What to do when Buying or Selling a Hair or Beauty Salon

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Posted July 11, 2016

When buying a hair or beauty salon, it is important that the new salon owners understand their obligations and the entitlements of taking on any existing hair and beauty employees from the old business. Understanding the do’s and don’ts with existing staff, will ensure that the new salon owners have the relevant paper work and information on all the employees to be legally compliant from the first day.

Transfer of Business (Buying a Hair and Beauty Salon)

Transfer of Business, under the Fair Work Act 2009, refers to a sale or takeover of a business when one business is seen to be “transferred” from one owner to another owner.
A transfer of business occurs when;

• an employee begins working for the new owner within 3 months of terminating their position with the previous owner;
• the employee’s duties are relatively the same; and
• There is a “connection” between the previous and new owner.

This “connection” relates to;

• The old employer selling some or all of the business assets to the new owner, such as shop fit outs, chairs, products, intellectual property;
• The employers are related bodies with a controlling interest in one another; or
• The old owner outsources work the employee does to the new owner; or
• The new employer stops outsourcing work to the old employer

When buying a Hairdressing Salon or Beauty Salon, the new salon owners must be aware of the existing hair and beauty employee’s entitlements. There are many staff entitlements to consider:

Personal Carer’s leave (sick leave) will always be carried over from the old employer to the new employer and therefore the new salon owner must ensure they receive information on all the employee’s personal carer’s leave balance.

Annual Leave: will depend on the contract of sale. In some circumstances the old employer will pay out all annual leave whilst in others, the new salon owner may choose to take on the annual leave balance, and hence this may be deducted off the sale price of the salon.

Long Service Leave: Generally, long service leave will take into consideration all time spent with the old employer in a transfer/sale of business. Therefore it is important to discuss pro-rata long service leave costs and discuss how this will be attributed to the new owner.

Lastly, Employee Records. It is essential the new salon owner obtains the records of any staff members they retain in the salon. These records should include start dates, any periods of unpaid leave and any other relevant information.

Should the new owner not employ one of the existing hair and beauty staff but then decides to rehire one of these employees within 3 months of the sale of business taking place, the new salon owner must contact the old employer to request the records for this employee. The old employer MUST provide these records to the new salon owner. Keeping in mind that employee records must be kept for seven years in line with the Fair Work Act 2009.

For additional information on buying and selling a Hairdressing Salon or Beauty Salon contact HABA and we will share all the information you need.
To get you started, click on our Buying a Hair and or Beauty Salon Checklist.