In the sale of your business, it is easy to lose sight of your employees and how your sale can impact them. You must consider the rights of your employees and their responses, particularly concerning their continued employment. It can be a challenging process at times, but you must manage your employees correctly and give thought to the obligations and liabilities connected to your staff.
When your business is sold, the purchaser will typically want some, or all, of the staff to be retained in the business and to continue their employment under the new ownership.
With this transfer, the purchaser will “recognise” or transfer the leave entitlements of the employees (annual leave, sick/personal leave and long service leave) that have accrued during their employment with you.
As such, the purchaser should not be responsible for the entirety of this liability, so for those employees that are to be retained, an adjustment will be made at settlement in favour of the purchaser to account for some of this cost.
Each State has a slightly varied accepted version of these adjustments, or otherwise the parties may come to their own agreement.
It is important to be aware that the payment you receive at settlement will generally be reduced to account for these adjustments.
Those employees that the Buyer does not wish to retain will be terminated from settlement.
As there is no transfer, no adjustment to the purchase price is required. However, you will be required to pay-out the relevant entitlements for these employees, as though their employment was terminated in the usual course of business. This means that the employees annual leave and statutory accrued long service leave must be paid to the worker directly, usually in the next pay cycle from settlement.
The employee is not entitled to any payment for sick/personal leave.
Whether or not an employee of your business is transferring with your sale, you must provide the minimum amount of notice to the employee, as is legally required.
The length of the employee’s employment will determine the period of notice and this should be provided accordingly prior to settlement. If you do not provide the required notice, you need to pay the employee in lieu, creating additional unnecessary costs.
Overall, your employees are a part of your sale and the need to support and manage your staff effectively will contribute to a smooth settlement and ensure that your employees are looked after, both personally and legally. It is therefore important that you receive the right advice by engaging a solicitor experienced in employment matters.
– Nicholas Galle, Legal Director at AP Group