A Q&A guide to outsourcing in Luxembourg.
This Q&A guide gives a high-level overview of the rules relating to transferring employees on an outsourcing, including structuring employee arrangements (including any notice, information and consultation obligations) and calculating redundancy pay.
1. What is an outsourcing?
Luxembourg law does not define outsourcing. In general, an outsourcing occurs when an organisation decides that a service or activity previously provided by its internal resources will be sourced from an external provider. The services being outsourced do not have to be fundamentally the same and do not necessarily have to be carried out within Luxembourg national territory.
Transfers of undertakings are governed by:
- Articles L. 127-1 to L. 127-6 of the Labour Code.
- Directive 2001/23/EC on safeguarding employees' rights on transfers of undertakings, businesses or parts of businesses (Transfer of Undertakings Directive).
2. In what circumstances (if any) are employees transferred by operation of law?
Initial Outsourcing of Service Provision
According to Article L. 127-1 of the Labour Code, the following rules will apply:
"In the event of the transfer of a company or a change in the employer's situation, in particular by succession, sale, merger, transformation of the company's assets or incorporation, all employment contracts in force on the date of the change continue to exist between the new employer and the company's employees."
Therefore, the affected employees' rights are maintained and automatically transferred to the transferee on a transfer of an undertaking.
The rules on transfers of undertakings apply whenever the undertaking to be transferred is located in Luxembourg, and apply to all employees, including those employed on part-time, fixed-term or temporary work contracts. The rules apply to outsourcings if the outsourced activities constitute an economic entity that maintains its identity. This is the case if the transferred undertaking or part of an undertaking both:
- Constitutes an organised set of resources (in particular personnel and equipment) enabling an economic activity.
- Is continued in an identical or essentially similar manner by the transferee.
Therefore, a change in the management, the organs of the company or shareholding is not considered to be a transfer of an undertaking within the meaning of the law.
To read the full article click on the following link: Transferring Employees on an Outsourcing in Luxembourg: Overview