After a merger, your people want to know what happens to their pay and benefits, and the pressure to answer everything at once is real. The good news is that you can take it in stages. Here’s how to bring two pay and benefits setups together while keeping your best people.
When two companies merge, it often triggers a review of salary and benefits to ensure that everyone is aligned. The harmonization process can be highly challenging, and it happens at a time when there’s a real risk of losing your best people.
M&A transitions can trigger staff turnover, with around 40% of critical talent leaving within the first 18 to 24 months after a deal closes. Not only does this create a staffing shortfall, it also means losing vital institutional knowledge and client relationships.
That’s why it’s so important to look beyond the financial aspects of compensation harmonization. This is an important part of engagement and retention, and it’s a moment where you can begin to shape the culture of the new organization.
The biggest challenges when merging two teams
Most mid-market mergers run into the same handful of pay and benefits problems. Knowing them early makes each one easier to plan for.
Comparable jobs pay differently
The most obvious issue is that two people might receive different compensation for the same job. The situation becomes more complicated when job descriptions don’t fully align, making it hard to perform like-for-like comparisons and create a level salary structure.
Each company thinks about pay in its own way
Behind every pay structure is a set of beliefs about what the company rewards. One company may pay for performance while the other rewards length of service, and the two may aim at different points in the market. These beliefs are part of each company’s culture, so your people will feel it when they shift, even if their paycheck stays the same.
Benefits are a vital part of compensation
Benefits are easy to treat as a line item, but your people experience them at home. The share of recent job changers who left mainly for better benefits doubled from 6% to 12% in a year, and 52% of employees say their wellbeing benefits are a big reason they joined or stayed. Even a minor change in health benefits might have a real impact on your people.
Budgetary pressures
Bringing pay and benefits together rarely comes free. Lifting underpaid people into range, matching benefits and running two setups side by side all add cost. It’s a good idea to price these alignment costs into the deal during due diligence, so the budget is there when you need it.
A phased plan for bringing pay and benefits together
It helps to think of harmonization as a series of stages, each with its own conversation with your people.
Before the deal closes: get to know both pay setups
Before you change anything, take time to understand how each company pays its people, and why. A side-by-side view of pay ranges, bonus plans, job levels and benefits is the starting point. The more useful work is looking for three things inside it.
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Promises already in motion. Check for a bonus cycle that pays out after close, raises people have been told to expect, and any retention or change-in-control agreements. Your people will judge the new company first on whether it follows through on these expectations, at least in year one.
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Risks you’ll inherit. Look at how each company classifies roles as exempt or nonexempt, and run a pay equity check across the combined workforce. Gaps that were invisible inside one company can become obvious once the two are compared, and it’s a good idea to bring in your employment attorney on anything that looks like a legal exposure.
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The people you can’t afford to lose. Name the critical roles in both companies and see where their pay sits against the market. Around 40% of critical talent leaves within two years of a deal closing, so these people’s pay is the first place to look for risk.
It also helps to ask why each setup looks the way it does. A company that pays below market but offers generous time off made a deliberate trade, and its people will notice if you take away the half they valued.
In the first quarter: agree how you’ll pay, and share what’s staying the same
Your people will feel more secure once they understand what the combined company believes about pay. That belief becomes your compensation philosophy, and your leadership team should settle four questions before any number moves:
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Where you’ll sit against the market. Decide whether you aim to pay at the market midpoint or above it, and whether that changes for roles that are hard to fill.
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Which market you’re comparing against. The two companies may have hired from different industries or regions, so agree on a consistent methodology for the combined business.
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What earns a raise. Performance, length of service, or a mix. If the two companies answer this differently, people on one side will feel the change most.
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How open you’ll be about pay. Decide whether people will see their own ranges and how pay decisions get made.
Then tell people early what’s staying the same, and for how long. The questions people ask first are concrete: Will my pay change? Will this year’s bonus be paid? Does my time at the old company still count? Answer the ones you can, and give a date for the ones you can’t.
