What happens to employee entitlements when a business is purchased?
Published: December 7, 2023
Are you buying or selling a business? Business Development Partner Will Mendoza talks about understanding employee entitlements while buying or selling a business.
Read Transcript
Buying or selling a business isn't as simple as it sounds.
What happens to the employee entitlements?
Do you need to recognize
the employees’ service
with the previous employer?
What happens if the employee gets disgruntled
by the new management?
When you're buying
and selling a new business,
there are a few factors
that you need to consider.
Typically,
when there is
a transfer of business,
the new employer has to recognize
the employees’ service
with the old employer,
when working out
most of the entitlements.
This could be including sick
and carer's leave,
requests for flexible
working arrangements
or parental leave.
However, there are
some entitlements
that the new employer
might not have to recognize,
and these include
redundancy, annual leave,
long service leave, unfair dismissal
or notice of termination.
For example,
with the annual leave,
two things can occur.
Annual leave
that is accumulated with
the old employer will be carried
across to the new employer.
Or, when the employers
are not associated entities,
the new employer can decide
not to recognize
the employees’ service
with the old employer,
and in that case,
the old employer has to pay out
the employees’ untaken
accumulated annual leave.
Alternatively,
if the employees are terminated
and entitlements are paid off
by the previous owner,
the new employers may not need
to recognize
most of these entitlements.
However, there are still some
they carry forward,
so make sure you do your research.
Other things to note are,
when there is a change
in management,
employees can become disgruntled
as there are new rules
that they may not like.
Managing the culture is crucial
and having the right contract
and handbook is key.
Give us a call.
We're more than happy
to give you some free
advice around
what you need to be aware of
and what the risks are associated
with the transition.
Our clients can get lightning-fast
answers to your employment
related questions
with Bright Lightning, an
AI-powered HR platform.