UK Contracts, Notice, Garden Leave and TUPE

Under Regulation 4(4) of TUPE 2006, any variation to your employment contract that is connected to the TUPE transfer is void — legally unenforceable — even if you agreed to it and even if your employer claims you consented. The new employer cannot use the transfer as an opportunity to harmonise terms downwards, cut your pay, reduce your benefits, or alter your working hours simply because the business has changed hands.

This protection is particularly powerful because it applies regardless of time: there is no set period after which the transfer connection fades in law, though in practice it becomes harder for you to prove the connection the longer after the transfer the change occurs. Courts and tribunals look at the reason for the change: if it is directly connected to the transfer (even if wrapped in business language), it is void.

Changes are permissible in two situations. First, if the change is for a genuine economic, technical, or organisational (ETO) reason entailing a change in the workforce — a restructuring for business reasons genuinely unconnected to the transfer. Second, where the change is permitted by the contract itself or by a collective agreement. Even where an ETO reason exists, the employer must still follow proper employment law processes (notice, consultation, or variation agreement) — ETO is not a free pass to change terms unilaterally.

Pay in lieu of notice (PILON) is a lump-sum payment equal to the salary you would have earned during your notice period, made when your employer wants to end your employment immediately rather than having you serve out the notice. PILON can be used whether or not your employment contract contains a specific PILON clause — though the tax treatment changed in April 2018.

Since 6 April 2018, all PILON payments are treated as taxable earnings for income tax and National Insurance purposes, regardless of whether the contract contains a PILON clause. Before this change, employers without a contractual PILON clause could sometimes pay notice pay as a tax-free termination payment within the £30,000 exemption. That route was closed by the Finance Act 2017.

Your statutory minimum notice entitlement (1 week per year of service, up to 12 weeks) must be paid in full. If your contractual notice is longer, PILON should reflect the contractual period. Failure to pay PILON is a breach of contract — you can recover the shortfall through the courts or Employment Tribunal.

Garden leave (or 'gardening leave') is a period during which an employee is required to stay at home — away from the workplace, clients, and confidential information — while still being paid full salary and accruing benefits. It is used during the notice period when an employer wants to prevent a departing employee from accessing sensitive business information, poaching clients, or immediately joining a competitor.

During garden leave, your employment continues — you remain an employee, accrue holiday, and receive all contractual benefits. You are still bound by your duties of fidelity and confidentiality. Your employer must continue to pay you. You cannot be forced onto garden leave unless your contract contains an express provision for it, though most senior employment contracts do.

Garden leave is distinct from PILON: on garden leave you serve out your notice but do not work; with PILON your employment ends immediately and you receive a cash payment. Garden leave is generally more useful for employers protecting trade secrets, client relationships, or recruitment of staff; PILON is simpler administratively.

An employment contract is a legally binding agreement — both parties must consent to any changes. Your employer cannot unilaterally change fundamental terms such as your salary, hours, job title, or place of work without your agreement. A change imposed without consent is a breach of contract.

If your employer imposes a fundamental breach without consent, you have several options. You can refuse and continue on the old terms, making clear you do not accept the change. You can accept under protest — working under the new terms while reserving your right to claim breach of contract. Or you can resign and bring a constructive dismissal claim, provided the breach is sufficiently serious. Working under changed terms for too long without protest can amount to 'affirmation' — losing the right to claim.

Employers may have contractual flexibility clauses (allowing reasonable changes to duties or location within reasonable bounds). The key is whether the clause is clear, unambiguous, and the change falls within its scope. Changes outside the clause — particularly to pay or fundamental job content — still require consent.

A zero-hours contract (also called a casual or on-call contract) is one where the employer does not guarantee any minimum number of working hours. The employer offers shifts or work as and when needed; the worker can accept or decline. Zero-hours contracts are common in hospitality, retail, social care, and student employment.

Workers on zero-hours contracts have statutory rights including the National Minimum Wage for every hour worked, 5.6 weeks' holiday entitlement per year (pro-rated based on hours worked), rest breaks, protection against discrimination, and whistleblowing protection. Most zero-hours workers will be 'workers' rather than employees, which means they do not have unfair dismissal rights unless they also have employee status.

Since 26 October 2024, the Employment Relations (Flexible Working) Act 2023 and subsequent regulations give zero-hours workers the right to request predictable working patterns after 26 weeks of service. From 2026, the Employment Rights Act 2025 will give qualifying zero-hours workers a right to be offered guaranteed hours reflecting their regular pattern — employers must make offers at the end of reference periods.

TUPE is the Transfer of Undertakings (Protection of Employment) Regulations 2006. When it applies, employees assigned to the transferring business or service move automatically from the old employer to the new one. Their continuity date stays the same and their contractual rights and liabilities move with them, including salary, working hours, holiday entitlement and relevant collective agreements. A transfer is not a lawful reason by itself to wipe away existing terms.

There are two main transfer types. A business transfer happens where an economic entity moves to a new employer and keeps its identity — relevant signs include the transfer of staff, premises, equipment, customers, work in progress or goodwill, and whether activities remain the same or similar. A share sale usually does not trigger TUPE because the employing company remains the same. TUPE can apply to a whole business or only the identifiable part that is changing hands.

A service provision change covers outsourcing, insourcing and retendering. For this route, there normally needs to be an organised grouping of employees whose principal purpose is carrying out the relevant activities for the same client, and the work after the change must remain fundamentally the same. A grouping can be one person, but TUPE will not normally apply to a goods-only contract, a single event or a genuinely short-term task. Whether a particular worker is assigned to the grouping is a fact-sensitive question.

An employer may defend a transfer-related dismissal or agreed contract change by showing an economic, technical or organisational reason that entails a change in the workforce — usually called an ETO reason. Economic reasons can include an essential cost-saving need; technical reasons may involve new equipment or processes; organisational reasons can include a genuine restructuring. Naming an ETO reason is not enough: it must be the real main reason and involve a workforce change, and the employer must still follow the ordinary fair dismissal, redundancy or contract-change process.

Both the old and new employer have information and consultation duties before the transfer. Affected employees or their recognised union or elected representatives must be told that the transfer is happening, when and why, its legal, economic and social implications, and any proposed measures such as redundancies, location changes, pay-date changes or new working patterns. Consultation must be genuine where measures are proposed. For transfers completing from 1 July 2024, direct consultation is permitted where the employer has fewer than 50 employees or fewer than 10 employees are transferring, provided no representatives already exist; otherwise representative rules apply.

If an employer fails to inform or consult properly, an employment tribunal can make a protective award. If you object to transferring, your employment normally ends on the transfer date and this is generally treated like a resignation, so redundancy or unfair-dismissal rights may be lost. Because coverage, assignment, ETO reasoning and remedies depend closely on the facts, ask for the transfer information in writing and seek advice from ACAS, a union or an employment specialist before objecting or signing new terms.