Every year, we learn about highly influential mergers and acquisitions that impact business as we know it. But there are also plenty of M&As that happen every day, flying under the radar. The problem these business decisions have on small to midsize companies create difficult HR dilemmas, which directly result from a lack of resources.
Navigating MA payroll on a global scale is a unique challenge for all parties involved. With a general focus on the financial success of the business side of the consolidation and keeping shareholders satisfied, payroll can easily fall to the sidelines. But if handled improperly, payroll can start to become a huge issue that directly impacts employees.
When employees learn about a merger or acquisition, they may start to worry about the security of their positions. If there’s a paycheck error, or worse, missed paychecks, that could cause employees to worry and look for new jobs — something more secure. In fact, according to a Harvard Business Review report, the failure rate for mergers and acquisitions is between 70 percent and 90 percent. That’s typically because of HR-related issues, which can occur from a lack of focus on payroll.
If your organization is getting ready for an M&A, this post can help you understand how to start navigating global payroll and help prepare your team for the significant business changes.
Speed is important during an M&A. You’ll need to keep up with the pressures from leadership to check as many boxes as fast as possible, which will include the implementation of payroll for newly acquired employees.
“Lift and shift” is a term used in transitions of all kinds. This term means that you get old payroll management systems working again, just this time, on a new platform. Instead of trying to reinvent the wheel, or fix all the current problems you have, it’s usually best to accept your existing processes as-is and rely on a third-party provider to take over your payroll, filling the gaps until things settle down internally.
Essentially, don’t take this transition as an opportunity to fix all your current problems. This is known as the “transform and shift” method. In a majority of transitions, the pressures of timeline and complexity lead to significant failures when managers try to fix the system while making a transition like this. That’s why we recommend accepting current processes as is by working with a consolidated payroll provider to help during the transition.
Getting the actual software transitioned should be relatively easy if you’re working with a seasoned provider. The trouble can begin when you don’t have all the steps in place before the M&A begins because you will start to feel the pressure of time.
To avoid any headaches, ensure that global payroll changes are included in your first 100 days milestones for the M&A transition. Establishing goals upfront is especially critical for multi-country deals. There are some complex scenarios that can factor into how payroll will be transitioned, such as overseas employees being absorbed into an existing entity in-country, creating a new entity for the new business, supporting employees through an international PEO, or a combination of these. A general understanding of the employee arrangement can help you understand how to maintain a compliant entity and can continue to pay people on time.
Don’t let business goals and operational processes trump employees during an M&A. Taking a people-first approach from the start of this transition can lead to success during and following the deal. Putting the concerns and focus on your team members, such as on-time and accurate paychecks, mitigates unnecessary risks including low morale, diminished performance, depleted productivity, and as mentioned earlier, loss of employees.
For over 13 years, Celergo has helped many companies transition through all different types of mergers and acquisitions with a focus on payroll management. We have a truly global team of experts serving 150+ countries that can help you check-the-boxes and successfully navigate an M&A transition. Contact us if you have any questions, we are here to help!
**This article is for informational purposes only. It is not intended to constitute legal advice.