Employees and Employee Benefits when Buying or Selling a Business

Whilst it is a requirement that you disclose the details of each employee when selling a business, we recommend full disclosure of names only under a Contract of Sale.

By providing good information about your employees during the marketing stage, it allows the buyer to appreciate the staff requirements, who is important to the business, and whether you have existing management and staff in place to continue with the business under new ownership.

At this stage, we recommend providing the following information to assist with a positive decision from a buyer:

• First Name
• Position (e.g. Manager, Admin Assistant)
• Employment Type (e.g. full time, part time, casual)
• Length of Employment
• Pay Rate
• Hours Worked
• Brief Description of Duties (if you have more than 10 employees, then just the key staff should be sufficient)
• Payroll Summary (should show total annual wages paid to each employee)

Once a Contract of Sale is in motion the full names of employees will be required.

The buyer will then be able to offer each employee continued employment which must be on terms no less favourable overall than their current employment. This includes continuity of employment benefits such as sick leave, rostered days off, annual leave, annual leave loading, long service leave, superannuation and redundancy; and those employees who are not continuing with the business (or terminated within 12 months) must be paid redundancy by the buyer.

Assuming the buyer is a Company, the buyer will be able to claim a tax deduction when the employee entitlements become due and payable.

Unless there is a lot at stake with the types or amounts of accrued entitlements for transferring employees, the buyer and seller can simply agree to transfer all entitlements to the buyer on the basis that the amount will be deducted from the purchase price at Settlement, or run with the REIQ Standard Conditions which allows an amount equal to 70% of the aggregate value.

For more substantial accrued entitlements, it’s best to perform more accurate calculations one by one.

#EmployeeBenefitsBusinessSale

DISCLAIMER
This is an opinion and should not be taken as professional or legal advice.