What Happens to Staff When a Preschool or Tuition Centre Is Sold?

Do staff automatically move to the buyer when a centre is sold?

It depends on the deal structure: in a share sale the employer does not change at all, and in a sale of the business the transfer of employment rules in the Employment Act move employees to the buyer on their existing terms.

Owners of preschools, tuition centres and enrichment schools often worry that a sale will cost them their team, and teachers worry about their jobs. The legal answer is more settled than most people expect. What changes is who the employer is, and that turns on whether the buyer is buying the company or buying the business. Our guide to share sales and asset sales explains the two routes.

What does section 18A of the Employment Act require?

When a business or part of it is transferred, the employees' contracts move to the new employer with the same terms and no break in service, and the employer must notify and consult them.

The Ministry of Manpower's guidance on transfer of employment sets out what this means in practice:

• Same terms: terms and conditions of employment remain the same unless the employee agrees to change them, and must not be less favourable after the transfer.
• Continuity: there must be no break in employment during the transfer.
• Notice: affected employees, or their union, must be notified of the transfer within a reasonable time and told the terms of the transfer, so that they can consult the company.
• Buyer's duty: the new employer must tell the previous employer about matters that will affect employees, so they can be informed within a reasonable period.
• Union agreements: the new employer takes over the previous employer's rights, powers, duties and liabilities under any union agreement in place before the transfer.
• Employees' side: transferred employees are expected to serve the new employer in the same way as their original employer.

If a dispute arises, MOM says the parties should negotiate the terms of the transfer. If they cannot agree, both sides have the right to end the employment with notice, and either can refer the matter to the Commissioner for Labour, who can delay or prohibit the transfer of the employee or order the transfer on terms the Commissioner considers just.

What does not count as a transfer of employment?

MOM lists a transfer of shares and a transfer of assets only as situations that are not a transfer of employment.

The other exclusions MOM lists are a transfer of operations outside Singapore, outsourcing of supporting functions, and a new service provider taking over from an outgoing one in a competitive tender. For education businesses the first two are the ones that matter.

What happens to staff in a share sale?

Nothing changes legally: the company is still the employer, so contracts, salaries, leave balances and service continue as before.

This is one reason share sales are less disruptive. Teachers keep the same employer name on their payslips and CPF contributions continue under the same employer. What does change is the people at the top, and a buyer who later wants to change pay, roles or policies must do so under the existing contracts and the ordinary rules of the Employment Act, not as part of a transfer. A buyer should read the employment contracts during due diligence for that reason.

Which ECDA staff rules matter when a childcare centre changes hands?

Every person working in a licensed centre must be approved by ECDA to be deployed there, so staff continuity is a licensing matter as well as an employment one.

The ECDA Code of Practice for Operators sets these requirements:

• Approval to deploy: a licensee must not deploy anyone to perform prescribed duties relating to the care or education of children or the operation of the centre without the Chief Licensing Officer's approval (s4.1, citing section 23 of the Act).
• Programme staff must hold the required qualifications, make a self-declaration on offences and warnings, be certified medically fit to work with young children, and have ECDA's approval (s4.1.1). Non-programme staff such as cooks, cleaners and administrators need the self-declaration, medical clearance and approval (s4.1.2).
• Staff particulars: the licensee must submit the particulars of every staff member deployed at the centre to ECDA within 28 days of deployment, and report changes within 28 days (Regulation 41, set out in s4.1).
• Principal: each centre must have a Principal deployed to oversee it, approved by ECDA and employed full-time (s4.2.1 and s4.2.2).
• Continuity of care: during a transfer of licence, the licensee must ensure that care and education are not compromised between the application and the transfer date (s3.3.6).

In a share sale the licensee and its staff approvals stay in place. In a transfer of licence the buyer becomes the new licensee, so confirm with ECDA early which staff submissions it needs in the new licensee's name. If the owner is also the approved Principal and is leaving, the buyer must have an ECDA-approved replacement ready, which is often the most important hire in the deal. If the buyer later changes the centre's name, staff must be given at least 1 month's written notice along with parents and ECDA (s3.6.3).

What about tuition and enrichment centre teachers?

The same Employment Act rules apply to employees, but many tuition and enrichment centres also use tutors on freelance or contractor terms, and those arrangements depend on their contracts.

Section 18A deals with employees. A tutor engaged as an independent contractor is not an employee, so whether that tutor continues after a sale depends on the contract and on whether the tutor agrees to work with the new owner. Because tuition and enrichment businesses often depend on a few well-known teachers, buyers look closely at who teaches which classes, how students would react if a teacher left, and whether teachers are bound by restrictions on taking students with them. Our guide on how to sell a tuition centre covers how this affects price.

Do buyers usually keep the existing staff?

Yes. In Edugrow's experience, most buyers retain existing staff, especially qualified teachers and key operations personnel.

The reasons are practical. Qualified early childhood educators take time to recruit, staff-child ratios have to be met from the first day, and parents are reassured by familiar faces. A centre with a stable, qualified team is easier to sell than one where the buyer expects to rebuild. Staff arrangements, including any retention terms for key people, are negotiated as part of the deal.

When should staff be told about the sale?

Usually once a deal is agreed and the buyer is committed, and in time to meet the legal and ECDA notice periods.

Telling staff too early risks resignations while the outcome is still uncertain, which is why Edugrow runs sales confidentially, with buyers signing NDAs before they receive any information. Once a deal is agreed, the timing is partly set for you. Parents must receive written notice at least 1 month before a change of key appointment holders (s3.5) or at least 3 months before a transfer of licence (s3.3.9), and staff will hear about it at the same time if not before. In a business transfer, MOM also expects employees to be notified within a reasonable time. Plan the announcement with the buyer, tell key staff first and in person, and have answers ready on pay, roles and reporting lines.

Before that point, the buyer's due diligence should cover employment contracts, CPF records, leave balances, ECDA approvals and qualifications, and any work pass holders, whose position should be confirmed with MOM.

How Edugrow helps

Edugrow has advised on 70+ education business transactions in Singapore since 2014, and staff communication is part of every one. We help sellers decide when and how teachers are told, help buyers plan the Principal and key roles before completion, and make sure the agreement records what has been agreed on staff. If you are thinking about selling, see how Edugrow handles a confidential sale.