Can We Legally Split an Employee's Salary Between Two Sister Companies? Seeking Advice

Hi All,

We are a small setup with a staff of around 30 employees. A new employee has recently joined the organization. The management has decided to pay 70% of his salary from one company and the remaining 30% from the sister company.

My question is, do we have a policy regarding paying an employee's salary from two different company accounts with distinct entities? Can you please assist me in resolving this query?

Thanks,
Priya

Dear Priya, there is no such term "sister company" under the Companies Act, 2013. Despite common ownership, in the absence of functional integrity and a common balance sheet, each company is an independent legal entity. Therefore, if an employee is appointed by and actually employed in a particular company, how can a portion of his salary be paid from another company? If you do so at your convenience, the employee may not object as long as he receives the salary mentioned in his contract of employment. However, it would be considered bad or improper accounting procedure. The saying "One cannot ride two horses with one arse" is equally true, just as one cannot serve two masters.