We are a German MNC with different subsidiaries all over the world. Now, I want to send Indian employees to our subsidiary in the United States for one year. How will this transaction be treated? Is it a delegation or a transfer? What are the processes and procedures for this, and what are the legal compliance requirements for India and the USA?
I would appreciate it if the above query is responded to with your valuable inputs.
From India, Mumbai
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3I would appreciate it if the above query is responded to with your valuable inputs.
From India, Mumbai
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Dear Mahendra,
It is not a case of transfer but by deputation. It is settled by the Apex Court in Manager, M/S. Pyarchand vs Omkar Laxman Thange & Ors on 27 September 1968:
"The general rule in respect of the relationship of master and servant is that a subsisting contract of service with one master is a bar to service with any other master unless the contract otherwise provides or the master consents. A contract of employment involving personal service is incapable of transfer."
If you treat it as a transfer, then many issues like PF settlement dues settlement, etc., would arise, and above all, service tax may have to be paid in terms of the following decision:
In GUJARAT HC, TAX APPEAL NO. 138 of 2014, the issue was whether the respondent is a Manpower Supply Recruitment Agency. In order to reduce its cost, the respondent deputed some of its employees to its group company, who were also engaged in similar businesses. The reason for such deputation was also on certain occasions stipulated work arising for a limited period. It was held that in order to reduce the cost of manufacturing, the company deputed some of its staff to its subsidiaries or group companies for stipulated work for a limited period. All throughout the control and supervision remained with the respondent. As pointed out by the respondent, the company is not in the business of providing recruitment or supply of manpower. The actual cost incurred by the company in terms of salary, remuneration, and perquisites was only reimbursed by the group companies. There was no element of profit or financial benefit. The subsidiary companies could not be said to be their clients. The deputation of the employees was only for and in the interest of the company. There was no relation of agency and client. It was pointed out that the employee deputed did not exclusively work under the direction of supervision or control of the subsidiary company. All throughout he would be under the continuous control and direction of the company.
Regards,
Sushil
From India, New Delhi
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It is not a case of transfer but by deputation. It is settled by the Apex Court in Manager, M/S. Pyarchand vs Omkar Laxman Thange & Ors on 27 September 1968:
"The general rule in respect of the relationship of master and servant is that a subsisting contract of service with one master is a bar to service with any other master unless the contract otherwise provides or the master consents. A contract of employment involving personal service is incapable of transfer."
If you treat it as a transfer, then many issues like PF settlement dues settlement, etc., would arise, and above all, service tax may have to be paid in terms of the following decision:
In GUJARAT HC, TAX APPEAL NO. 138 of 2014, the issue was whether the respondent is a Manpower Supply Recruitment Agency. In order to reduce its cost, the respondent deputed some of its employees to its group company, who were also engaged in similar businesses. The reason for such deputation was also on certain occasions stipulated work arising for a limited period. It was held that in order to reduce the cost of manufacturing, the company deputed some of its staff to its subsidiaries or group companies for stipulated work for a limited period. All throughout the control and supervision remained with the respondent. As pointed out by the respondent, the company is not in the business of providing recruitment or supply of manpower. The actual cost incurred by the company in terms of salary, remuneration, and perquisites was only reimbursed by the group companies. There was no element of profit or financial benefit. The subsidiary companies could not be said to be their clients. The deputation of the employees was only for and in the interest of the company. There was no relation of agency and client. It was pointed out that the employee deputed did not exclusively work under the direction of supervision or control of the subsidiary company. All throughout he would be under the continuous control and direction of the company.
Regards,
Sushil
From India, New Delhi
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The above principles are common law principles and are applicable to international deputation. Many MNCs, including TCS, also send their employees on deputation for a specified period to their projects abroad.
Thanks and regards,
Sushil
From India, New Delhi
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Thanks and regards,
Sushil
From India, New Delhi
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Dear Mahendraji, The old thread of yours came to my attention today. My answers to you are as follows:
When you are sending any employee to your subsidiary company with the intention to bring him back after some time, it should be treated as deputation and not transfer.
You simply need to give him a letter of deputation with details of salary and perks on deputation and continue to pay him from your home company account, charging the amount to the subsidiary company where the employee is sent on deputation.
When you are sending any employee on deputation abroad, you have three options available. Either you pay him in INR, in foreign currency, or in both. Basic working conditions will be as per the country where he is sent on deputation. Social security will be as per the origin country, i.e., India, when the deputation abroad is less than 5 years, irrespective of the Social Security Agreement between the two countries.
Sorry to differ with Super Moderator (Cite Contribution) mam. I stand to be corrected.
Regards
From India, Mumbai
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When you are sending any employee to your subsidiary company with the intention to bring him back after some time, it should be treated as deputation and not transfer.
You simply need to give him a letter of deputation with details of salary and perks on deputation and continue to pay him from your home company account, charging the amount to the subsidiary company where the employee is sent on deputation.
When you are sending any employee on deputation abroad, you have three options available. Either you pay him in INR, in foreign currency, or in both. Basic working conditions will be as per the country where he is sent on deputation. Social security will be as per the origin country, i.e., India, when the deputation abroad is less than 5 years, irrespective of the Social Security Agreement between the two countries.
Sorry to differ with Super Moderator (Cite Contribution) mam. I stand to be corrected.
Regards
From India, Mumbai
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