How Do You Transfer Employees and Benefits When a Company Closes Within a Group?

Hello Friends,

I want to know the transfer procedure in case of transferring bulk employees from one company to another within the same group of companies as the previous company has closed. All the employees of the previous company will be transferred to another company within the same group. Please help me understand the procedure of their transfer.

In this case, I believe their PF and gratuity are also to be transferred. Please help in understanding the entire procedure.

Thanks in advance,
Kabita

Dear Kabita,

If the transfer is happening within the same group, then you may not need to complete more formalities. Yes, PF and gratuity should be transferred to the new employer.

Dear Kabita, it is truly commendable that your management has taken the initiative to provide employment to the employees affected by the closure of a particular unit by transferring them en masse to another unit within the same group. However, your post does not address several crucial aspects of the unit closure:

1) Is the closed unit a separate legal entity distinct from the transferee unit?

2) If so, how many workers were employed there at the time of closure?

3) If the number of employees was 100 or more, was permission for closure obtained from the appropriate government authority?

4) Regardless of the answer to the previous question, was there a bilateral agreement with the workers regarding their terminal benefits due to the closure?

5) What provisions were made for workers who were unwilling to transfer?

6) Were the full and final settlement, including closure compensation, gratuity, outstanding wages, prorated bonus until the closure date, leave encashment, and repayment of loans and advances, provided to all affected workers, including those who refused the transfer due to relocation challenges?

7) If not, will the transferred workers retain their continuity of service from the closed unit?

8) Are the terms of employment, such as wages, leave, and job status, the same in the new unit?

9) Is the proposed transfer part of a bilateral agreement involving the workers, the transferee unit, and the management of the closed unit?

10) If not, has the transferee unit made any commitments regarding the conditions mentioned in questions 7 and 8 above?

Answers to these questions are crucial for the success of this rehabilitation effort and to prevent any future issues related to the service conditions and legal obligations of the transferred employees and the transferee unit.

Transfer Procedure for Employees Between Companies

You have to issue a letter to employees from the old company stating they are transferred to XYZ, and their current terms and conditions will be maintained by the new company. The new company has to issue a new letter repeating the earlier terms and conditions. If you have an LIC policy for gratuity, then only you have to complete the formalities. When you mention terms and conditions are the same, you accept the employee's earlier date of joining and as such protect the gratuity.

However, the question of leave will arise. You may allow employees to carry forward their earlier leave balances, or the earlier company can pay off the leave wages.

Dear Kabita,

I have gone through your post, and it is not as simple as you understand. Mr. Umakanthan, the senior member of this forum, significantly presented the facts for your understanding. I hope this will help you grasp the whole situation. I suggest that your management should appoint a consultant with expertise in dealing with closure, retrenchment, and layoff matters. This way, you can ensure a hassle-free closure and staff transfer.

Thank you all for all your valuable inputs and suggestions. Now I have a clear picture of the transfer process. Prabhat, I do agree with you, and thanks to Mr. Umakanthan for sharing the facts about the entire transition process.