HM Revenue and Customs’ (HRMC) new approach will see liability for any national minimum wage underpayments transferred to the new employer after a TUPE transfer. Similarly, liability for any associated penalties, including fines, will also transfer over.
This is the position now in place for all TUPE transfers occurring after 2 July 2018.
Historically, the new employer did not inherit any such liability but under the new regime, liability for NMW underpayment or any penalties can be enforced in full against the new employer. The liability is not conditional on any knowledge or wrongdoing of the new employer; they are liable whether they were responsible for the underpayment or not.
This change in approach constitutes a significant shift in the apportionment of risk in TUPE transfers between incoming and outgoing employers. Incoming employers will now be potentially exposed to financial risk where they are not culpable, or even aware, of any wrongdoing.
From a practical perspective, employers acquiring staff by means of a TUPE transfer, for example on the acquisition of another business, should be conscious of HMRC’s revised approach.
Our advice in such situations would be for employers to take appropriate steps to mitigate their risk including conducting a thorough due diligence exercise and ensuring that the employee liability information is adequate to allow for the identification of any potential NMW liability and seeking appropriate indemnities against any potential losses arising as a result of NMW underpayments.