Annual Leave and TUPE Transfers: What Happens to It

If your company is acquired and TUPE applies, your accrued annual leave transfers with you. Regulation 4 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 moves your entire contract of employment to the new employer, along with “all the transferor’s rights, powers, duties and liabilities” under it — and an accrued leave balance is exactly such a liability.

You do not get paid out and start again. Your balance, your leave year, your contractual entitlement, and your continuous service all follow you across. Which is straightforward for the employee and genuinely difficult for the HR team receiving 40 people on a different leave year with a different bank holiday arrangement.

Key Takeaways

• Regulation 4 transfers the contract intact — accrued leave is a transferring liability, not a debt to be settled.
• Continuity of employment is preserved, so service-linked leave entitlements carry over.
• The new employer generally cannot cut your leave entitlement to match its existing staff simply because of the transfer.
• The outgoing employer must supply employee liability information at least 28 days before the transfer under regulation 11.

What Transfers, Precisely

GOV.UK summarises the effect: employees’ terms and conditions transfer and continuity of employment is maintained. In leave terms, that means all of the following move to the new employer:

• Your accrued but untaken balance on the transfer date
• Your contractual entitlement — if you had 30 days plus bank holidays, you still have 30 days plus bank holidays
• Your leave year dates, whatever they were
• Continuous service, so a service-based increment (“+1 day at 5 years”) keeps counting from your original start date
• Approved future bookings, including any already approved beyond the transfer date
• Any carry-over the outgoing employer had agreed

Regulation 4(2) also deems the outgoing employer’s acts and omissions to have been those of the new employer. If your old employer wrongly refused leave or miscalculated holiday pay, the liability for that follows the transfer too.

What the New Employer Cannot Do

The instinct after a transfer is to harmonise: put everyone on one leave year, one entitlement, one bank holiday arrangement. TUPE makes that hard.

Changes to terms and conditions where the sole or principal reason is the transfer itself are void. That protection applies whether or not the change is dressed up as a package that is “no worse overall”. An employer cannot reduce transferred employees from 30 days to 25 to match the existing workforce, even if it offers something else in return.

There are narrow routes to lawful change — variations for an economic, technical or organisational reason entailing changes in the workforce, and specific relaxations where the transferor is insolvent. Both are technical and need proper advice before you rely on them.

The practical consequence is that harmonisation usually happens slowly, by agreement, and often only for new joiners. Expect to run two leave regimes side by side for a while.

The Reconciliation Problem HR Actually Faces

This is where transfers consume weeks of admin. Five specific mismatches recur.

1. Different Leave Years

The most common and most disruptive. If the transferring staff run a January–December leave year and the acquirer runs April–March, a transfer on 1 September lands mid-year for one group and mid-year for the other, at different points.

The transferred employees’ leave year does not automatically change. You either run their original leave year alongside yours, or you agree a one-off transitional period with them — a short or long “stub” year to align the dates. The stub must not reduce their pro-rated statutory entitlement.

2. Bank Holidays In vs Plus

If the outgoing employer’s contracts said “28 days inclusive of bank holidays” and yours say “20 days plus bank holidays”, the totals match but the balances in your system will not. Load a transferred employee’s 28-day figure into a system configured for “plus bank holidays” and you have just given them 36 days.

Check the contract wording before you import a single number. Our post on whether bank holidays count as annual leave sets out the three wordings and how to tell them apart.

3. Days vs Hours

Organisations that track leave in days and organisations that track in hours cannot exchange balances without a conversion rule and an agreed day length. Part-time staff are where this goes wrong: a “12 days remaining” balance means something different for a 3-day-a-week employee than a 5-day one.

4. Carry-Over Rules

The outgoing employer may have allowed 10 days of carry-over where you allow 5. Carry-over already accrued and agreed is part of the transferring liability. Applying your stricter rule retrospectively is a reduction in terms.

5. Undocumented Practice

The hardest category. Discretionary extras — a Christmas Eve closure that never came out of anyone’s allowance, a birthday day off, an informal “take an afternoon” culture — may have become implied contractual terms through custom and practice. They do not appear in any contract or spreadsheet, and they surface three months after the transfer when someone asks why their birthday leave was refused.

Ask the transferring employees directly during consultation. They know what the practice was; the HR file does not.

Worked Example: A Mid-Year Transfer

Ade transfers on 1 September 2026 from a firm running a January–December leave year. His contract gives 25 days plus 8 bank holidays. On transfer he has 9 days remaining plus 3 bank holidays still to come.

His new employer runs an April–March leave year with 28 days inclusive of bank holidays.

What the receiving HR team must record:

• Entitlement: 25 days plus bank holidays, unchanged. Not 28 inclusive.
• Balance to load: 9 days of discretionary leave, plus the 3 remaining bank holidays held separately.
• Leave year end: 31 December 2026, not 31 March 2027.
• Continuous service: from Ade’s original 2019 start date, so his 7-year service increment applies now, not in 2033.

Four fields, four opportunities to get it wrong. Multiply by 40 transferring staff and you understand why leave reconciliation is usually the single largest post-transfer admin task.

The 28-Day Information Duty

Regulation 11 requires the outgoing employer to give the new employer employee liability information not less than 28 days before the transfer. That information covers identity and age, the statutory written particulars of employment, disciplinary and grievance actions in the previous two years, any court or tribunal claims in the previous two years, and applicable collective agreements.

Note what is not on that statutory list: current leave balances. They are not expressly required, which is exactly why they are so often missing. Ask for them explicitly, as a separate item, in writing, at the same time as the regulation 11 request. Get a per-employee balance, the leave year dates, the entitlement wording, and any agreed carry-over.

What This Means for You

If you are transferring: take a dated screenshot or export of your leave balance before the transfer, keep a copy of your contract, and check your first post-transfer payslip and leave record against both. Discrepancies are usually data errors rather than bad faith, but they are far easier to fix in week one than in month six.

If you are receiving transferring staff: request leave data alongside the regulation 11 information, reconcile contract wording before importing any numbers, and plan to run parallel leave years rather than forcing alignment. Raise custom-and-practice extras during consultation, not afterwards.

Leave Balance supports multiple leave years, multiple entitlement structures, and separate bank holiday allocations within a single account — so a transferred group can keep its own rules without a spreadsheet running alongside. Our UK annual leave entitlement guide covers the statutory baseline every transferred contract has to clear. Flat $10/month, unlimited employees, 14-day free trial.

This article is general information about TUPE and UK employment law, not legal advice. TUPE is technical and fact-sensitive — take advice on any specific transfer.