When purchasing a business, one of the decisions to make is whether to take on the employees of the business being purchased. Before you commit to transferring the employment of existing employees or offering jobs to employees, you should do your employment due diligence, as well as general business due diligence.
The failure to do so can be expensive, time consuming and painful.
Here is a non exhaustive list of the sorts of things business purchasers should look at when considering whether to take on employees of an existing business:
1. Review the jobs in the business and the jobs structure, if applicable, to see which jobs are required after the purchase is completed.
2. For each job, consider whether the position is filled by an employee or contractor?
3. If a contractor, does the contractor operate as a sole trader or company, is there a written contract in place and what are its terms. In particular, what is the services description, is there any guarantee of work, what are the payment rates and terms and what is the notice required of termination. Is it a true arms length commercial relationship or is it really an employment relationship? Keep in mind that independent contractors (including companies) can now raise disputes in the Fair Work Commission about unfair contract terms and sham contracting can have significant penalties.
4. If a job is filled by an employee, is the position a full time, part time or casual position? Is there a position description for the job and does this accurately reflect the work actually being done. Keep in mind that it is the substance of the relationship that is important, not just the form of the contract. Have casuals been employed on a regular and systematic basis?
5. For employees, is there a written contract in place? Does it contain remuneration, minimum notice of termination, award offset, confidentiality and post employment restraint provisions? Is the contract appropriate for the role?
6. Is the salary or wage being paid for a job appropriate? Are there other benefits being provided and are they referred to in the contract of employment? Are discretionary benefits provided? When was the last review?
7. Is the seller complying with all National Employment Standards and any applicable industrial award or enterprise agreement provisions (bearing in mind the transfer of business provisions of the Fair Work Act 2009 (Cth).
8. Have minimum wage requirements been met and has there been any correspondence with the Fair Work Ombudsman? Are there detailed and up to date employee records in compliance with the Fair Work Act 2009 (Cth)?
9. Are superannuation contributions up to date?
10. Have workers compensation premiums been paid for all employees?
11. Review the annual leave records of each employee – are employees taking regular annual leave or are there any large accruals.
12. Review personal leave records – is there any unusual pattern or amounts of personal leave being taken. Has any personal leave been due to incidents or injuries in the workplace?
13. Do employees have any workplace flexibility arrangements in place and what are the terms of those arrangements?
14. Are there any employees on parental leave?
15. Review disciplinary records – have any employees been the subject of disciplinary action and was that action justified.
16. Review performance appraisals – there should be at least an annual performance appraisal undertaken. Have the performance appraisals been meaningful?
17. Who are the key people in the business and what are the risks of them leaving the business?
18. Is there an appropriate employee policy manual covering operational matters and is there a record of employees acknowledging the policies on induction and subsequent refreshers.
The absence of up to date employment records or evidence of disregard for basic legal requirements should be taken into account. Buying a business is a significant investment and purchasers should take the time to properly consider staffing requirements and the people who make the business tick. Otherwise, you may be saddled with underperforming employees or ticking time bombs and/or you may lose valuable employees.
Please contact us if you would like any further information or help.