October 2018 | Jonathan Harris
Unless an award applies, the Fair Work Act 2009, Long Service Leave Act 1995 and National Employment Standards (NES) determine who is liable for employee entitlements when your business is sold.
In a sale of a business there are a number of important things to be aware of regarding long service leave, personal leave, and other employee entitlements.
Long Service Leave (LSL)
For long service leave, when a business is sold and employees transfer to the buyer, service with the first employer is regarded as service with the second employer. As a result, the old employer cannot pay out long service leave to a transferring employee; this money must be paid to the buyer to hold for the employee.
Sellers who try to payout LSL are essentially gifting their employees those payments and will still have to pay the entitlements to the buyer of the business.
Unless an award applies, as with long service leave, personal leave has a value and accumulates. When a business is sold and employees transfer, personal leave entitlements also transfer to the new employer and usually the buyer expects compensation.
Annual Leave/Redundancy Pay/Unfair Dismissal
A new employer can make a choice about whether or not they will recognise service with the old employer for the purposes of annual leave, redundancy pay and unfair dismissal entitlements. If a new employer chooses to recognise service, the old employer will generally be required to pay a proportion of the value of the entitlements owed to transferring employees for the buyer to hold.
Working out what you have to pay your employees is important in a sale of business situation. Don’t make the mistake of paying them directly without getting advice or you may end up having to pay twice!
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