In the market to acquire a business?
While most buyers focus on financial performance, client relationships or lease terms, many overlook whether the business is compliant with Australia’s workplace laws – and that can be a costly mistake. Here’s why.
Historic non-compliance can expose new owners to risk
If the business you’re buying has a history of underpaying employees, whether it’s through incorrect award classifications, unpaid overtime or missed entitlements, you may inherit some of that risk.
In an asset sale, where you buy the business’s assets rather than the company itself, you’re generally not responsible for prior wage liabilities unless you agree to take them on in the sale contract or retain employees under similar terms.
In a share sale, where you acquire the entire entity, you assume all existing liabilities, including staff entitlements and any breaches of the Fair Work Act.
Even in asset sales, if you continue unlawful pay practices (intentionally or not), you could be held liable from the day you take over.
Protect yourself with proper due diligence
The best protection is proper due diligence before the sale. While financial audits are standard, buyers should also conduct a thorough review of employment compliance. This includes engaging an independent auditor, like Vertruen, to assess payroll systems and records, award classifications, owed entitlements and overall compliance history.
It’s also essential to work with your legal team to ensure the sale agreement includes clear indemnities and warranties related to employee entitlements and workplace compliance.
A hidden wage issue can quickly turn an exciting time into a financial and legal burden. Taking the time to investigate these risks up front can help avoid costly headaches later.
Compliance doesn’t stop after settlement
If there are no red flags and you’ve decided to proceed with the sale, don’t assume the hard work is done. With annual wage increases and award updates, ongoing compliance is key.
For example, you may not be aware that you must regularly review employee wages – especially on the anniversary of each worker’s start date – to ensure you’re meeting current award requirements and entitlements.
This is where Vertruen’s continuous compliance services can help you stay on track. Our continuous compliance services give you a proactive advantage, meaning problems can be addressed in real time rather than discovering them years down the track.
To learn more, visit our Continuous Compliance page.
