M&A Checklist: Human Resources Due Diligence

Checklist of the usual Human Resources information requests:

  1. Provide copies of recent organization charts and a description of your management structure, including principal functional areas, head count by area, and reporting relationships.
      
  2. Provide job descriptions or job ladders for all major job categories—include minimum education and experience levels required.  If any special skill sets are required, please note.
      
  3. Provide current pay ranges and recent increase matrix (if available).  If you have multiple ranges or use different ranges in different geographical locations, please provide all.
     
  4. List current personnel (including lists of officers and directors) with hire dates, current annual salaries, bonus targets (if applicable), commission targets (if applicable), years of service with the Company, site location, highest educational degree, and prior experience, if available.  Include annual stock option run-rate, if applicable.  Indicate last review date if you are on an anniversary review.  If on an annual review, indicate last date and average increase.  Identify any accrued vacation time per employee.  Identify key employees on the list (asterisk or label "key").
     
  5. List personnel who have left employment in the last twelve months.  List last position, length of service with the Company prior to termination, and any severance payments or liabilities incurred.  If known, indicate whether or not employee took a position with an affiliated company.  Identify key employees on the list (asterisk or label "key").
     
  6. Provide employee turnover information for the last two years, including and excluding employees that have been terminated.
     
  7. Describe the payroll process including who processes (provide company name if payroll processed externally), frequency of paycheck distribution (list time frames; i.e., monthly, every two weeks, on the 1st and 16th, etc.).  Indicate the frequency and timing of commission payouts (monthly, every two months, etc.) and whether it differs from the normal payroll processing.
     
  8. Provide a copy of all employment or employment-related contracts with current or former employees—all prior employment-related commitments.  Please be sure to include any severance agreements as a result of change in control issues.
     
  9. For International employees, please provide a copy of the employment contracts.  If contracts are not in English, please have translated.  Again, if there are any special severance agreements that might be triggered as the result of change in control issues, please include.
     
  10. Provide copies of all existing employee policies, pay plans, employee handbooks, or manuals, etc.  Include any supervisory/manager handbooks and company rules/regulations.
     
  11. Describe all vacation, sick pay, paid time off, holiday, sabbaticals, and other employment policies.  For each, discuss eligibility and accrual rates, days accrued, and how they are monitored.  If carry-over is allowed, please discuss and indicate maximums, if any.  If you treat any class of employees differently (non-exempts, executives, etc.), please indicate the policies used.
     
  12. Describe the sales commission plan.  For each employee on commission, please provide a copy of the commission plan agreement.  If individual agreements do not exist, indicate target commission amounts per employee (can be done under #4).
     
  13. If you have an incentive plan, please describe.  If the incentive plan is for a select group of employees, please indicate who is eligible.  If you have multiple plans, please discuss each separately.  If an employee is eligible for more than one plan (i.e., commission plus MBO) please discuss and indicate who is affected.
     
  14. If you have a profit-sharing plan, please describe.  Include a copy of the actual policy detailing eligibility, payout requirements, payout amounts, etc.
     
  15. If you have a stock option plan, indicate when options are granted (new hire, review time, promotions, discretionary, etc.).  If you use a matrix for granting stock, please provide.  If you vary your grants for International employees, be sure to include the information specific to the International sites.  Please include the typical vesting schedule for options.  Indicate if vesting differs given whether the stock is New Hire or renewal.  How is the stock granted (for one year . . . 
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