Ed Llarena, Jr.
Owner/ Managing Partner
Human Resource
Pam Parker

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hi all,
in any merger or takeover scenario when the salary structure of the 2 companies are different, in order to bring all the employees under one common payroll, can we reduce the existing basic pay of an employee when doing the new salary fitment for them keeping the gross annual pay constant

From India, Hyderabad
The answer to this totally depends on your individual circumstances. First, is there any local law that would keep you from doing it (in the Us, the answer is probably no), then look at whether there are existing employment contracts with any of the employees, or a union contract that would keep you from lowering salary. If not, then the terms of the merger agreement can address this.

From a non-legal point of view, lowering the salaries of employees as a result of a merger is not an appropriate decision and/ or action to take.
It will create a lot of demoralization among employees. It can also result to union unrest and strike.
In many mergers that I know, the salary issue is either "constant" (status quo) or "upward".
The dominant and surviving organization in mergers normally has better salary rates than the company that is absorbed.
But, when the surviving entity takes over a company that has higher salary rate, it is presumed that the company is ready to adjust its rate to the level of the newly acquired company.
Hence, the normal employee reaction is positive and hopeful, although the new organization can always decide to have a "temporary status quo", to avoid any additional cost arising from the merger.
Best wishes.
Ed Llarena, Jr.
Managing Partner
Emilla Consulting

From Philippines, Parañaque
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