How workforce integration can make or break cross-border M&A
The long-term success of cross-border mergers and acquisitions relies heavily on treating workforce integration as a strategic work stream, not as an administrative afterthought.
M&A deal teams are typically organised around legal completion, financial consolidation and operational synergies. This can mean that, all too often, employment issues are treated as an administrative follow-up – something for the HR team to handle after the deal has completed.
However, this approach has the potential to introduce key risks to the longer-term success of the deal. In many jurisdictions, employees are transferred to the acquiring company under terms protected by law, without the need for new contracts or individual consent.
While this may be relatively straightforward from a legal perspective, the acquiring employer inherits employee expectations and liabilities, reporting obligations and benefits arrangements from day one, as well as a number of statutory deadlines that begin counting down immediately.
This article looks at the influence of regulations, business policies and practices in one European jurisdiction, Poland, to illustrate the broader point that workforce integration extends beyond employment contracts. A relatively standard merger in Poland can trigger obligations across:
- Employment law
- Employee consultation and communication
- Payroll administration
- Social security administration
- Employee benefits
- Workforce documentation
- Collective agreements
This highlights the wider reality facing multinational employers: if workforce integration can be this complex in one jurisdiction, organisations managing cross-border mergers across multiple jurisdictions face significantly greater challenges.
Employee transfer versus workforce integration
While the transfer of employees to a new company is mostly a legal matter, workforce integration as a business issue.
The transfer is process-driven and largely prescribed by statute; integration involves complexities around ensuring people understand what has changed, that their pay is correct on the first payroll cycle after completion, and that key employees are still on board six months after the deal closed.
Poland offers a useful illustration of the importance of workforce integration, not because it is unusually difficult, but because it shows how quickly a standard employee transfer can spread into employment legalities, payroll, benefits, tax, social security and internal policy.
Liabilities transfer with people
In many jurisdictions, an acquiring company inherits not only the employee contracts themselves, but also all associated terms and conditions: salary, seniority, accrued leave entitlements and any collectively agreed benefits.
Crucially, the acquiring company is also jointly and severally liable for obligations that arose before the transfer date, including unpaid wages, holiday pay and outstanding social security contributions.
In Poland, this is covered by Article 23¹ of the Labour Code, which stipulates that the acquiring employer becomes party to existing employment relationships. This is in alignment with the EU’s Acquired Rights Directive (2001/23/EC) and legislation in other countries, such as the UK’s Transfer of Undertakings (Protection of Employment) (TUPE) regulations.
This exposure is one of the most commercially significant aspects of any merger or acquisition involving employees, and should form a core part of pre-deal due diligence. Acquirers should establish exactly what will be inherited: contract terms, working time and leave balances, overtime practices, contingent workforce arrangements and the liabilities behind them.
Communication as a retention tool
Without effective communication about a merger or acquisition, employees tend to compare notes as soon as they hear about any deal.
If they do not hear what is changing and what it means for them, they may well fill in the gaps themselves, often acting on incomplete information before any formal communication reaches them. It is crucial to identify critical talent early on in the process, and plan when and how they will be communicated to before completion.
Polish law requires the transferring employer to notify each affected employee in writing at least 30 days before the transfer. The notification needs to cover the anticipated date and reasons for the transfer, the legal, economic and social consequences, and any planned changes to employment conditions. If trade unions are involved, employee representatives need to be consulted on the same timeline.
In the two months following a transfer, employees may terminate their employment with seven days’ notice. This does not constitute a dismissal and does not trigger any severance obligation. However, it has the potential to remove people at precisely the moment where continuity matters most.
Employee experience is crucial
Without proper handling and communication, issues can arise around entitlements and benefits when two workforces are combined under one employer. Any differences in entitlements can surface quickly through casual conversations between colleagues, rather than through a clear, accurate official statement.
Under Poland’s rules for Employee Capital Plan (PPK) schemes, a merger triggers a mandatory reset. Within seven days of the transfer, the acquiring employer must conclude new PPK participation agreements for transferred employees. Opt-out declarations previously submitted to the acquired entity expire automatically. Employees who had chosen not to participate are re-enrolled by default, and will have contributions deducted from their salary unless they submit a new opt-out declaration to the acquiring employer.
If performed correctly and proactively, this is a routine administrative step. If handled purely in the background, employees might just see it as an unexplained deduction on their first payslip after the deal.
Internal policies live on after the transfer
Terms derived from a collective agreement that were binding on the acquired entity continue to apply to its transferred employees for a year after the transfer, unless the acquiring employer’s own agreement is more favourable, or a new agreement is concluded.
Internal rules – including salary rules, work rules and employee fund regulations – continue to apply until superseded. This means harmonisation should be treated as a programme with its own timeline, and not as an event that concludes at closing.
Cross-border M&A activity is never straightforward. Notification periods, consultation requirements, employee protections, statutory savings schemes and reporting obligations differ between jurisdictions. It is never safe to assume that an approach validated in one market will hold in the next.
A single acquisition in one overseas jurisdiction can generate significant complexity. A multi-country transaction requires local expertise in each jurisdiction, coordinated centrally, with one integration timeline.
Four priorities for M&A leaders
Given the potential pitfalls of workforce integration following a cross-border merger or acquisition, it pays for business leaders to prioritise four key activities.
- Begin workforce due diligence early: identify employment liabilities, workforce risks and documentation gaps while they can still influence deal price and structure.
- Bring in payroll and compliance teams from the start: payroll continuity, historical data migration and registration deadlines are set long before the first post-deal pay run.
- Build an employee communication strategy before the deal is public: employees should hear about any changes, and what they mean for them, from their employer first.
- Set a workforce harmonisation roadmap: contracts, benefits and policies align over months, not on day one, and the harmonisation process should be planned proactively.
When it comes to cross-border M&A, workforce integration should not be treated as the administrative follow-up to a deal, it has the potential to protect, or erode, deal value. it has the potential to protect, or erode, deal value.
Companies that treat it as a strategic work stream – one that is resourced early, coordinated across HR, payroll, tax, legal and compliance, and sustained beyond closing – integrate faster, have lower compliance risks, and keep more of their combined talent.
Learn more about our M&A services or speak with one of our M&A experts to find out how we can support your workforce integration.
