Global payroll in mergers and acquisitions: how to ensure a smooth transition

Facing payroll challenges during cross-border mergers and acquisitions? Mauve's Global Payroll services offer a compliant-friendly solution to minimise disruption and keep employees paid on time, every time.

• Effective payroll integration is essential for compliance, financial accuracy, and employee trust during M&A.
• Best practices include early payroll audits, centralised systems, and leveraging global compliance services.
• Partnering with experts can help organisations avoid risks like permanent establishment exposure and payroll errors.

Mergers and acquisitions (M&A), the combining of two or more businesses into one entity, are complex undertakings. This is especially true when they involve international operations. These often high profile, high value transactions involve many moving parts. Beyond aligning corporate structures and cultures, organisations must ensure that their internal processes such as payroll systems integrate seamlessly across borders.

Mishandling payroll during an M&A can create compliance risks, financial discrepancies, and employee dissatisfaction. This is where global payroll management plays a crucial role in ensuring a smooth transition.

For more information, read our Ultimate guide to global payroll.

What are mergers and acquisitions (M&A) and how do they work?

Mergers and acquisitions (M&A) refers to the combining of two companies or the taking over of one company by another.

• Mergers: transactions whereby two or more companies combine to form one new organisation.
• Acquisitions: one company purchasing and absorbing another company.

M&A aims to create strong, valuable entities. The new entities benefit from greater innovation, cost savings, greater market share, and access to new audiences and markets.

In 2024, there were approximately 3,486 mergers and acquisitions involving UK companies. These transactions totalled US $248.6 billion in value. This figure was a significant increase from 2023.

The importance of payroll in M&A

In any M&A, payroll involves ensuring compliance with tax laws, labour regulations, and reporting requirements across jurisdictions. As with any global payroll undertaking, mistakes in payroll can have serious consequences. Financial penalties, impacted retention, and even damage to the company’s reputation are all on the cards.

In 2024, 21% of Irish workers reported that their payments arrived late on one or more occasions. Meanwhile, 27% reported incorrect payments. Employees also view payroll as a reflection of the new company’s competence and reliability.

If payments are late or incorrect, trust in the organisation may erode, affecting retention and productivity. Morale quickly drops when staff feel undervalued. Workers will naturally begin to look elsewhere for reliability and supportive culture.

Global payroll becomes even more significant when companies operate in multiple countries. Each jurisdiction has unique requirements around tax, social security, reporting, and benefits. Without proper planning, integrating these diverse systems can be a daunting task and cause major obstacles.

Common challenges in global payroll during M&A

Managing payroll in cross-border M&A transactions presents several key challenges that companies should be aware of. Compliance with local laws is top of the list. Every country has its own employment and tax regulations. Ensuring compliance across all jurisdictions is complex and requires in-depth local expertise.

If payroll is managed incorrectly, businesses may accidentally create a permanent establishment in a country. This can trigger tax liabilities and compliance obligations. On top of this, data security is a major consideration. Sharing sensitive employee data across systems and countries can expose businesses to GDPR violations and other data protection risks.

Integrating different payroll software, processes, and vendors can result in data discrepancies, reporting issues, and delays. Meanwhile, a lack of clear communication about payroll changes can lead to uncertainty, dissatisfaction, and resistance during the transition.

Best practices for managing global payroll during M&A

To ensure payroll runs smoothly during mergers and acquisitions, organisations should follow these best practices.

Conduct a payroll audit early

Before finalising the deal, companies should review payroll processes in each jurisdiction. This audit helps identify potential compliance issues. It can also highlight discrepancies in salary structures and benefit inconsistencies that need to be resolved before integration.

Standardise and centralise payroll processes

Where possible, businesses should move towards a centralised payroll model. Standardisation improves consistency, reduces errors, and simplifies reporting across multiple locations.

Partner with global compliance services providers

Specialist providers can help businesses navigate complex employment and tax laws. Leveraging global compliance services ensures adherence to local regulations and mitigates the risk of fines or disputes.

Manage permanent establishment exposure

Companies must evaluate whether their payroll structures could trigger a permanent establishment in foreign jurisdictions. Working with tax and compliance experts can prevent unexpected liabilities.

Prioritise data security and integration

Payroll involves sensitive data, making security paramount. Ensuring systems comply with GDPR and other local data protection laws is essential. Integration strategies should include secure data migration and reconciliation processes.

Communicate clearly with employees

Transparent communication helps build trust. Employees should be informed about changes to payroll schedules, benefits, and reporting. Regular updates can alleviate concerns and maintain morale.

Use technology to streamline operations

Modern payroll platforms can unify multiple systems and provide real-time insights into global payroll data. This supports better decision-making and helps maintain compliance across all jurisdictions.

The role of Employer of Record in M&A payroll transitions

An Employer of Record (EOR) can be invaluable during cross-border M&A deals. By acting as the legal employer of staff in foreign jurisdictions, an EOR takes responsibility for payroll, tax compliance, contracts, and benefits. This reduces the risk of non-compliance and ensures employees continue to be paid correctly during the transition.

For companies entering new markets through acquisitions, an EOR provides an immediate, compliant solution for employing staff without the need to establish a local entity. This mitigates permanent establishment risks and streamlines the integration process.

Why payroll accuracy matters in cross-border M&A

Payroll accuracy has strategic implications for the success of the deal. Inaccurate or delayed payroll can damage employee trust and engagement.

It can incur fines and penalties for non-compliance. Financial reporting and due diligence can become overly complex. On top of this, integration efforts across entities can be majorly hindered. Working with a trusted partner ensures accurate, timely, and compliant payroll, builds employee confidence, and creates a smoother path for broader organisational integration.

Global payroll integration strategy

A successful payroll integration strategy during M&A should involve payroll and HR leaders early in the M&A process. It should also align payroll operations with the overall integration timeline.

Centralised systems and global expertise are leveraged to balance local compliance requirements with global standards. Lastly, communication and employee support should be prioritised throughout the integration.

How Mauve Group can help

At Mauve Group, we specialise in supporting businesses through complex global transitions, including mergers and acquisitions. Our Employer of Record and global compliance services help organisations integrate payroll across borders smoothly and compliantly.

With expertise in more than 150 countries, we ensure accurate payroll, manage compliance risks, and provide scalable solutions to support your growth. Whether you are acquiring a company overseas or integrating diverse global teams, Mauve offers the guidance and infrastructure to ensure a seamless payroll transition.

Frequently asked questions

1. How long does it take to integrate global payroll in an M&A?

The timeline varies depending on the number of jurisdictions and complexity of payroll systems. With proper planning, integration can take several months, but early audits and centralisation can shorten the process.

2. What happens if payroll compliance is overlooked during M&A?

Overlooking payroll compliance can lead to fines, tax liabilities, reputational damage, and employee dissatisfaction. In severe cases, it may even jeopardise the success of the acquisition.

3. Can an Employer of Record manage payroll after an acquisition?

Yes. An EOR can manage payroll and compliance for employees in multiple jurisdictions, ensuring a seamless transition while mitigating risks like permanent establishment.