Do employees have to consent to a business transfer in India?

Under the old Industrial Disputes Act, courts were divided on whether workers' consent was needed. The Industrial Relations Code carries an equivalent transfer-of-undertaking provision, so a cautious approach is to ask each employee for written acceptance and have counsel confirm the current rule.

When did India's labour codes come into force?

All four labour codes took legal effect on 21 November 2025, and the central rules under them were notified on 8 May 2026. State rules are uneven, and Telangana's were still in draft as of October 2026.

How is gratuity handled when GCC employees transfer?

In a share purchase the gratuity liability stays in the company, so due diligence should confirm it is properly calculated and provisioned. In a business transfer, the contract should say whether the new employer recognizes past service and takes on the liability with a price adjustment, or whether the provider settles it.

Moving employees at transfer under India’s new labour codes

GCC employee transfer in India under the new labour codes: share purchase vs business transfer, continuity of service, gratuity, PF and retention.

By Onfocus editorial team. Published 13 November 2026. 8 min read.

How employees move when a GCC changes hands depends on the transfer route. In a share purchase, the client buys the Indian company that already employs the team, so the employer does not change and employment continues. In a business transfer or slump sale, staff move from the provider to a new employer, and India's rules on continuity of service at a transfer of undertaking apply.

Those rules now sit inside India's labour codes, which took legal effect on 21 November 2025 (Lakshmikumaran & Sridharan; DLA Piper, Nov 2025). This post explains what a GCC employee transfer in India involves under the codes: continuity of service, gratuity, provident fund, communication and retention.

The labour codes in brief

Four codes took effect together on 21 November 2025: the Code on Wages, the Industrial Relations Code, the Code on Social Security and the Occupational Safety, Health and Working Conditions (OSH) Code. Between them they replaced 29 central labour laws (Lakshmikumaran & Sridharan; DLA Piper, Nov 2025).

The central rules under all four codes were notified on 8 May 2026 (Business Today, May 2026). State rules are uneven. Telangana's were still in draft as of October 2026 (TaxAJ, Oct 2026; iPleaders, May 2026), and iPleaders also reports West Bengal lagging. As of November 2026, a GCC can be fully under the central codes while some state-level detail is still unsettled.

For a BOT transfer, three parts of the codes deserve a review with counsel. The definition of wages sets the base for gratuity and provident fund contributions. The rules on fixed-term employment change how gratuity applies to those staff. And the transfer-of-undertaking provision in the Industrial Relations Code governs what happens to employees in a business transfer.

Why the transfer route decides the employee plan

The route is fixed by how the BOT was structured at the start. If the centre was built in a dedicated Indian company, the client buys its shares. If it was a ring-fenced unit inside the provider's company, the client buys the business. Our post on share purchase vs slump sale at transfer covers the tax and FEMA side of that choice.

	Share purchase	Business transfer or slump sale
Employer after transfer	Unchanged: the same Indian company	A new employer, usually the client's own Indian company
Continuity of service	Automatic, because nothing changes for the employee's contract	Governed by the transfer-of-undertaking rules
Employee consent	Not usually the question	Courts have split on whether consent is needed
Gratuity liability	Stays in the company	Moves with recognized service, or is settled
Provident fund	Same EPFO registration and member accounts	New employer registration, and accounts carried across
Paperwork for each employee	Policy updates and communication	Transfer or offer letters, usually with written acceptance

The share purchase column reflects the basic point that the employing entity does not change. It is our reading rather than a cited rule, and counsel should still check the employment contracts for anything tied to the provider.

When the client buys the shares of the Indian company, the employment contracts, length of service, PF registration and gratuity accrual all stay where they are. Nobody needs a new offer letter because their employer has not changed.

What does change is ownership and, over time, governance. IMC's suggested sequence for a BOT transfer ends with onboarding employees under the parent's governance, after the share transfer, contract assignment and IP migration (Legal 500 (IMC), May 2026).

Watch for benefits that belong to the provider's group rather than to the Indian company. Group health insurance under a provider master policy, provider-branded learning programs and any provider share plans usually stop at transfer and need a replacement ready on day one.

If the client then wants to harmonize pay structures or policies with its own group, that is a separate change to conditions of service and follows the normal rules for such changes. Plan it as a second step, after people have settled under the new owner.

Business transfer: continuity of service

Under the old Industrial Disputes Act, section 25FF dealt with transfers of an undertaking. It required employees to be kept on with continuity of service and on terms "no less favourable", failing which retrenchment-style compensation was payable. Courts were divided on whether the workers' consent was needed for the transfer (Bar & Bench (Ahlawat & Associates); Mondaq).

The Industrial Relations Code 2020 replaced the Industrial Disputes Act and carries an equivalent transfer-of-undertaking provision into the new law. We have not confirmed the section number or the exact wording for this article, and counsel must confirm both before you rely on them. Ask counsel the same questions the old provision raised: which employees it covers, what "no less favourable" means for your pay and benefits, and whether you need individual consent.

Until counsel says otherwise, a cautious plan for a business transfer looks like this:

The new employer issues each employee a letter that recognizes past service for all purposes, including gratuity and leave.
Pay and benefits are no less favorable than before, line by line, and someone has checked that.
Each employee is asked for written acceptance, so the transfer does not depend on a contested point of law.
The plan covers employees who decline, with counsel's view on what is owed to them.

