HMRC, National Minimum Wage (NMW) and TUPE – not necessarily topics to get the pulse racing, but crucially important for employers to get right, particularly in light of HMRC’s new position on enforcement of the NMW.
In addition to a worker’s right to enforce NMW entitlement, HMRC also has enforcement powers (including naming and shaming, financial penalties and criminal offences in some cases). In its “Agent Update 67”, available to read here at page 4, HMRC have now confirmed that from the 2nd of July 2018, all NMW liabilities, including the full penalty amount, will be enforced against the new employer where there has been a transfer of employment in terms of the Transfer of Undertakings (Protection of Employment) Regulation 2006 (‘TUPE’).
Generally speaking, TUPE applies where there has been a transfer/sale of a business (or part of a business); or where responsibility for providing a service transfers from one employer to another. ACAS has some useful TUPE guidance, which can be accessed here.
Where TUPE applies the contracts of employment of the employees in the transferring entity/service will automatically transfer to the party acquiring (transferee). The transferring employees are protected from dismissal and changes to their terms and conditions of employment, unless there is an economic, technical or organisational reason entailing changes in the workforce (an ‘ETO reason’). The transferee effectively steps right into the employer shoes of the seller/outgoing service provider and all of the rights, powers, duties and liabilities in relation to the employment contracts pass to the transferee. Whereas in the past HMRC charged the former employer all or part of the penalties in respect of arrears that accrued before the transfer, HMRC will now enforce any liability (which can be substantial and include penalties) against the ‘new’ employer.
The TUPE regulations are technical and each case will turn on its own particular circumstances. Nevertheless, it is vital that businesses and organisations take advice in circumstances where TUPE may apply, and that they take advice as early as possible. For example, if an employer fails in its duty to inform and consult in relation to TUPE, a protective award of up to 13 weeks’ gross pay for each employee can be awarded by the Tribunal.
Businesses acquiring other businesses, or just acquiring contracts providing services, should ensure that relevant information is obtained and assessed as part of the due diligence process, and that appropriate warranties and/or indemnities are sought to account for the increased risk as a result of this new announcement from HMRC.
The NMW regulations are not straightforward. Employers could be forgiven (although not by the Tribunals or HMRC) for thinking that all that is required is to ensure that workers receive a minimum rate of pay for each hour worked. However, there are quite specific rules in relation to, for example, apprentices, accommodation allowances, and of course, the issue of whether sleep-in carers are entitled to the NMW, continue to play out in the country’s top courts. Employers must therefore take advice to ensure they are NMW compliant.
MacRoberts’ employment law team is the longest established specialist team in Scotland. We work closely with our corporate colleagues across various types of business transfers and corporate transactions, and regularly advise clients in relation to outsourcing and other service provision changes.