It’s a good idea to make one clear promise you know you can keep, such as no base pay cuts as a result of harmonization through the next plan year. A specific commitment calms people far more than general reassurance, and it gives you room to plan the rest properly.
Over the first year: move everyone onto one pay and benefits structure
Once you’ve agreed on a philosophy, you can build the structure that puts it into practice. The order matters here, because each step depends on the one before it.
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Agree on the job levels first. Set out the levels and what each one means in scope, skills and responsibility, and get your leaders to sign off before anyone is placed. Leaders naturally want to protect their own people, and agreeing to the rules first keeps those conversations focused on the role.
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Place people by the work they do. Titles rarely line up across two companies, so match people on what the job actually involves and the work being performed. An HR Generalist at one company and a People & Culture Partner at the other may be doing the same job.
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Set a pay range for each level. Build the ranges from the market you agreed on, so every range aligns with your philosophy.
Once everyone is placed, some people will land outside their new range. A good rule of thumb is to bring anyone paid below the minimum into range first, since they have the most reason to feel undervalued. These are often called green circles. People paid above the maximum, known as red-lined, often keep their current pay while their increases are paused. Tell them plainly what that means for their future raises, because silence will feel like a demotion. One option is a lump-sum bonus in place of an increase, which rewards good work without pushing their pay further above the range.
Benefits move on their own clock. Keep the plans people know running while you design the combined package, and make the switch at the plan year or open enrollment, when people already expect to review their choices. It also helps to stagger the changes so no single moment hits everyone at once.
Give both teams time to settle in
Bringing two pay and benefits setups together takes patience, and that patience is how you show your people they matter. Take the stages one at a time and keep people informed, and both teams will come through the change with their trust in you intact.
If you’re planning a merger or working through one now, Helios HR can help:
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Compensation Consulting for organizations that need to bring two sets of pay ranges, job levels and benefits into one
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Strategic HR for organizations that want an experienced partner through the whole integration
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HR Compliance for organizations that need to check pay classification and transparency rules as the two companies combine
Talk to us about bringing your teams together.
Frequently asked questions
What is pay harmonization?
Pay harmonization is the process of bringing two or more pay and benefits structures into one after a merger or acquisition. It usually covers job levels, pay ranges, bonus plans and benefits, so people doing similar work are paid on the same basis.
What are red-circled and green-circled employees?
Red-circled, or red-lined, employees are paid above the maximum of their new pay range, so their increases are usually paused while the range catches up. Green-circled employees are paid below the minimum, and it’s a good idea to bring them into range first.
When should you start planning pay and benefits harmonization?
Start during due diligence. Comparing both companies’ pay ranges, bonus plans and benefits early shows you what alignment will cost, so you can build it into the deal budget and avoid surprises once the deal has closed.
How long does it take to harmonize pay and benefits after a merger?
It varies with the size and complexity of the deal. Pay changes often settle within the first year, while benefit plans frequently run side by side until the next plan year or open enrollment, when people already expect to review their choices.
What happens to employee benefits after a merger?
In most mergers, people keep their existing benefit plans for a while. The combined company designs one package, then makes the switch at the plan year or open enrollment. Staggering changes helps people adjust without feeling a sudden loss.
Should you cut anyone’s pay when harmonizing salaries?
Most companies avoid base pay cuts during harmonization, because they damage trust at the moment you most need it. A common approach is to hold pay steady for people above their new range and pause their increases, or offer a lump-sum bonus instead.
How do you tell employees about pay and benefits changes after a merger?
Tell people early what’s staying the same, and give dates for the decisions still to come. Managers are usually the most trusted messengers, so brief them first and make sure they can answer the questions people ask most often.
Related resources
- Global Benefits During M&A: Turning Challenges into Opportunities (Aon, 2025)
- How Strategic Retention Drives M&A Outcomes (Mercer, 2025)
- Reducing Benefits Is a Short-Sighted Cost-Cutting Strategy (Alight, 2025 Employee Mindset Study)
- MetLife Employee Benefit Trends Study 2025 (MetLife, 2025)