and the name of the HR lead who will be the point of contact.

Fourth, your approach to integrating transferred staff — how you will support them in understanding your organisation's culture, processes, and reporting structures without imposing immediate changes that would breach TUPE protections. Fifth, how you will manage any differences between the transferred staff's existing terms and your standard employment model, including your longer-term approach to harmonisation where this is a future objective.

Evaluators score TUPE responses highest when they demonstrate: specificity (named roles, concrete timelines), legal accuracy (demonstrating you understand your obligations), and genuine consideration of the employee experience — not just compliance process. A response that treats TUPE as a procedural obstacle to be managed will typically score lower than one that presents the transfer as an opportunity to bring skilled, experienced staff into the organisation effectively.

Second-generation TUPE

Second-generation TUPE occurs when a contract changes hands for the second or subsequent time — typically when a previously outsourced service is retendered and awarded to a new provider. The employees currently delivering the service under the incumbent contractor transfer again to the new contractor.

The legal position for second-generation transfers is the same as for first-generation: TUPE applies to service provision changes where an identifiable grouping of employees is assigned to the service. The practical complexity increases significantly. Staff who transferred from a public body to a private contractor may still hold terms from their original public sector employment that have been protected through multiple TUPE transfers — including local government pension scheme (LGPS) membership, enhanced sick pay, or legacy redundancy pay scales.

The Cabinet Office Statement of Practice on Staff Transfers in the Public Sector (COSOP) and associated Fair Deal guidance set out specific protections for staff transferring out of the public sector. Fair Deal requires incoming contractors to offer pension arrangements that are broadly comparable to the LGPS or other public sector scheme — a requirement that can significantly increase staffing costs relative to a standard defined contribution pension model.

On long-running outsourced contracts, the incumbent may have itself inherited staff from a previous provider. The ELI you receive will reflect the current state — but understanding the full employment history behind each transferring employee, including their original terms and any formal change agreements reached at previous transfers, requires careful review. For high-value or staff-intensive retenders, commissioning an independent HR due diligence review of the ELI data before finalising your price is a sound investment.

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