Transfer From One Company To Another Within The Same Group

Dear Seniors,

1) What are the areas we should keep in mind when we transfer employees from one company to another within the same group?

2) Here the situation is like this: we have two companies named A and B. Company A is a Joint Venture, and company B is Fully Owned. We would like to transfer employees from Company A to Company B, which is fully owned. Then we will second the employees who are identified with Company B. What are the things to be kept in mind under such an action?

Regards,
Ritesh

Dear Tagplus,

Regarding your query, please ensure that the A & B companies are registered under EPF, ESI, and Gratuity. If not, please do not transfer them from A to B as you will be liable to pay the ESI/EPF dues as per the statutory norms.

For those who are transferring from A to B, please issue reappointment letters based on the company you are moving to. Ensure that the attendance registers and all other statutory records are maintained properly.

If you need further clarification, please contact Laxmi at 9866917232.

Thank you.

Dear Tagplus,

Even though the employee is being transferred within the same group, the companies are different, and the policies governing the companies may vary. Ideally, the employee should resign from the first company, clear all dues, and then vice versa. Subsequently, he can join the second company as a new employee. Internal communication can refer to the employee as an internal transfer, but for the sake of system efficiency, policies, and calculations, this approach would be preferable.

Thank you.

Well, all these strategies are fine, but what happens to the gratuity and the gratuity period? Why can't every company do this by floating a new, fully owned company every four years and keep "transferring" the employees in the manner discussed, so as to escape any liability under the Payment of Gratuity Act forever? I would like to know the answers.

Warm regards.

Dear All,

Regarding the transfer within their sister concern, gratuity will not be affected, and continuity of service will remain the same.

Hi Ritesh,

I have handled many such cases in my career. I assume that these two companies are two separate legal entities. You can follow the steps below:

1. Give the fresh appointment letter and enter into the fresh employee contract.
2. Resign from the earlier organization with all full and final settlements (F&F).
3. Ensure that employees are compensated for any losses due to policy changes.
4. In the employment contract, you can mention that their date of joining (original company) will be considered for retrenchment.
5. Gratuity can also be settled, or the gratuity fund can be transferred from one company to another.

If you wish to encourage employees to take the transfers and utilize them for career and talent management purposes, my best suggestion is to harmonize HR policies across the group to ensure that future transfers proceed smoothly.

Thanks and regards,

Raj,

This can very well be done by companies. In fact, people do such things. Of course, you cannot make a new company every 5 years as the record and history will change. But if you have 2 companies, every 4 years you can ask people to resign from one and come to the other. However, then they cannot attract good quality employees.

The general practice I have seen in good companies is to have employees in a holding company and send them on deputation to subsidiaries. That way, the liability of gratuity and statutory dues stays with the holding company even if paid off by a subsidiary. The companies give a letter to the employee clarifying that the deputation will not be considered as a break in service with the parent company and will be counted as such for gratuity, superannuation fund, increment, grades, and seniority.

In cases where the employee is transferred to another subsidiary permanently, a similar letter is given by the new company to the employee stating that his services will be deemed to have started from the date when he joined the original company.

That is what best practices say.

It is unfair to ask the employee to resign and take his settlement. The employee is a loser in a lot of things, not only gratuity.

Ritesh, you cannot loosely or casually apply the word 'transfer' to any process of procuring employees for a company since every process has its own legal implications under labor laws. So be clear about what process you want to adopt, keeping in view the suggestions given by the members.

B. Saikumar
Mumbai

Ritesh,

You may effect the transfer/secondment using any methodology that is mutually consented by the two managements and is legally sound. There are various methods to do it (all methods should have separation from A and an Appointment letter for B even if you have a Group Mobility Policy). The important issue is to ensure that the maximum interests of the employees under 'transfer' should be protected by giving them the benefit of continuity of service, particularly for gratuity and earned leave. One way of doing it is to transfer the prorated gratuity amount and EL amount to B.

Please discuss if you need more clarity.

Ashok
8587804557

Dear All,

Please refer to the Honorable Bombay High Court's judgment delivered yesterday (Google 'air india' and see news). The court has dismissed a petition filed by employees who were being transferred to a newly created subsidiary. I would like to know what our members having a legal background think about this development. Can it stand the scrutiny in the apex court?

Hi Experts, kindly advise me on the below things.

If Company A is acquired by Company B, what are all the consequences? If the employees of Company A are retained in Company B, can the employees' gratuity, PF, earned leaves, and service be considered as continued service or a break in service? If this is considered as continued service, could you please clarify under what statutory sections this is covered?

How to transfer the PF online? I have tried the EPF website, but it is not opening. Please suggest other sites.