Buying a Business – Employment Matters to Consider
When looking to acquire another farm or business a lot of consideration goes into the financial side of the purchase, costs, potential for growth, etc. However, if you are taking over the employees of that farm or even another business there are many matters that need to be looked at as a mistake in this area could be costly.
As the potential employer of those existing staff you are entitled to review their past employment history and consider the working relationship you want to create.
The Fair Work Act sets out certain mandatory requirements. The existing employees will retain their leave accruals, annual leave and personal leave, and long service leave accruals. It is possible that the vendor pays out the annual leave or makes a financial adjustment at settlement for the value of the annual leave, but the purchaser inherits the sick leave entitlements which cannot be paid out, and the length of service for the purposes of calculating long service leave is fixed.
It is best to advise those employees you intend to keep that they will continue to be employed but under a contract of employment that you will provide. Though an employee may have been a good worker for the vendor there is no guarantee that they will continue to do so under new management. Provided you advise the employee before the settlement date and before they start working for you as the prospective employer you can notify them, in writing, that you will not recognise their previous service with the business as concerns the ‘applicable qualifying period’ and therefore the employee cannot claim unfair dismissal if you terminate the employment within six months for a large employer (15 or more staff), or 12 months for a small employer (fewer than 15 staff).
It is also important to obtain copies of all employment records and ascertain if any employee has a workers compensation claim, or has had one or potentially has one, has a record of disciplinary action, and any other issues that may affect their future employment.
If you are looking to take on a new business with employees Primary Employers Tasmania can provide you with a ‘due diligence’ check sheet to assist in a smooth transition.