What Employers Need to Know About Employee Entitlements During a Transfer of Business
A change of business ownership can look straightforward on paper while creating difficult questions for employees. Pay, leave, service and workplace instruments may not all follow the same path. Employers involved in a transfer should identify which workers are transferring and check the rules that apply before making assumptions about what carries across.
1. Confirm whether the legal transfer rules apply
Under the Fair Work framework, a transfer can arise where an employee starts with the new employer within three months of leaving the old employer, performs the same or substantially the same work, and there is a recognised connection between the employers. The facts matter, so a sale of a business is not the only situation that may need checking. Employers dealing with a transfer of business in Australia should confirm the position for the specific transaction.
2. Work out what covers the employee
A transferring employee may continue to be covered by a transferable workplace instrument, such as certain enterprise agreements, while an employee previously covered by a modern award may become covered by the award that applies to the new employer and the work. This can affect pay and conditions. Employers should identify the applicable award, agreement or other instrument rather than assume the new organisation’s usual settings automatically apply.
3. Review how prior service affects entitlements
The new employer generally has to recognise service with the old employer for many entitlements, including areas such as personal leave, parental leave and eligibility to request flexible working arrangements. However, the treatment of service can differ for some entitlements. A transfer of business in Australia may therefore require separate checks instead of one blanket decision about continuity.
4. Check annual leave carefully
Annual leave can be handled in more than one way. In some transfers, accumulated annual leave moves with the employee. Where the employers are not associated entities, the new employer may be able to decide not to recognise prior service for this purpose, which can mean the old employer must pay out the untaken accumulated leave. The transaction documents and employment arrangements should align with the legal position.
5. Do not assume redundancy and long service leave are simple
Redundancy treatment can depend on factors including whether the employers are associated entities and whether the employee accepts a suitable offer from the new employer. Long service leave can also depend on the law and instruments that apply to the employee.
6. Deal with notice from the old employer
A transfer ends the employee’s position with the old employer. Fair Work guidance states that the old employer must give the required notice of termination or payment instead of notice, subject to the rules that apply. If the transfer happens before the notice period finishes, the balance may still need to be paid. This is separate from the employee beginning work with the new employer.
7. Give employees clear information
Uncertainty is often one of the hardest parts of a transfer for staff. Employees should be told what is happening to their employment, who the new employer will be, which conditions are expected to continue and where questions should go.
8. Check the position before making final commitments
A transfer of business in Australia can involve the Fair Work Act, awards, enterprise agreements, contracts and, in some cases, state or territory rules. The consequences can differ between employees. Employers should verify entitlements before issuing final letters or promises and seek workplace relations advice where the position is uncertain.
The practical goal is continuity without guesswork. Employers need a clear record of each transferring employee, the instrument covering them, their service history and the treatment of key entitlements. Careful checking before the change takes effect can reduce disputes and make the transition easier to explain.
