Service provision change

What it is

A service provision change is one of the situations that the Transfer of Business (Protection of Employment) Regulations (S.L. 452.85) treat as a transfer. Regulation 2 covers three cases:

1. Outsourcing. Activities stop being carried out by a business (the “client”) on its own behalf, and are carried out instead by a contractor on the client’s behalf.
2. Re-tendering. Activities move from one contractor to a subsequent contractor, on the client’s behalf.
3. Insourcing. Activities stop being carried out by a contractor and are carried out instead by the client on its own behalf.

Why it matters

Where the regulations apply, the employees assigned to the activity transfer to the new employer on their existing terms, with the employer’s rights and obligations towards them (regulation 3A). The change is not in itself a ground for dismissal, although dismissals for economic, technical or organisational reasons entailing changes in the workforce are not ruled out (regulation 5(2)).

The regulations apply where the undertaking or part transferred is situated in Malta (regulation 3(1)(d)). A transfer may take place through more than one transaction, and whether or not any property passes (regulation 3(3)).

Duties to inform and consult

The outgoing and incoming employers have information and, in some cases, consultation duties towards the employees’ representatives, including a written statement at least fifteen working days before the transfer where the duty applies (regulations 4 to 8). See transfer of business.

A common mistake

Treating the end of a service contract as a redundancy, when the staff should transfer to the incoming contractor, or the reverse. Each route has different rules, and the wrong choice is costly.