New employers liable for National Minimum Wage (NMW) underpayments after TUPE transfer

Written By

alison dixon module
Alison Dixon

Partner
UK

I'm a partner in our International HR Services group, which I co-head, based in London. I have more than ten years' experience advising clients on complex employment law issues.

HMRC has confirmed that it will now enforce outstanding liabilities and penalties for failing to pay the National Minimum Wage (NMW) to employees subject to a TUPE transfer against their new employer – the transferee. This represents a significant departure from previous practice, under which the previous employer – the transferor – would retain liability for historic NMW underpayments accruing prior to the relevant TUPE transfer. 

NMW compliance is a particular problem in the hotel sector, with hospitality employers near the top of the list of offenders published by HMRC earlier this year.  This change in practice will therefore be of particular importance to businesses looking to acquire hotels.

This new approach was implemented on 2 July 2018. The significant potential penalties for failing to pay NMW (including a punitive amount of up to 200% of outstanding arrears, up to £20,000 per worker) highlights the need for careful due diligence as part of any transaction or arrangement to which TUPE could apply.

An update from HMRC can be found here.

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