If you’re considering making an offer to buy a care home you’ll have plenty to think about. Aside from the challenge of securing the necessary finance, you’ll need to carry out a thorough investigation of the business to make sure you know exactly what you’ll be taking on and, importantly, to calculate whether you’ll be able to generate a profit.
Crucially, you’ll also need to satisfy yourself that the existing care home staff are doing a good job and that you can buy your care home business confident in the knowledge that those staff will transfer with the business.
Care home staff: your business’s most valuable asset?
The reputation and success of a care home business is inextricably linked with the quality and performance of its manager and the employees who actually provide the care. And it’s essential that you have a full complement of staff on board from Day 1 of your new venture in order to provide business and care continuity.
This is currently an issue of particularly high importance for Care Home buyers as the care sector is experiencing a staffing crisis on a number of levels. Nationally, there is a general shortage of skilled carers, qualified nurses and experienced care home managers. Low pay coupled with the physically and emotionally draining nature of the work mean that fewer people are attracted to the sector.
This is compounded by the uncertainty created by Brexit. Some 90,000 European nationals currently work in the UK care home sector (around 6% of all jobs in the social care sector) but the result of the 2016 referendum has left a cloud of uncertainty over their future here. Many feel unwelcome and undervalued and are choosing to look for more secure options elsewhere.
Consequently, the care sector is experiencing high staff turnover and many advertised vacancies remain unfilled. Care home operators with insufficient employees to provide the necessary quality of care have little option but to take on expensive agency staff.
When buying a care home, then, it’s critical to understand which employees will transfer with the business on completion of your purchase and the extent of their skills, qualifications and experience.
How does TUPE affect the transfer of care home employees?
Where activities carried out after a change in business ownership are fundamentally the same as those provided beforehand – as will be the case in the sale of a care home as a going concern – legislation exists to automatically transfer employees to the new provider, unless they choose not to stay.
The legislation is known as ‘TUPE’ (pronounced ‘tewpee’), an acronym for the “Transfer of Undertakings (Protection of Employment) Regulations 2006” as amended by the “Collective redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014”) and its purpose is to protect employees’ rights when the organisation or service they work for transfers to a new employer.
In theory, this should mean good news for the buyer of a care home, like you, who needs to guarantee business continuity. However, the TUPE legislation has wider ramifications for buyers of care homes.
Can care home employees refuse to transfer to a new business owner?
In short, yes. The crucial point is that the legislation exists to protect the employee’s position. Care home staff are entitled to stay on under the existing terms and conditions of their contracts with the seller if they choose to do so but, equally, if an employee doesn’t want to stay on in the same job, they can refuse to work for the new employer. No notice is required; the employee simply has to tell their employer, or the new employer, before the transfer happens.
Clearly, this could leave you in a difficult situation, particularly if a key staff member – for example, the registered manager – chooses to move on.
What are a buyer’s rights and obligations in relation to transferring care home staff
Care home employees who choose to remain and accept you as their new employer, on the other hand, also bring potential issues for the unwary business buyer.
Whilst you will undoubtedly be glad to retain a full workforce so that you can ensure business continuity, you do need to be aware that employees who transfer will transfer together with all existing rights and liabilities under their existing contracts of employment, including terms and conditions relating to pay, commission and bonus entitlements, holidays, sick pay, job title and function.
For example, you may find yourself the new employer of employees on long term sick leave or maternity leave. Or it could be that the staff don’t have the exact skill set and qualifications that you are looking for to provide the standard of care you expect.
In addition, any employee dispute or claim for breach of contract will also transfer directly to you. In practice, this means you could find yourself the subject of an outstanding claim relating to an incident prior to the transfer; for example, a claim for discrimination.
The importance of due diligence when buying a care home business
With so much potential uncertainty surrounding the quality, commitment and liabilities associated with care home staff, it’s imperative that you seek expert legal advice at an early stage in the buying process, preferably from someone who is familiar with the care home sector and its regulatory framework.
TUPE legislation is complex and the potential liabilities involved with accepting the transfer of a workforce can be substantive and problematic. The last thing you need as a new business owner is unexpected staffing issues rearing their ugly head on the day after your transaction completes.
In particular, your solicitor will guide you through a process known as ‘due diligence’, or pre-contract enquiries, during which you will have the opportunity to carry out a thorough investigation of the care home business you want to buy, including its employees. Whilst TUPE legislation does impose a duty on the seller to disclose basic employee liability information to you as buyer, in our experience, this is often less than satisfactory. You will need absolute certainty about the number of staff transferring as well as the extent of the liabilities you will pick up as the new employer.
Should you decide to proceed with the purchase, you’ll also need to make sure that the sale agreement contains appropriate warranties and indemnities from the seller which reflect the findings of your due diligence and adequately protect your position as new employer. Depending on the seller’s reasons for sale, you may also want to include a non-compete clause in the sale contract.
Above all, a successful care home purchase depends as much as anything on developing and managing a positive relationship with the seller and the care home’s existing employees. An experienced business solicitor who is familiar with the particular challenges of the care home sector and the ins and outs of the buying process will be able to provide the objective input you need at what can be an emotional and stressful time.
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The sooner we become involved in the process of helping you to buy your Care Home business the more likely it is that your purchase will be successful, so please contact us today.
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