How to Navigate Employee Transfers Between Group Companies with Shared Promoters?

Dear Seniors,

Considerations for Employee Transfer Between Group Companies

1) What are the areas we should keep in mind when transferring employees from one company to another group company where the promoters are the same, and it is a public limited company?

Situation Overview

2) Here is the situation: We have two companies named A and B. Company A was established 22 years ago, and a few promoters started Company B last year. Both are public limited companies. We would like to transfer employees from Company A to Company B from the management staff and workmen category who have rich experience in the same manufacturing process.

Following employees have been working for the last year physically at the new site. Some are there completely, and a few are there whenever services are required, but they are still on the old company's payroll:

- GM – Operations – working for 22 years in Company A
- Asst. Manager – QC – working for 16 years in Company A
- Electrical – In charge – working for 20 years in Company A
- Technical Assistants – working for 12 years in Company A

Key Considerations for Permanent Transfer

What are the things to be kept in mind when we transfer employees permanently to the new company? Additionally, how do we return the amount of salaries paid by the old company for services rendered in the new company over the last year?

Regards,

When both companies belonging to the same group are willing to transfer personnel from the old company to the new one, there will be no problem in creating mutually agreeable terms and conditions as far as the companies are concerned. However, the willingness of the employees chosen to be transferred should first be ascertained and obtained in writing. There may be ample reasons for hesitation or unwillingness in their minds because of relocation, promotional avenues, managerial attitudes of the board of directors of the new company, future prospects of the new venture, etc. In view of their experience ranging from 12 to 22 years, some of them may be willing to accept superior designations with higher responsibilities and salaries. Some of them may, out of caution, prefer not a permanent transfer but only a temporary deputation keeping their lien.

In any case, the willing persons can be transferred to the new or Transferee Company with continuity of service and all the conditions of service, not at least less favorable than in the Transferor Company. In that case, the terminal benefits and social security benefits should also be transferred forthwith to the accounts of the Transferee Company. Otherwise, if the employees are willing, their accounts may be settled by the Transferor, and their service with the Transferee may start afresh.

The new company may be asked to reimburse the entire amount of salaries plus a proportionate share of indirect commitments spent so far on the employees lent.

Employee Transfer and Benefits Management

Now, the employee has been transferred to a new company. Benefits should also be transferred promptly to the accounts of the Transferee Company. Can the old company issue a termination letter? The old company is a Private Limited entity, whereas the new company is a Public Limited entity.

Regards

Whatever the type of constitution of the old and new companies, since the transfer of service is effected with continuity of service and all attendant benefits with the consent of the transferor and transferee companies and the employees as well, I think there is no necessity for termination orders of services.

Regards,

If your previous company transferred all your service particulars and benefits for the service rendered to the new company and you have documentary evidence for the same, there should be no problem.

List of Termination Benefits to Consider When Transferring an Employee from One Group Company to Another Group Company

When transferring an employee from one group company to another, it is essential to consider various termination benefits to ensure a smooth transition. Some key benefits to include in the process are:

1. **Severance Pay:** Providing a fair severance package to the employee based on their length of service and the company's policies is crucial.

2. **Continuation of Benefits:** Ensure that the employee's benefits such as health insurance, retirement plans, and any other perks are continued seamlessly after the transfer.

3. **Payout of Accrued Leave:** Calculate and compensate the employee for any accrued leave days that they have not utilized before the transfer.

4. **Relocation Assistance:** If the transfer involves a relocation, consider providing relocation assistance to the employee to help them with the moving process.

5. **Communication of Changes:** Clearly communicate any changes in the terms of employment, role responsibilities, or reporting structure that may occur due to the transfer.

By addressing these termination benefits proactively, both the employee and the company can navigate the transfer process smoothly and maintain a positive relationship throughout the transition.