Le contrat d'emploi global est-il plus qu'un outil au service de la substance économique au Grand-Duché de Luxembourg ?

Abstract

In the current economic world, multinational firms represent more than 50% of world trade. They are based in every part of the world and, with the help of the best advisers, they can exploit gaps and mismatches in order to optimize their financial and tax situations.

During the last decades, it appeared different countries tried to tackle this economic development. The reply came from OECD by several recommendations to avoid aggressive tax planning and erosion of taxable basis. One of the recurring obligation is about the economic substance of an entity in a country. The economic substance of a company is what can justify the purpose of a presence in a country aside a tax haven. The most important item to improve the substance is the real presence of local employees who are experts in the business carried out by the company. Grand Duchy of Luxembourg allows (without any kind of laws) companies to split the working time of their employees between several employers, this process is called a GEC for Global Employment Contract.

A Global Employment Contract is an employment contract that governs the contractual relationship between an employee and several employers (typically different entities belonging to the same group of companies). Under a GEC, an employee is deemed to work on behalf of the different entities which are parties to the contract.

Related costs are shared between the different employers depending on a distribution key based on time spent or work performed by the employee for each of them. These criteria are agreed between employers in a Common Paymaster Agreement, an agreement distinct from the GEC that governs the relationship between the employing entities and a representative designated by the other entities amongst these entities (the Paymaster). The Paymaster take in charge the formalities of the payment of salary, the withholding of taxes, plus the other advantages in kind. Each entity has to manage social security for its own.

Despite all the advantages brought by the GEC for the corporate groups, the situation of employees could be complex. The organization of that kind of groups is most of the time a matrix organization, which means for an employee that he needs to work for several managers. The employee would need to organise his time between every entity, handle the particularities of each of them, find time to reach different deadlines and convince all the involved managers during evaluation process. As a manager, he would need to share his workforce with others, which ask skills of communication and organization.