Employment does not transfer by itself.
Employment is personal, so a sale does not move employees from one employer to another by itself. The buyer decides which employees to offer work to and is not obliged to take any of them, and each employee decides whether to accept. The seller must be told which employees the buyer intends to keep, and where the buyer does not want particular staff, the seller usually has to terminate them and bear the cost. Directors who are employees are treated like any other employee. The transfer of business rules in Part 2-8 of the Fair Work Act 2009 then govern how service and entitlements are treated.
Entitlements and recognition of service.
Recognition of prior service is not all-or-nothing. For some purposes, such as annual leave and redundancy, the buyer can choose whether to recognise an employee's service with the seller. For others, including personal and carers leave, parental leave and flexible-work requests, recognition is required. Long service leave stands apart: continuity is protected by the Long Service Leave Act 2018, prior service carries across and the buyer must recognise it whatever the contract says, and continuity is preserved even where an employee is re-employed within a set period. Redundancy generally is not payable where the buyer makes a suitable offer and recognises service, and smaller employers are treated differently again, while unfair dismissal turns on a minimum period that can include service with the seller unless the buyer elects in writing not to recognise it.
How it is settled.
Where entitlements are not paid out, they are adjusted against the price so the buyer, who takes on the liability, is compensated, and those adjustments carry their own tax treatment, so they are commonly discounted to reflect it and worked through with the accountant. In Victoria the practice is to adjust long service leave at close to full value for longer-serving staff. We handle the employee provisions in the contract through our business sale and purchase service, and advise on the Fair Work issues through our employment law service.
Long service leave is not optional. The buyer must recognise a continuing employee's prior service whatever the contract says, so it is always part of the settlement adjustment, and terminating staff soon after a sale can invite an unfair dismissal dispute even where a redundancy looks genuine.
Law referenced: Fair Work Act 2009 (Part 2-8); Long Service Leave Act 2018.