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As any real estate employer will tell you, the decision to sell or grow a business rarely comes lightly. It’s a personal and professional inflection point. The culmination of years of hard work and ambition. But amid the paperwork, valuations and strategic negotiations, there’s one critical piece that’s often overlooked: your people, writes Bryan Wilcox, CEO of REEF.
Whether you’re exiting the business or acquiring another to expand your footprint, the employment obligations involved in the transfer of a business are not just legal technicalities, they can significantly shape the success of the transaction.
The human element of a business transaction
When a real estate agency (or a component like the rent roll) changes hands, it’s common for employees to be transferred to the new owner. Legally, this is referred to as a “transfer of business”. While it might sound straightforward, there’s a lot riding on how this is handled.
The Fair Work Act sets out clear rules on what counts as a transfer of business. If employees from the old employer are rehired by the new employer within three months and are performing essentially the same duties, they’re considered “transferring employees“. This brings with it a host of obligations, both for the seller and the buyer.
What sellers need to know
If you’re the seller, your ability to influence the employment fate of your team may be limited.
Ultimately, it will come down to the sale of business contract and in some instances, you may be responsible for ending those employment relationships, including paying out entitlements such as unused annual leave, notice, long service, or redundancy.
Even when staff are transferred, you must still formally terminate their employment in writing. Skipping this step can leave you exposed.
What buyers need to consider
If you’re the buyer, don’t wait until settlement to think about the people side of the deal. You’ll need to determine which employees you want to retain and understand the implications of doing so. Some entitlements, like personal carer’s leave and long service leave, automatically carry over, while others, like annual leave and redundancy pay, can be negotiated.
This due diligence is not just smart, it’s essential. Overlooking it could saddle your business with unexpected liabilities or workplace issues. For instance, if you don’t provide the correct notice about excluding prior service from the Minimum Employment Period, you may unintentionally give new employees the right to bring an unfair dismissal claim earlier than anticipated.
A word of advice
It’s easy to get caught up in the commercial upside of a sale or acquisition. But if you don’t get the employment transition right, it could cost you more, financially and culturally, than you bargained for.
My advice to both sellers and buyers? Seek advice early. Engage your legal and HR advisers as part of the planning process, not just the clean-up crew at the end. Above all, remember: businesses change hands, but people and their entitlements can’t be forgotten in the fine print.
Bryan Wilcox is the chief executive officer of the Real Estate Employers Federation.
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