Employee Entitlements When Selling a Business in Queensland
You have spent years building your business, and now you are ready to sell. The price is agreed, the buyer is keen, and settlement is on the horizon. Then your accountant or lawyer asks a question you had not thought about: who is responsible for the staff's accrued leave? In many Queensland business sales, this question arrives too late and too expensively. The good news is that with the right advice, it is entirely manageable.
What happens to employees when a business is sold?
Employees do not simply "come with" the business the way plant and equipment do. Legally, the seller terminates the employees' existing employment, and the buyer offers them new positions. However, if the arrangement qualifies as a transfer of business under the Fair Work Act, the employees' prior service may be treated as continuous with their new employer. That continuity brings accrued entitlements with it.
In a typical Queensland asset purchase, this connection is usually straightforward because the buyer is acquiring the seller's equipment, stock, premises, and goodwill. The practical effect is significant: even though the employees have technically been terminated and re-employed, their accrued entitlements may not reset to zero on settlement day.
Which entitlements transfer to the new employer?
Not all entitlements are treated equally. Some transfer automatically and cannot be avoided. Others give the buyer a choice, but only if the buyer follows the correct procedure.
Personal and carer's leave always transfers. It cannot be paid out by the seller and cannot be opted out of by the buyer. Annual leave transfers by default, but the buyer can choose not to recognise the employee's prior service, in which case the seller must pay it out. This is typically addressed in the business sale contract, with the parties agreeing on an adjustment to the purchase price. Redundancy pay and the qualifying period for unfair dismissal protection follow a similar pattern: the buyer can opt out of recognising prior service, but only by giving the employee written notice before their first day.
Long service leave is the one that catches people out
Queensland has its own rules for long service leave, and they operate independently of the Fair Work Act. When a business changes hands and employees continue in the same roles, Queensland law treats their service as continuous. Unlike annual leave or redundancy pay, the buyer cannot simply opt out of recognising prior long service leave service.
Even if the seller pays out the financial value of accrued long service leave before settlement, the employee's entitlement may still transfer to the buyer. For buyers, this means long service leave must be carefully factored into the purchase price. For sellers, it means accurate records and full disclosure are essential.
Non-recognition notices must be done properly
For those entitlements where the buyer can opt out, the mechanism is a written notice given by the buyer to the employee before the new employment begins. This sounds simple, but the Fair Work Commission has made clear that strict compliance is required. The notice must come from the buyer itself, not the seller, not a related company, and not a solicitor acting on someone else's behalf. It must be in writing and given before the employee's first day. If any of these elements is missing, the prior service counts as if the notice had never been given.
Watch out for "contractors" who are really employees
If the seller has been engaging workers as independent contractors who are, in substance, employees, those workers may have accrued significant entitlements that the buyer inherits. Recent changes to the Fair Work Act have made it easier to challenge contractor classifications by requiring a practical assessment of the real nature of the working relationship, not just what the paperwork says. A buyer conducting due diligence must look beyond the seller's contracts and assess whether any contractor arrangements would withstand scrutiny.
What sellers and buyers should each be thinking about
Sellers should calculate and disclose all accrued entitlements across their workforce, and consider whether any contractor arrangements would be reclassified as employment. Buyers should request employment records, review leave balances, prepare non-recognition notices in advance, and factor transferred entitlements into the purchase price. If you are still at the heads of agreement stage, this is the right time to raise these issues, not at settlement.
How I can help?
If you are buying or selling a business, do not leave employee entitlements to chance. Getting these wrong can mean unexpected liabilities for the buyer and reduced sale proceeds for the seller, and the amounts involved are often substantial.
Book a consultation with me to discuss your transaction. Together we can review the employment position, identify any risks, and make sure entitlements are properly dealt with before you sign.
Related articles
Business Sale Contracts: The Basics
Buying a Business? Watch Out for These Asset Purchase Pitfalls
Selling your business? See Selling a Business in Queensland.
Want my view on your own situation?
Book an initial consultation: up to two hours with me by phone for a fixed fee of $1,650 (including GST), then a short written note of my advice and next steps. If my conflict check means I can't act, I'll refund your fee in full. To check anything first, email
info@klaw.com.auor call
(07) 3103 3199.
Joe Kafrouni, Accredited Specialist in Business Law, Kafrouni Law
Disclaimer: This article is general information only and is not legal advice. Before acting on it, get advice on your own circumstances. To the extent the law allows, Kafrouni Law accepts no liability for any loss arising from reliance on it. This article is the copyright of Kafrouni Law.
What People Say
Book an initial consultation
An initial consultation is the best way for us to find out whether, and how, I can help. It suits business owners and directors facing a decision that matters. You get my considered view of your situation, not just a first impression.
The fee is a fixed $1,650 (including GST). It covers a phone consultation of up to two hours, plus up to one hour of my time to consider the material you send me beforehand and to prepare my written note afterwards. Here is how it works:
1. When you book, you tell me briefly what the matter is about and who else is involved, so I can carry out a conflict check and confirm I’m free to act. If I can’t act for you, I’ll refund your fee in full.
2. I tell you what information and documents I’d like to see, and I consider them before we speak.
3. We talk it through by phone. I give you my initial advice, the options I see and what I’d do in your shoes.
4. Afterwards, I send you a short written note of my advice and the next steps I recommend.
If I can help further, I’ll explain how. If I can’t, I’ll say so. You are under no obligation to engage me further. If your matter needs more than this, I’ll send you a proposal setting out how I can help and an estimate of my fees. No further work starts until you accept it.
I keep only a limited number of consultation times. If none suits you, or you’d like to check anything before booking, email info@klaw.com.au and I’ll do my best to accommodate you.