HM Revenue and Customs (HMRC) has changed the way it enforces the national minimum wage following a transfer of employees under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).
Since 2 July 2018, all national minimum wage liabilities are being enforced against the new employer, whereas previously the old employer remained liable for all or part of any penalties that were triggered by arrears that accrued before the transfer.
HMRC has not announced the reason for this change, but it does seem unfair on the new employers, given that they could now be penalised for another employer’s wrongdoing.
While businesses transferring employees may be thinking they can now breathe a sigh of relief, as they will escape liability for national minimum wage areas following a TUPE transfer, this is unlikely to be the case in reality. It is extremely likely that any prospective new employer will require the old employer to give specific warranties and indemnities before a TUPE transfer, to ensure that the new employer is protected in the event that any national minimum wage arrears are found to be due post-transfer, relating to the period before the transfer.
However, it may not be possible for a prospective new employer to gain protection via warranties and indemnities when a business outsources certain services to a contractor, such as hiring a cleaning organisation to clean its offices, or takes services that were previously carried out by a contractor back in-house.
It will therefore be very important that prospective new employers do as much due diligence as they can in these circumstances, in order to ascertain whether there may be any national minimum wage liabilities following the transfer, as this may affect whether or not they wish to go ahead with the service provision.
Hannah Ball is an associate solicitor at Howes Percival