Transferring Employees Between Related Companies In New Zealand

If you run a group of companies (or you’re restructuring into one), there’s a good chance you’ll eventually need to move staff from one entity to another.

Maybe you’ve set up a new company for a new business line, you’re separating a risky trading activity from the rest of the group, or you’re simplifying payroll and operations. On paper, it can feel like a simple admin change.

But legally, transferring employees between related companies can be tricky - because an employee isn’t employed by your “group” in general. They’re employed by a specific legal entity.

This guide breaks down what New Zealand employers need to think about when transferring employees between related companies, the common structures you can use, and the steps to take so you don’t accidentally create employment risk while trying to make a sensible business change.

Why Transferring Employees Between Related Companies Isn’t Just An Admin Change

In New Zealand, the employment relationship is between the employee and the employer named in their employment agreement (and reflected in payroll records, KiwiSaver enrolment, IRD reporting, and workplace policies).

So if you’re moving staff from Company A to Company B (even if you own both), it usually means you’re changing their employer. That can affect:

• legal responsibility for wages, holidays, and compliance
• the enforceability of restraints, confidentiality, and other clauses
• service-related entitlements like sick leave eligibility and redundancy calculations
• personal grievance risk if the move isn’t handled properly

It’s common for business owners to assume a “related company transfer” is automatically fine because the same directors and managers are involved.

But from an employee’s perspective (and from the Employment Relations Authority’s perspective), a new legal employer can be a material change - and that’s why process matters.

Is It Really A “Transfer”, Or Are You Ending One Job And Starting Another?

When you’re transferring employees between related companies, there are typically three practical ways it can be structured. The right approach depends on what you’re trying to achieve, how long the arrangement will last, and whether you want service and entitlements to carry across.

1) Secondment (Employee Stays Employed By Company A)

A secondment is where the employee remains employed by the original employer (Company A), but temporarily works in/for Company B (or at least under Company B’s direction day-to-day).

This can be useful where:

• you’re testing a new business line
• you’re sharing staff across entities in the group
• you want flexibility without permanently changing employment

Secondments still need clear documentation, especially around who supervises the employee, who pays them, what policies apply, and what happens at the end of the secondment.

2) New Employment With Company B (Resignation/Termination + Rehire)

This is the “clean break” option: employment with Company A ends, and the employee signs a new agreement with Company B.

It can work in some cases, but it carries higher risk if you try to force it through, or if it results in a disadvantage to the employee (for example, loss of service-related entitlements or a change to pay/role without proper agreement).

It also raises questions like:

• Do you pay out accrued annual leave on termination?
• Does sick leave reset?
• Can you use a 90-day trial period again? (Often not - and it’s only available in limited circumstances. Trial periods must be agreed in writing before the employee starts work with the new employer, and they’re generally only available to eligible employers. Even where Company B is technically a different legal employer, “trialling” someone who is effectively continuing in the same role may be closely scrutinised.)

If you go down this path, it’s important that the process is genuine and properly documented with a tailored Employment Contract for Company B.

3) “Transfer” By Agreement (Novation / Tripartite Arrangement)

In many related-company transfers, what you’re really looking for is continuity - same role, same pay, same team - just under a different employing entity.

A common legal tool for that is a written agreement between three parties:

• Company A (current employer)
• Company B (new employer)
• the employee

In commercial terms, people often refer to this as a “novation style” arrangement, because it replaces one party to the contract (the employer) with another, by consent.

This can be a good option where you want to preserve service and keep the move smooth, but you still need to document exactly what carries over (service date, pay, leave balances, policies, and any changes).

Where the transfer involves other commercial contracts too, a Deed of Novation (or a tailored transfer agreement) can sometimes form part of your paperwork set.

A Practical Step-By-Step Process For Employers

If you want to reduce risk when transferring employees between related companies, you’ll usually get the best results by treating it like a structured change process, rather than a quick payroll switch.

