What happens to employees when a self-employed individual creates a company?

 

What about the workers previously hired under the individual’s name?

The answer is clear: they do not lose their rights. In fact, labour legislation protects job continuity through the concept of business succession, as regulated in Article 44 of the Workers’ Statute.

CONTINUITY IS GUARANTEED 

When a business maintains its identity — that is, it continues operating with the same resources, activity, and staff — the law considers that there has been a transfer of undertaking, even if the owner changes. In this case, the new employer (the company) is automatically subrogated into the labour and Social Security obligations and rights of the former employer (the self-employed individual).

This means that employment contracts are not terminated, but remain in effect with no need to sign new agreements. Employee consent is not required, and they cannot oppose the change.

CONDITIONS DO NOT CHANGE DUE TO THE LEGAL TRANSFORMATION 

The new company must respect the existing employment conditions: wages, working hours, vacation time, seniority, etc. The same collective bargaining agreement will continue to apply, as long as the activity and workplace remain the same.

If there were better individual conditions or improvements beyond the collective agreement, they cannot be removed automatically due to the ownership change. To do so, a formal substantial modification procedure would be necessary, based on economic, technical, organisational, or production-related reasons.

WHAT IF THERE ARE OUTSTANDING LABOUR OR SOCIAL SECURITY DEBTS? 

The new company also inherits any pending obligations. Specifically:

• It is jointly liable for three years for any outstanding labour debts the self-employed person may have (e.g., unpaid bonuses or overtime).
   

• Regarding Social Security, joint liability remains in force for the four-year limitation period.
   

This means that neither the legal transformation nor the creation of a new company releases the entrepreneur from prior obligations.

At Valero Tax Legal, we help you manage the transition from self-employed to company structure safely, efficiently, and fully in line with the law.