Understanding TUPE When Selling a Nursery

When you sell a nursery business, the employees do not simply transfer across as a matter of goodwill or practical convenience. They transfer because the law requires it. The Transfer of Undertakings (Protection of Employment) Regulations 2006, known as TUPE, applies to the vast majority of nursery sales and sets out clear obligations for both the seller and the buyer.

TUPE is one of the areas that catches nursery sellers off guard most often. Not because the rules are impossible to follow, but because they require action at specific points in the process and because getting them wrong can result in claims that complicate or delay completion.

This guide explains what TUPE means in practice for nursery sellers, what you are required to do, what the buyer is taking on and how to manage the process so it does not become a source of friction late in the deal.

What TUPE means in a nursery sale

TUPE applies when a business or part of a business transfers from one employer to another and the transferred operation retains its identity. A nursery sale almost always meets this test. The nursery continues to operate as a nursery, in the same premises, delivering the same service, with the same children. The employer changes. The business does not.

The practical effect is that all employees who are assigned to the nursery at the point of transfer move to the buyer automatically. Their contracts of employment transfer with them. Their continuity of employment is preserved. Their terms and conditions, including pay, hours, holiday entitlement and contractual benefits, cannot be changed simply because ownership has changed.

This applies regardless of whether employees are full-time, part-time, on fixed-term contracts or on zero-hours arrangements, provided they are genuinely assigned to the nursery being sold.

TUPE does not apply to the seller’s employees who are not assigned to the nursery. If you have staff who work across multiple sites or who are employed centrally and not specifically assigned to the setting being sold, their position needs careful consideration and legal advice.

Why TUPE matters specifically in nursery sales

Nurseries are staffing-intensive businesses. The workforce is not background overhead. It is the registered product. Staffing ratios are a legal requirement, and the qualification profile of the team affects what the nursery can offer and how it is regulated.

This means TUPE in a nursery sale is not an administrative formality. It is central to the operational continuity of the business. A buyer who does not understand what they are inheriting in terms of employment obligations, pay rates and contractual terms cannot properly assess the cost base they are acquiring. A seller who does not manage the TUPE process correctly risks claims that can surface after completion and affect the final proceeds.

There are also nursery-specific dynamics that add complexity. The designated safeguarding lead, the Ofsted-registered manager and any staff who are named in the nursery’s registration or quality framework carry particular operational significance. Their transfer, or departure, is not just an employment question. It is a regulatory one.

Which employees transfer under TUPE

The starting point is identifying which employees are assigned to the nursery being sold. In most single-site nursery sales, this is straightforward. Everyone working at the nursery transfers.

In more complex situations, the picture needs more thought. This includes:

• Sellers who own multiple nurseries and are selling only one site
• Sellers who employ centralised staff, such as a finance manager or HR function, who support the nursery but are not assigned exclusively to it
• Sellers who have the nursery manager split across sites
• Staff on long-term absence, including maternity leave, sick leave or career breaks, who are still employed and assigned to the nursery

Employees on long-term absence transfer with everyone else. Their absence does not remove them from the TUPE scope. This matters because it affects the buyer’s inherited obligations and the seller’s disclosure requirements.

The rule of thumb is that if an employee is employed and assigned to the nursery, they transfer. If there is any doubt about a specific individual, take legal advice before the process begins rather than after.

What terms and conditions transfer

When an employee transfers under TUPE, their existing contract of employment transfers in full. The buyer steps into the seller’s shoes as employer.

This means the buyer inherits:

• Pay rates, including any contractual pay progression or increments
• Contracted hours and working patterns
• Holiday entitlement, including any enhanced entitlement above the statutory minimum
• Notice periods
• Any contractual sick pay arrangements
• Pension contributions, subject to specific pension TUPE rules
• Any other contractual benefits, such as enhanced maternity pay or staff discount arrangements

The buyer cannot simply impose new terms after completion on the basis that they are the new owner. Changes to terms and conditions that are connected to the transfer are void. There are limited circumstances where changes can be agreed, but they require genuine consent from employees and should be handled carefully with legal advice.

