What Happens to My Wages if My Company Is Being Bought Out?
Original post by Dennis Hartman of Demand Media
Workers rely on their wages to remain financially stable and invest for the future, whether it involves planning for retirement, saving to buy a home or developing an individual investment portfolio. Buyouts, in which one company purchases stock in another to take control of it, can impact workers' wages and ability to invest in both positive and negative ways.
If you lack an employment contract and your new employer determines that your job is unnecessary, or already employs someone who can fulfill it adequately, you may see your wages disappear and experience unemployment after a buyout. Workers on both sides of a buyout risk seeing their wages reduced or eliminated as the new company reassesses its costs, strategy, organization and human resources. Full-time positions that transition to part-time can cause workers' wages to decrease drastically. Workers who lose their wages following a buyout may receive severance packages or employment assistance based on an agreement between the two businesses made prior to the buyout.
Contracts and Negotiating Wages
Some workers will retain their jobs through a buyout and earn a similar or identical wage with the new company. This occurs when an employee's contract specifies continued employment or compensation following a merger or acquisition. Even if an employment contract doesn't guarantee a worker's wages, it may serve as a strong bargaining point in negotiating a new wage and compensation package with the new company.
For workers who survive buyouts, wages can actually increase as the new company seeks to organize its skilled workers for optimal success. A 2010 study from researchers at the University of North Carolina at Chapel Hill and Duke University shows that workers for companies that are bought out who retain their jobs receive average wage increases of nearly 10 percent, while workers whose companies perform buyouts see their wages dip slightly.
Changes to your base wage rate are only one of the immediate effects of a buyout. Other changes typically include alterations to your employer's benefits policy. Here again, two businesses must merge their existing policies, adopting elements from both or selecting one policy that makes more sense financially. A larger workforce may leave your wages unchanged but allow your new employer to provide more benefits at a lower cost. These secondary changes can have as much of an impact on your ability to invest and save for the future as a change to your salary.
- Reish & Reicher; How to Keep Employee Benefits on Track Through a Merger or Acquisition; Gail Reich; June 2000
- Lawyers.com: Protect Yourself in a Merger
- Strategy+Business; How M&A Affects Employee Wages; Paige Parker Ouimet, et al.; May 2010
About the Author
Dennis Hartman is a freelance writer living in California. His work covers a wide variety of topics and has been published nationally in print as well as online. Hartman holds a Bachelor of Fine Arts from Syracuse University and a Master of Arts from the State University of New York at Buffalo.
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