Transfer of Business Under the Fair Work Act
The transfer of business Fair Work Act rules apply when employees move from one employer to another because work, and often assets, pass between them. The new employer can take on the same awards and agreements, and the employees' service may be recognised.
The rules are technical. The label a business gives the deal does not decide the outcome. This guide explains the idea in plain terms.
How transfer of business fair work act works
- The old employer and new employer reach a deal, such as a sale of the business, an outsourcing, or a handover of a contract to a new provider.
- Employees of the old employer end their employment and start with the new employer within the period the Act sets, so check the timing with the Fair Work Ombudsman.
- The employees do the same or similar work for the new employer, such as the same cleaning contract or warehouse operation.
- A connection exists between the two employers, for example the new employer takes on assets, equipment or a contract from the old one.
- If these conditions are met, an award or enterprise agreement that applied before can continue to apply to the transferring employees.
- The new employer should recognise the employees' service for leave entitlements, and the Fair Work Commission can be asked to resolve disputes.
Examples of transfer of business fair work act
- A cleaning contractor loses an office tower contract, and the new contractor takes over the same cleaners on the same site and the same shifts.
- A civil construction firm sells its plant and its labouring crew to a competitor, and the crew carry on the same work for the buyer.
- A warehouse operator hands its pick-and-pack operation to a logistics provider, which takes the equipment and employs the same team.
- A café owner sells the shop and its fit-out, and the baristas continue under the buyer on the same roster.
- An office-based business outsources payroll to a provider that hires the payroll staff and takes their files.
Transfer of business rules and key numbers
Most of the detail comes from the Fair Work Act and your award or agreement, not from a single number.
| Item | What the rule is | Where to confirm it |
|---|---|---|
| Who is covered | Employees in the national system whose work moves from one employer to another | Fair Work Ombudsman |
| State public sector | NSW state public sector employees are in the state system, so different rules can apply | NSW Government |
| Awards and agreements | A transferring instrument can continue to apply to the new employer in limited circumstances | Fair Work Commission |
| Redundancy pay | NES redundancy pay applies to employers with 15 or more employees, and no NES redundancy pay applies for under 1 year of service | Fair Work Ombudsman redundancy page |
| Unfair dismissal | Applications go to the Fair Work Commission within 21 days of the dismissal taking effect | Fair Work Commission |
| Records | Time and wage records kept for 7 years, with payslips within 1 working day of payday | Fair Work Ombudsman pay slips page |
Related terms
- Transferring employee: an employee whose employment ends with the old employer and starts with the new employer.
- Transferring instrument: an award or enterprise agreement that can carry across to the new employer.
- Continuity of service: counting time with the old employer towards leave and similar entitlements.
- Genuine redundancy: a job that no longer needs to be done, which is a separate test from a transfer.
Transfer of business FAQ
What is a transfer of business under the Fair Work Act?
It is a situation where an employee ends work with one employer and starts with another doing the same or similar work, and a connection links the two employers. The Act then carries across certain protections, including some awards and agreements.
Do employees keep their leave when the business is sold?
Often, yes. The new employer may need to recognise service with the old employer for leave, such as annual leave of 4 weeks a year for full-time staff. Leave balances should be accounted for in the handover, so check the details with the Fair Work Ombudsman on 13 13 94.
Does a transfer of business trigger redundancy pay?
Not always. If the employee accepts a job with the new employer, redundancy pay may not be owed, and the rules on service recognition can differ. If no job is offered, a genuine redundancy and severance pay may follow, so get advice before signing anything.
This is general information, not legal, tax or financial advice, so check the Fair Work Ombudsman, the ATO or an employment lawyer for your situation. To see how a payout is worked out, read our redundancy calculator guide, or visit our host employer labour hire page to talk to TQN Personnel.