How to Prevent Salary Inequality During Mergers and Acquisitions

How to Prevent Salary Inequality During Mergers and Acquisitions

This article was updated on Oct. 2, 2018.

Mergers and acquisitions (M&As) can lead to salary inequality between employees holding similar positions. According to the Society for Human Resource Management (SHRM), talent management, benefits and compensation are among the major pain points for finance and HR leaders during M&As.

Reevaluating Salaries During a Merger and Acquisition

In any merger or acquisition, some job attrition is expected as duplicate positions are eliminated and other salaried positions are altered, eliminating some positions and readjusting the duties of others. A merger or acquisition is also a good time to reevaluate what you're paying people for salaried positions compared to others in your industry. Insight into salaries for similar positions in different industries can help make sure you don't lose talent after the transition. But the equalization of salaries is not a simple matter of attempting to match dollar amounts.

Here are three factors to consider.

1. Consider Other Forms of Compensation

Incentive compensation, bonuses or PTO benefits may have been significantly different between each organization involved in a merger or acquisition. Any payment equalization will need to take these compensation differences into account. SHRM notes that bringing everything into alignment in a single pay period is usually impractical, so look to make adjustments over one or more pay periods. For key staff members, you may want to offer retention bonuses to be paid out several months after the completion of the business transaction. This can help ensure the talent you want to retain doesn't leave shortly after completion of the deal.

2. Assess Location

When looking to correct any salary inequality for a merger or acquisition, remember to take regional economic differences into account. You may be able to pay a manager less but still consider it equal compensation based on where they live.

3. Rely on Benchmarking

Remember that a merger or acquisition also involves key executives and managers reevaluating their status within the successor organization. So you may be looking to adjust salaries not only for equalization within the firm, but also to make sure salaries are in line with similar jobs at other businesses. If salaries don't keep up, you could be in danger of a talent drain that could hurt the successor organization in the short term and over the long run. However, overpaying for talent will limit corporate profits. So you want to carefully evaluate salaries for certain levels of talent inside and outside of your industry.

When making an evaluation of salary equality, keep in mind that salary surveys could contain inaccurate and inflated averages for salaries. It's best to rely on real data that you can obtain from a payroll services provider. The provider will have details about what people in different positions are actually earning and will be able to advise you on regional differences, total compensation packages and other factors essential for aligning pay structures following a merger or acquisition.