Transferring Employees Within Group Companies: Employer’s Legal Guide

Moving great people to where they’re needed most is one of the big advantages of operating under a group structure. Whether you’re restructuring, consolidating brands, launching a new entity or finalising a business sale, transferring employees between related companies can help you redeploy talent efficiently and keep operations humming.

That said, a transfer isn’t just an internal admin change. Each employing company is a separate legal entity, and Australia’s employment laws set out specific rules for when service must be recognised, what happens to entitlements, and how industrial instruments apply.

In this guide, we’ll walk through how transfers work in Australia, when the “transfer of business” rules apply, what to include in new contracts, and common pitfalls to avoid so you can protect your business and support your team through the change.

What Does “Transferring Employees” Mean In A Corporate Group?

In practice, transferring employees within group companies means ending employment with one employer and commencing employment with another, even where both entities are related or controlled by the same parent company. Legally, that creates a new employment relationship.

Typical scenarios include:

• Restructures after growth, consolidation or cost changes (e.g. merging operating entities).
• Business or asset sales where staff move to the purchaser.
• Standing up a new subsidiary or brand and redeploying experienced staff.
• Multi-site operations or franchises moving staff between related entities.

Because the employing entity changes, you’ll usually need a new Employment Contract, clear employee consent, and a plan for entitlements and records. The right approach depends on whether the move is a “transfer of business” under the Fair Work Act.

Can You Legally Move Staff Between Group Entities?

Yes - but it’s not automatic. You generally cannot unilaterally move an employee from one employer to another. Transfers should be managed as a termination and re-engagement by agreement, with the employee’s informed, written consent.

Consent and process

Employees should receive a letter explaining the proposal and a contract for the new employer. If the current role is being discontinued, make sure you handle notice correctly (or agree how notice will be managed) to avoid disputes about unfair dismissal or entitlements. If you’re unsure about changing terms as part of the move, review your approach against best practice for changing employment contracts.

Is it a “transfer of business”?

Under the Fair Work Act, a transfer of business generally occurs when:

• Employment with the old employer ends and the employee becomes employed by the new employer within 3 months, and
• The work the employee performs for the new employer is substantially the same, and
• There is a “connection” between the employers (for example, an asset transfer, outsourcing/insourcing arrangement, or the entities are associated within the meaning of the Corporations Act).

When these criteria are met, certain entitlements and industrial instruments can carry across. If not, the default rules (including payout of some entitlements on termination) may apply.

Associated entities

Transfers between associated entities (for example, companies within the same corporate group) attract particular rules. In many cases, service must be recognised for National Employment Standards (NES) entitlements, and redundancy pay obligations are treated differently compared to transfers to unrelated purchasers. We unpack these nuances below.

Step-By-Step: How To Transfer Employees Between Companies

Here’s a practical sequence to follow. Your exact steps may vary depending on your award coverage, enterprise agreements, and whether the move is a transfer of business.

1) Map the business rationale and timeline

Clarify why the transfer is occurring (e.g. restructure, sale, new entity), which roles are affected, and your timeline. The 3‑month window is important for transfer of business, so plan commencement dates accordingly.

2) Consult early and get written consent

Explain the proposed move, any changes to duties, location, remuneration or reporting lines, and how entitlements will be treated. Provide employees time to consider and ask questions. Confirm consent in writing before any change takes effect.

3) Set the employment end/start dates

Typically, the termination with the old employer is the day before the new employment starts, so there is no practical gap in service. If the old employer issues notice (or pays in lieu), ensure it aligns with your obligations under employment notice periods and, where used, lawful payment in lieu of notice.

4) Issue new contracts with clear terms

Provide new contracts from the receiving entity. These should set out position, classification (under any applicable award), remuneration, hours, location, start date, and how prior service will be recognised. Avoid “resetting” eligibility periods (for example, probation) where service must be treated as continuous under transfer of business rules.

5) Decide and document entitlement treatment

Confirm whether the move meets the transfer of business rules. If it does, the new employer will generally recognise prior service for NES entitlements such as annual leave accrual, personal/carer’s leave and, subject to associated-entity nuances, redundancy. If it’s not a transfer of business, accrued annual leave is usually paid out by the old employer on termination and accrual restarts with the new employer. Long service leave follows state and territory laws (more below).

6) Manage payroll and records

• Collect new tax and super details where required and set the employee up in the new payroll system.
• Provide the Fair Work Information Statement (and the Casual Employment Information Statement if relevant) at the start of the new employment.
• Keep thorough records showing the basis for recognising service and any transferred entitlements.

7) Separation certificates and notifications

Employer Separation Certificates are not automatically required for every transfer. They are generally provided if an employee requests one for Services Australia purposes. If needed, follow the rules outlined for Employer Separation Certificates. There’s usually no requirement to notify regulators about an internal staff transfer itself; focus on accurate payroll reporting and super contributions from the new employer.

How Do Entitlements And Continuous Service Work?

Entitlements are where most transfers rise or fall. Getting this right avoids underpayments, disputes and penalties.

Annual leave and personal/carer’s leave

If the move is a transfer of business, the new employer will usually recognise the employee’s service and take on accrued annual leave and personal/carer’s leave balances (rather than the old employer paying them out). If it is not a transfer of business, accrued annual leave is generally paid out on termination by the old employer, and accrual starts again with the new employer.

