How Do You Legally Transfer Employees Between Branches with the Same Directors?

Procedure for Transferring Employees Between Branch Companies

What is the procedure for transferring a few employees from one company to another branch company, including statutory requirements? Both the directors and the business are the same; it's just a company name change. Please suggest the legal process as well.

Dear Hema Latha,

If the company is different, then why not send the employees on deputation to another company? Let them remain on the rolls of your company. You may continue to pay for social security (like PF, ESI, etc.) as per the attendance. However, your company may raise the debit note to the other company to recover the expenses incurred due to the deputation.

As far as the local expenses are concerned, the employees may ask for the reimbursement of them from the deputed company. They need not send the bills to your company.

I am recommending the above solution because if the employees are transferred to the new company, then they will have to resign from the existing company, and the new company will have to issue a fresh appointment letter. This will create unnecessary breaks in the employees' careers.

While deputing the employees to a new company, issue a proper letter to the employees on company letterhead. Clearly state the procedure for paying their salaries and who will clear their reimbursement claims. Additionally, you can mention the authority of the new company to handle the matters of discipline, performance appraisal, promotion, etc.

This is my opinion. Other senior members may provide their opinions as well.

Thanks,

Dinesh Divekar

Yes, Mr. Dinesh Divekar's observations and his suggestions are fine in the circumstances explained by Ms. Hema-Latha. It's obvious that for all purposes, they are two different entities. You may refer to them as sister companies, subsidiaries, affiliates, etc., but not as a branch of your company. The change of the company's name itself suggests that there are two companies. When a few of your existing employees are transferred as you described, it's not to be construed as simple "transfers, temporarily, or permanently." In effect, it's a "severance" of the employer-employee relationship. If this is not the case, if they will be repatriated after a few months or years of service in a different company/entity, then it can be treated as "deputation." If yes, then their service conditions should be amended/modified suitably, giving the lien or loan service rights with respect to continuity of service and associated benefits, etc., to the employees involved. In any case, a properly described document duly authenticated by the appropriate authority/authorized signatory, which is to be unconditionally accepted by those employees, should be arranged.

Legal Procedure for Employee Transfer

The legal procedure exists under the law for transferring employees from one company to another branch of the same company.

You did not provide details about your company, such as whether it is manufacturing or service-oriented, the total number of employees, and its registration status. You have not explained why you want to transfer them. It may not be legally permissible even if the directors of both businesses are the same without a common balance sheet. Additionally, does the appointment letter include a clause about transferring employees to other branches of the company across the country? In a nutshell, employees can be sent on deputation, potentially resulting in financial loss.

Employer's Responsibility in Employee Transfer

If an employer is taking resignation and issuing a fresh appointment letter to a group of employees from one company to another within a radius of one kilometer under the same control, but with different legal identities for each factory, is this practice correct? The transfer is intended to exempt the employer from social security responsibilities. In the existing company, there is no PF, ESI, Bonus, etc. The fresh employer wishes to regularize these aspects. Under these circumstances, is this exercise correct on the part of the employer? If not, what repercussions might the employer face before the authority, aside from local disputes between the employer and employees?