New employers responsible for accrued national minimum wage liabilities following TUPE

HMRC has confirmed changes to its enforcement of national minimum wage liabilities where there has been a TUPE transfer.

From 2 July 2018, any liability for historic national minimum wage underpayments or related penalties are to be enforced against the new transferee employer, irrespective of whether the new employer was responsible for the underpayment/penalty. Previously the former employer, the transferor, was responsible for any such liabilities that had accrued up to the transfer date.

The financial penalty for an employer in breach of the national minimum wage requirements can be up to 200% of the total pay arrears, capped at £20,000 per worker.

This change may result in significant additional costs for a transferee. Transferees should therefore ensure they carry out sufficient due diligence on pay terms ahead of any transfer to avoid being caught out by any nasty (and expensive!) surprises. It may also be appropriate to negotiate appropriate warranty and/or indemnity protection in the commercial agreement where possible.