Issues with transfer of staff during M&A transactions

Merger and acquisition (M&A) transactions involve not only the transfer of assets, equity and debts, but also issues with the transfer of staff. Here there are two major concerns: how working hours are counted in the original working unit; and how economic compensations are paid. In this article, the authors briefly analyze these two concerns under different M&A transaction scenarios.

Transformations in labour relations

First, we need to understand how contracted labour relations are transformed under different kinds of M&A transactions. M&A transactions entail acquisitions as well as mergers, which are categorized into two areas:

1. Merger by absorption. This refers to the situation when two or more companies merge, and one of the merging companies takes over the other companies and continues to exist and operate. The contracted labour relationships for employees of the absorbing company do not have any material changes as their employer continues to exist. For employees of the absorbed companies, contracted labour relations will be subject to change as their employing unit changes, even though the work location, nature of work, salary and compensations may not have any material changes.
2. Merger by amalgamation. This refers to when two or more companies are merged in a way that both lose their identities and a new separate entity is founded. For employees under each of the merging companies, contracted labour relations will change according to the changes made to their employing entities.