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Whether you are closing or selling your business, this has a significant impact on your employees. When you close your business, your employees will have to be let go. If you decide to sell your business, your employees may choose to transfer to the new owner or end their employment.

Transferring employees

If you are selling your business, your employees may transfer with the business to the new owner. If this occurs, you will need to do the following:

  • 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 that will be effective from the date of the new ownership.

There are some employee entitlements that the new owner must recognise and others that the new owner doesn't have to recognise. Find out more about what is required when businesses change hands.

A change of ownership ends an employee's position with you, so you must give notice or provide payment in lieu of notice to all employees. If a transfer of business occurs before the notice period ends, then you must still pay the rest of the notice period to your employees.  Find out more about what happens when businesses change owners.

Letting go of employees

Letting go of your employees can be difficult so good communication is important.

You may wish to talk to your employees straight away, and explain the situation to them. No matter how you decide to tell them about it, you are required by law to give them official notice in writing.

You'll also need to pay out any entitlements your employees may have.

Giving notice

You must give written notice to your employees in one of the following forms:

  • delivering the notice personally
  • leaving the notice at your employee’s last known address
  • sending the notice to your employee’s last known address by pre-paid post.

You must provide your employees with the right amount of ending employment (also known as a notice period). This will depend on how long your employee has been working for you and the type of employee they are (you don’t need to give notice to casual employees).

You can also choose to pay out the notice, which must be the amount equal to the full amount the employee would've been paid if they worked until the end of the notice period.

Find out more about notice periods.

Paying entitlements

Whether your employees transfer to a new owner or terminate employment with the business, there are some entitlements, such as outstanding wages and accrued leave that you need to pay out.

If your employees are transferring to a new owner, the entitlements you need to pay out will depend on what you have negotiated with the new owner. There are some employee entitlements that the new owner must recognise and others that they don't have to recognise. If they choose not to recognise some entitlements, you'll have to pay those entitlements out.

The final entitlements you need to pay your employees will vary depending on a number of factors.

Read the Fair Work Ombudsman's final pay information to find out how to finalise pay for your employees.

Termination payments

If your employees are eligible, you will also need to pay employment termination payments. These can include:

  • payment in lieu of notice
  • a gratuity or 'golden handshake'
  • compensation for the loss of a job
  • unused rostered days off
  • unused sick leave.

Employee taxes

Whether you've sold or closed your business, there are also a number of tax issues that you need to finalise for your employees. These can include:

The Australian Taxation Office website has an employer obligations checklist if you need more information on your obligations when your employees cease employment.

Supporting employees

As this can be a stressful and uncertain time for employees, good communication is important. Treating employees fairly will encourage them to continue to work efficiently and give you plenty of notice if they decide to move on to new jobs.

You can support your employees by giving them as much notice as possible to allow them to weigh up their options.