HR due diligence – compensation differences

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  • #93243
    Robert Winslow
    Participant

    Does anyone have any experience with acquiring companies wherein the pay structure of the target is materially higher than that of the buyer, and if so, how do you manage this without creating risks of losing people through constructive dismissal suits, unexpected retirements and resignations?

    #93460
    Kyle Froling
    Participant

    This will have to be an identified risk during the DD process. If this is something that will be accepted, I would focus on key talent that you would like to retain and offer them a retention agreement and incentives for staying. I have been part of a merger where the organization is very “top heavy” and we would retain their level of pay but would demote their job title and vice versa. You can also adjust profit sharing, bonus structure and other benefits to impact total compensation.

    #93878
    Robert Winslow
    Participant

    Thanks, Kyle.

    #94490

    Its quite a tricky question.

    Company A could be paying $1.3x amount for this role.
    Company B (been acquired) could be paying $x amount for the same role.

    Staff at company B obviously would not very pleased with this situation. Therefore the management of the two company would have to decide which key talent(s) to retain.

    #95231
    Manish
    Participant

    Differences in pay can cause low employee engagement. A strategy around retention should be a key focus area in the near term to avoid and value destruction. Retention plans can be developed for employees identified as critical to integration.

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