National Minimum Wage penalties for employers with staff who transfer under TUPE
HMRC has changed its approach to how it apportions National Minimum Wage liabilities, including penalties, between the former employer and new employer in a transfer situation.
Under TUPE the general position is that employment liabilities connected to the transferring employees transfer to the new owner. However respect of any national minimum wage liabilities and penalties, HMRC charged the former owner all, or part of the penalties where they were triggered by arrears that accrued before workers were transferred under TUPE provisions.
Since 2 July 2018, where TUPE applies, the new owner of the business will be responsible for national minimum wage arrears which arose whilst the worker was employed by the former owner of the business. Any penalties will also transfer to the new owner who takes over the business.
It is therefore essential that new owners carry out a thorough due diligence exercise prior to the transfer date. This includes receiving assurances that wage information in the employee liability information (ELI) is correct and contains full details of any outstanding claims against the outgoing employer.
Whilst TUPE liabilities will often be the subject of contractual indemnities particular regard should now be had to the wording of the indemnities to take into account of the new employer’s exposure.