Employee transfer from one entity to another

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1

Hi,

We are looking for more information on the process for employee transfer from one entity to another. What are the basic checklist to be followed?

Please advise

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Hi,

While transferring Employee from one entity to another, make sure below points are considered:

  1. Transfer of DOJ
  2. Salary Transfer as per Structure of New Entity
  3. UAN to remain same and New PF account number for new entity
  4. Transfer of PF
  5. Transfer of Leave Balance
  6. If Gratuity is funded, then transfer from previous fund to new fund
  7. ESIC Number to remain same
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Hi Ann,

In the realm of employment, the term ‘entity’ refers to an organization or a business that has its own independent legal and financial existence.
Likewise, the term ‘transfer’ may denote the movement of an employee which may horizontal or lateral from one post or job, department or section, plant or unit at the same or another place without detriment to his employment status, salary and responsibility.
In the case of inter-entity transfer, the employment identity of the employee gets changed first not withstanding the parity or otherwise of the rest. If the employee can be called back any time by the transferor entity from the transferee entity, it is not a transfer but deputation only subject to the consent of the employee concerned.
Therefore, normally inter-entity transfer is not possible or we can say as very difficult as it involves the consent of the employee, continuity of past service for the purpose all current and future employment benefits including terminal benefits as the organizations are distinctly separate legal entities. You may raise a question about group companies or sister companies belonging to the same owners. There is no such distinction as "group companies’ or “sister company” under the Companies Act,1956. To acquire such a prerogative of transfer of employees between such units, there must be the elements of functional integrality and common balance sheet. Even then, the contract of employment, service regulations or the standing orders should permit such inter-unit transfer.

In respect of intra entity transfer or transfer within the same company, transfer is an incidence of service and it is the managerial prerogative of the employer to decide who among his employees to work where, when and how long based on work exigencies. Here the personal inconveniences caused to the employee do not matter. At the same time any orders of such transfer shall not be a colorable exercise of power or a measure of victimization. To avoid such allegations, the transfer policy of the establishment shall be as transparent as possible. At times, transfer can be effected at the willingness of the employee too. Thus, the transferring authority should be considerate on the interest of the organization and the interest of the employees as well. Then there would be no qualms about transfer from any quarters.

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Thank you @Ankit @Umakanthan for the clear details. That helps.

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Hi @Ankit @Umakanthan

Another question- Do we need to final Settle employee during entity transfer? if so why

Please share your thoughts.

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Not required when it is a transfer of an employee as long as he is under your direct/indirect control, salary is processed by you despite of deputation at customer place. When you use the word “employee transfer”… he/she is still your employee leaving all “if’s and buts”…

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If you are transferring an employee from one legal entity (eg:- a registered business as per companies act) to another, it is not a transfer but basically an exit in one unit and joining in another unit. It can be true that in both the companies, one or more directors are common and that is not a justification for treating this as a transfer. If it is transfer between divisions / departments/locations etc., no need to do any settlement and re-joining, During heavy duty enterprise HR system integrations, we have faced this situation, a number of times and I recommend to have a clear definition of entity and its scope, so that there will be a common understanding in the organization.

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Hi Ann,

It depends on the transfer/merger agreement between the two entities.
A) If it is agreed only to transfer the assets and liabilities except the employees on roll of the transferor entity, then the transferor should settle the accounts of the employees full and finally.
B) On the contrary, if the transferee entity agrees to take the employees with continuity of service and with the same conditions of employment like salary, leave etc., no necessity to settle their accounts.

In respect of workmen falling under the Industrial Disputes Act,1947, this situation is clearly dealt with u/s 25-FF.

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The general practice is to have employees in a holding company and send them on deputation to subsidiaries. That way the liability of gratuity and statutory dues stays with the holding company even if paid off by a subsidiary. The companies give a letter to the employee clarifying that the deputation will not be considered as break in service with the parent company and will be counted as such for gratuity, superannuation fund, increment, grades and seniority.

In cases where the employee is transferred to another subsidiary permanently, a similar letter is given by the new company to the employee stating that his services will be deemed to have started from the date when he joined the original company.

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