National Minimum Wage penalties now enforced following a TUPE transfer

Employer Pays

HMRC has announced that it has changed its approach to enforcing the National Minimum Wage (NMW) where there has been a transfer of employees from one employer to another under TUPE. This new approach came into effect on 2 July 2018 and as a result of the change, where there has been a transfer of employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) all NMW liabilities, including the full financial penalty amount, are now being enforced against the new employer. This is a change to the position prior to 2 July 2018 where the former employer was responsible for all or part of any penalties that were triggered by arrears that accrued before the employees transferred under TUPE.

This change has a potentially significant impact on Transferees as financial penalties of up to 200 per cent of the pay arrears (capped at £20,000 per worker) are payable where the transferring employees have not been paid the NMW.

“It is important that employers receiving employees through a TUPE transfer, check carefully the employees’ terms and condition of employment including pay,” notes Howes Percival employment law expert Hannah Ball.

“Where a TUPE transfer occurs in the context of a business acquisition it is essential that the asset purchase agreement contains suitable warranties and indemnities to protect the new employer.”

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