Questions and Answers on Credit Union Mergers

Questions and Answers on Credit Union Mergers


Last month’s’ article on Do’s and Don’ts in Credit Union Mergers generated a great deal of interest and lots of questions.


Where people, culture and change are concerned, life can be complex. Where employment law is concerned, it can seem like a minefield at times.


It has to be acknowledged that many credit unions have over the last 10 years worked hard to improve their own and the sector’s current and future state. The number of credit unions have reduced from 428 in 2006 to 281 today and presently there are approximately 27 mergers in progress. There are now 50 credit unions with more than €100m of assets and 115 with less than €25m of assets

However it is widely acknowledged that there are many factors that will continue to put pressure on the longer term viability of the credit unions and therefore the need to continue the good work of the last ten years. This will include changes to products, services, systems but also to staff, skills and management.


This month’s article answers many of the additional questions raised about mergers.


Where last month’s article concentrated on the post-merger period, deriving benefits from restructuring and and the actions that should be taken pre-merger, this month’s article looks more at the post-merger period and at several employment law related areas.


Below is a compilation of some questions and answers about credit union mergers.

Questions and Answers on Credit Union Mergers




1. What about TUPE? Do we not have to transfer all staff and management if we are merging? Of course, as a credit union, you must comply with the TUPE legislation. That means that all staff in the employment of the transferor on the day of the transfer must be transferred on their existing terms and conditions of employment (except for occupational pension scheme) and their length of service. The key here is staff in employment on the date of the transfer. If it is clear from your due diligence that there are staff or management in the transferor that are surplus to requirement after the merger, why would you consider transferring them and either a) creating jobs to suit their skill-set or b) plan to run severance programmes after the merger.


Our experience is that creating jobs around transferring staff that are really surplus to requirements after a merger does not work in the long-term, and, is of course, cost increasing.


Our view is that the transferor may have to take tough measures, which may be painful, to slim down their operation to the right size pre the merger. This is in compliance with legislation.


These are all difficult discussions for every credit union, its board and management, and no one wants to see people losing their jobs. However, credit unions have to be sustainable and viable, and adding one credit union to another credit union should offer opportunity to gain economies of scale, in this case on the people side. These are of course the most difficult discussions of all, but they do need to be considered in the totality, based on what is good for the merger and for each credit union.


2. What about right-sizing after the merger? Can we make changes after the merger? After a TUPE, it is possible also to right-size the operation, but there are several risks attached and management time will be severely taken up with such a right-sizing and means diverting from other mission critical needs.


Under the ETO (economic, technical and organisational) principle of the TUPE legislation, right-sizing can take place for any of the ETO reasons.


Thus, if you now have 2 Credit Controllers and only need 1 post-merger, you will need to run a fair, reasonable and transparent selection process to determine which Credit Controller from the pool of 2 Credit Controllers will leave and who will stay.


Selection could be based on the LIFO (last-in first-out principle). Bear in mind that the Credit Controller from the incoming credit union will have transferred with the years of service.


Selection could also be based on a matrix comprising of experience, qualifications, length of service, and such like.


Either way, this is a time consuming and challenging process, particularly for the Credit Controller in the transferee who is now at risk of losing their job because of the transfer of the incoming credit union.


All risks for Unfair Dismissal have now passed to the transferee, as have the costs associated with any redundancy.


3. Can we run a Voluntary Severance scheme? Yes. Voluntary severance is overall the most appropriate way to handle over-staffing. However, this will take some time to organise and manage. There will be associated costs. There will be time associated with managing the process, and staff and possible union engagement. There may be challenges associated with it. And ultimately, the right number of staff or the right staff for the future of the merged credit union may not accept a voluntary severance option as they may not see it as compatible with their needs.

Consideration may also be given to a voluntary severance scheme outside the context of a merger process. This may arise in the context of a credit union ensuring they have the right skills on board for future requirements and ensuring that the skills they do have on board are being fully utilised to meet members service, regulatory and supervisory requirements.


4. How can we assess how well that staff or management will adapt or change after the merger? The best thing would be to test this with the transferring staff before the merger.   Set out what you will need the staff and management to do, if retained, after the merger. How will their roles be different? What will be their change in hours? What will the new opening hours be? What systems will they be working on? What way will the procedures and practices change?


If staff and management don’t agree before a merger to changes that you know you want to bring about, then what hope is there after a merger, at which stage they will be secure in their positions having transferred under TUPE.


In the discussions that happen beforehand, staff should be at their most flexible to change; afterwards maybe too late.


A Task, Skills, Qualifications, Soft Skills and Flexibility Matrix could be set up which outlines the way it is now before the merger, and sets out with each staff member what will the requirement after the merger.


There would also be indications in how well staff have progressed to take on training and qualifications in the past number of years. Staff who have not progressed by now, are unlikely to progress in the future in the new entity.


Running a small, say 5-person credit union, is an entirely different proposition to being part of a senior management team in a credit union that has say 20 – 30 staff. Most managers and assistant managers find that transition very difficult. However, this depends on their own background, experience, and qualifications. Those who have worked in other sectors or in other companies in the financial/banking services sector, and who have broad and deep experience as well as qualifications and an experienced and adaptable skill-set can, and often do transition very well.


5. Do we not have to harmonise or equalise pay and conditions after a merger? No. TUPE does not require you to harmonise pay and conditions after a merger. It only requires that you maintain transferred staff on the terms and conditions (except occupational pension) and their length of service.


You may be under pressure before and after the merger from a variety of sources to harmonise.


However, you may decide to ring fence or red circle the T&C’s of the incoming party. There is no obligation in law or in IR terms to harmonise.


Too many mergers are cost-increasing for the transferee and become even more so when parties agree to equalise pay and conditions for everyone. It makes no business sense for the transferor staff to get improved pay and conditions just for transferring. Of course, having staff on two or more different sets of pay and conditions is awkward to manage, but that’s better in our view than cost-increasing harmonisation. But if the harmonisation would cost very little, you may weigh it up and, harmonising, which is administratively easier going forward, and which may head-off morale issues due to perceived differences in pay, may, on balance, be more attractive. Some credit unions are harmonising by bringing incoming staff onto the next nearest point on the scale. Where there is a minor difference this may make sense. But watch for all the extras like the cost of pension schemes, sick pay, maternity leave, etc.

Where you decide not to harmonise, that’s perfectly ok. You would need to update your employee handbook too.

This brings us on to the matter of new staff joining the credit union. You may, due to increasing pressure on costs, need to setup a ‘new entrant’ scale and T&C’s, and this is also legitimate and compliant with legislation, and new entrants will also be ‘ring-fenced’ or ‘red-circled’ as such.


Six types of successful acquisitions/mergers


You may also be interested in the recently updated McKinsey classic on the six types of successful acquisitions. The authors have expanded their take on value-creating acquisitions/mergers and updated many of their examples. It’s worth reading to reflect on your credit union merger strategy.



Contact us or call us at Call 01 866 6426 to discuss your pre-merger or post-merger needs on a confidential basis.