How to manage global payroll during M&A activity

Imagine taking the contents of a grocery bag and dumping it upside down inyour 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, asemployees 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&Aactivity 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 theorganization. Specifically, it’s often payroll and human resources thatredefine 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 yousucceed, you contribute meaningfully to a successful M&A, helping yourbusiness 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 keydecisions regarding evolving talent needs. They’ll be evaluating placement andpromotions, as well as identifying opportunities to redefine your globaltalent pool—including which regions to target for new employees.

Additionally, these departments will be working diligently to integratetechnologies 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. Somewherebetween 70% - 90% of all M&As fall short of expectations, leaving businessowners 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 theloop and prepared for disruptive changes. This helps to keep your workforceintact, engaged and productive.

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

The solution: Focus on your people. Embrace honest and transparentcommunication at all levels. Give your employees a timeline and a set ofrealistic expectations to balance the stress of the constant change created bypayroll mergers and acquisitions.

Related content: Payroll & HCM change management: A step-by-stepguide

2. Merging payroll data and analytics

And M&A presents the perfect time to prioritize clean data and comprehensivesystems that connect payroll and human resources together. Achieving asingle, comprehensive view of workforce data is extremely beneficial forinforming 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 usthe ability to quickly transform data and facts into action. We’re usingthis intelligence alongside our own consumer expertise and judgment to drivebetter results.”

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

Related Content: Business questions you can answer with standardizedworkforce data

3. Planning and implementation

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

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

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

The solution: Take time to plan things out, includingcontingencies in order to maintain some order amid the chaos created bychange.

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. Insteadof trying to control every aspect of the transition, lean on your partners toprovide expertise in their areas.

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

Your global payroll provider can:

• 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 ofexperience, these vendors help your company prepare for anything that comesyour way.

If you’re approaching or working through an M&A, we think you’ll like thisarticle, too: Global workforce considerations for mergers, acquisitions or divestitures