PF to a new company to be exempted from PF deduction - Legal Implication

Hi, The management team of my company has decided to withdraw PF deduction and wants to transfer it's existing employees (14-15) from a 'PF Deduction Registered Company' to a new company to be exempted from PF deduction on meeting the following criteria:
1. Employee strength less than 20
2. Employees earning more than INR 15,000/- per month.
3. We have taken 'PF Exemption Acceptance Letter' letters from the employees.
Request you to please advise and share your inputs on the following:
1. Can the company transfer employees ?
2. Do we need to issue Transfer OR Fresh Appointment Letters ?
3. Will there be any legal issues, if any on account of this transfer of employees from a PF registered company to another.
4. Will there be any impact on employees to claim gratuity (after completion of 5 years of service) - will the transfer from one company to the another be considered as a break of employment ?
Regards,
Abhishek Jain.

You cannot just transfer your employees to another company with a view to eliminating PF liabilities. What you have to do is to close down the present establishment and clear the dues with ESI, PF, Sales Tax etc and then clear the dues of the employees as per Industrial Disputes Act (sec 25F and 25FFA), pay the gratuity payable based on their service and then appoint these employees in the new company by giving new appointment orders. Employees will definitely lose their continuity of employment but will be compensated by paying gratuity till date. Yes, if you have only 15 employees, you need not follow the complicated procedures associated with closure and retrenchment as prescribed under ID Act but you cannot simply close it just to avoid any statutory liability. You can have a consent letter from the employees that they are ready to work in the new establishment without Pf and other benefits, but that will bounce back to you as a solid proof that you have closed down the unit with a clear intention of avoiding PF. That will not be permitted. Now, when you approach the District Industries Centre or such other offices for sanction of opening a venture, they will certainly put up this issue and may refuse to grant permission saying that a unit under the same management doing the same business was closed and the new unit is sought to be registered for availing benefits like tax, bonus payment, etc.

in addition to the comments by Mr Madhu, Please note:
We have taken 'PF Exemption Acceptance Letter' letters from the employees.-This will have no impact, since an EPF Covered Employee should continue to contribute on ceiling EPF Wages i.e Rs15,000/-
You can think of restricting EPF Contribution up to Ceiling i.e Rs15,000/-PM

Dear Shri Abhishek Jain,
You are transferring the employees to new Company, which establishment has no PF code no as strength less than 20.
Get the resignation of the employees in the old Company and issue joining letter to new establishment.
As establishment not covered under EPF act, no need to deduct PF until strength below 20 nos.
When strength reaches 20, the members who have previous membership may be entitled for PF deduction, even their PF wages are above 15 K. and you have to take new pf code.
You cannot escape from PF liability after strength 20 nos.
Thanks,
Vidyadhar Bhat

Sorry but this is not sounding ethical. Also if employee switches from one company to other there should be proper exit and entry. As the second company is a different entity. transfer is not possible.

Dear Aniket,
Even the second Company is a different eitity, till strength count reaches 20, PF is not applicable and no transfer will be initiated.
When employee shift from one Company to another Company, he has to resign from first establishment and join another Company.
As per act, when strength of the establishment reaches count 20, they have to take PF no. Further the present member whose has UAN, same is to be consider for PF contribution even their PF wages are above 15 K. New member whose PF wages above 15 K to be treated as Excluded Employee and will be exempt from EPF deduction.
Thanks,
Vidyadhar Bhat

You can't transfer any employee indifferent organization.You have to issue them new appointment letter do all others formalities.I think transfer is possible only in same organization it my be for different locations.