Manage employees when you sell or close your business
Your options and obligations to your employees
As the current business owner, you have limited options:
- If you close your business, you have to let your employees go.
- If you sell your business, your employees may transfer to the new business or end employment with the business.
You have several obligations to ensure that you fairly treat employees through this change:
- provide notice
- finalise payments (including any redundancy pay owing)
The award or enterprise agreement that applies to your business may have extra rules like needing to consult with staff or giving time off to look for other work, so remember to check what yours.
1. Communicate with your employees
Change can be stressful for employees. Communication is key!
One way to help your employees through this change is to give them as much notice about the change as possible.
2. Provide notice
It doesn’t matter if you close or sell your business, either change means that an employee’s position with you ends. You must give official notice or provide payment in lieu of notice to all employees.
If a transfer of business occurs before the notice period ends, you must still pay the rest of the notice period to your employees even if they continue to work for the new owner.
No matter if employees cease employment with the business or transfer to the new owner, the law requires you to give them official notice in writing.
Let employees go
Whether you close your business or you sell your business and the new owner doesn’t need them, it is difficult to let employees go.
You may wish to talk to your employees directly and explain the situation. Good communication is key to ensure that this period of change is easier for both yourself and your employees.
Transfer employees
If you're selling your business and your employees will transfer with the business, you need to:
- provide up to date employee records to the new owner
- notify the new owner of any contractual, leave, financial and legal obligations you have with your employees
- work out with the new owner what obligations you'll be responsible for and what obligations will be transferred to the new owner
- provide your employees with notice of ending employment and let them know that they'll need to sign a new contract with the new owner
3. Finalise payments
Remember that you still have to make payments to your employees even when you close or sell your business.
These payments include:
- entitlement payments
- employment termination payments
- employee tax payments
Entitlement payments
If your employees transfer to the new owner, which entitlements you pay will depend on what you negotiated with the new owner. The new owner must recognise some entitlements, but others they don’t. If they choose not to recognise some entitlements, you are responsible to pay them.
Entitlements can include:
- outstanding wages
- accrued leave
The final entitlements you need to pay your employees depend on:
- the terms of your existing contract
- the relevant modern award
- the number of employees your business has
- whether the employee is entitled to redundancy
- the state your employee is employed in
- if long service leave is payable
Learn more about final pay and how to finalise pay to your employees.
Find out more about employee entitlements on a transfer of business.
Employment termination payments
Employment termination payments (ETPs) are lump sum, one-time payments when employees no longer work for you.
An ETP may include:
- payment in lieu of notice
- redundancy or severance pay
- a gratuity or ‘golden handshake’
- compensation for the loss of a job
- unused rostered days off
- unused annual leave or long service leave
Employee tax payments
You need to finalise tax issues for your employees when you close or sell a business.
These tax issues can include:
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