Buying a Business – Have You Considered Personal Leave?

January 2024 – Jonathan Harris

If you are buying a business, you should consider the issue of personal leave.

What is personal leave?

Personal leave (also known as sick leave or carer’s leave) lets employees take time off work for:

– personal illness, injury, or an unexpected emergency; and
– caring responsibilities or family emergencies.

For each year of service with an employer, employees are entitled to up to 10 days of paid personal leave

At the end of each year, any personal leave that the employee does not use is carried over to the following year and employers are expected to honour those entitlements.

Is the buyer required to honour personal leave that has accrued before the purchase?

As the new employer of the business, the buyer is expected by the staff to honour all accrued leave entitlements, but the seller is not legally obligated to fund the personal leave entitlements as part of the adjustments on the sale of the business.

The issue is both a cost to you and/or having disgruntled staff working for you.

Consider key-employees when buying a new business:

– What happens if key employees leave shortly after you buy a business?
– What protections do you have to prevent key-employees from taking customers?

If you are buying a company, you also inherit whatever protections the seller had in place with those key people, usually their employment contract.

On the other hand, if you are just buying the business, you will have to re-establish those protections.

You may want the terms of employment to change when you take over the business.

We cannot stress enough how important this is.