If the buyer intends to harmonise terms across a group of nurseries they already operate, they need to understand that TUPE creates a significant restriction on their ability to do this, at least in the short term. This is a common source of misunderstanding between sellers and buyers, and it is better resolved during negotiations than after completion.

The information and consultation obligations

TUPE places specific obligations on both the seller and the buyer to inform and consult with affected employees before the transfer takes place. This is not optional and it is not something that can be done at the last minute.

The seller’s obligations include:

• Informing employee representatives or, where no recognised union or elected representatives exist, the employees directly, about the fact that the transfer is taking place
• Providing information about when the transfer is expected to happen
• Explaining the legal, economic and social implications of the transfer for affected employees
• Describing any measures the buyer intends to take in relation to the employees after transfer, or confirming that no measures are planned

The buyer’s obligations include providing the seller with information about any measures they intend to take in relation to the employees after transfer, in sufficient time for the seller to include this in the information provided to employees.

The consultation element is triggered when either party intends to take measures in connection with the transfer. If the buyer plans to make changes to rotas, introduce new policies or restructure roles after completion, those intentions should be disclosed and, where appropriate, consulted on before transfer.

In nurseries, where staff continuity is operationally critical and where employee confidence affects parent confidence, the way this process is handled matters beyond legal compliance. Staff who feel informed and respected during a sale process are more likely to stay. Staff who feel they have been kept in the dark are more likely to leave, which directly affects the business the buyer is acquiring.

The employee liability information obligation

Separately from the information and consultation process, the seller is required to provide the buyer with specific written information about the transferring employees. This is known as employee liability information and it must be provided at least 28 days before the transfer completes.

The information required includes:

• The identity and age of each transferring employee
• Details of their employment particulars, effectively the information that would be included in a written statement of terms
• Information about any disciplinary action taken against the employee in the last two years
• Information about any grievances raised by the employee in the last two years
• Information about any legal action brought by the employee against the employer in the last two years, or any circumstances that might give rise to such action

Providing this information late, or failing to provide it at all, gives the buyer a right to bring a claim. In practice, most buyers will have requested much of this information through due diligence long before the 28-day obligation kicks in. But the formal obligation exists independently of the due diligence process and should be tracked separately.

Dismissals connected to the transfer

One of the most important protections TUPE provides is against dismissal in connection with the transfer. Dismissing an employee because of the transfer, or for a reason connected to it, is automatically unfair. This applies regardless of the employee’s length of service.

This means a seller cannot tidy up the workforce before sale by making redundancies that are connected to the transfer. It also means a buyer cannot dismiss employees after completion simply because they do not want to inherit certain roles or terms.

Redundancies that are genuinely for economic, technical or organisational reasons, and that involve changes to the workforce rather than just a change of ownership, can be lawful. But this is a narrow exception and it requires careful legal analysis. Sellers who are considering any dismissals in the period leading up to a sale should take employment law advice before acting.

The risk of getting this wrong is significant. Automatically unfair dismissal claims do not require two years of service. They can be brought from day one of employment. And liability for such claims can rest with the seller, the buyer or both, depending on the circumstances.

Pensions and TUPE

Pension rights under TUPE are subject to a separate regime that is more limited than the general rule on terms and conditions. Occupational pension scheme benefits do not automatically transfer under TUPE in the same way that other contractual terms do.

However, the buyer is required to provide a pension arrangement for transferring employees who were members of an occupational pension scheme with the seller. The minimum requirement is to match employee contributions up to six percent into a stakeholder or equivalent pension arrangement.

If the seller operates an enhanced pension arrangement, this needs careful consideration. The buyer may not be obliged to match it exactly, but the position should be disclosed and understood by both parties early in negotiations.

In nurseries, where many employees are on relatively modest salaries and pension arrangements may be straightforward, this is often not the most complex part of the TUPE conversation. But it should not be ignored, and any commitments made to employees about pension continuity should be reviewed against what is actually required before they are repeated.

