Buying a Business or Bidding for a Contract? Check the TUPE and People Risks First

Winning a major contract or buying another business can be an exciting growth opportunity.

The commercial conversation often begins with revenue, clients, systems, property, equipment and delivery.

But one question needs to appear much earlier: What happens to the people?

If employees may transfer as part of the deal, the workforce can materially affect the true cost, risk and practicality of the transaction.

Finding that out after the contract has been signed is far too late.

TUPE should be considered early

TUPE can apply when a business or part of a business transfers to a new employer.

It can also apply to qualifying service provision changes, including outsourcing, insourcing and retendering.

Whether TUPE applies depends on the facts. But if there is even a reasonable possibility that employees could transfer, the issue should be considered during commercial planning — not left until mobilisation.

Start by understanding who may transfer

Before building a workforce plan, ask who currently performs the work, how much of their time is dedicated to the service, how the team is organised, whether employees split their work across several contracts, whether managers are included and whether absent employees may still be assigned to the service.

Do not build your operating model around an assumed headcount until the transfer population has been properly considered.

Understand the real employment cost

Salary is only one part of workforce cost.

Depending on the circumstances, employers may also need to understand working hours, overtime arrangements, allowances, bonus arrangements, holiday entitlement, notice periods, contractual benefits, continuous service, existing working patterns, collective arrangements and other contractual commitments.

An apparently profitable contract can look very different once the employment costs are understood.

Ask about employee relations risk

Do not just ask how many employees there are. Ask what is happening with them.

Are there grievances, disciplinary matters, performance processes, long-term sickness cases, flexible working arrangements, outstanding complaints, employment claims, workplace conflicts or promises made by managers that have not been documented properly?

TUPE due diligence should help the incoming employer understand the workforce it may actually inherit — not simply provide a list of names.

Look at the operating model

Suppose 15 employees currently deliver a service, but your proposed model requires eight.

That is not simply a spreadsheet issue. You may need to consider restructuring, redundancy risk, consultation, selection methodology, retained roles and the workload of those remaining.

Those costs and timescales should be considered before promising a client an unrealistic mobilisation date.

Check whether critical knowledge is walking across with the contract

People risk is not only legal risk. It is operational risk too.

Ask who understands the systems, who owns the client relationships, who knows the history of the service, who has access to important information, who holds licences or specialist knowledge and who would be difficult to replace.

A contract can transfer successfully on paper and still fail operationally if key knowledge is lost.

Consider what you intend to change

Incoming employers should think carefully about their proposed post-transfer structure.

Are you expecting to change reporting lines, relocate people, change working patterns, restructure, remove roles, introduce new systems, combine teams or change responsibilities?

The earlier those plans are understood, the better the transfer can be managed.

Do not treat Employee Liability Information as the entire due-diligence exercise

Employee Liability Information is important. But good HR due diligence goes further.

It asks what information is missing, what does not match, what has not been documented, what risks are already developing and what the incoming employer will need to deal with immediately after transfer.

The objective is not to make the transaction more difficult. It is to prevent avoidable surprises.

HR should sit alongside the commercial team

HR is often brought into a transaction once the commercial decisions have already been made.

That is backwards.

Where employees are central to delivering the service, workforce information should influence pricing, timelines, mobilisation, risk, restructuring assumptions, management capacity and ultimately whether the deal is commercially viable.

Before you sign, ask one final question

Do we really understand the workforce we may be taking on?

If the answer is no, there is more due diligence to do.

The HFactor supports organisations considering acquisitions, contract bids, outsourcing, insourcing and TUPE transfers.

Thinking of buying a business or bidding for a contract involving employees? Talk to The HFactor before you sign.

Free initial consultation: https://www.the-hfactor.com/contact