Company Mergers Involving Benefits Packages

Managing Employee Benefits During Mergers and Acquisitions

Company Merger
Company Merger and Acquisition. Depositphotos.net

Companies often find it beneficial to merge into larger organizations in order to leverage resources, like working capital, equipment, employees, clients, and facilities. Mergers can also occur when a company decides to increase its value by buying up a competitor and offering shares of its stocks to expand further operations. This is referred to as a merger and acquisition. Most often, mergers of all types seem to happen in secret and human resources may be one of the last departments to find out.

Then it’s up to the HR team, along with the compensation and benefits administrators, to determine how this will affect the benefits package offered to existing and new employees.

How should employee benefits packages be handled during a company merger to ensure the best possible outcome and retain valued employees?

Here you can find tips for making this a smooth transition before, during, and after the merger takes place.

Before the company merger – evaluate the compensation and benefits plans of each business entity

If there is the opportunity to meet the leaders of the other company, whether it’s a merger or acquisitions case, every effort should be made to review the compensation and benefits offered by each entity, far in advance of the actual event. Certain factors need to be carefully evaluated including;

  • Starting salaries for every job type and progressive compensation
  • Total compensation packages offered to eligible employees
  • Elements that dictate salary vs. hourly positions
  • Conditions that create employee eligibility for benefits
  • Any gaps in current compensation and benefit programs
  • Legal compliance changes that occur as a result of the merger (increased number of employees)

    Once these factors are sorted out, only then can both human resource teams work together towards developing a comprehensive salary and benefits program for all affected employees.

    Another critical aspect of this process is conducting an employee survey to find out what employees value the most about their compensation programs. This feedback is invaluable when designing a new and improved benefits package because it’s focused on actual employees’ needs. Work with current benefit administrators to learn about the use of benefits over the last couple of annual periods to further narrow down the benefits that will provide the most value and use. Add multiple perks to make the benefits package even better. 

    The committee should blend all current benefits and compensation into one program, with an intended date to make changes official. This allows employees who have been paid less from one company to receive the additional compensation, new benefit plans to get set up in time for open enrollment, and company policy and job titles to be formerly approved and published. 

    During the company merger – handling changes to the compensation and benefits programs

    Just before the merger takes place, human resources may choose to inform employees about this event and how it will directly affect them.

    There is no concrete rule for how this should take place, but do so with the least amount of business interruption in mind. Present a formal document that outlines all of the timelines for updating all areas of compensation and benefits. For example, list the departments and when salary increases will take place. Then include the dates for when the old benefits program ends and the new program is open for registration. Reassure employees there will be no gaps in coverage. Share a copy of the new summary plan documents with employees. 

    Employees should have the opportunity to meet individually with their supervisor and a representative from their entity’s human resource team. This allows time for asking questions, getting more information, and understanding the positives of this merger.

    Schedule a day for the new benefits administration company to be onsite to answer specific questions about the benefits program as it will roll out.

    Be sure to have a lot of marketing around this and hold educational sessions to go over things. For remote employees, have a series of teleconferences to accomplish the same things.

    After the company merger – improving and measuring success of company comp and benefits

    In the days and weeks after a merger takes place, things may seem odd at the company. New people will have arrived and teams will be reconfigured. Not only that, but leading up to the merger, some former employees will have either been terminated, have resigned, or been reassigned to new things. A brand new organization emerges from two separate ones, with new policies and procedures and ideals. In the best case scenario, a merger will go smoothly and the company will form its new identity without any real trouble. In the worst case, people will push back and things will not go as planned. It's important to focus on helping employees move forward

    This is where all the careful planning of the company’s compensation and benefits will really count. When employees know that they can count on the same, if not better, compensation and benefits, they tend to be happier and more satisfied with the outcome. Work with the management team to stay in touch with how employees are reacting to the merger, if they are taking the time to learn about the new benefits plan, and if they are finding value in this. Use benefit enrollment reports to measure the success of the benefits program. This is a critical time for employee retention, training, and corporate culture building that will last years from now.

    Strategies for communicating mergers and changes to compensation and benefits

    As mentioned earlier, it is absolutely vital to the merging company to have an open door policy in terms of communication. While some aspects of the merger are private only to the executive leadership team, employees do sense that something big is coming and this can create much fear within the organization. It’s far better to be truthful and give the needed facts to employees so they can prepare for the merger, because it also affects their livelihood.

    Some effective ways to communicate a merger that involves a change to compensation and benefits packages include:

    • Introducing employees to the idea of the merger by talking about opportunities in the industry and why the merger positions the company well.
    • A series of internal emails that broadcast the upcoming dates of staff meetings and informal sessions with managers to discuss the changes coming.
    • Full access to individual employee information, including salary history and benefits, so that employees can make informed decisions.
    • Surveys that poll employees on their ideas and opinions so they have healthy outlets for expressing themselves while the merger happens.
    • A point of contact person assigned to address any concerns that employees have about the merger and their work status.

    By following the above pointers, a company merger can successfully take place while maintaining the core team that can take the company the next level.