Corporate groups made up of multiple legal entities often move employees back and forth between affiliated companies — whether to restructure, set up a new company, or consolidate support functions in one place. This is often done by issuing an internal memo and changing the company name on the payslip.
In legal terms, affiliated companies are separate employers. Moving an employee from one company to another therefore affects the employee's rights far more than it appears, and is a common cause of labour disputes when the employee is later dismissed.
Transferring Position and Transferring Employer Are Not the Same
| Transfer within the same company | Transfer to an affiliated company | |
|---|---|---|
| Employer | The same person | Changes to a new juristic person |
| Is consent required? | Depends on the employment contract and work rules, and must not make the conditions of employment worse | Consent from the employee must be obtained |
| Length of service | Continuous as normal | Can be continuous if the transfer is made with consent, and this should be confirmed in writing |
Why consent is required
The law provides that an employer cannot transfer its rights under an employment contract to a third party without the employee's consent. Affiliate companies, even if they share the same set of shareholders, are third parties within this meaning.
Labour protection law, for its part, lays down the principle that when there is a change of employer, a transfer, or a merger and the employee consents, the rights the employee holds with the original employer pass to the new employer, and the new employer must be liable for those rights in every respect.
If the employee consents: which rights must follow
- Length of service — counted as continuous, which is the most important point because severance pay on termination is calculated from length of service.
- Wages and benefits — not lower than before.
- Accumulated annual leave days that have not yet been used.
- Provident fund — if there is one, the transfer or continuation of membership must be handled correctly.
- Social security — notify withdrawal from the old employer and register with the new employer so that continuity is maintained.
- Existing non-compete or confidentiality agreements — it must be agreed how they will apply.
If the Employee Does Not Consent
Refusing to change employers is not a resignation and is not a refusal to obey an order. The original company remains the employer. The company's options are:
- Continue employing the employee at the original company
- Send the employee to assist at an affiliated company while remaining an employee of the original company
- Terminate the employment, which requires payment of severance based on length of service, payment in lieu of advance notice where notice was not given within the required period, and other entitlements, and carries the risk of being sued for unfair termination
Three models group companies use, and the risk of each
Transfer with continued service — A tripartite agreement is made between the original company, the new company, and the employee, stating that the period of service continues and that the employment conditions are not less favourable. This is the model with the fewest disputes.
Terminate, then rehire — The original company pays severance in full according to the length of service, and the new company starts counting service from zero. This is permissible, but the payment must actually be made and must be complete. If the termination is done without payment and the employee is then made to start anew, the employee can still claim their rights.
Secondment to assist temporarily — The employee remains an employee of the original company but works for an affiliate. It must be agreed clearly who pays the wages, who gives the work instructions, and when the employee will return.
Common Mistakes
- Asking the employee to sign a resignation letter with the old company in order to join the new one, which creates a dispute over whether the previous period of service has ended.
- Reducing wages or benefits in the new contract on the grounds that it is a new company.
- Moving the workplace far away together with the change of employer, which may affect the employee's normal living arrangements and give rise to additional legal rights.
- Forgetting the work permits of foreign employees, which are tied to the previous employer.
- Failing to notify social security, causing a gap in coverage.
Documents You Should Have
- A tripartite transfer agreement, signed by the authorized representatives of both companies and the employee
- A written confirmation that the length of service continues uninterrupted, stating the original start date
- New employment terms that are no less favorable than the previous ones
- A list of the rights transferred, such as accumulated leave days and the provident fund
- Evidence of social security notification and the work permit (if any)
For employees asked to sign transfer documents
Read everything thoroughly before signing, checking whether your years of service continue to count, whether wages and benefits remain the same, and whether the document you are asked to sign is a transfer agreement or a resignation letter. If you are unsure, you can request a copy to read first.
Read more: Severance pay upon termination · Work rules
📌 See more: Labor law · Business law
If a corporate group is about to move employees across legal entities, or you have been asked to sign transfer documents, consult our legal team before signing.
This article provides general information and is not a legal opinion for any specific case.