Managing Payroll in M&As: How a Global Solution Can Help

During a merger or acquisition, payroll is one of the first items a team will assess. After all, how do you successfully combine two (or more) payroll systems with different payroll processes, infrastructures, policies, and compensation structures?

It’s a process you have to get right the first time, as improper payroll management during an M&A can result in over/under-reporting, payroll errors, employee attrition, and more. 

An M&A provides an excellent opportunity to assess and enhance your payroll processes and shift towards a global payroll solution that not only simplifies new employee onboarding, but also streamlines future entity acquisitions. Read on to learn more.

This article contains insights from Deel’s recent Global Payroll Summit, where Dan Van Damme, Manager, Account Executive, ENT, Deel, spoke about how companies can use global payroll to streamline M&As. Watch the summit on-demand to hear from Dan and other experts.

Managing compliance across borders

When companies merge, they may face difficulties incorporating new payroll requirements and processes. This can be especially challenging when they have to merge different regulatory standards for taxes, benefits, and employee data.

For example, in the US, companies have to determine how they will manage employees’ W-2 forms and tax filing. Typically, the impacted employees will either receive a single W-2 at the end of the tax year or a W-2 from each company they worked for during the tax year, depending on whether or not they keep the same EIN (Employer Identification Number).

Incorrect payroll reporting after an M&A can result in significant penalties, as the company’s corporate taxes are incorrectly aligned with employment tax reporting. As a result, the employees and employer may be significantly over or under-taxed.

Using a global payroll provider like Deel during and after an M&A can simplify compliance across different regions and regulations by centralizing payroll management. Deel’s platform:

• Strengthens payroll compliance with both local and international laws
• Makes transferring employee and payroll data easy  during structural changes
• Manages W-2 forms and tax reporting to avoid common errors like misreporting
• Actively monitors regulatory updates and provides straightforward advice

Altogether, these steps help minimize the risk of non-compliance and ensure a streamlined process for integrating new employees post-M&A.

See also: A Guide To Switch From EOR To Payroll With Owned Entities

Harmonizing employee compensation and benefits

Global payroll solutions can help address disparities in pay scales and employee benefits between the merging entities by standardizing compensation structures. This not only guarantees fairness and transparency but also enhances employee retention by offering competitive and compliant compensation tailored to local requirements.

By leveraging a global payroll vendor’s expertise in regulatory compliance, companies can also ensure they’re providing the correct benefits packages for every worker they acquire. For example, you can use Deel’s Benefits Tool to identify the statutory, common, and competitive benefits plans in each market to ensure new employees are receiving the packages they’re legally entitled to (or better).

See also: The Remote Team’s Guide to Employee Compensation Strategies

Retaining talent and enhancing employee engagement

Three-quarters of key employees leave within three years of a major transition. However, a global payroll solution can play a pivotal role in helping companies retain talent from an acquired company and enhance the employee experience for all.

Using a global payroll system makes combining multiple payrolls easy, providing a seamless transition for employees. As a result, you can avoid payroll errors, delays, or inconsistencies that can arise during M&As, thereby enhancing the employee experience and trust in the new company.

By outsourcing your payroll functions to a global payroll solution, you also benefit from analytics and reporting capabilities that provide insights into payroll, compensation, and employee performance across different geographies. This data can help management make informed decisions regarding talent management, retention strategies, and identifying areas where employee engagement can be improved.

Fast and hassle-free onboarding is crucial for maintaining morale and productivity among newly acquired talent. With Deel’s owned infrastructure, you can quickly and easily onboard new employees, ensuring all processes are handled by experts.

See also: Integrating Inherited Talent: 7 Key Steps for Enterprise M&A

Visa support and mobility

Using a global payroll solution like Deel during an M&A activity can significantly improve visa support and mobility for companies acquiring businesses with expatriate employees.

“M&A audits will often reveal employees who may need visa support as well,” said Dan. “That’s an implication, a very costly implication, that the folks working on the M&A may not even be aware of.”

While not all global payroll and HR solutions offer visa and mobility support, Deel does. Deel’s in-house immigration and mobility support provides an essential service by helping teams navigate the visa application process, ensure compliance with immigration laws, and track visa statuses across their organization.

This is particularly crucial in situations requiring a company to meet Successor-in-Interest (SII) criteria in countries like the US, where the continuity of job roles and opportunities is a legal necessity for transferring employees.

See also: A Guide to Relocating Employees

Tech considerations for global payroll integration

Correct and efficient data migration is essential during an M&A. But how do you address the technical challenges that come with merging different payment methods, pay frequencies, and compliance requirements? 

Typically, all-in-one payroll solutions have the infrastructure and support required to seamlessly transition complex payroll data. With Deel, this includes payroll professionals and customer success managers who will help you before, during, and after the data migration process to guarantee accuracy in payroll processing across different jurisdictions.

Global payroll solutions also offer the flexibility needed to integrate custom-built solutions or legacy systems from both entities, leveraging APIs to automate and sync data across the HR tech stack. This not only minimizes manual interventions but also aligns payroll with other key systems such as accounting, human resources, and hiring software. 

The support included with global payroll solutions ensures employees can easily navigate the new system, maintaining payroll accuracy and efficiency during the critical post-merger integration phase.

See also: 10 Challenges of Cross-Border M&A Integration

Simplify your M&A with Deel

A global-first payroll and HR solution like Deel can provide valuable support and due diligence during the M&A integration process, keeping employees satisfied and operations running smoothly. Deel has acquired several companies over the years, and our team of experts has helped companies of varying sizes execute M&As in 30+ countries.

When you’re ready to bring new employees on board, Deel’s Global Payroll and employer of record (EOR) services can help, offering:

• Unified payroll and HR for all workers and regions
• Deel-owned infrastructure and entities in 150 countries, including Spain, Germany, Australia, Canada, India, and more
• Unmatched global payroll coverage worldwide
• Compliance Hub to actively monitor and flag regulatory changes and recommend actions
• Global gross-to-net reports to understand global payroll spend
• In-house payroll experts around the globe
• In-house CSMs, reliably fast 24/7 support, and one point of contact for each country
• Visa and immigration support from mobility experts
• And more

Book a 30-minute product demo with a specialist today to learn more.