Redundancy pay

Redundancy pay is nuanced:

• Where the new employer is an associated entity and the employee continues in employment with the new employer, redundancy pay is typically not payable at the point of transfer, and prior service is recognised.
• Where the new employer is not an associated entity, if the new employer offers acceptable employment and the employee accepts (or unreasonably refuses suitable employment), redundancy obligations may be affected. The exact outcome depends on the Fair Work Act rules and any applicable industrial instrument.

Because redundancy decisions can be complex in transfers and sales, it’s wise to sense‑check calculations using a structured approach to redundancy pay.

Long service leave (state and territory laws)

Long service leave is governed by state and territory legislation, and recognition of prior service can differ across jurisdictions. Some laws require recognition of service for transfers within associated entities or in business sales, while others turn on the nature of the transfer or whether employment is continuous in fact.

If you have employees in different states, confirm local rules before finalising the treatment of balances. For example, Victorian rules and worked examples differ from other jurisdictions - this calculator for long service leave in Victoria illustrates how local law applies.

Industrial instruments (awards and enterprise agreements)

Where a transfer of business occurs, the previous enterprise agreement or award-based arrangements can “follow” the transferring employee unless certain exceptions apply (for example, the new employer has an enterprise agreement that already covers them). You’ll need to confirm the relevant instrument, classification and pay rates to ensure compliance from day one.

Continuous service and eligibility periods

Under a transfer of business, an employee’s service with the old employer generally counts as service with the new employer for NES purposes. This can affect eligibility periods for unfair dismissal, parental leave and other entitlements. Be careful not to assume you can “restart the clock” on service-based thresholds.

Common Pitfalls And How To Avoid Them

Most transfer hiccups come from treating the move as a simple internal change. These are the issues we see most - and how to sidestep them.

• Missing employee consent: Moving an employee without informed, written agreement risks breach of contract and unfair dismissal claims. Always document consent and the basis for any changed terms.
• Resetting entitlements incorrectly: If it’s a transfer of business (especially between associated entities), you generally must recognise service for key entitlements. Don’t implement fresh probation or reset accruals where the law requires continuity.
• Getting redundancy wrong: Redundancy obligations depend on associated-entity status, the offer of suitable employment, and instrument coverage. Model the options (redeploy, transfer, or redundancy) before you announce changes. If you do end employment, ensure final pay is correct - this guide to calculating final pay is a helpful cross‑check.
• Overlooking industrial instruments: Enterprise agreements or award classifications can carry across and override assumptions about pay or hours. Confirm coverage early and classify roles correctly.
• Poor documentation: Without clear letters and contracts, you risk confusion about recognition of service, balances and policies. Keep a clean paper trail for audit and employee relations purposes.
• Assuming regulators must be notified: Outside of standard payroll and super obligations (and any industry‑specific requirements), you generally don’t “notify” authorities about an internal staff transfer. Focus on compliant onboarding with the new employer.

What Documents Do You Need For A Smooth Transfer?

The right documents make the process simpler and protect both your business and your team. Depending on your structure and industry, consider:

• Employment Contract: A new contract from the receiving entity setting position, pay, hours, location and how prior service and entitlements will be treated. If you’re changing terms at the same time, align your approach with guidance on changing employment contracts.
• Transfer letter or side agreement: A short letter explaining the reason for the transfer, the timing, any changes to duties or location, and how entitlements will be recognised or paid out.
• Termination letter (by agreement): A letter confirming the end of employment with the old employer by mutual agreement on the specified date (not redundancy unless applicable), to support the transfer timeline.
• Fair Work Information Statement: Provide this at the start of the new employment (and the Casual Employment Information Statement if relevant).
• Policies and handbooks: Make sure the employee receives and acknowledges any updated workplace policies under the new entity (for example, within a staff handbook) and understands any new processes.
• Separation certificate: Only if requested or required for Services Australia - see the rules on Employer Separation Certificates.

If you’re formalising new roles, it can be a good time to refresh position descriptions and ensure you’re using a current, tailored Employment Contract template that reflects your award coverage, confidentiality and restraint provisions.

Special scenarios to plan for

• Business or asset sales: Due diligence should confirm who is assuming which entitlements, whether industrial instruments will transfer, and how offers of employment will be made. Redundancy and service recognition must be addressed expressly in the transaction documents.
• Multi-site/franchise groups: Movement across sites operated by different related entities will often be a transfer of business, with service recognition implications. Ensure rosters, classifications and rates remain compliant at each site, and that onboarding is complete every time a new employing entity is involved.
• Probation and performance: If service is continuous under a transfer of business, avoid trying to “restart” probation. Performance management should follow the new employer’s policies and any applicable instrument.

Key Takeaways

• Transferring employees between group companies isn’t an internal admin change - it’s a new employment relationship that requires consent, clear contracts and careful entitlement treatment.
• If the move meets the Fair Work Act transfer of business rules (including the 3‑month window and substantially the same work), prior service will generally be recognised for NES entitlements and some industrial instruments can carry across.
• Redundancy pay and service recognition differ for associated-entity transfers versus transfers to unrelated purchasers; model your options before announcing changes.
• Annual leave and personal/carer’s leave usually transfer under a transfer of business; otherwise, accrued annual leave is typically paid out on termination. Long service leave follows state and territory laws, so check local rules.
• Use clean documentation - new contracts, transfer letters, and accurate payroll records - and only issue separation certificates where they’re actually required.
• Confirm award/EA coverage and classifications from day one with the new employer, and avoid “resetting the clock” where service is continuous.

If you’d like a consultation on transferring employees within group companies - or need help preparing the right documents - reach out to us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.