Enforcement of National Minimum Wage and TUPE Transfers
With national minimum wage (NMW) in the headlines already this year, and some household names being named and shamed for breaches, it can seem a minefield for small to medium employers to navigate.
HMRC has now changed who they will enforce liabilities against, for breaching the NMW legislation where a business is taken over or a contract to provide services is won.
With effect from 2 July 2018, where there has been a business transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply, all NMW liabilities, including the full penalty amount, will now be enforced against the transferee, that is the "new" employer.
Previously, HMRC enforced NMW penalties in these circumstances against the transferor (the previous employer), where they were triggered by arrears that accrued before employees transferred under TUPE.
Enforcement of the NMW is initiated either by a complaint from workers or third parties, or as a result of risk profiling or targeted enforcement of a particular low-paying sector by HMRC. The enforcement measures available to HMRC include: service of notices of underpayment; civil penalties; "naming and shaming"; recovering underpayments through tribunal or civil courts; and criminal prosecution.
If served with a notice of underpayment, the arrears of NMW, along with a financial penalty, have to be paid within 28 days. The maximum penalty is 200% of the total underpayment with an overall maximum penalty of £20,000 per underpaid worker.
These penalties, combined with the arrears which have to be repaid, could have significant consequences for business owners. The "naming and shaming" scheme is also likely to have a significant impact on the reputation of the business.
It is therefore clear that for those buying a business or taking over a contract which will involve the transfer of staff to the new business under TUPE, carrying out due diligence checks will be even more crucial to ascertain whether there have been any underpayments and the extent of any exposure to NMW claims.
If you would like to discuss any issues raised in this article, we have specific employment law expertise in advising in this area. For further advice, please contact Senior Solicitor, Hannah Boynes or a member of the Employment Team.
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Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.