How M&As Affect Payroll and What You Need to Do About It

Peanut butter and jelly. Mornings and coffee. Summer and air conditioning. Some things are better together.

Your business has decided to try a merger and everything is coming together like peas and carrots. The only problem? No one knows who is a pea and who is a carrot and everyone is confused about which processes to follow.

Growth is hard, especially when you add a merger or acquisition (M&A) into the mix. This week as we continue our series on growth, we will discuss the impact of an M&A on your payroll function.

Joining Forces

Combining resources with another organization capitalizes on the best of what each organization brings to the table so both organizations can multiply their success.

The strategic benefits of M&A include more cash flow, greater talent, the elimination of competition, and an increased customer base.

But often the vision and reality of an M&A are very different. There will inevitably be growing pains with any M&A because bringing together two independent groups of employees with different cultures and policies is no small task. If the transition is not managed well, an M&A creates a lot of unnecessary headaches for your organization.

Keeping Payroll Rolling

If you manage the payroll for your organization, it’s vital that you are a part of any conversations about a potential M&A. Integrating employee data from two separate payroll systems requires planning to ensure no critical data is lost in transition and that you maintain compliance.

The good news is that with cloud-based payroll solutions, merging employee information is not as complicated as it used to be.

Here are some decisions and steps to navigate in ensuring your transition is seamless.

  1. Determine which payroll solution you will maintain going forward. This is also a good time to evaluate whether the system you’re using fits your needs as you add more employees and locations.
  2. Determine when you will bring all employees onto one system. (You may have a period of overlap where you are running payroll on two systems.) Once you have a deadline for integration, work backwards and assign the task of migrating employee data from the system you’re phasing out onto the other one. Make sure to communicate these dates to all of the affected employees through multiple channels to minimize anxiety and confusion.
  3. Test the system multiple times before you go live so you can address any errors in the conversion.
  4. Find out what information you will continue to have access to in the previous system, and for how long.
  5. Based on the terms of your merger or acquisition, determine whether some employees will require an additional W-2 for the year.

In Your Corner

Overwhelmed? We realize these details can sound daunting on top of all of the stress of two worlds colliding.

A payroll partner can guide you through all of the new dynamics that come with growth and change. If you’re already a client of ours and you have an M&A in your future, we can help you prepare for a migration. If you’ve been managing your payroll yourself, this is a fantastic time to bring on a partner to help you tackle your payroll so you can tackle everything else. Schedule a free 30-minute assessment here.

On Deck: How M&As Impact HR

Payroll is just one function that will be affected by a merger or acquisition. Having new employees join your organization impacts your core HR, as well. We’ll cover how to keep HR running smoothly in the face of an M&A next time, so stay tuned.

If you missed our previous posts on how growth impacts your payroll and HR functions look no further: