In a merger or acquisition situation, planning is critical to ensure a smooth and hassle-free transition. Among the many financial and organisational aspects that must be considered, payroll and HR strategies need to be prioritised as they have a huge impact on the success of the deal as well as on staff expectations and morale.
Says Peter Ibbotson, CEO of Praxima Africa Payroll Systems, an outsource payroll solution provider: "There is usually a sharp rise in payroll and HR system report requests from clients in the run-up to a merger or acquisition, as well as post the event. This is because critical information is contained in these systems.
In the first instance, due diligence requirements must be met. Companies must ascertain the accuracy and timeousness of payroll and related legal, tax and HR matters in order to identify risks, clarify processes and objectively measure the effectiveness of these systems. Pension and provident funds, medical aids, leave, salary benefits and package structures must also be reviewed.
"No acquisition or merger is ever easy. A number of scenarios may raise immediate concerns," advises Ibbotson. "It may be a hostile takeover or the situation may be politically charged. Companies may have to be 'right-sized' with the expectation of job losses leading to reluctant co-operation. Organisations may also find themselves having to accommodate a different payroll solution, dealing with new or different HR policies, and functioning within a dissimilar business culture. Often, this is difficult to do when you are too close to the situation and have vested interests or a loaded agenda.
"The effect of this kind of business event on employees' sense of stability, their overall morale and productivity is significant," says Ibbotson. "Businesses have a responsibility to their staff to ensure the process is as transparent as possible. While non-disclosure is part of any merger or acquisition, all staff at both companies need to know as soon as possible how the merger or acquisition will affect them.
"Making use of an outsourced payroll solution provider offers both organisations an unbiased, experienced and professional third-party view of the situation that delivers effective solutions."
A crucial HR requirement may be to assess and harmonise the HR policies of the two companies to ensure equitable remuneration and retention of vital staff members. This will necessitate the assessment and possible adjustment of staff gradings, remuneration, job key performance indicators, performance evaluations, and more.
To prepare the company for change and minimise complexity, organisations need to do their homework thoroughly, Ibbotson advises. "Know what information is required, set schedules and ensure staff are informed as relevant information becomes available. The value of having a clear agenda and communication strategy, and approaching the situation without tunnel vision cannot be overemphasised - it's the only way to understand the challenges that must be faced and work out a suitable solution that meets regulatory, business and people needs."
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