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An Employer of Record (EOR) is a partner that can help businesses with the administrative and compliance aspects of hiring employees through various company phases — from launch all the way through to acquisitions, mergers, and spin-offs.
Undergoing one of these processes requires careful HR management to ensure a smooth transition of payroll, benefits, and other HR processes to the new company. This article will cover the ways an EOR like Remofirst can support businesses going through mergers, acquisitions, and spin-offs.
HR operations are one of the key considerations in any transaction involving a merger, acquisition, or carve-out. Once the transaction closes, payroll, benefits, and other HR processes are typically disconnected from the original company and transferred to the new one. This means that the newly formed company will need new structures and solutions in place before the transition is complete — adding complexity and urgency to the process.
In some transactions, there will be enough time for the preparation of new entities, new payroll solutions, and customized benefit offerings, but the tight deadlines mean that, in most cases, the company doesn’t have enough time to put all of this in place.
Add to this mix a global workforce spread across multiple countries, and the process becomes even more complicated — making an EOR partner an attractive alternative to the headache of managing it alone. The EOR provides all of this HR infrastructure ‘off the shelf,’ enabling the buyer or new company to transition their team quickly and smoothly after the transaction closes.
The many benefits of using an EOR service provider during acquisitions, mergers, and spin-offs include:
Remofirst has extensive experience in these situations and has helped a number of customers successfully execute spin-off and carve-out transactions in a timely manner while creating a great experience for the impacted employees.
For instance, in January 2023, Remofirst was brought in about 30 days before the close date of a carve-out to support some of the employees of the entity being acquired who would not have the support of an existing entity or payroll process once the transaction closed.
The Remofirst team had to move fast to ensure a few key services were delivered prior to the close date, including the following:
Let’s take a look at some of the processes we can support you with and the information you will need to provide.
The first thing we need to understand is the timeline of the deal, and how this impacts a potential start date, so we’ll probably ask you when you expect to close the transaction and how solid the timeline is. The reason we need to know is because close dates tend to shift often, so this can be a moving target.
We’ll also need to know where there is a Transition Service Agreement (TSA) in place. A TSA is an agreement between buyer and seller companies (or divested entities) in which one entity provides services and support (i.e., IT, finance, HR, real estate, payroll, etc.) to another after the closure of a divestiture to ensure business continuity for a predefined period. Typical TSAs can range from 60 days in a smaller transaction to as long as one year in some higher-value transitions.
The answers to these questions will help us understand your needs and propose the most appropriate solutions.
To ensure the transition is as efficient as possible, we will also need to understand what solutions the company already has in place. This will help us assess how we can best replicate the current systems and benefit offerings.
Remofirst can provide a detailed side-by-side comparison, covering topics like health, dental, vision, and pension plans, as well as specific issues like replicating payroll schedules, technology solutions, integrations, and reporting capabilities.
In many cases, Remofirst can provide a like-for-like solution. If a comparable solution doesn’t exist in our current set of capabilities, we can often cover this with some sort of cash stipend.
Additionally, if a benefit capability is not currently available but is essential for your business, we can look into engaging a broker to put this benefit in place.
The process for matching the benefits for employees — especially in Europe — is dictated by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), and its purpose is to protect employees if the business in which they are employed changes hands. Its effect is to move employees and any liabilities associated with them from the old employer to the new employer by operation of law.
Another important consideration is employee tenure or seniority. In most countries, the longer an employee is employed with the same company, the more benefits they accrue. These could include additional notice periods for termination of employment, extra paid time off allowances, and more.
You will need to communicate with Remofirst if you intend to transfer these accrued benefits to the new entity. In general, this is something we can assist with. However, transferring these accrued benefits can create additional risk for Remofirst and our local partners.
For example, if an employee is owed six months of severance pay upon termination, that creates a significant liability for any EOR. As a result, we may request additional deposits or encourage you to pay out these benefits in advance of employing your team under our local partner.
A reliable EOR partner can help make the transition process smooth for businesses going through a merger, acquisition, or spin-off.
The Remofirst team can support you with our valuable experience, competitive pricing, and round-the-clock customer service. To learn more about the costs of partnering with an EOR like Remofirst, check out our article on Employer of Record pricing.
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