What happens to your staff entitlements when you sell
Which employee entitlements transfer to the buyer, which ones you pay out at settlement, and why the answer changes the price you actually receive. Written for an asset sale in Queensland.
General information only, not financial, legal or taxation advice. Tony Pope holds Queensland Office of Fair Trading licence 4963575.
The short version
- Sick and carer's leave, parental leave and the right to request flexible work carry across to the new employer in every transfer of business.
- Annual leave, redundancy pay and unfair dismissal service are different: a buyer who is not an associated entity can decline to recognise prior service.
- Long service leave is not on that list in Queensland. A transfer of the business does not break a transferred employee's continuity of service, so the liability generally moves with the staff who move.
- If the buyer declines, you pay it out at settlement. That is a cash cost off your net proceeds, not a negotiating point discovered later.
- Get the entitlements schedule accurate before you go to market. It moves real money and it is the easiest thing in the deal to get wrong.
Sellers tend to think about employees in terms of who stays. The bigger question at settlement is what the entitlements do, because that one has a number attached to it and the number comes off your proceeds.
The two groups
Under the transfer of business rules, some entitlements move to the new employer whatever anybody prefers, and some are the buyer's choice.
Always carry across. Sick and carer's leave, the right to request flexible working arrangements, and parental leave. The new employer recognises the employee's prior service for these and there is no election available.
The buyer can decline. Annual leave, redundancy pay and service for unfair dismissal purposes. Where the buyer is not an associated entity of the seller, they can choose not to recognise prior service.
Long service leave is different again. The Fair Work Ombudsman describes only a narrow case where a new employer does not have to recognise prior service for long service leave, tied to some older registered agreements. In Queensland, the Industrial Relations Act 2016 says a transfer of the business does not break a transferred employee's continuity of service, and applies that to long service leave. So for staff who move across, the long service leave they have built up generally moves with them, and the price discussion has to account for it.
Updated 13 October 2026. An earlier version listed long service leave with the entitlements a buyer can decline. In Queensland it generally carries across with the staff who transfer.
The buyer's election on annual leave, redundancy and unfair dismissal service is the whole commercial point, because an asset sale to an unrelated buyer, which is how a normal business sale is structured, is exactly the case where the election exists.
What the election costs you
If the buyer declines to recognise service for annual leave, you pay out the untaken accumulated annual leave at settlement. If they decline for redundancy, the redundancy exposure stays with you, subject to the rules about an employee who rejects an offer on similar terms that recognises prior service.
For a business with a long serving team, that is not a rounding error. Eight staff averaging four weeks of accrued leave is close to a full month of payroll, payable in cash on the day, out of the proceeds you were counting on.
Why it should be settled before you go to market, not at contract
Three reasons, and the third is the one that actually causes trouble.
It changes the net number. The price is not what you receive. The price minus the payouts, the apportionments and the fees is what you receive. An owner who has not run that calculation is negotiating on the wrong figure.
It is a negotiating variable, not a fixed cost. Whether the buyer recognises service is something that gets agreed, and it can be traded against other terms. It cannot be traded if nobody raises it until the contract is being drafted.
An inaccurate entitlements schedule breaks trust at the worst moment. If your leave accruals turn out to be understated during due diligence, the buyer does not simply correct the number. They start asking what else in the financials was prepared the same way. A leave balance that is out by twenty per cent is a small problem that creates a large one.
What to do about it
Get an accurate accrual schedule from your bookkeeper or payroll system, employee by employee, covering annual leave, personal leave and long service leave, with start dates. Then have your accountant confirm the balance sheet provision matches it.
Then put the question to your solicitor early: for a sale structured this way, in this state, which of these transfer and which are paid out. The answer belongs in the information you give a buyer, not in a discovery.
The part that is not about money
Your staff will ask what happens to their leave. Being able to answer that accurately, on the day you tell them, is worth a great deal to how the handover goes, and the handover is part of what the buyer is paying for.
An owner who has to say "I'll find out" has told the team something about how prepared the sale is.
Common questions
Does a buyer have to take on my employees?
No. In an asset sale the buyer is a different legal entity and there is no obligation to offer employment to anyone. In practice a buyer usually wants the team, because the team is a large part of what they are paying for, but the offers are theirs to make and the terms are theirs to set.
Who pays out accrued annual leave when a business is sold?
It depends on whether the new employer recognises prior service. Where the buyer is not an associated entity and chooses not to recognise service for annual leave, the old employer has to pay out the untaken accumulated annual leave. Where service is recognised, the liability moves across and is normally adjusted for in the price.
Does long service leave transfer when a business is sold?
Generally, yes, for the staff who move across. The Fair Work Ombudsman describes only a narrow case where a new employer does not have to recognise prior service for long service leave, tied to some older registered agreements. In Queensland, the Industrial Relations Act 2016 says a transfer of the business does not break a transferred employee's continuity of service, and that rule applies to long service leave. With a long serving team it is a large number that moves with the staff, so it belongs in the price discussion and in front of your solicitor early.
Keep reading
All notes on selling a business · All seller guides · What is my business worth?
Check it yourself
Primary sources, none of them affiliated with me and none of them endorsing this site. Where anything here differs from an official source, the official source is right.
Links open on external government and industry websites. The full list sits on licensing, registers and official sources.
Ask what it is worth
Free, in writing, and nobody finds out you asked. Tell me the trade and the suburb and I will do the rest.
Nobody finds out you are selling. This goes to me only, into my own database in Sydney. I will not contact your accountant, your landlord, your bank or your staff, ever, unless you ask me to.
If you would rather not put anything in writing yet, ring 0431 124 128. Prefer to pick a time yourself? Book a time in my diary.
Thinking about selling?
Thirty minutes, on the phone or in person, at a time that suits you including evenings. You will get a straight read on where the business sits today and what would move the number. It costs nothing, there is no obligation, and nobody finds out you asked.