How to manage global payroll during M&A activity

March 21, 2022

Imagine taking the contents of a grocery bag and dumping it upside down in your refrigerator, letting things settle where they fall instead of neatly putting them away. 

The mess inside the fridge is what it can feel like during a global M&A, as employees and leaders alike must navigate the challenges of combining the people and processes—notably, HR and payroll—of two separate organizations.  

If you’re part of a multinational, technology and/or private company, you should probably buckle up: J.P. Morgan reported record-breaking M&A activity in 2021—and suggests there are plenty of trends driving more mergers and acquisitions in 2022. 

The impact of M&A on global payroll and human resources 

Your executive office is focused on the big picture trajectory of the organization.  

Meanwhile, the brunt of operational change falls on the people within the organization. Specifically, it’s often payroll and human resources that redefine their processes and procedures in the midst of a major upheaval.  

If you fail, and the road gets too bumpy, great talent jumps ship. But if you succeed, you contribute meaningfully to a successful M&A, helping your business to take advantage of opportunities like: 

  • Expanding technology 

  • Talent and capability acquisition 

  • Sustainability and social governance priorities 

Your payroll and human resource staff need the right information to make key decisions regarding evolving talent needs. They’ll be evaluating placement and promotions, as well as identifying opportunities to redefine your global talent pool—including which regions to target for new employees. 

Additionally, these departments will be working diligently to integrate technologies and combine workflows, while maintaining accuracy and efficiency. 

The administrative side of payroll mergers and acquisitions can be intense, but we have a few tips to help you keep your head above water. 

4 critical success factors for payroll during mergers and acquisitions 

According to Harvard Business Review, M&A success isn’t easy. Somewhere between 70% - 90% of all M&As fall short of expectations, leaving business owners wondering what went wrong.  

HR and global payroll teams can help set the M&A up for success by focusing on these priorities.  

1. Managing the employee experience 

We’re all creatures of habit, and when things begin to change around us, it causes stress. The hard work falls on payroll and human resources to keep employees in the loop and prepared for disruptive changes. This helps to keep your workforce intact, engaged and productive. 

For example, Netflix focuses on people over formal HR policies, guiding employees through change with a simple five-word motto: “Act in Netflix’s Best Interest.” This approach has helped the company to thrive throughout major disruptions, including digital transformation. In 2013, at the height of their transformation, stock values tripled, and their subscriber base grew by 29 million.  

The solution: Focus on your people. Embrace honest and transparent communication at all levels. Give your employees a timeline and a set of realistic expectations to balance the stress of the constant change created by payroll mergers and acquisitions. 

2. Merging payroll data and analytics 

And M&A presents the perfect time to prioritize clean data and comprehensive systems that connect payroll and human resources together. Achieving a single, comprehensive view of workforce data is extremely beneficial for informing strategic decision-making.  

Levi Strauss realized the importance of data-driven decisions and made big investments in both AI and data. One use case for the iconic retailer was to better understand when and how to run promotions. The investments paid off—one campaign launched using information gleaned from an AI model wound up driving sales that were five times higher than expected.  

According to Levi’s Chief Financial Officer Harmit Singh, “AI gives us the ability to quickly transform data and facts into action. We’re using this intelligence alongside our own consumer expertise and judgment to drive better results.” 

The solution: As you integrate a new company into your own, it’s important to also integrate data from all sources, particularly workforce data from your HCM with all global payroll operations. Having a single, global view of workforce data can help inform future growth decisions for the company.  

3. Planning and implementation 

The key to a successful transition is planning. You need a workable plan before you start and a solid set of guidelines for navigating the transition and a post-implementation plan that brings everyone together. 

When Lego, the well-known global toy manufacturer, was faced with the possibility of bankruptcy, it leveraged planning and implementation to strategically right the ship. Lego built cross-functional teams to infuse the company with innovation, transforming its product lines, operations and brand image.  

Lego’s executive team and creative operations focused on the external transformation. But HR and payroll teams reinforced this progress by redesigning workflows and policies to instill a culture of fun. Every detail—from the hiring process and workforce planning to global compliance—is centered around Lego core values.  

The solution: Take time to plan things out, including contingencies, in order to maintain some order amid the chaos created by change. 

What to consider (current, transition and post-implementation): 

  • Payroll function and structure 

  • Legal entity 

  • Compliance audits 

  • Change management priorities 

  • Hiring processes 

  • Severance processes 

  • Payroll processing workflows 

  • Guidelines for concurrent payroll 

  • Workforce planning 

  • GDPR compliance 

  • Employee onboarding 

  • Tax compliance 

  • Tax filing 

  • Local and global compliance risks 

  • Payment processing 

4. Leveraging your partners 

Take a hard look at the services you outsource and how your needs will change throughout your M&A. Instead of trying to control every aspect of the transition, lean on your partners to provide expertise in their areas.  

If you did your due diligence when choosing a global payroll provider, it should be able to grow with you as your needs change during the M&A process. 

  • Increase your adaptability  

  • Simplify your workforce transitions 

  • Lower your global payroll costs 

  • Manage your compliance risks 

  • Help you gain global visibility 

The best payroll providers are part of your talent team. With deeper skills and a broader range of experience, these vendors help your company prepare for anything that comes your way. 

If you’re approaching or working through an M&A, we think you’ll like this article, too: 

 

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