The following Pensions practice note Produced in partnership with Dentons provides comprehensive and up to date legal information covering:
THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL AND PERSONAL PENSION SCHEMES
Outsourcing involves an organisation entering into an agreement under which a third party takes over responsibility for providing services which are currently provided by the organisation’s own workforce. In almost all cases, an outsourcing will involve the automatic transfer of employees’ contracts of employment to the service provider.
A typical example is the outsourcing of a company's IT services (the Customer) to a specialist provider (the Supplier). Here, the Supplier would agree to provide IT services to the Customer with the Customer’s existing IT staff being transferred to the Supplier.
Pension issues can arise as a result of the automatic transfer of employment. This is relevant on an initial outsourcing (‘first generation’) and on subsequent outsourcings or changes in service provider. Pension issues can also arise on termination of the outsourcing agreement.
The key pension issues that need to be considered in a private sector outsourcing are:
what pension liabilities will transfer (with the employees) to the Supplier
what post-transfer pension benefits the Supplier has to provide to transferring employees, and
whether the Customer and Supplier have a duty to inform and consult transferring employees about changes to their pension arrangements
Note that additional specific issues arise on an outsourcing by central or local government and from former state-owned companies. For further information, see Practice
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