When selling or purchasing an operational business there are many things to consider, and the impact on employment compliance is an area that needs careful understanding and attention. This weeks HR Highlight will further explore this important area.
When buying a business that you intend to run with some or all of the current staff there are standard items to consider such as; will all assets and stock move to ownership of the new business in entirety or will some be removed? Are some of the assets under control or ownership of a third party?
Will you be transferring the employees, recognising the service and the entitlements for all employees?, or will the employees be terminated by the selling, paid out all of their entitlements and then offered employment with your new business?
- If employees will transfer with the business it is important that this is communicated to the employees and that the buying business obtains information about staff engagement dates and other pertinent employment documents from the selling business.
- If the employees will be terminated by the selling business it is important that as the buying business you receive assurances from the selling business that all entitlements were paid out. In addition any letter of offer to the employees would need to reflect that the employee may have worked at the location before but for the purposes of all employment entitlements the date of commencement with the new business.
This may seem like a simple decision, however it is important that throughout the sale negotiations the full cost and implication of each choice is well understood, as there are complicating factors that may impact the ongoing cost to the buying business.
One of the areas that a buying business needs to understand when deciding the treatment of employees as part of the transfer is the requirement to transfer the employees current employment instrument.
If the employees will transfer with the business and they are currently covered by an employment instrument that employment instrument transfers with the employee. The employee can only be moved to the new businesses employment instrument if it is demonstrated that the employee would be better off overall under the new businesses employment instrument. This area has ongoing implications and in the case of the employment instrument being an Enterprise Agreement, there could be 4 years or more of managing multiple employment instruments in the workplace, as new staff would not be able to be engaged under the transferred employees Enterprise Agreement.
When Selling a Business
When you are the party that is selling the transferring business all of these considerations get flipped. There is still a requirement for there to be clear understandings regarding staff to ensure that your business is protected. If all staff are transferring then redundancy will not apply, however, if only some of the staff are transferring there may be redundancies applicable in some circumstances. Similarly if the employee entitlements are transferring over to the new business, the selling business should have recognition of this on an employee by employee basis, to combat any queries that may arise in the intervening years. Typically a letter or contractual clause that notes the employees name, start date, calculation date, leave type and dollar amount carried into the new business.
ACAPMA has explored Transfer of Business here: https://acapmag.com.au/2014/07/hr-highlight-transfer-of-business/
Here to Help
ACAPMA members are reminded that the ACAPMA Employment Department has a series of resources from Quick Reference Guides to template letters and investigation and reporting checklists that can assist with ensuring compliant and consistent responses in this area, and can access the advice and support of the ACAPMA Employment Professionals. HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by emailing firstname.lastname@example.org it’s free for members.
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