What happens when a business is sold?
Existing employees may have entitlements to leave, notice and severance pay.
On this page:
- Transmission of business
- What employees are entitled to receive from the old employer
- What employees are entitled to receive from the new employer
When a business or part of a business is sold or transferred it usually means there has been what is called a ‘transmission of business’.
Both buyers and sellers may have obligations to employees when a transmission of business occurs. These obligations may vary depending on whether employees are covered by the Western Australian industrial relations system or the national industrial relations system.
The information on this page is for employees in the Western Australian industrial relations system. If you do not know if it is relevant to you, read our information on who is in the Western Australian State system.
An employee’s contract of employment with the seller of the business is terminated when a transmission of business occurs. An employee’s termination entitlements are set out in relevant industrial legislation, awards and agreements.
In summary, the seller of the business must:
- give the correct amount of notice or pay in lieu, even if the person is employed by the buyer;
- pay out accrued annual leave;
- inform employees of upcoming changes to the business;
- make severance payments if the business has 15 or more employees, or if it is required by the relevant award/ agreement;
- if more than 15 employees are made redundant, notify Centrelink and consult with relevant unions.
Employees may not be entitled to severance payments if they:
- accept employment with the buyer that recognises continuous service; or
- decline a similar job with the buyer - a similar job is one that has similar terms and conditions to the job they did with the old employer (the seller), plus the new employer (the buyer) recognises the period of previous employment.
The buyer of the business is not obligated to employ the staff of the previous owner. But often buyers will want to take on existing staff so that they have the skills and people they need to run the business. The buyer may decide to interview employees to determine their suitability.
If the buyer employs existing workers, a number of employee entitlements may carry over to the new employer. The specific entitlements are set out in relevant awards, agreements and legislation. Typical entitlements include:
- accrued sick leave is recognised; and
- continuous service with the previous employer is counted towards the qualifying period for long service leave with the new employer.