Managing differing pay levels as part a merger or acquisition

We were recently approached by an employer who was faced with the challenge of managing differences in pay levels between two companies as part of a merger.

This is a common challenge, particularly for organisations that have grown through merger and acquisition. Indeed, many do not address pay inconsistencies for many years. The key issue when comparing the pay for two organisations that have merged is to compare the data on a like-for-like basis. Often the two companies will not have a consistent way of labelling their roles, which will need to be overcome by cleaning and categorising the job titles into a single list without duplicates. To do this it is also important to define the roles properly. So the starting point will be Job Descriptions or Role Profiles and whether the scope of each role can be compared.

The best way to compare like-for-like work is by grading each set of roles, or using a similar underlying hierarchy. Again, the two companies may use completely different grading systems, so it will be important to balance how accurate the comparison between the two systems are. If one company uses a system that is not granular enough (i.e. it uses broad bands) or worse, does not have a system at all, it may be worth applying the other companies’ system to their roles.

Whilst the above may be the ultimate goal, a lack of time and resources (and budget) may mean this is impractical in the short term. In such cases, a simple mapping of the two companies’ roles to each other may be enough; the pay levels can then be compared on a job-by-job basis, or across all roles at the same level of seniority.

It is worth noting that equal pay legislation in many countries (particularly in the UK) consider the subsidiary companies to be under one umbrella parent company. As such, once the two companies merge, there is an expectation that the pay should be aligned and therefore be consistent. This is an important point as, for some organisations, this is a key driver to address the differences in pay levels.

If you are currently facing similar challenges, get in touch today to see how we can help.