Buying an agency? You need to understand employee entitlements

Buying an agency? You need to understand employee entitlements

The sale of a real estate agency is something most business owners will face at some point. Here are some things to be aware of when it comes to employee entitlements.

When an agency is sold it's common for the employment of some, if not all, of the employees to be transferred to the new business. As the new employer, the buyer of the agency needs to be aware that many employee entitlements carry over from the old employer. This is because of the “transfer of business” provisions in the Fair Work Act.

Transfer of business

The Fair Work Act defines a “transfer of business” as any situation where: 

  • the employment of an employee of the old employer has been terminated; and 
  • within three months of that termination, the employee becomes employed by the new employer; and 
  • the work the employee performs for the new employer is the same or substantially the same as the work performed for the old employer; and 
  • there is a connection between the old employer and the new employer (for example, there is a transfer of ownership of assets).

What's the impact?

So how does a transfer of business affect an employee's entitlements?

Annual leave
Annual leave can be transferred with an employee to the new employer. Alternatively, where the employers are not associated entities, the new employer can decide not to recognise an employee’s previous service. This means the old employer will pay the employee their annual leave entitlement up to the date of the transfer and the employee will then start to accrue a new annual leave entitlement from their date of commencement with the new employer.

Personal/carer's leave
The new employer must recognise prior service with the old employer. In other words, the new employer needs to accept liability for any personal/carer’s leave the employee has accrued with the old employer.

Parental leave
An employee’s prior service with the old employer counts towards determining eligibility for unpaid parental leave and their right to request exible work arrangements under federal law.

Long-service leave
A transferring employee’s long- service leave entitlement will be determined in accordance with the relevant state or territory long-service leave legislation.

Generally, service with the old employer is counted as service with the new employer, however advice should be sought based on the agency’s location.

Notice of termination
Only service with the new employer counts when determining the period of notice of termination that must be given to the employee by the new employer.

Unfair dismissal
If the new employer wants protection against an unfair dismissal claim by a transferring employee for the statutory minimum employment period,* there must be an expressly written exclusion from recognising previous service with the old employer. This written exclusion must be agreed prior to the employee commencing with the new employer. Where the transferring employee is not advised of the exclusion in writing, their prior service will be recognised for the purpose of calculating the minimum employment period.

Redundancy pay
Where the employers are not related entities, the new employer can choose whether to recognise the employee’s service with the old employer for the purpose of redundancy entitlements.

Employee records
The employee records of transferring employees must be transferred to the new employer and kept for seven years in accordance with the record keeping obligations under the Fair Work Act.

To find out more, call REEF on 1300 616 170.

* The statutory minimum employment period is 12 months for businesses with 14 or fewer employees and six months for other businesses.

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About REEF

The Real Estate Employers' Federation is the real estate industry’s leading not-for-profit employer and workplace relations advisory association. It has more than 1600 members and subscribers across Australia.

Each year, REEF receives more than 20,000 calls from real estate employers needing help and guidance on matters affecting the employment relationship.

Contact us

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     Sydney  NSW   2000

  •   1300 616 170

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