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Buying and Selling a Business – practical advice on legal issues


The entitlement to long service leave arises if an employee has been with the business for five years. The employee will lose that entitlement after five years and before ten years the employee resigns. The employee will have the entitlement to be paid out their long service leave if they are terminated after five years. The employee is not entitled to actually take a long service leave break until they are with the business for ten years.

The entitlement is just under one week per year of service. You could go to this web site to calculate: 

When does the clock start for an employee if the business is sold? Is it day 1 – when they were employed; or is it the date the business is sold?

The answer is that the sale of the business does not re-set the clock for employee entitlements – the start date for the long service leave entitlement remains the date they were employed by the previous business owner.

This rule often strikes buyers of the business as unfair, for this reason – the seller of a business needs only credit the buyer for long service leave entitlements of an employee who has been with the business at least five years – no credit is available for example for employees who have been with the business for four years, and in one year’s time will come into the entitlement, which means that the obligation will be fully borne by the buyer.

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