The new employer has to exist and be registered before this starts. In practice that means the client's Indian company is incorporated, funded and registered for payroll, PF and state labour purposes before the transfer date.

Gratuity: plan it in the design phase

Morgan Lewis advises that gratuity alignment be planned in the design phase of a GCC, at the start of the engagement (Morgan Lewis, Mar 2025). By the time of transfer, some staff will have years of accrued service, and the liability is real money.

In a share purchase, the liability stays in the company you are buying. Due diligence should confirm that it is properly calculated, provisioned and, where a fund or insurer is used, funded. The wage definition under the codes can change the base on which gratuity is calculated, so check that the provision reflects the codes rather than older pay structures.

In a business transfer, decide in the contract whether the new employer recognizes past service and takes on the accrued liability, with a matching price adjustment, or whether the provider settles it. Recognizing service is usually better for retention. Fixed-term staff need separate attention, because the codes treat their gratuity differently.

Provident fund and EPFO continuity

Provident fund is where small gaps become visible to every employee on their next statement. Practitioner guidance from BOT providers names EPFO accounts among the items a vague transfer clause fails to cover.

In a share purchase, the company's EPFO registration and member accounts carry on unchanged. In a business transfer, the new employer needs its own EPFO registration in place before day one, member accounts need to move across, and there should be no month without contributions. Confirm the wage base for PF under the codes when you set up the new payroll.

Check the state rules where the centre sits

Labour compliance in India is partly state-run, so the transfer plan has to reflect the state where the centre operates. For a Hyderabad centre, TaxAJ notes that Telangana exempts IT and ITeS establishments from certain Shops and Establishments Act provisions until 30 May 2028 (conditions apply), that professional tax is ₹200 a month on salaries above ₹20,000, and that minimum wages were revised from 1 June 2026 (TaxAJ, Oct 2026). In a business transfer, the new employer needs its own state registrations to benefit from these. Our guide to setting up a GCC in Hyderabad covers the wider picture.

A communication plan for the transfer

Employees hear about a transfer through rumor first unless the plan prevents it. A sequence that works for most centres:

Before any announcement, build a record for each employee: entity, terms, length of service, accrued gratuity and leave, and PF status. Identify the people the centre cannot lose.
Brief managers and key people individually, shortly before the general announcement.
Announce to everyone, with leaders from the client present, and explain why the transfer is happening.
Publish a written FAQ covering employer, service, pay, benefits, gratuity, PF, location and reporting lines.
In a business transfer, issue letters and collect written acceptance, with time for questions.
On day one, make sure payroll, insurance, system access and ID cards all work.
After the first payroll under the new owner, check in with every team and fix any errors quickly.

Keep the message consistent. Employees compare notes, and a different answer from two managers costs more trust than a slower answer.

Retention through the transfer

A change of employer, or even a change of owner, makes people look at the market. That market is busy: foundit projects 510,452 GCC hires in India in 2026, with AI and data roles the fastest-growing segment (Business Today, Jul 2026). Zinnov reports average GCC increments of 9.8% for FY26, with AI and ML roles at 21.1% (Zinnov, 2026).

Retention measures that tend to work at transfer:

Retention bonuses paid at set dates after transfer, for the people identified as critical.
Full recognition of tenure, so nobody restarts the clock on gratuity, leave or seniority.
A visible career path inside the client's global organization, which is a large part of what a GCC can offer that a provider cannot.
Continuity of managers, so that people keep the reporting line they joined for.

A transitional services agreement can keep payroll processing or HR systems running through the provider for a short period after transfer, which reduces the risk of a day-one payroll error. For how the operate phase sets this up, see our guide to BOT for GCCs in India, phase by phase and the Build-Operate-Transfer model.

How Onfocus can help

Onfocus already recruits and runs engineering teams for clients in fintech, banking and Web3, and runs a graduate training program. In a BOT engagement we keep employment records, gratuity provisions and PF accounts transfer-ready from the first hire, and we work with your Indian counsel on the transfer mechanics. If a transfer is on your roadmap, talk to us about your GCC plans.

This article is general information, not legal or tax advice. Confirm the details for your situation with Indian counsel and a chartered accountant.

Frequently asked questions

What happens to employees when a GCC is transferred through a share purchase?: The client buys the Indian company that already employs the team, so the employer does not change. Employment contracts, length of service, PF registration and gratuity accrual continue. Benefits tied to the provider's group, such as a group health policy, may need replacing on day one.
Do employees have to consent to a business transfer in India?: Under the old Industrial Disputes Act, courts were divided on whether workers' consent was needed. The Industrial Relations Code carries an equivalent transfer-of-undertaking provision, so a cautious approach is to ask each employee for written acceptance and have counsel confirm the current rule.
When did India's labour codes come into force?: All four labour codes took legal effect on 21 November 2025, and the central rules under them were notified on 8 May 2026. State rules are uneven, and Telangana's were still in draft as of October 2026.
How is gratuity handled when GCC employees transfer?: In a share purchase the gratuity liability stays in the company, so due diligence should confirm it is properly calculated and provisioned. In a business transfer, the contract should say whether the new employer recognizes past service and takes on the liability with a price adjustment, or whether the provider settles it.
What happens to provident fund accounts at transfer?: In a share purchase, the company's EPFO registration and member accounts continue unchanged. In a business transfer, the new employer needs its own EPFO registration before day one, and member accounts must move across without a gap in contributions.