Selling Your Business Without The Headaches – A Sellers Guide

After years of running your business, you’ve decided to sell your business and the contract is finally on the table in front of you. The numbers are looking great, the buyer is keen and your excited to see your next chapter in sight. But have you considered what the sale of your business means for your employees? Many sellers may accidentally overlook key workplace obligations, turning their smooth exit into a legal headache.

When selling your business it is important to recognize that this is considered a major workplace change that can impact business structure, employment of your employees and/or create redundancies in some cases.

To support business owners in taking that exciting next step to selling their business, our HR Consultants have created this Sellers Guide to provide insight into your legal obligations.

Consultation Requirements

As the sale will mean a major workplace change for your workforce, you are legally required to complete consultation with existing employees. This involves;

• Notifying any employees (and their representatives) who might be affected.
• Discuss proposed changes as soon as possible after a decision regarding sale is made.
• Provide written information about the changes and any measures to reduce adverse effects.
• Give prompt consideration to matters raised by employees or their representatives.

Risks of Non-Compliance

A failure to comply with consultation obligations means that an employer:

• will not be able to establish that a person’s dismissal was a case of “genuine redundancy” under s389(1)(b) of the Fair Work Act (FW Act) and therefore is at risk of an unfair dismissal claim,
• may be required to participate in a dispute settlement procedure under the enterprise agreement (if applicable) if this is activated by a union/employees; and/or
• may be ordered by a Court to pay penalties and/or compensation for breach of an award/agreement (in addition, interim orders may be made including temporarily preventing the employer from implementing any redundancies).

Terminating 15 or More Employees As A Result

The Fair Work Act requires an employer to notify or consult with a union if:

• they decide to dismiss 15 or more employees for economic, technological, structural or similar reasons; and
• they knew or should have known that at least 1 of the employees was a union member.

The employees don’t need to be covered by an award or enterprise agreement for this requirement. Employers must also notify Centrelink before dismissing 15 or more employees.

Communication Strategy When Communicating Change

An internal communication strategy outlines exactly how your business will deliver key messages to your staff. For smaller businesses, this can be a simple document setting out the ground rules for when and how staff communications will be handled, and who will handle them. Your communications strategy should cover:

• What – the types of information or key messages that will be communicated to staff
• Who – the messages should come with the authority of senior managers. Engaging representatives from different parts of the organisation, ensures the communication is seen as having broad support by management
• How – messages should be clear, consistent and given with context so employees can better understand them.
• When – the communication should be prompt and give employees time to respond.

Seek feedback on how your employees are receiving communications. Be flexible and refine your strategy over time to make sure it remains effective and practical.

A business must also ensure that the communication methods are suitable for the scale of their business. A good communication channel is authentic, regular, targets and provides two-way communication. Examples may be ensuring an open-door policy prior and during the proposed change, organising set meetings at times employees may attend, and setting up support sessions.

Consultation Strategy

The consultation with employees should be carefully considered and planned to be most effective. Throughout the consultation it is crucial that the following occurs:

• Employees know what is to occur once the sale agreement is in place; the change and its potential impact for them individually.
• It is a clear process with a transparent timeline.
• Management and employees work together to identify workforce issues or problems arising from the proposed change and agree on ways to resolve these.

Review of Employment Agreements & Award Conditions

Prior to commencing any changes, it is important to review what is included in current employment agreements and under the Modern Awards or enterprise agreements (if applicable) to ensure these conditions are followed throughout the consultation process.

This review is specifically to review clauses regarding redundancy, notice periods, entitlements, and transfer of employment.

Entitlements Audit

Ensure you are aware of the workforces’ current tenures, leave entitlements and other special conditions that may need to be carried over to the new business.

From a seller’s perspective it would be important to understand how employees on an employee share scheme will be impacted (i.e., paid out or carried over).

Transferring Employees to New Buyer

Once the review of the workforce is completed, the new buyer must determine whether employees will be transferred, terminated or offered new employment agreements. If transferring is to take place, ensuring prior service and leave entitlements will be carried over is critical.

During a transfer the current owner must provide accurate and complete HR records and data, including:

• Employment agreements
• Leave balances, entitlements, and Award classifications
• HR policies and procedures

Importance of HR Support During Sale

The sale of a business can be a challenging and stressful process. With the support of a HR Consultant this process can be made smoother, protect you from legal risk and ensure your employees are managed with care.

Compliance Maintenance

A HR Consultant will guide you through your Fair Work Act obligations, Modern Awards and Enterprise Agreements conditions; ensuring you meet your consultation requirements and avoid unfair dismissal claims. They can also support you through the correct redundancy processes where required.

Communication Management

A HR Consultant will develop and facilitate timely communication plan for your employees to ensure they feel they are kept in the loop. Whether this be through letters, FAQs, meeting scripts or facilitating meetings individually, they ensure your message is consistent and legally compliant.

Preparing Your Workforce Data

Enlisting the support of a HR Consultant, will enable you to complete an independent audit of all employment agreements and entitlements. This ensures smooth and accurate transfer of HR records to the buyer.

Bringing in a HR Consultant early helps you avoid legal pitfalls, protect your employees, and leave your business in the best possible position for sale.

 

 

 

Ready to sell your business with confidence?
Don’t risk costly claims, compliance issues, or a messy handover. Our HR experts can guide you through every step from employee consultation to cultural transition so you can focus on closing the deal.

Call us today on 07 3630 5695 for your free phone consultation and get tailored advice for your business sale.

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