Impact of Transitioning from Pvt Ltd to LLP on Employee Benefits
Since these are two separate entities, joining the LLP will cause the employee to lose all benefits of continuous service. It is acceptable to transfer the PF (or ESI) from one company to another, and that will not make any difference. However, the continuous service required for gratuity, leave, and retrenchment benefits (in the case of employees not having managerial powers) will be lost.
Settlement Agreement to Preserve Benefits
To avoid this, there should be a settlement signed by the employee, the management of the Pvt Ltd Company, and the management of the LLP firm. This settlement should also be sent to the government for registration. The settlement should clearly specify how the service will be treated for the purposes of gratuity, leave accumulation, retrenchment and layoff benefits, seniority for promotion, and other service benefits, if any. It need not be made for each individual employee; one settlement applicable to all employees is sufficient, provided it is signed by the office bearers of the trade union.
In the absence of a union, a few employees should be resolved to sign on behalf of the others.