By Globalization PartnersMarch 2016
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M&A activity is heating up in the land down under. Energy, mining and minerals have been at the heart of many large M&A deals in Australia in recent years but the middle market, private sector is quickly becoming the “bread and butter” of M&A activity. Many companies are hiring in Australia, not only because they see Australia as a place for doing business locally, but with surrounding Asians countries as well – China, in particular. There are also other drivers fueling the M&A market like the $5b (AU) Asset Recycling Program, where public utilities are being taken private to fund upgrades to infrastructure, low interest rates and the China-Australia Free Trade Agreement. All these ingredients combined, create the perfect recipe for foreign investment.
Despite the glimmering hope of new markets and assets, dealing with the employment fall out from M&A can be a significant barrier to entry. For any company considering an acquisition in Australia, it pays to do the employment homework up front. Unfortunately, most of that homework is left to an already overworked, US based HR team who probably lacks a thorough understanding of the potential complications.
Here are three things your HR team should consider if your company is planning an M&A transaction in the land down under:
- Existing employees. As a buyer, your company is not obligated to extend an employment offer to the employees of the business it is purchasing. However, since there is no “at will” employment in Australia, the company will likely incur in the selling agreement, fees that cover the cost of termination payments, leave and other entitlement payouts. If the decision is made to keep the existing employees, there will be a significant amount of due diligence to ensure a good fit and determine the transfer benefits.
- Gaining employee consent. Unlike the US where businesses are often acquired without any input from employees as to their transfer, this is not the case in Australia. Employees must give express consent to be transferred. And if they agree and are rehired doing the same work they did before, this will trigger the Fair Work Act of 2009 and a host of regulatory requirements that must be met in terms of benefits. Most employees are well aware of this trigger and will be looking to negotiate a more advantageous deal moving forward. From a regulatory perspective, the new employer must meet a mandatory benefit standard. Balancing employee happiness with regulatory compliance and the prevailing benefits employees in the new entity already receive can get tricky. In many cases, the mandatory minimum in Australia will far exceed what is considered generous in the United States. Truing this up can become a serious headache.
- Long term service. In most cases, the sale of the business is likely to trigger local, long term service legislation. This means that your company, as the buyer, will inherit long term employees’ leave entitlements. Long term leave liability may be something the HR team is asked to help assess before the deal moves forward. Learning as much as possible about this particular legislation is critical.
At Globalization Partners, we work with HR Departments large and small to help unravel the employment morass that comes with hiring overseas, post acquisition in 130 countries around the world. We understand the intricacies and nuances of long term service, mandatory benefits and best practices. We can help you figure out your transfer obligations and assist you with making a smooth rehire with far less risk, in far less time. But most importantly, we help you keep your most treasured employees on board, happy and moving your international venture forward.
Do you have a question about global hiring in general or post acquisition hiring overseas? Reach out to us. We’re here to help!