Merging of two companies - How will the employees of YYY be treated in respect of their work experience?

Hi team, I need your assistance in one of my company matter. I am working for a chocolate manufacturing company (YYY Food Products). We are total 20 employees in Head Office and 250 in plant. Now when me make white chocolate its made in YYY Food Products and when we make dark chocolate its made in XXX Foods Pvt. Ltd. Both are our companies in two different names. Recently XXX Food Products went thru privatisation and became XXX Foods Pvt. Ltd. Since both the companies are ours, we are wishing to merge both them as XXX Food Pvt. Ltd. Or you can say XXX will acquire YYY . My qs is. in this context ,

>> How will the employees of YYY be treated in respect of their work experience?

>> What shud be the right thing to do with their PF accounts ?

>>How do I go about their confirmation letters?

>> How do I rightfully treat those employees who are already confirmed?

>> What prominence does PF has before and after october?

>> What happens to the PF amount after 10 yrs of service?

Please suggest me what to do also if there are any other things that I need to think or act besides.

Dear Moushumi,

The first thing you need to do if there are workers is to refer to Industrial Disputes Act, 1947 (If you have a specific State Disputes Act then refer it) and allied State Rules.

The Act will give you the conditions for Transfer of employment.

Now for the others:

(I) Clear all dues in the same way as you would for a resigning/retiring to all employees of previous Companyand effect the necessary transfer of PF as you would do for a new recruits.

(II) Issue fresh appointment letters to all employees , as you would do for new joinees.

(III) Pay gratuity (even if they have not completed five years of continuous service) on actual basis for 5 years and above service holders and pro rata basis for less than 5 years.

(IV) The question of Seniority (whether it should be from Date of Joining Previous Company or date of Transfer to new Company) regarding this transfer should be decided by the top Management. Some Companies compensate the loss of seniority by giving increment or handing compensation. This generally occurs for workers and supervisors. For Management Staff, I feel that instead of compensating for loss in Seniority, there should be a system by which the Management employees of previous Company should not lose their promotional opportunities.

(V) About probationers, follow (I), (II),(III) and can insert the following clause

" Without creating any precedent the Management has decided that due to the aquisition of ________, it has decided to reduce the probationary period by such period(or can put ___ months__days) as you have worked for___________ as one time dispension. Kindly note that this reduction in your probationary period will in no way affect the length of your service which will be calculated from ___________ (Date of Service)

And I did not understand your question no. 5

And about Question No. 6, transfer does not affect the length of Membership of PF. They are entititled to benefits as all others who are continuously employed in the same Company.

Hope I have been able to clear your doubts.

Kind Regards,

SC[/b]

Dear Moushumi,

Oops, sorry typo the clause may be as follows

" Without creating any precedent the Management has decided that due to the aquisition of ________, your probationary period will be reduced by such period(or can put ___ months__days) that you have worked for___________ as one time dispension.

The ammended probationary period is for ____ months ____days.

Kindly note that this reduction in your probationary period will in no way affect the length of your service which will be calculated from ___________ (Date of Joining new Company)

OR,

You can also issue a circular which may be like this :

TO all employees of ____________(Previous Company)

Without creating any precedent the Management has decided that due to the aquisition of ________, the period of probation for all probationers will be reduced by the period that they have worked for___________ as one time dispension.

The length of their service will be considered from their date of entry in (New Company)

(Put an example or illustrate with an example)

Kind Regards,

SC[/b]

Dear SC[/B]
thanks for your post i am also having same problem but i think i am much concerned about the gratuity matter.
you have given suggestion on this is
III) Pay gratuity (even if they have not completed five years of continuous service) on actual basis for 5 years and above service holders and pro rata basis for less than 5 years.
can you elaborate on this please ?
regards
sj

Dear SJ,

When you are closing a company and starting a new one on paper, the best thing to do is to close all the accounts of employees by clearing their dues.

One of such due is gratuity which you must pay statutorily. Hence, for people over 5 years of continuous service the Payment of Gratuity Act is there.

For people with less than 5 years you need not pay Gratuity, but since the two companies are having the same management and merging, the Labour Courts can view such transfer as an way of evading liabilities by the employer, hence it is better to clear the gratuity.

Let me elucidate.

Suppose an employee with 3 years experience is working in Company A is transfered to Company B and leave Company B after 2.5 years.

Is he entitled to Statutory Gratuity? The answer is no in both cases (Company A he has worked for 3 years and Company B for 2.5 years). Now the employee goes to Court and claims that the Company has done this to evade their liability of Gratuity, what defence can Company B put up? The problem in this case is that both the Company has the same Management.

The other problem is how do you account for the period of service which a person has done in an organisation with another organisation.

It will add to the individual experience but not in the Company's Role i.e in the above year if I try to merge the 3 years with 2.5 years, there is going to be a lot of problem both in administtering statutory provisions and accounting procedures.

Kind Regards,

SC

Dear Swastik,
your reply is of great help for me. Thank you very much for ur response. Well.. qs no. 5 was PF account of any employee, now if he wishes to transfer or withdraw it, does that make any difference if he does it before the month of october , or after the month of October. Is there any assessment or does it matter to employee to claim or transfer his PF money at (October) time frame ?
Swastikji, one more thing is abt gratuity, I m still not able to get it. The employee working for three yrs should get his gratuity money upto three yrs. Is it ?
m confused,
Regards,
Moushmi Pan

Dear Moushumi,
Since the Management of both your companies are the same. As I have already stated in my earlier post that a person who works for 3 years in the company you are closing down and transfering him into the other Company leaves after 2.5 years. As per law he is not entitled to Statutory Gratuity in either of the Company as he has not completed 5 years of service in either of the roll.
But, actually he has worked for 5.5 years(3+2.5), so if the company does not pay him gratuity he can go to Labour Court claiming that the change was effected by Management to evade gratuity. The other problem will be of maintaining statutory records(HR problems).
So, it is always advisable to settle off all dues.
Regards,
SC

Dear Swastik,
Pls share relieving/experience letter incase company's aquisition in which both companies tenure i want to mention
Regards,
Chetan