What sellers should prepare before going to market

Most of the information a buyer needs for TUPE purposes overlaps with what they will request through standard due diligence. Preparing it in advance speeds up the process and reduces the risk of last-minute requests causing delays near completion.

Sellers should prepare:

• A full staff list with names, roles, contracted hours, start dates, salaries and any contractual benefits
• Copies of current employment contracts, including any variation letters that differ from standard terms
• Details of any enhanced terms, such as enhanced holiday, enhanced sick pay or enhanced maternity pay
• Records of any disciplinary action, grievances or employment disputes in the last two years
• Details of pension arrangements and current contribution levels
• Any settlement agreements that have been reached with current or former employees
• A summary of current absence levels and any employees on long-term leave

Having this information organised before heads of terms are signed means the seller is not scrambling to compile it during due diligence, and the formal employee liability information can be provided on time without difficulty.

Common TUPE mistakes in nursery sales

The mistakes that cause problems tend to be predictable.

Leaving information and consultation too late is the most common. Some sellers treat TUPE as a legal box to tick near the end of the process rather than a process to manage from early in the sale. By the time completion is close, the timeline for meaningful consultation has passed and the seller is non-compliant.

Failing to disclose employment disputes is another frequent issue. A seller who knows a grievance has been raised or that a disciplinary process is ongoing and does not disclose it is in breach of the employee liability information obligation. If the buyer discovers this after completion, it can trigger claims and damage the relationship between the parties.

Assuming zero-hours or part-time staff do not transfer is an error that surfaces occasionally. All employees assigned to the nursery transfer, regardless of their contract type or hours.

Making dismissals before completion without legal advice is perhaps the most serious mistake. Even if the intention is genuinely operational rather than connected to the sale, a dismissal that a tribunal finds was connected to the transfer can be automatically unfair and expose the seller to uncapped compensation in some circumstances.

What buyers should check

Buyers receiving a nursery under TUPE should satisfy themselves that:

• The employee list is complete and accurately reflects everyone assigned to the nursery
• Employment contracts have been provided and any enhanced terms are identified
• The disciplinary, grievance and litigation history has been disclosed fully
• Any employees on long-term absence are included in the transfer and their status is understood
• The pension position has been explained and the buyer’s obligations after transfer are clear
• The information and consultation process has been carried out properly by the seller

If there are gaps in any of these areas, they should be resolved before completion rather than accepted as something to deal with afterwards.

Final thoughts

TUPE is not a reason to avoid selling a nursery or to treat the sale as more complicated than it needs to be. It is a framework that protects employees during a process that, from their perspective, involves a significant change they did not choose. Handled properly, it is a manageable part of the sale process that runs alongside the legal and financial workstreams without derailing them.

The sellers who find TUPE straightforward are the ones who started organising their employment records early, took legal advice before making any decisions about staff in the lead-up to the sale and communicated with their team in a way that was honest, timely and calm. The sellers who find it difficult are the ones who left it too late or tried to manage it without proper advice.

If you are thinking about selling your nursery, TUPE should be on your checklist from the start, not something you get to when a solicitor mentions it.

Sources

UK Government, TUPE: a guide to the regulations (overview of TUPE obligations for employers):
https://www.gov.uk/transfers-takeovers

UK Government, The Transfer of Undertakings (Protection of Employment) Regulations 2006 (full legislation):
https://www.legislation.gov.uk/uksi/2006/246/contents

UK Government, Automatic unfair dismissal (dismissal connected to a TUPE transfer):
https://www.gov.uk/dismissal/unfair-and-constructive-dismissal

ACAS, TUPE: transfers of businesses and services (practical guidance for employers):
https://www.acas.org.uk/tupe

UK Government, Workplace pensions: what you must do (minimum employer pension obligations):
https://www.gov.uk/workplace-pensions/what-you-must-do

UK Government, Disclosure and Barring Service checks: guidance for employers (DBS requirements relevant to transferring staff):
https://www.gov.uk/guidance/dbs-check-requests-guidance-for-employers