Business transfers: Can a buyer claim for furloughed employees who transfer under TUPE?

HMRC have just issued guidance to confirm that a buyer of a business is eligible to claim under the Coronavirus Job Retention Scheme in respect of the employees of a previous business that transferred after 28th February 2020 if the TUPE business succession rules apply to the change in ownership.

Why is this an issue?

Under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE” to its friends), following a business sale, employees automatically transfer from the selling company to the buying one. TUPE ensures that the employees cannot be sacked prior to the business transfer and also that they are guaranteed identical terms and conditions of employment. An employee will still transfer even if they are on long-term sick leave or maternity leave.

So, isn’t it automatic that an employee on furlough leave will also transfer?

Yes it is. Employees who have been placed on furlough leave (or the “Coronavirus Job Retention Scheme” if we are being formal) will also transfer to the new employer.

Surely the buyer can keep claiming back furlough costs from the Government then?

Ahem. This is where the issue arose. Until the latest Government clarification (9th April 2020) the rules simply stated that businesses “can only claim for furloughed employees that were on your PAYE payroll on or before 28 February 2020”. This presented a problem for a buyer business, because employees transferring into their businesses after 1 March 2020 would not have been on the payroll and so would not be eligible to be furloughed.

 

What do I do next?

 

To discuss your particular circumstances do contact me and I can advise.

Clearly, the Government is making up the rules as they go, without the benefit of a proper consultation – e.g. they have been issuing clarifications and corrections when anomalies (such as this one) become apparent. But thankfully, this anomaly with respect to TUPE has now been directly addressed.

But what if I have already exchanged contracts on a business purchase and am committed to take the furloughed employees? Do I have to take them off furlough?

No. The buyer will be able to leave the employees on furlough and claim through the Government scheme.

Leave a Reply

Your email address will not be published. Required fields are marked *