The Deal Closed. Then the Payroll nightmare began.

By Cherie Griffiths | Payroll Consultant, Australian Payroll Association

Why the biggest risk in any merger or acquisition might be sitting quietly in payroll and nobody thought to ask about it until it was too late.

The first I heard of an acquisition I once worked through was after it had already settled. What I was handed was an employee's bank account details and their start date with our company. That's it. No leave history. No industrial instrument. No warning about what had actually been promised to staff.

When I asked for the full Masterfile, each employee's original start date, and whether we were responsible for finalising the outgoing employer's Single Touch Payroll year-to-date figures, I was met with genuine confusion. Nobody had even considered the question.

When There's No One Left to Ask

The complication that turned this from "annoying" into "genuinely risky" was timing. The previous business owner had closed up entirely by the time any of this came to light. No forwarding contact. No one left to ask.

Where original start dates and leave history couldn't be confirmed, I had no choice but to apply presumptions, and every one carried risk. Breaks in service and periods of leave without pay were invisible to me, so the leave balances I loaded could easily have been wrong in either direction.

Then came the second landmine. It later emerged the employees were covered by an enterprise agreement that was well out of date and had never been provided to us, despite employees already being told nothing about their pay would change.

It wasn't just about the business purchase. More information was needed, and it was needed before settlement, while there was still someone left to ask.

The Fair Work Act Doesn't Care Who Knew What

What happened is not simply poor handover. It's a well-known trap under the Fair Work Act: where a transfer of business occurs, an enterprise agreement is a transferable instrument that follows employees to the new employer automatically, whether or not the new employer knew it existed, and even where the new employer already has its own agreement or award. Certain entitlements, including personal and carer's leave, transfer regardless of what either party intended.

And here's the kicker: an agreement that's passed its nominal expiry date hasn't lost its legal force. "Expired" doesn't mean "gone."

Structure Changes Everything. But Payroll Is Rarely Told Which One Was Used

Deal structure changes what actually applies, but payroll is rarely told which structure was used. A share purchase means the employing entity never changes, so contracts and agreements simply continue as they always have. An asset purchase is what triggers the transfer of business provisions described above.

Whichever structure is used, the practical outcome for payroll is the same: complete, accurate information is needed before day one, not requested once the deal has already closed.

Mergers Bring a Whole New Set of Headaches

A true merger (two workforces combining, rather than one absorbing the other) raises further questions again. Where both businesses have their own award or agreement covering similar roles, there's no automatic answer as to which applies going forward, and it's entirely possible to end up with two people doing the same job on different pay and conditions.

Someone also has to decide whose payroll system and pay codes the combined business will run on, rather than simply importing one employee list into an existing setup. Overlapping roles can also trigger genuine redundancy and consultation obligations that a straightforward acquisition doesn't raise in the same way.

The Questions Due Diligence Teams Keep Missing

• What is the actual deal structure, a share purchase or an asset purchase, and does it trigger the transfer of business provisions under the Fair Work Act?
• What industrial instrument genuinely covers these employees, has the actual document been sighted rather than assumed from job titles, and if it has passed its nominal expiry date, does everyone understand that this does not remove its legal effect?
• What accrued leave entitlements, annual, personal and long service, are being inherited, and has this been quantified as a liability rather than left as a data field to sort out later?
• What has already been communicated to employees about their pay and conditions, and has that communication been checked against what is legally accurate?
• Is there any known or undisclosed history of underpayment, and who carries that risk once the deal has settled?
• If this is a merger rather than an acquisition, whose industrial instrument applies where both businesses have one covering similar roles, and has that been resolved before employees find out they're on different terms?
• Whose payroll system and pay code structure will the combined business actually run on, and has that decision been made before data migration starts rather than during it?
• Has payroll been given complete employee data, including TFN declarations, superannuation details and STP year-to-date figures, before day one, not after it?
• Will the seller, or whoever holds their records, still be contactable after settlement if data turns out to be missing, and if not, is there an agreed, documented process for the assumptions used rather than ad hoc decisions made under pressure?

Why This Matters to Every Payroll Professional

When these questions go unasked, the impact lands squarely on payroll. Leave balances get built on guesswork rather than fact. Entitlements owed under an agreement nobody knew existed go unmet for months then need correcting all at once. Employees lose trust in a new employer before they've even met them.

None of this is about slowing a deal down. It's about recognising that payroll holds the information needed to protect both the buyer and every transferring employee, and the earlier that information is sought, the fewer surprises show up in month one.

The lesson from my own experience is a simple one: ask the questions while there's still someone left to answer them.