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Posted by Aaron Suthers Business Law

Employee entitlements in business sales.

When negotiating to buy or sell a business, many people concentrate on the price for goodwill, plant and stock in trade, without considering the hidden cost of employee entitlements.

With the extensive reach of the Fair Work Act, it is understandable that sellers assume that buyers will take on the obligation to pay leave and redundancy entitlements after the sale, but this is not always the case.

The Fair Work Act provides that an unrelated buyer can choose whether or not it will recognise the service of the employees with the seller for the purpose of calculating a number of entitlements, including redundancy and annual leave.

If those issues are not considered and dealt with in the contract, the seller may be left with a nasty shock and a large bill to pay.
Proper advice in the preparation of your contract will ensure that you get exactly what you bargained for.

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