Resignation or Redundancy in a Business Sale: What Employers Need to Know

Selling your business is a major milestone. But alongside the commercial negotiations, it’s critical to manage employee entitlements correctly – otherwise, you could face costly disputes and compliance issues. One of the most common areas of confusion is the difference between resignation and redundancy during a business sale.

When It’s Considered a Resignation

If the new owner offers an employee a role on substantially the same terms and conditions as before, and the employee chooses not to accept it, this is treated as a voluntary resignation.

• The employee will still be entitled to accrued benefits, such as annual leave.
• However, they will not be entitled to redundancy pay, as the job was available but declined.

When It’s a Genuine Redundancy

If the new owner does not offer ongoing employment, or if the role is no longer required, the situation may amount to a genuine redundancy.

• In this case, the employee will generally be entitled to redundancy pay, which is calculated based on their length of service.
• This payment is in addition to any other accrued entitlements.

Why It Matters

The Fair Work Act sets out clear rules around employee entitlements, and getting it wrong can expose you to penalties or disputes. Managing the transition carefully not only protects your legal position but also helps maintain goodwill with staff during a time of change.

Get the Sale Right from Start to Finish

A business sale should be exciting – not legally risky. With the right advice, you can navigate employee entitlements smoothly, protect your business, and focus on the opportunities ahead.

At Argon Law, we help business owners understand their obligations and ensure compliance when selling.

Thinking about selling your business? Contact us for tailored advice on managing employee transitions the right way.