Buying a business can be an exhilarating and exciting experience. It can be stressful too. It is important to get appropriate professional advice so that you are aware of all the issues to consider before you sign on the dotted line.
Each business has its own particular requirements for due diligence and it is important that when the contract is prepared that it be made subject to appropriate outcomes from appropriate enquiries.
Staff are a vital component of any business and you need to ascertain which staff you want to retain. A contract must provide that any accrued employment benefits of continuing staff are met by the seller up to the date of takeover and thereafter by you. The Contract must consider:
- Annual Leave
- Personal / Carer's Leave (also known as sick leave)
- Compassionate Leave
- Community Service Leave
- Long Service Leave
From the employees point of view the change of business does not interrupt their employment and therefore accumulated leave and long service leave entitlements continue unchanged. An employee who has been employed in the business by the seller or any previous owner for in excess of 7 years will upon termination of employment be entitled to pro rata long service leave from the then current owner of the business.
As a Purchaser you will want to know what liability you have acquired in accumulated staff entitlements. While some forms of leave do not accumulate; e.g. compassionate leave and community service leave, the history of staff claims may indicate future costs to the business.
Long service leave entitlement is based on a period of continuous service. However some periods of absence are allowed; e.g. absence from work on leave or illness. Also, if someone's employment is terminated and subsequently re-employed within three months, then the absence does not break the continuity of employment.
Some industries allow workers to work for many employers and gain their long service leave benefit from the Portable Long Service Leave Scheme. This applies mainly to the building and construction industry and contract cleaning industry. Employees register with QLeave scheme and receive credit points for every day they work. Once they achieve the requisite credit points they are entitled to paid long service leave.
Purchasers of businesses need to be aware of leave entitlements and the effect of them on the business once they have taken over the business. Accounting for them properly will mean an adjustment in the purchase price to the purchaser's benefit.
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