> Disclaimer: SiteKiln gives you plain-English information, not legal or employment advice. Talk to a qualified professional before making big decisions.
The short version
When a construction contract changes hands -- from one contractor to another, or from in-house to outsourced -- the employees working on that contract don't just disappear. TUPE transfers them to the new contractor automatically, on their existing terms and conditions, with their continuity of service intact. The new contractor inherits them whether they want them or not. Getting this wrong means automatically unfair dismissal claims, backdated liabilities, and penalties. If you're winning or losing contracts, you need to understand TUPE.
Why this matters in construction
Construction runs on contracts. Contracts get won, lost, and re-tendered constantly. Facilities management, site security, cleaning, maintenance -- all regularly change provider. Even core construction services can trigger TUPE when a client moves from one contractor to another for ongoing work.
The problem? Most small contractors have never heard of TUPE, or assume it doesn't apply to them because "everyone's self-employed." That's a dangerous assumption.
TUPE applies automatically. You don't need to agree to it. You don't need to sign anything. If the legal test is met, the employees transfer -- along with all their contractual rights, accrued liabilities, and potential claims.
When TUPE applies
TUPE covers two situations:
1. Business transfer
A business or part of a business transfers from one employer to another as a going concern. The key question: is there an economic entity that retains its identity after the transfer?
2. Service provision change (SPC)
This is the one that hits construction most often. An SPC occurs when:
| Type | What happens | Construction example |
|---|---|---|
| Outsourcing (first generation) | Client contracts out a service for the first time | Developer brings in a contractor to handle site maintenance previously done by in-house staff |
| Re-tendering (second generation) | Contract moves from one contractor to another | FM contract on a completed development moves from Contractor A to Contractor B |
| Insourcing | Service brought back in-house | Client takes back cleaning/security previously done by a contractor |
For an SPC to trigger TUPE, three conditions must be met:
- There must be an organised grouping of employees whose principal purpose is carrying out the activities in question
- The activities must be fundamentally the same before and after the change
- The contract must not be for a single event or short-term task, and must not be solely for the supply of goods
What transfers -- and what doesn't
Transfers automatically:
| What | Detail |
|---|---|
| Employment contracts | All employees assigned to the contract transfer to the new provider |
| Terms and conditions | Pay, hours, holiday entitlement, benefits -- all carry over intact |
| Continuity of service | Their start date with the old employer counts. If they had 4 years' service, the new employer inherits that |
| Accrued holiday | Any untaken holiday transfers as a liability |
| Outstanding claims | If an employee had a grievance or potential tribunal claim, the new employer inherits it |
| Collective agreements | Any collective bargaining agreements that applied |
| Trade union recognition | Transfers if the undertaking maintains a distinct identity |
Does NOT transfer:
| What | Detail |
|---|---|
| Occupational pensions | Old-age, invalidity, and survivor benefits under occupational pension schemes do not transfer (but the new employer must provide a minimum pension provision) |
| Criminal liabilities | These stay with the old employer |
| Self-employed individuals | TUPE only protects employees. Genuinely self-employed subcontractors are not covered |
Construction trap: If someone is labelled "self-employed" but is actually an employee (see guides 3.1--3.8), TUPE may still apply to them. The label doesn't determine status -- the reality of the working relationship does.
The critical obligations
For the outgoing contractor (transferor)
| Obligation | Detail |
|---|---|
| Provide Employee Liability Information (ELI) | Must be provided in writing to the incoming contractor at least 28 days before the transfer |
| What ELI includes | Names, ages, dates of birth; written terms of employment; disciplinary/grievance records (last 2 years); details of any actual or potential legal claims; applicable collective agreements |
| Inform and consult | Must inform affected employee representatives about the transfer -- when, why, and what it means for them. Must consult if any "measures" (changes) are envisaged |
| Don't dismiss because of the transfer | Any dismissal where the sole or principal reason is the transfer is automatically unfair |
Penalty for failing to provide ELI: Minimum £500 per employee -- awarded to the incoming contractor.
