Preparing a business for sale: Human Resources (HR) considerations and the transfer of employee entitlements
When selling a business, most owners focus on financials, legal structures and negotiations. However, one area that often gets overlooked, but is critically important, is Human Resources. Your people (employees) are often key to the value of your business and how you manage their transition can significantly impact the success of the sale.
Why HR matters in a business sale
Employees play a major role in day-to-day operations, client relationships, and business continuity. Buyers will look closely at your team structure, contracts, and any risks associated with the workforce. A well-managed HR transition can help maintain business performance and preserve staff morale throughout the change.
Key considerations for the transfer of employee entitlements
When a business is sold, there are typically two types of sale structures: asset sale or share sale. Each has different implications for employees.
Asset Sale
The buyer purchases the business assets but not the legal entity. In this case, employees are typically terminated by the previous employer and may be offered new contracts by the buyer. The buyer can choose whether or not to recognise prior service and transfer accrued entitlements (e.g., annual leave, personal leave, long service leave).
Share Sale
The ownership of the company changes, but the employer (the company) remains the same. In this case, employee entitlements and contracts typically remain unchanged.
Regardless of the sale structure, key HR considerations include:
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Accrued Leave and Entitlements: Understanding what’s owed and how it will be handled in the sale contract.
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Employment Contracts: Ensuring contracts are up to date, compliant, and transparent.
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Awards and Agreements: Confirming compliance with relevant modern awards or enterprise agreements.
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Communication: Deciding when and how to inform employees about the sale.
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Continuity and Retention: Identifying key employees and working with the buyer to retain them post-sale.
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Redundancy: If the new owner does not wish to retain employees, the previous employer may need to pay redundancy entitlements.
Early planning is key
HR should not be an afterthought. Begin reviewing employment records, contracts, and entitlements well before going to market. Engaging legal and HR advisors early can help you avoid costly surprises and present your business as well-prepared and low risk to potential buyers.
Engage a Moore Advisor to assist
Navigating the sale of a business can be complex, especially when it comes to employee matters. Ensuring you understand and comply with all legal obligations and the way you manage your team during a sale says a lot about your leadership and directly influences the transition for both the buyer and your employees. By planning ahead and handling HR and employee entitlements professionally, you increase buyer confidence and help protect the culture and continuity of your business.
Our HR specialists can help guide you through the process, making sure that you have a robust plan, and can even provide support and resources.