Payroll Considerations for Mergers & Acquisitions: Part 2

Though many industries faced challenges during the COVID-19 pandemic, one that has continued to flourish is the merger and acquisition (M&A) market. Of course, there are a number of logistics organizations must review prior to closing a deal. Ones that should be at the top of the list, though, are payroll and benefits. Read on for Part 2 of this article series on key payroll considerations to think about before closing a deal, and be sure to check out Part 1 too.

Change Management

It’s important for both entities to be open to learning about the different payroll processes and solutions of the other entity when it comes to change management. To ensure a smooth transaction, we recommend having a constructive conversation where decision-makers from both parties can ask questions and understand why and how different processes are performed before making a unilateral decision.

Consider assigning an on-site resource for employees. If this is a global transaction, it might be helpful to have someone in the new country to document current payroll processes and procedures, discover what that population is like and report on feedback. We suggest making sure this resource stays through the first payroll cycle to work through any questions or confusion regarding pay stubs.

Timely communication about payroll is extremely important for employees. Get ahead of the game by creating a matrix or FAQ document of what is changing versus staying the same concerning payroll. Also, establish who is responsible for answering questions related to compensation, payroll technology and expenses. If you need to escalate a question or issue, be sure to document the escalation path for approval.

While a merger or acquisition as a whole will need a checklist or playbook, we recommend having a documentation system for each department (payroll, benefits, AP, etc.) as well, to include due dates, deliverables and an assigned representative for each task. This will make it easier to back track on processes and procedures if there are questions down the line.

Lastly, you’ll want to think through a training program for your employees. Many will require training  on new timekeeping, absence and expense systems, new HR, payroll and expense contacts, escalation paths and more. What is the best way to execute the training program? If employees are used to video tutorials, perhaps this is the way to go. You may also consider reference guides, live sessions with Q&A or even a sample earnings statement with explanations for each code, as they will likely change post-transaction.

Employee Benefits

It’s essential for payroll to have a seat at the table when it comes time to programming benefits. Talk through what the alignment of benefit plans, including accruals, will look like. Will you have two sets of accruals, or just one? Also, who will be responsible for profit sharing and 401(k) matching? Be sure to have a good understanding of equity questions as well, including what kind of stock options you have, RSUs, RSAs, etc. Make sure your system is able to tax appropriately, especially if this is a mid-year transition, in which prior balances for FSA, HSA and 401(k) plans would need to be carried over.

Payroll administrators undoubtably play a crucial role in any company, which means it’s essential to make sure they’re in the loop during all stages of M&A transactions. Whether your company is working through the payroll fundamentals of its next transaction or has general payroll questions, reach out to our experienced payroll and benefits experts today, and don’t forget to read Part 1 of this series for more key insights on payroll and M&A.

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