HR Merger and Acquisition Checklist Part 2


This is a continuation of Part 1

Regulatory Compliance

Aim: To identify any policies or contractual terms and conditions that contravenes employment related laws, including laws on taxes.

Action: Other than looking at all the employment contracts, obtain copies of all existing employee policies, pay plans, employee handbooks, or manuals, etc.  Include any supervisory/manager handbooks and company rules/regulations.

Employment Contracts

Aim: Be alert about staff that are still working without an employment contract. Later, conduct a check on regulatory compliance: hiring age, irregular withholdings and deductions and so on.

Action: Obtain copies of the employment contracts. Check for gaps as well as

  • Are the employment contracts, independent contractor contracts, free lancers contracts in place?
  • What are the different employee and non-employee groups and what are their termination terms and conditions?
  • What do the laws state on termination and retrenchment?
  • Are there special terms and conditions for management staff?
  • Are there special terms for termination due to merger and acquisition?
  • Are the terms and conditions stipulated on intellectual property, confidentiality, poaching of clients and staff?

Manpower Agreement

Aim: The status of any employment agreements will affect the negotiations

Action: Get copies of collective agreement, employment contracts, independent contractor contracts, free-lancer contracts, vendor contracts.

  • When is the next renewal of collective agreement with the trade union?
  • Are there any employees on fixed term or part-time employment contracts? When are the contracts to be renewed?
  • Are there any independent contractor or freelance agreement? When are they to be renewed? What is provided in the termination clause?
  • Is any function being outsourced?
  • Any staff due for retirement or had their retirement extended?
  • Any staff still on probation or have their probation extended?
  • Any staff on work passes? When are they due for renewal or are they overdue?
  • Any staff that have been posted overseas?
  • Are there any outstanding severance agreements to be met?

Talent Exit Strategy

Aim: Avoid having problem with local legislative authorities.

Action: Refer to my earlier article on organizational restructuring, and build a employee list that will help you identify staff that will be affected by the law should the company decide to lay them off.

Work Pass Requirement

Aim: To avoid loss of staff through neglect of work pass requirements.

Action: Obtain a list of staff on work passes.

Talent Acquisition and Retention

Aim: To get an understanding of the recruitment pipelines; the level of staff retention; and the rate of staff turnover. Take a look at the reasons why staff left the company.


  • Obtain a list of personnel who have left employment in the last twelve months.  List last position, length of service with the Company prior to termination, and any severance payments or liabilities incurred.  If known, indicate whether or not employee took a position with an affiliated company.  Identify key employees on the list.
  • Obtain staff metrics for the last 2 to 3 years, to have an understanding of the recruitment rate and attrition rate
  • Obtain records of exit interviews completed and identify the top 5 reasons why staff leave their jobs.
  • Are there unresolved employee complaints and grievances?
  • Are there any pending litigations?
  • Are there departments with high attrition rates?

Performance Management

Aim: To get an understanding of who are the top performers and most valuable staff; possible successors if key personnel should leave

Action: Obtain a summary of the performance scores of all the staff for the last 3 years. Check through the personnel files for records on staff disciplinary and recognition records.

  • Does the company have a performance management system? Is it effective and fair? Has the company been consistently in providing performance review to staff?
  • Does the company practice salary review and bonus payments?
  • What is the methodology used in the payout?
  • Are there any salary adjustments and bonuses that need to be back-paid?
  • Are there policy regarding promotion and succession planning? Are there any succession plans?

Integration (Harmonization) Strategy

The first priority is to align the job grading structure with that being used at the head office. The second priority will be to align the benefits, but with an eye on local practices.

HR Policies and Processes

Aim: Does the acquiring company have a set of HR policies to which the M&A team can fall back on to do some of the early integration while reviewing the C&B programs?

Employee Compensation

Aim: To gain an awareness as to whether the acquiring company has a job and compensation structure. To gain an understanding of each staff’s compensation against the market benchmark.

Action: Obtain the job families, job grades, job descriptions and job ladders. Obtain the current pay ranges and recent increase matrix if available. Obtain details of the various compensation packages, including guaranteed and non-guaranteed components; cash and non-cash components. Obtain the last review date, the performance scores, any salary increase and fixed quantum payout. Obtain the promotion list over the last 3 years. Get an understanding on how non-performers are being managed.

  • Are there any job descriptions? Have these been update? Do they need to be changed?
  • Is there a salary structure? Do the jobs need to be aligned with corporate job grading structure?
  • How is the salary level compared with the industry?
  • Are there any potential new positions that need to be created? Are there any functions that need to be brought back from outsourcing party?

Employee, Sales and Management Incentive Plans

Aim: Check to see if there are retention schemes to hold the higher management staff and whether they are incentivized and not overpaid. Check to see if the sales team is compensated for their efforts and results.

Action: Get a summary of all the incentive schemes in the company as well as the plan details. This should include profit-sharing plan, stock option plan, bonus targets (if applicable), commission targets (if applicable), incentives, special allowances

  • Employee and Management share plans: Are there any outstanding or potential pay-outs?
  • When are the payouts for the sales incentives? Are there grievances due to late payouts, poor designed incentive plans?
  • Are there compensation for senior executive should their services be terminated due to the acquisition?

Employee Benefits

Aim: Get some ideas of the accrued paid leave that are outstanding.

Action: Other than looking at all the employment contracts, obtain copies of all existing employee policies, pay plans, employee handbooks, or manuals, etc.  Include any supervisory/manager handbooks and company rules/regulations.

  • Does the company meet the minimum regulatory guidelines for employee benefits?
  • Healthcare insurance plan: Have the premium been paid? When are they due for renewal? If they need to be terminated, when can it be done and how much of the premium will be refunded? Can the current plan be extended for another 3 to 6 months?
  • Other insurance: Is there a need for term, personal accident and other specialized insurance. The insurance premiums for specialized insurance cover such as kidnapping can be very high.
  • Work Injury Claims: Has the company taken out an insurance cover? Are there any work injury claims that have not been processed? Are there any claims that had not been paid?
  • Pension Scheme: Are there any penalties for outstanding payments? Are there any private schemes in addition to the government mandated schemes?
  • Family Related Programs: Are regulations regarding child care leave, paternity leave, maternity leave and so on implemented?
  • Government mandated funds: Have the regulations been followed? Are there any penalties for oversight?
  • What are the leave schemes and paid holidays? What is the impact on number of working days in a year?

Management Benefits

Aim: Uncover omitted or undisclosed costs in terms of management benefits. To develop disposal or termination or alternative use strategies for things such as:

  • Benefits in kind
  • Lease agreement
  • Utilities and amenities agreements
  • School arrangements
  • Insurance cover
  • Consultancy fees

HR System and Payroll

Aim: Gain an understanding the status of the payroll.

Tax Liabilities

Aim: Uncover omitted or undisclosed business costs in terms of tax liabilities.

  • Are there outstanding tax liabilities with respect to independent contractors?
  • Are there any potential tax liabilities for management share option schemes?
  • Did the company unlawfully withheld money for tax payments?
  • Are there tax returns that need to be filed?

Costing the Transition Program

  • Key talent retention program
  • Review sales incentive targets and incentives
  • Manager training program
  • Technical retraining program
  • Outplacement program
  • Relocation program
  • Retrenchment costs
  • Post-merger team building program
  • Stress reduction program
  • Train managers on how to communicate change

Training Programs and Records

Usually this is not a priority item. If the company decides to change its current software or hardware, training will be something that will be considered.