By: Natasha Hawker
Now things seem to be looking up are you thinking about a merger or acquisition? Many SMEs decide one of the quickest ways to grow your business is to buy another one.
There is a lot of due diligence required around the financials, compliance and other legalities – but there are also the legal requirements if you want to take on the seller’s employees – if you are considering this I would recommend that you complete the following checks:
* review all employment contracts – it’s likely you will find a wide variety of them – which, as the new owner, you will need to meet the BOOT test (more on this later)
* personnel file audit – what are the performance levels of the current employees
* what are the absenteeism rates like? – if high, there may be an underlying problem
what is the current percentage rate of attrition? – is this managed or unmanaged ?
* what type of training is recorded? What’s the frequency of this
* what are the accident or near miss rates like?
Collecting and analysing this information will provide you with a wealth of knowledge about the employee footprint and will also provide the value proposition of the employees, (or alternatively the problems you are about to inherit).
Example – I knew of a company that had casual employees on permanent contracts – not great but not the biggest problem – these employees had upwards of twenty years service. The buyer did not check the personnel files, so has just inherited a massive liability in terms of long service leave and redundancy payouts. Now obviously the seller did not share this piece of information and had they, the sale may have proceeded but it would have likely affected the price.
If you are looking at transferring employees across to your company and a warning up front – this is a complex area of employment law, you must pass the ‘BOOT’ or the Better Off Overall Test. This effectively means the employees transferring across cannot be made to settle for employment conditions less or lower than their current situation. This is beyond compensation and could cover conditions such as additional annual leave or guaranteed training budgets. A further consideration is – how will this impact your current team when they find out the new guys are on a better deal?
Have you had any experience positive or negative experiences in this area?