Why HR & WHS Due Diligence Is Essential Before Buying a Business

May Ann Guirindola
Nov 17
3 min read

Buying a business? Read this before you sign anything.

Buying a business is one of the biggest decisions you’ll ever make. On the surface, everything can look appealing — tidy financials, steady revenue, loyal customers, and a seemingly stable operation. But the truth is that numbers only tell part of the story.

On paper, everything can look perfect — clean books, stable cashflow, loyal customers and a “smooth operation.”

But behind the scenes?

And this is where so many buyers get blindsided — not because they ignored due diligence, but because they only checked the financials and skipped the part that actually determines whether the business will succeed long-term:

👉 HR and Work Health & Safety due diligence.

Skipping this step can turn your dream investment into a stressful — and very expensive — nightmare.

Award compliance is one of the biggest risks in any business acquisition, and it’s also one of the most overlooked.

Awards are complex. They change often. And most small to medium businesses don’t have the systems, processes, or expertise to interpret them correctly.

When you buy a business, you may unknowingly inherit:

incorrectly classified employees
staff underpaid for years without realizing
misapplied penalties, overtime rules, or allowances
missing timesheets or incomplete payroll records
outdated employment contracts that contradict award obligations

Many businesses operate for years without ever being audited. If an underpayment issue surfaces after you take ownership — even if the error occurred long before you arrived — you can still be held financially responsible.

It’s not uncommon for new owners to uncover tens of thousands of dollars in:

back payments
superannuation corrections
re-calculated entitlements
penalties for non-compliance

And once staff become aware of the sale, payroll scrutiny almost always increases.

This is why HR due diligence isn’t a “nice-to-have.” It protects you from inheriting liabilities you didn’t create but will absolutely have to pay for.

A business might hand over a WHS manual, a few checklists, or a “safety folder,” giving the illusion of compliance. But that doesn’t tell you anything about how safety is actually lived day-to-day.

You may be walking into:

a culture where shortcuts are normal
staff who never received proper training
safety documentation that’s been copy-pasted or left untouched for years
unreported near misses
equipment that’s unsafe or overdue for maintenance
a workplace that only looks compliant when someone is watching

If a serious incident occurs after settlement, the responsibility falls on the new owner — even if the unsafe systems were developed long before you took over. Regulators won’t accept “that started before I bought the business” as a defense.

WHS due diligence gives you clarity before you step into the role of PCBU. It tells you what needs fixing before it becomes a legal or financial catastrophe.

Financial statements don’t show:

internal conflicts
resentment toward previous management
long-term staff who are resistant to change
high performers who are planning to leave
toxic behaviours that others have learned to tolerate
poor management practices that will undermine your leadership

These are the things that make or break a smooth transition.

Without HR due diligence, you simply won’t know what you’re inheriting.

The most challenging issues in a business sale are rarely the ones you can see — they’re the ones buried in the back end: award compliance, payroll accuracy, culture, safety practices, entitlements, and hidden liabilities.

A business can look perfect on paper and still fall apart in your hands because of unresolved people and safety problems.

Due diligence protects you from:

overpaying for a business that’s not compliant
inheriting unsafe systems
liability for historical underpayments
sudden staff turnover after settlement
costly remediation work you didn’t anticipate
reputational damage for issues you didn’t create

Negotiation power.

When you understand the true risk, you can:

adjust the purchase price
request remediation before settlement
or walk away entirely

Knowledge protects your investment.

At P&P Consulting, we conduct comprehensive HR and WHS due diligence so buyers know exactly what they’re purchasing — not just the glossy version presented during the sale.