According to the Harvard Business Review, studies show that between 70% and 90% of mergers or acquisitions fail. While there are many reasons for this, varying from the challenge of managing multiple branch offices to incompatible cross-border IT infrastructures and a wealth of local and country regulations, one area that is often overlooked is the part payroll plays in the success or failure of a merger.
I have spoken with many business leaders, all with many years of M&A experience. From these discussions, I have drawn up a list of lessons learned from the field to help you implement a seamless transition for payroll. Their understanding of this complex process also offers guidance around optimizing your deal’s financial and operatorial synergies.
Top ways to approach payroll when involved in an M&A
Consolidate solutions for greater cost savings
Combining multiple vendors enables an organization to generate savings of scale. You should also review the possibility of consolidating entities where possible to reduce costs.
Improve the Employee Experience
Acquiring talent is a leading driver for M&A. M&As can be stressful for employees due to the uncertainty, competing priorities, and a change in systems and processes. Ensuring there is a smooth transition is critical for employee retention and productivity.
Using a single global platform, with full integration with your HCM establishes a consistent approach across both companies for a better employee experience. Improved self-service will not only improve the employee experience but support HR and Payroll staff who will be burdened with additional workload post-merger.
Use data analytics to identify outliers
Centralizing payroll information produces an invaluable single source of truth. Now business leaders can access real-time analytics so HR, Payroll, and Finance leaders can quickly identify headcount synergies. These analytics can also support forecasting future payroll costs and investigating significant variances.
Create a post-merger plan
For a successful transition, payroll leaders should arrange regular meetings with HR, Finance, and key business stakeholders. All parties should agree on a detailed plan with milestones clearly delineated.
Be sure the plan covers the following areas:
- the payroll function structure
- full legal entity listing and compliance review
- change managers and what their responsibilities include
- zero breakage: what it means and why it is important
- concurrent payroll runs and how you plan to operate them. We typically advise two concurrent payroll runs
- workforce planning and the need for additional staff to deal with increased queries & additional workload after an M&A
- severance process
- tax filing requirements, including Leaversand Starters
- payments test plan
- post-implementation follow-through
- existing payroll systems
- compliance risks, especially around the current and past employees of the acquired organization
- GDPR compliance
- employee onboarding experience.
Work with Finance to automate your GL
Fully automating your GL entries and consolidating a single chart of accounts will free your finance and payroll team from manual processes, resulting in improved self-service and audit readiness.
Leverage the expertise of your payroll provider
As I wrote in 5 Ways Global Payroll Can Assist at the Start of an M&A, organizations can lean on their payroll provider to facilitate a smooth transition of payroll operations. In the most basic terms, it is about reviewing and preparing, creating a roadmap and savings report, open transparency for all before the deal is signed, deciding whether to consolidate payrolls or leave as regional and finally, agreeing on compensation policies.
Now is the time to look to your global payroll provider for support and guidance. Utilize their expertise and experience. For example, at Immedis, we support our customers with their acquisition strategy by onboarding new employees onto one platform. We work closely with payroll leaders to plan for upcoming acquisitions. Our team and in-country partners’ combined knowledge take ownership for compliance with local tax legislation requirements, reducing your risk in onboarding new jurisdictions.Back to all posts