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What happens to redundant staff during a merger?

On Behalf of | Nov 1, 2022 | Business Law

Maintaining growth and sharpening your competitive edge often requires taking bold steps as an executive or business owner. A merger with another company can be a very savvy business move for those hoping to curb a specific market or grow significantly in the upcoming years.

A merger can help you secure new talent, better facilities and access to trade secrets that could give your company more of a competitive edge. Of course, there are inevitably hiccups during mergers. One concern is that at least some of the staff at the companies will become redundant.

You don’t need two fully-formed Human Resources teams unless you intend to operate two completely separate divisions or different facilities. You may want to combine your sales teams and accounting departments. How do businesses handle redundancies in their staff following a merger?

They identify top priorities for retention

Inevitably, you will need to let some staff members go after a merger, and some people will also leave of their own volition. Rather than waiting to see how your staff roster thins out on its own, you can direct the process by approaching key workers at your company and the company you are merging with to offer them incentives to remain with the company after the merger.

The process of identifying the highest-performing and most important workers in different departments at your company can also help you determine which positions you can eliminate and locate the lower-performing workers that you may want to terminate.

They avoid discriminatory practices

One of the biggest concerns for a company merging with another business is that the employees the company lets go will try to take legal action, possibly claiming wrongful termination after the loss of their jobs. If the company isn’t very cautious in its review of major employment decisions, such as who to retain and who to terminate, there could be trends in those decisions that lead to wrongful termination or discrimination claims against your business.

Some of the redundant staff at your business may leave on their own, and you may have to make the difficult decision to terminate certain others. Identifying and preparing for the biggest financial and legal risks associated with business mergers can help you more safely navigate an upcoming transaction.