Step 1: Clarify The Reason For The Transfer (And Document It Internally)

Before you talk to staff, be clear about why you’re doing the transfer. For example:

• group restructure
• moving a business line into a new entity
• bringing staff under the entity that holds the contracts or licences
• simplifying accounting and payroll

Having a clear business rationale helps you communicate consistently and reduces confusion later if an employee questions the change.

Step 2: Work Out What Will Change (If Anything)

Ask yourself: are you changing only the legal employer name, or are you also changing terms?

Examples of changes that need careful handling include:

• pay rates, bonus/commission structures, or pay cycles
• job title or duties
• work location or reporting lines
• hours of work, roster patterns, or availability expectations
• the policies that apply (e.g. IT, conduct, vehicle use)

If the employee will be disadvantaged, you should expect the legal risk (and the need for consultation) to increase.

Step 3: Choose The Right Legal Structure (Secondment Vs Transfer)

Once you know whether the change is temporary or permanent, and whether terms are changing, you can decide whether you need:

• a secondment arrangement
• a termination and rehire (not always recommended)
• a transfer agreement preserving continuity

This is also a good time to check whether there are any industry-specific rules. For example, in some sectors there are “vulnerable employee” protections (often referred to as Part 6A protections) that can apply when work is contracted out, re-tendered, or transferred to another employer (such as certain cleaning, catering, laundry, and security services). These obligations don’t apply to every restructure, and they won’t necessarily apply just because two companies are related - the trigger is usually a change in who employs the people doing that work because the work itself has moved.

Step 4: Consult Properly (Even When Employees Are Happy About The Move)

In New Zealand, employers have good faith obligations under the Employment Relations Act 2000. That usually means you should not “announce” the transfer as a done deal if it affects employment arrangements.

Instead, aim for a consultation process that includes:

• providing relevant information about the proposal and the reason for it
• giving employees a genuine opportunity to comment and ask questions
• considering feedback with an open mind
• confirming outcomes in writing

Even if you expect everyone to agree, doing consultation properly can help you avoid disputes later.

Step 5: Confirm How Leave And Service Will Be Treated

This is where many related company transfers go wrong.

Key questions include:

• Will the employee’s start date carry over? (Important for sick leave eligibility and some other entitlements.)
• What happens to annual leave balances? Are you transferring balances, or paying them out and starting fresh?
• Will there be any change to pay rates or ordinary weekly pay calculations? (This can affect holiday pay calculations.)

There isn’t a one-size-fits-all answer, but you should be deliberate and consistent - and put the arrangement clearly in writing.

Step 6: Put The Right Documents In Place And Update Your Systems

Once you’ve agreed the transfer approach with the employee, you’ll need to implement it properly. This usually includes updating:

• the signed employment documents
• payroll/IRD records and employer details
• KiwiSaver employer contributions and reporting
• delegations/authorisations (who approves leave, expenses, etc.)
• privacy notices and HR record handling processes

Because payroll and reporting settings can have tax and compliance implications, it’s also worth checking the implementation with your payroll provider and/or accountant (and where appropriate, the IRD guidance) - this article is general information and isn’t tax advice.

Key Legal Issues To Watch When Transferring Employees Between Related Companies

Even when everyone is on good terms, these are the issues that most commonly create problems for employers.

Good Faith And Process Risk (Employment Relations Act 2000)

If an employee believes they were pressured into moving companies, misled about their entitlements, or treated unfairly in the process, you may face a personal grievance.

Good faith isn’t just about being polite - it’s about being transparent, giving employees a meaningful chance to engage, and not using your position to force an outcome.

Redundancy Risk If The “Transfer” Is Actually A Restructure

Sometimes a transfer between related companies is part of a wider restructure - for example, shutting down Company A’s operations and moving a smaller team into Company B.

If roles are being disestablished, or people are not being offered equivalent roles, then redundancy obligations (including consultation and a fair process) may apply.

If you’re unsure whether your plan is drifting into redundancy territory, it’s worth getting advice early - the cost of getting it wrong can be much higher than the cost of setting it up properly. For complex changes, support like Redundancy Advice can help you map the process before you communicate with staff.

