Key pension issues in a private sector outsourcing
Produced in partnership with Dentons

The following Pensions practice note produced in partnership with Dentons provides comprehensive and up to date legal information covering:

  • Key pension issues in a private sector outsourcing
  • The nature of an outsourcing
  • Automatic statutory transfer of terms and conditions of employment
  • The pensions exception—Beckmann issues
  • Statutory requirement on Supplier to provide minimum pension benefits
  • Consultation obligations
  • Risks to the Customer
  • Employee relations issues
  • Onward transfers
  • Risks for the Supplier
  • More...

Key pension issues in a private sector outsourcing


The nature of an outsourcing

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:

  1. what pension liabilities will transfer (with the employees) to the Supplier

  2. what post-transfer pension benefits the Supplier has to provide to transferring employees, and

  3. 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

Popular documents