FAQ/redundancy and insolvency – does TUPE apply?

Company insolvencies are on the rise. The latest data from the Insolvency Service which was reported last week by the FT shows that company failures have continued to climb in early 2025, with businesses struggling to survive in a climate of rising costs and economic pressures. The figures show 1,971 company insolvencies in England and Wales, an 11% rise compared to a year ago. 

So, what about the employees of those businesses and, if the business is able to carry on trading in some form, does TUPE apply? It’s a question we are increasingly being asked so we have added it to our FAQs series. On the line with the answer, Ed Goodwyn:

Ed Goodwyn: “The law recognises in an insolvency situation that there's a benefit of keeping the business alive and as a result of that policy the law of TUPE has a variation within it as to whether or not the insolvency proceedings are of a liquidation type or an administration type. So, in other words, if the business is looking to carry on as a ‘going concern’ and is being sold on, often by way of what's called a pre-pack administration, then the main parts of TUPE continue to apply whereby the employee won't be made redundant, they will TUPE across to the new entity broadly with most of their rights intact, particularly their rights in relation to continuity of employment, and if they are dismissed in that situation because of the transfer they will have automatic, unfair dismissal rights so that they're protected. Conversely, in a liquidation situation, TUPE provides that there isn't so much protection for the employee, they will not TUPE transfer across, so they can be dismissed and they will be left in the cold, if you like, they won't go across, their employment will come to an end, and their rights will not be with the businesses, but their rights will reflect back to the Insolvency Fund and, basically, they'll be looking to get some money off the government for the losses they've suffered.”

This programme has been added to our FAQs series of programmes on redundancy issues, both individual redundancies and collective. You can find them using the search engine on the Out-Law website.