Taking care of employees when you sell

When you sell your business, assuming your buyer intends to keep all staff, then your employees have two options. They can stay or they can leave. It is very normal for a business to undergo changes in staff during a transition of ownership. Whatever their decision, there are some things to consider when taking care of employees during the sale of your business.

Selling to an employee

Have you considered the benefits of selling your business to a current employee?

Selling to a current employee can ensure a smooth transition between vendor and buyer, maintaining the continuity of the business. Of course, there can be the adverse risk of the employee continuing harmful trends if they do buy the business. However, there are other advantages to this option, including not having to spend time and resources ‘selling’ the qualities of your business to a stranger.

Taking care of employees: your responsibilities

When buying a business, there are responsibilities a purchaser has to their new staff. Yet the vendor also has legal responsibilities to their staff. These are usually mapped out in the negotiation process with the buyer.

The most common scenario during a takeover is for the buyer to take on the financial burden of current employees’ accrued leave and similar financial commitments. They do this with an understanding that the price of the business will reflect this inherited financial responsibility.

However, this is not always the case, and you may find that you are responsible for acknowledging a staff member’s previous service, whether they are offered further employment with the new owner or not. Be sure to discuss this in your negotiations with the buyer as this will influence the purchase price. Check out the Australian government’s Business.gov.au, which details your legal responsibilities to your staff when selling.

Going one step further

What business.gov.au advises is that you must give written notice to your employees in regards to the sale of the business. But why not go beyond this to ensure the smooth transition of the business? As well as providing notice in enough time that they can consider their options, reassure your staff of the change by informing them of what is likely to happen in regards to their position, the way in which the business operates and any leave or payments that are contractually due to them. Be sure to have discussions about your staff with the buyer early in the process. If they feel that they are one of the key concerns in your negotiations, then this reassurance will translate into an ownership transition with the least disruptions to the other key part of your business: your customers.

Of course, you don’t want to scare off any potential buyer by having a workforce that is jumping ship. Judge the timing of your announcements. Rather than involving all your employees in the negotiations, consider choosing your best staff to aid the process and boost your negotiation power. Just be sure that they will keep the sale of the business quiet until you make the required announcement. Also consider providing the buyer with HR information/surveys that may give them an insight into where employees think the company performs well and what processes they suggest changing to improve your business.

Well before the sale of your business, be sure to eliminate any unnecessary costs of running of the business. An incoming buyer will likely want to cut costs where they can. This is similar to someone moving into a new home wanting to make a few immediate changes to their home. It’s human nature. By eliminating unnecessary costs early you reduce the risk of your employees bearing the weight of changes made by the new owner.

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More than anything, let your employees feel appreciated. It is inevitable that there will be staff changes during a transfer. People often instinctively recognize a changeover of management as a sign they should try something new and different. It is important that circumstances remain reflective, appreciative and most importantly, optimistic about the future of the business.


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