What Happens to Your Staff When You Sell?

Short answer

In a share sale, your staff stay employed by the same company on the same terms, so nothing about their employment changes because of the sale. In an asset sale, TUPE usually moves them to the buyer's company with their terms and length of service protected. The law protects their terms either way. What you control is how and when they hear about it, and what the buyer plans for them, so agree both before you sign.

1. In a share sale

The buyer buys the shares of your company, so the company that employs your team does not change. Their contracts, pay, holiday and start dates stay exactly as they are. GOV.UK's guidance says the identity of the employer must change for TUPE to apply, which is why TUPE does not usually apply to a share sale.

Any changes the new owners want to make later follow normal employment law, as they would for any employer. See share sale or asset sale for how the two types of sale differ.

2. In an asset sale: TUPE

In an asset sale, the business moves from your company to the buyer's company, and TUPE usually applies. According to GOV.UK:

the new employer takes over all the previous terms and conditions of employment;
continuity of employment carries over, so each person's start date stays the same;
pension rights earned up to the transfer are protected, although the new employer does not have to provide an exact copy of the old pension scheme;
the new employer cannot change terms if the reason is the transfer itself;
dismissals are only possible for an economic, technical or organisational reason involving changes in the workforce, and normal fair dismissal rules still apply.

Before the transfer, the old employer must give the new employer information about the employees who are transferring, at least four weeks before the transfer. The employer must also inform and consult employee representatives, or staff directly where the rules allow it. Acas can advise on the detail, and your solicitor will plan the timing with you.

3. When and how to tell your team

Most owners keep a sale confidential until the terms are agreed, often until shortly before or at completion. Uncertainty unsettles people, and news can reach customers before you are ready. Sometimes one or two senior people are told earlier, under a confidentiality agreement, to help with the buyer's questions.

Plan the announcement with the buyer, so everyone hears the same thing on the same day. Staff usually want to know:

whether their job, pay and terms are safe;
who they will report to, and whether they will work from the same place;
whether the business will keep its name;
why you are selling, and how long you are staying.

In an asset sale, the duty to inform and consult affects the timing, so agree the plan with your solicitor.

4. Key people

Buyers look at how much of the business depends on a few people: a senior engineer who knows every site, or an office manager who runs the diary. You can reduce that risk well before a sale:

write down how the business runs, from scheduling to reporting;
let customers get to know more than one person;
keep employment contracts, training and competence records up to date for everyone.

Some buyers agree retention arrangements with key people as part of the deal. Ask any buyer what they plan.

5. How Richmonds approaches your team

Your engineers and office staff are the business, and we plan for them to stay on their existing terms. We do not contact your staff before you agree, and we agree with you how and when your team hears about the sale. See how it works.

Questions owners ask

Will my staff lose their jobs if I sell?

Not because of the sale itself. In a share sale their employer does not change. In an asset sale, TUPE moves their jobs to the new employer on the same terms, and dismissals are only possible for an economic, technical or organisational reason, with normal fair dismissal rules still applying.

Do my staff keep their length of service?

Yes. In a share sale nothing changes. In an asset sale, TUPE means continuity of employment carries over, so their start dates stay the same.

When should I tell my staff I am selling?

Most owners wait until the terms are agreed, often until shortly before or at completion, and plan the announcement with the buyer. In an asset sale, the duty to inform and consult affects the timing, so agree it with your solicitor.

Sanjeev Desour is the founder of Richmonds, which buys UK water hygiene, water treatment and fire safety businesses from owners who want to retire. He founded IGNITE Academy in 2014 and runs the IGNITE Group of companies. LinkedIn

Sources

This guide is general information, not legal, tax or financial advice, and it is not an offer to buy any business. It reflects the rules and announcements known on the "last reviewed" date above. Tax rules and rates change, and announced changes may be altered before they become law, so take advice from your own accountant and solicitor before you act. Richmonds accepts no liability for decisions made on the basis of this guide. See our website terms.

What happens to your staff when you sell your business