Employee Entitlements in a Transfer of Business

A business must consider the accrued entitlements (such as service-related entitlements like leave) the transferring employee has bought with them from their previous employer.

What is Continuous Service?

The Fair Work Act 2009 states that when an employee is transferred from one employer to another, the new employer must recognise the employee’s previous service.
There are certain exceptions to this principles including:

• Circumstance where a new employer is not an associated entity of the old employer;
• The new employer may not recognize a transferring employee’s previous service for annual leave and/or redundancy pay.

The FWA states that if an employee is employed by a new employer within three months of leaving their old employer, and the old and new employers are associated entities, the new employer must recognise the employee’s period of service with the old employer.

What classifies as unfair dismissal?

Under the Fair Work Act, employees who are transferred to a new employer are entitled to have their previous period of service recognized. This service generally counts towards the ‘minimum employment period’ required for protection from unfair dismissal. The minimum employment period varies between 6 months and 12 months, depending on the size of the business.

Types of Leave Entitlements

Personal/Carers Leave

The new employer is obligated to recognise the accrued personal/carer’s leave entitlements of a permanent employee who is transferring from their old employer.

Long Service Leave

For the purpose of calculating long service leave, the new employer is obligated to recognise a transferring employee’s period of service from their old employer. Long service leave entitlements may vary depending on the state in Australia.

Annual Leave

The new employer is obligated to recognise the annual leave the transferring employee has accrued in their old employment. However, the new employer are not required to recognise annual leave if;

• The new employer choose not to do so;
• The old employers and new employers are not associated entities.

The above requires it to be finalised prior to the employees commencement with the new employer.

Parental Leave

An employee who has been with a company for 12 months or more is eligible for parental leave. For example, if an employee has been with a company for 11 months before transferring to a new company, they will be eligible for parental leave as soon as 1 month after starting with the new company.

Right to Termination & Severance Pay

If an employee’s employment ends with a new employer, the new employer must recognize the employee’s period of service with the old employer. This period of service will count towards the employee’s right to notice of termination. For more information, see here.

No Period of Service Can Be Counted Twice

An employee’s previous period of service cannot be counted again to calculate a benefit with a new employer if the employee has already received the benefit of an entitlement based on that service with the old employer.

How HR Connect can help

If you require assistance with dealing with disciplinary issues concerning staff, HR Connect can help. Our HR Advisors will be able to guide you through each step of the disciplinary process and we have template documents (e.g. direction to attend a disciplinary meeting, written warning, letter of termination, etc) available as part of our subscription packages.

About HR Connect

HR Connect is one of Australia’s leading providers of HR & workplace safety advice services, designed to help small business owners make confident and compliant business decisions.

Disclaimer

The information provided in these knowledge base articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice. The information in this summary is correct as of August 2021.

This knowledge base article will change over time, as Modern Award legislation relating to this Industry or Occupation is passed by the Fair Work Commission. Originally published on 21 September 2021 and last updated on 18 February 2022.

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