A look at how transferring existing employees must be handled in Singapore, Japan, India and Hong Kong
Businesses operate in an interconnected environment and are often subjected to mergers, acquisitions, and restructuring processes.
It is important for employers to understand the legal requirements and framework surrounding the transfer of employment contracts in order to effectively navigate through during these transitional phases.
This article provides a comparative analysis of the legal obligations on employers considering a transfer of business/undertaking across the region.
In Singapore, the answer is yes. Under the Employment Act, a “transfer” includes “the disposition of a business as a going concern and a transfer effected by sale, amalgamation, merger, reconstruction or operation of law.” This includes intra-group reorganisations.
In India, the answer is also yes. For employees who are “workmen” (individuals who are not employed in a managerial or administrative capacity or supervisors who earn less than INR10,000 a month), a transfer scenario arises where “the ownership or management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer.”
There is no definition in Japan and Hong Kong.
In Singapore, employees who are covered under the Employment Act have automatic transfer of their employment contracts. The employee automatically transfers to the transferee on their existing terms of employment with continuity of service.
The answer is no for employees in Japan, India, and Hong Kong.
However, in India, there are statutory protections afforded to “workmen” who are not taken on by the transferee under the Industrial Disputes Act. Workmen with at least one year of continuous service are entitled to the same notice and compensation (calculated to the transfer date) as they would be entitled if made redundant; unless:
In the event of an automatic transfer, employees in Singapore are transferred on their existing terms of employment. Any amendments will require the employees' consent.
In Japan, a transfer involves the employee resigning from the existing employer and being newly employed by the new employer. As such, the new employer can offer employment to the transferring employee on any terms it wishes. However, if the terms are not satisfactory to the employee, the employee can choose to stay with the existing employer. Therefore, in practice, the transferring employee and the transferee will negotiate mutually satisfactory terms before the transfer.
In India, a transfer also involves the employee resigning from the existing employer and being newly employed by the new employer. As such, the new employer can offer employment to the transferring employee on any terms it wishes. Note that certain employees may be entitled to notice and termination payments if the terms of employment offered by the new employer are less favourable than the existing terms of employment (see above).
In Hong Kong, a transfer involves the employee resigning from or being terminated from the existing employer and being newly employed by the new employer. As such, the new employer can offer employment to the transferring employee on any terms it wishes.
Fatim Jumabhoy is a Managing Partner at Herbert Smith Freehills in Singapore and head of the firm’s Employment, Pensions and Incentives practice in Asia. Prawidha Murti is a Partner at Hiswara Bunjamin & Tandjung in Jakarta, an associate firm of Herbert Smith Freehills.
