How Can We Smoothly Transition Employees to Our New Company Without Impacting Their Benefits?

Dear Team, I need your assistance in completing the transition process for our existing employees to our new company. As our existing company will close, we have established a new company with new registration for P.F, ESI, etc., while maintaining the same founder and management.

Required Documentation

Please advise on the required documentation, including the issuance of relieving letters from the existing company and appointment letters from the new company.

Settlement of Gratuity

Regarding the settlement of gratuity upon relieving from the existing company, we need to ensure that their experience is not impacted. Could you provide a draft for this process?

It is imperative that we handle this transition ethically and legally, without causing any loss to our employees.

Your prompt assistance is greatly appreciated.

Thank you.

Regards, Preeti

The ESI and EPF parts are separate and in their respective portals. You have to mark the exit of the individual employee and register them as a new employee under the portal of the new employer the next day itself so that there will not be any break in service or non-contributory day (in PF). You can continue to use the same insurance number in ESI and the same UAN in PF, although the PF member ID will change because the PF ID will be different for the new establishment. The transfer of benefits under ESI is automatic; employees do not need to do anything to ensure it, but they will receive the benefits based on the contributions made by them in the previous company. However, to transfer the funds under EPF schemes, the individual employee should submit a transfer request online using the member portal. In respect of unskilled workers, HR executives may need to assist them with the transfer, but this process is not very urgent and can be initiated after one or two months of contribution to the new company account.

Memorandum of Understanding for Transition

Most importantly, it is essential to have a memorandum of understanding signed by the employees regarding their joining date, continuous service for the Gratuity Act, Industrial Disputes Act, and some provisions relating to the Factories Act/Shops and Commercial Establishments Act, which govern the leaves for which employees are eligible in the new company.

This memorandum can be created either individually through an office order highlighting the points mentioned above or through a memorandum of understanding describing the terms and having all employees sign it as accepted. Whether it is an individual office order or a memorandum, it should state:

1. The date of joining in the existing company will be considered the date of joining in the new company for all purposes.
2. With this transition, seniority will not be affected.
3. There will be no payment of retrenchment compensation as no employees are retrenched, but the service is taken over by the new company without interruption.
4. For calculating gratuity under the Payment of Gratuity Act, the date of joining in the existing company will be considered the date of joining in the new company, meaning no employee will receive gratuity at present.
5. Accrued leave in the existing company will be transferred to the new company, and employees will receive credit for the same number of leaves they had in the existing company.
6. With this transition, the service conditions of the employees will remain unchanged, and they will be governed by the same service conditions in the new company.

The above steps would legally and ethically justify the transition.

Thank you, Madhu, for your kind assistance. I would like to inquire if there is a need to update the NDA or any other agreements in light of the recent company transition. Additionally, I would greatly appreciate it if you could provide me with the format for the MOU.

Your support is truly invaluable, and I am grateful for your guidance in this matter.

Thank you once again.

Since the NDA is not part of a service condition, you can collect a fresh NDA from each employee separately. For this, the same format shall be used. To obtain the employees' concurrence on statutory matters, you should prepare a memorandum with the details given above.

Dear Madhu,

Our new company was registered in the year 2021. There are employees whose joining dates are from the years 2009 and 2010 in our old company, and they are currently working with us. How can we show the same date of joining in the new company when this new company did not exist in 2009?

Please help me understand this. I greatly appreciate your willingness to help.

Thank you.

Regards,
Preeti

Memorandum of Understanding for Transition

For that, a memorandum of understanding would serve the purpose. A memorandum of understanding is a declaration as well as a settlement between the employer and the employee regarding the date of joining, service conditions, and other matters agreed upon by both parties. It should have been done when the transition took place, but it can still be completed now.

For the Existing Company (Closing Down):

Relieving Letters: Each employee should receive a relieving letter stating their last working day at the existing company.

Experience Certificates: Provide experience certificates detailing their period of employment and roles/responsibilities.

For the New Company:

Appointment Letters: Issue appointment letters from the new company specifying the new employment terms, start date, and other relevant details.

Transfer Letters: A formal letter from the new company acknowledging the seamless transition from the old company. https://google.com