Who is liable for enforcement of the National Minimum Wage after a TUPE transfer?

HMRC has confirmed liability for historic national minimum wage underpayments or related penalties are to be enforced against the new employer – irrespective of whether the new employer was responsible for the underpayment/penalty. Previously the former employer was responsible for any 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 an employer taking on employees after a TUPE transfer. Businesses should ensure they carry out sufficient due diligence on pay terms ahead of any transfer to avoid being caught out by any nasty (and expensive) surprise.

It may also be appropriate to negotiate appropriate warranty and/or indemnity protection in the commercial agreement where possible.