Stay on Top With an HR Due Diligence Checklist

Even though a company merger is full of opportunity, it can be nerve-wracking for employees worried about job security and the many changes that come with mergers and acquisitions. Nearly three-quarters of workers define their sense of purpose by their jobs, which makes changes in the workplace especially overwhelming. This means you can’t inner workings of the company that you are acquiring and expect a smooth transition. 

Your human resources department is the main point of contact for employees that are feeling nervous, and you can provide guidance and reassurance during the transition with the help of an HR due diligence checklist. Never heard of that? Don’t worry, we’ll break it down for you.

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What Is HR Due Diligence?

The idea behind due diligence is to ensure a smooth transition during the acquisition or merger process. The acquiring company is responsible for analyzing the human capital and HR policies and procedures of the company that they are obtaining to identify any areas of weakness. From there, they can improve the existing processes or implement new ones to boost the overall efficiency of the organization as a whole. 

As part of the acquisition checklist for HR, the acquiring company looks at many factors, including workplace relations, company culture, employee agreements and benefits, and training and development processes. This can help find areas of similarities, as well as differences that will need to be addressed during the transition process.

Why Is HR Due Diligence Important?

The HR due diligence checklist is intended to make the transition a breeze for everyone involved. It can provide valuable peace of mind to employees at the company being acquired worried about a merger. Take a close look at the inner workings of the business to preempt any future conflicts. By taking the time to handle the transition properly, you can boost loyalty and maintain optimal employee performance. 

How Long Does the HR Due Diligence Process Take?

You should expect at least a month or two to complete the HR due diligence process. It will vary, however, depending on the size of the company being acquired and the degree of improvements that need to be made. You may be pleasantly surprised to find that most processes are up to your standards, or you may need to implement more extensive changes that will take a little longer. 

HR Due Diligence Checklist

Now you know what HR due diligence is and why it’s important, what do you actually need to look at? The checklist can be broken into four main sections: a current staff overview, a review of the target company’s HR policies, a review of the HR legal and compliance issues, and a review of the HR benefits.

• Current staff overview. This includes looking at the number of employees, their salaries and responsibilities, and how long they have been with the company. You should also look into the ongoing training and education plans that the company has paid for and an operational expense breakdown. An audit of the HRIS system can also offer valuable insight.
• Review of the target company’s HR policies. Examine any policies about discipline, leave (including sick and parental leave), the employee handbook if one exists, and the code of conduct.
• Review of the HR legal and compliance issues. Be sure you are familiar with the details about the employment contracts of current employees, non-compete contracts, informal workers and freelancers, and confidentiality agreements in place.
• Review of HR benefits. Take a look at both monetary and non-monetary compensation, commissions and bonuses, and severance plans to ensure you understand what the current employees expect. You should also be familiar with details about employee health insurance plans and pension, retirement, or savings plans that are available for current employees. 

Make Sure You Understand HR Due Diligence Responsibilities

You can tailor the checklist to meet the specific needs of your company, but it is important to understand the basics and why it is beneficial to a smooth transition. Wellhub is here to support HR professionals and help you support your employees, even during the acquisition or merger process. To learn more, talk to a Wellbeing Specialist today. 

References: 

• Checklist: Acquisition HR Due Diligence. SHRM. (2022, April 26). Retrieved January 9, 2023, from https://www.shrm.org/resourcesandtools/tools-and-samples/hr-forms/pages/acquisitionchecklist_human%20resources.aspx
• Dhingra, N., Samo, A., Schaninger, B., & Schrimper, M. (2021, April 5). Help your employees find purpose-or watch them leave. McKinsey & Company. Retrieved January 9, 2023, from https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/help-your-employees-find-purpose-or-watch-them-leave
• HR due diligence checklist: Mergers & Acquisitions. IRIS FMP. (2021, November 19). Retrieved January 9, 2023, from https://fmpglobal.com/services/global-mergers-acquisition-consulting/mergers-acquisitions-hr-checklist/
• HR Due Diligence: How to do it seamlessly. ANSARADA. Retrieved January 9, 2023, from https://www.ansarada.com/due-diligence/hr
• Patel, K. (2022, May 26). How to Efficiently Conduct HR Due Diligence. DealRoom. Retrieved January 9, 2023, from https://dealroom.net/blog/how-to-conduct-hr-due-diligence