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Hi Team, We have Company A and Company B (wholly owned by Company A with common directors)and want to use the employees of Company A in Company B. We would like to ensure employees donít lose their benefits like accrued leaves, gratuity, continuous employment, etc.
A) Should the Employee be asked to resign from company A and issue a fresh offer from company B? Should the employee be given a reliving/experience letter and FnF?
B) Transfer/depute the employee from Company A to Company B. What are the formalities to be taken care.
Please share the pros and cons of each option and if there are any other options to be explored.
We want the employees to be on Company B's payroll.

From India, Bengaluru

If you have two companies of the same directors, it is fine if you transfer the employee from one company to another company so that their continuity of service will not be affected. For transfering, issue an office order directing the employee concerned to take charge in the other company. Since joining the other company, his salary and allowances will be processed from the second company but the length of service would not be affected.

At the same time, asking the employee to resign and settling the accounts would cause legal issues as in the eyes of law, for various matters especially Labour Law matters, the two companies would be clubbed together and asking an employee to resign and join the other company as a fresh employee would not be acceptable. In many cases, the employee who resigns may not have completed the required service of 5 years and this would make him ineligible to get gratuity. But at the same time, if the arrangement is transfer, then the continuity shall be ensured and you need not make any F&F in between the service.

From India, Kannur


If you opt for option A employees will lose their benefits like service continuity, Gratuity etc. Being same group and Director the right choice is to transfer the employees from Company A to Company B. You can issue just a transfer letter confirming the transfer date, reporting Authority , change in roles and responsibilities / designation if any etc. You can add a line stating their DOJ with company A will be the commencement date of their employment for the purpose of calculating Gratuity in future. If Company A & B have same Establishment code for PF then employees can continue in the same number.

From India, Madras
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