For the incoming contractor (transferee)
| Obligation | Detail |
|---|---|
| Accept all transferring employees | You cannot cherry-pick. Everyone assigned to the contract transfers |
| Honour existing terms | You must maintain their existing pay, hours, holiday, and other terms |
| Inherit all liabilities | Outstanding holiday, potential claims, continuity of service -- all yours now |
| Inform and consult | Must inform your own affected employees about the transfer and consult if measures are planned |
| Don't dismiss because of the transfer | Same rule -- automatically unfair |
Can you change terms after a TUPE transfer?
This is where most contractors come unstuck. The short answer: not easily.
| Situation | Can you change terms? |
|---|---|
| Change where the sole or principal reason is the transfer itself | No -- void and unenforceable, unless there's an ETO reason |
| Change for an ETO reason entailing changes in the workforce | Yes -- but must follow fair process (redundancy procedures, consultation) |
| Change unrelated to the transfer | Yes -- normal contractual variation rules apply |
| Change permitted by the contract itself (e.g. mobility clause) | Yes -- provided the clause existed before the transfer |
What's an ETO reason?
Economic, Technical, or Organisational reason entailing changes in the workforce:
- Economic: Genuine financial difficulty, reduced demand
- Technical: New technology reduces the need for certain roles
- Organisational: Restructuring, combining duplicate roles after transfer
The ETO reason must involve an actual change in the size or makeup of the workforce -- not just changes to people's contracts. You can't use an ETO reason to simply cut pay.
TUPE and dismissal
| Type of dismissal | Legal position |
|---|---|
| Dismissal where the transfer is the sole or principal reason | Automatically unfair -- no qualifying period needed |
| Dismissal for an ETO reason | Potentially fair -- but must follow a fair procedure (consultation, selection criteria, right of appeal) |
| Redundancy after transfer | Can be fair if there's a genuine ETO reason and a proper redundancy process is followed |
| "We just didn't take them on" | Still counts as a dismissal by the old employer -- automatically unfair |
Construction reality check: The most common TUPE breach in construction is the incoming contractor simply not taking on the outgoing contractor's staff. They win the contract, bring their own team, and the old team is told there's no work. That's an automatically unfair dismissal, and both the old and new contractor can be jointly liable.
TUPE and subcontractors -- the complication
TUPE was designed to cover direct contractual relationships between client and contractor. But construction uses layers of subcontracting.
General rule: TUPE does not apply between a contractor and their subcontractor's employees, because there's no direct contractual relationship with the client.
Exception: The EAT held in Jinks v London Borough of Havering that TUPE can apply to a subcontractor's employees where there's a service provision change -- even where there's no direct contract between the client and the subcontractor. The client can inherit the subcontractor's employees when the main contract ends and the work is brought in-house.
This catches clients off guard. If you're a developer or main contractor bringing work back in-house after terminating a contract, the sub's employees may transfer to you.
What's changing -- ERA 2025 and the two-tier code
The Employment Rights Act 2025 introduces new provisions to prevent a "two-tier workforce" on outsourced public sector contracts. Due to come into effect in October 2026:
- When public services are outsourced, transferred workers must be treated no less favourably than when employed by the public body
- Non-transferring workers assigned to the same contract must also be treated no less favourably than transferred workers
- The obligations extend to workers, not just employees -- potentially capturing categories previously excluded from TUPE in practice
- Obligations flow down to subcontractors delivering the service
- Contracting authorities must take "all reasonable steps" to ensure suppliers comply throughout the life of the contract
Construction impact: If you're bidding for public-sector construction or maintenance contracts, your workforce model and pricing will need to account for these new obligations. You can no longer undercut bids by putting your own staff on worse terms than the transferred public-sector workers.
