Strategies for a Successful Merger or Acquisition: Focus On Payroll

In 2014, the healthcare industry saw growth in both the volume and value of merger and acquisition transactions, according to a report from Irving Levin Associates, Inc.  When a merger or acquisition takes place, the workforce is often the first to feel the impact. Labor accounts for up to 54.2% of operating costs,1 and the expense involved to replace a single healthcare worker can equal as much as $88,000.2

Retaining key talent and keeping employees satisfied following a merger or acquisition can be a challenging task, however, if the processes that touch them are carefully thought out and expertly managed, a merger or acquisition will stand a better chance of success. One such area worthy of focus is payroll.

More than any department, employee payroll is under great pressure to ensure a seamless transition for the affected facilities and employees. Receiving a timely and accurate paycheck is a huge satisfier for staff and will go a long way in ensuring a successful transition, post-merger or acquisition. There are several tactics that can easily be deployed by any organization as part of a go-forward plan for integration. If utilized before, during and after the transaction, the chances for a successful and smooth merger and acquisition process will increase.

Include a representative from the Payroll department on the due diligence team

It is important to have a representative from the payroll department review timecards and pay policies of the facility that is to be acquired to help uncover liabilities that would otherwise remain unknown. When Payroll is involved early in the acquisition process, there is more time to plan for integrating pay policies when the acquisition is finalized. This can help reduce the amount of time required to process payroll for newly acquired employees.

Make sure pay policies comply with state and federal wage and hour laws

An acquiring organization assumes the liability for any wage and hour violation of the organization that is to be acquired. Therefore, it’s good practice to review all pay policies of any organization that is planned for acquisition and make necessary updates in advance. It’s important that an attorney who has a clear understanding of both state and federal wage and hour laws that impact the organization complete this tactic.

Standardize pay policies when possible

Healthcare pay policies are complicated, and every facility is unique. During the acquisition negotiation process, pay policies of the new facility should be standardized to match existing pay policies. If this is not possible, the acquiring organization should leverage the flexibility of a time and attendance solution to build new pay rules that will accommodate the new policy.

Plan for bringing the new facilities onto your time and attendance system

It’s important to recognize that integrating a new facility and new employees into existing workforce systems goes beyond placing employees into the system and building any needed new pay rules. Each facility must follow the established timecard review, and ensure practices become part of the culture of the organization to be acquired.

Understand how demands on Payroll resources will impact integration timelines

It’s not unusual to have concurrent acquisition projects. When Payroll resources are being tapped for multiple projects, it’s important to prioritize and understand what must be done first and what can be delayed. By understanding which parts of each project are mission critical and which can wait, integration planning can make the process as streamlined and cost-effective as possible.

Payroll should be part of the due diligence phase, and follow the process though the post-implementation period. By leveraging these suggested tips, the organization can help ensure that all compliance obligations are met, and potential legal and regulatory matters are considered. This will ultimately create an opportunity to minimize liabilities and avoid potential risks that can slow down or impact the ability to pay employees in an accurate and timely manner.

For more information about workforce management strategies before, during and after a merger or acquisition, check out our white paper.

1http://www.beckershospitalreview.com/finance/10-statistics-on-hospital-labor-costs-as-a-percentage-of-operating-revenue.html
2Jones, CB. Revisiting Nurse Turnover Costs: Adjusting for Inflation. Journal of Nursing Administration, 38, no 1 (2008): 11-18

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