Continuity Of Employment And Entitlements (Holidays Act 2003 And Beyond)

Employees often assume (reasonably) that if they’re doing the same job for the same “overall business”, their entitlements should carry over.

But when you change the employing entity, you need to decide and document:

• whether service is treated as continuous
• whether annual leave is paid out or transferred
• what happens to alternative holidays, time in lieu, and other accrued benefits

Because holiday pay calculations can be technical, it’s important not to take shortcuts here. A small error repeated across several employees can quickly turn into a costly remediation exercise.

Restraints, Confidentiality, And IP Clauses

If Company A has confidentiality, restraint of trade, or IP clauses in its employment agreement, those clauses don’t automatically “belong” to Company B just because Company B is related.

You’ll want to make sure Company B has enforceable protections in its own documentation. That might mean:

• a new agreement with updated clauses, or
• a transfer arrangement that clearly deals with ongoing obligations

This is especially important if the employee has access to valuable client lists, pricing, or trade secrets, or if they create content, designs, software, or other intellectual property as part of their role.

Privacy And Employee Records (Privacy Act 2020)

When you move employees between entities, you’re likely also moving their HR file (performance notes, medical certificates, payroll data, disciplinary history, and more). That’s personal information, and it needs to be handled carefully.

At a minimum, you should be clear with employees about:

• what information will be transferred
• why it’s being transferred
• who will have access to it
• how it will be stored and protected

It’s also a good time to check whether your group’s Privacy Policy and internal practices reflect how you handle employee information across related entities.

What Documents Should You Prepare For A Smooth Transfer?

Good documentation does two things: it reduces misunderstandings and it protects you if there’s a dispute later.

Depending on the transfer method, you may need some (or all) of the following.

A Transfer Letter Or Tripartite Transfer Agreement

This should clearly set out:

• the date the employer changes
• whether the role and duties stay the same
• whether pay and hours stay the same
• how service will be recognised
• how leave balances will be treated
• what policies apply going forward

A New Employment Agreement (Where Required)

If the move involves any meaningful change (or you want to refresh terms), you’ll often use a new agreement under Company B.

This is particularly important where you want to:

• update the role description and KPIs
• introduce new benefits or incentive structures
• clarify confidentiality/IP ownership
• add or update restraint clauses

Using a tailored Employment Contract helps ensure Company B is properly protected from day one.

A Secondment Agreement (If The Transfer Is Temporary)

A secondment agreement can reduce confusion about who is responsible for what, especially where Company B manages the employee day-to-day but Company A remains the legal employer.

Updated Workplace Policies (And Consistent Group Standards)

Transferring employees is also a good moment to tidy up policies across the group, particularly around conflicts, outside work, and confidentiality.

For example, if employees are moving into a company with different client relationships or commercial sensitivities, a clear Conflict Of Interest Policy can help set expectations early and avoid headaches later.

Group Governance Documents (If You’re Restructuring The Group)

If the transfer is happening because you’re changing how the group is owned or controlled (for example, new shareholders or a new holding company), it’s worth checking your governance documents too.

While it’s separate from employment paperwork, a clear Shareholders Agreement can help you manage decision-making across the group - including who has authority to approve major operational changes like moving staff between entities.

Key Takeaways

• Transferring employees between related companies usually means changing the legal employer, so you can’t treat it as a simple payroll update.
• The safest structure depends on your goal: a secondment can work for temporary moves, while a written transfer arrangement or new employment agreement may suit permanent moves.
• Even where employees are supportive, you should still follow a fair consultation process and meet good faith obligations under the Employment Relations Act 2000.
• Be deliberate about continuity of service and leave treatment - and document clearly how annual leave and other entitlements will be handled.
• Make sure restraints, confidentiality, and IP protections remain enforceable after the move (they don’t automatically carry across just because companies are related).
• Don’t forget privacy: employee records contain sensitive personal information and must be transferred and stored in line with the Privacy Act 2020.

If you’d like help transferring employees between related companies (or documenting a secondment or group restructure properly), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.