What to do
If you're winning a contract:
- Ask for Employee Liability Information early. Don't wait until 28 days before transfer. Request it as part of due diligence during the tender process.
- Budget for inherited staff. Their pay, holiday accrual, continuity of service, and any potential claims are now your problem.
- Don't assume everyone is self-employed. If people assigned to the contract are employees in reality, TUPE applies regardless of labels.
- Inform and consult your own workforce. If the transfer will affect your existing employees (e.g. restructuring, redundancies), you must consult with representatives.
- Don't change terms on day one. You need an ETO reason, and you need a fair process. Harmonising terms downward is one of the most litigated areas in TUPE law.
If you're losing a contract:
- Provide ELI on time. 28 days minimum. Failure costs you £500+ per employee, payable to the incoming contractor.
- Don't dismiss staff to make the transfer "cleaner." A dismissal connected to the transfer is automatically unfair.
- Cooperate with the incoming contractor. Provide accurate, complete information. Hiding liabilities doesn't make them disappear -- it just means they come back as tribunal claims.
- Check your indemnities. Your contract with the client should address who bears the cost of TUPE liabilities. If it doesn't, negotiate now.
If you're an employee and a contract is changing hands:
- Your job transfers automatically. You don't need to agree or sign a new contract. Your terms stay the same.
- You can object to the transfer -- but this is treated as a resignation, not a dismissal. You lose your job with no claim, unless the transfer involves a substantial detrimental change to working conditions.
- Keep records of your current terms. Pay, hours, holiday, benefits, pension. If the new employer tries to change them, you'll need evidence of what you were on.
- You should have been consulted. If nobody told you about the transfer, that's a breach -- and you may be entitled to a protective award of up to 13 weeks' pay.
What to do next
- If a contract is changing hands on your site, find out whether TUPE applies -- ask your employer directly.
- Keep records of your current terms: pay, hours, holiday entitlement, pension, and continuity of service start date.
- If nobody has told you about the transfer, that's a breach -- you may be entitled to a protective award of up to 13 weeks' pay.
- If the new contractor tries to change your terms on day one, get advice before agreeing to anything.
- If you're told there's no work for you after a transfer, that may be an automatically unfair dismissal -- act quickly.
Sources
- Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246)
- Employment Rights Act 2025 -- two-tier workforce provisions (commencing October 2026)
- GOV.UK -- Business Transfers, Takeovers and TUPE
- ACAS -- What a TUPE Transfer Is
- Construction Management -- Transferring Construction Staff: What Are the Legal Issues?
- Gateley -- TUPE or Not to TUPE: Service Provision Changes
- Lewis Silkin -- TUPE Takeaways: When Is There a Business Transfer or Service Provision Change?
- Weightmans HR Rely -- Guide to Transfer of Undertakings (TUPE)
- PeopleOS -- TUPE Employer Obligations
- Davidson Morris -- TUPE Redundancy Guide for UK Employers
- DAC Beachcroft -- TUPE Service Provision Changes and Fragmentation
- Wilsons LLP -- Service Provision Changes: When Does TUPE Apply?
- Devonshires -- TUPE and Sub-Contracts (Jinks v London Borough of Havering)
- Neathouse Partners -- Does TUPE Apply to Sub-Contractors?
- Pinsent Masons -- UK Prepares to Introduce Two-Tier Worker Protections Across Public Sector
- Lewis Silkin -- What's Happening in Employment in 2026 (TUPE and public services)
- LRD Publications -- Transfers and Service Provision Changes (TUPE)
This guide is for general information only and does not constitute legal, tax, or financial advice. TUPE is a complex area of law and its application depends on the specific facts of each transfer. The ERA 2025 two-tier workforce provisions are expected to commence in October 2026 -- detailed regulations and a statutory code of practice are still awaited. Employment status is determined on a case-by-case basis. Always take professional advice specific to your circumstances before acting on anything in this guide. SiteKiln is not a law firm and accepts no liability for actions taken based on this content.
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