HR Due Diligence
Financial diligence is thorough and legal diligence is thorough. People-side diligence is frequently a headcount table and an org chart, which is where undisclosed liabilities and post-deal attrition tend to live.
The problem
The people risks that damage transactions are rarely visible on a balance sheet. Statutory dues understated. Contract labour exposure sitting with the target as principal employer. Employment contracts that do not bind anyone to anything. Two key people holding all the operational knowledge and no reason to stay after close. A culture that will not survive integration.
What this covers
- Statutory exposure quantified — PF, ESI, gratuity, bonus, contract labour
- Employment contracts, notice periods, non-compete and confidentiality reviewed
- Key-person dependency and retention risk assessment
- Compensation structure benchmarked, and parity issues that will surface post-close identified
- Live and threatened employee disputes, and their likely trajectory
- Organisation structure, span of control and genuine redundancy
- Culture and integration assessment against the acquiring organisation
- Post-deal people plan for the first hundred days
Why me for this
Twenty-four years across manufacturing, EPC, media, IT and ITeS, including manpower rationalisation, territory alignment and merger-related restructuring work alongside McKinsey and Hay Group. Head-HR experience within law firms, on the advisory side of transactions.
Common questions
What does HR due diligence cover?
Statutory compliance and quantified exposure, employment contracts and their enforceability, compensation structure and internal parity, key-person and retention risk, live or threatened disputes, organisation structure, and cultural fit for integration. The output should be a quantified issues list, not a description of the target's HR policies.
How long does it take?
For a mid-size target with reasonable data-room quality, one to three weeks. The constraint is almost always the completeness of what the target provides rather than the analysis itself.
What are the most common findings?
Four, repeatedly. An unquantified and unfunded gratuity liability, because it accrues silently and is paid years later. Provident fund exposure from a salary structure built to minimise contributions in a way that will not survive scrutiny. Contract labour exposure sitting with the target as principal employer, where nobody verified the contractor's actual filings. And key-person dependency, where two people hold the operational knowledge and have no reason to stay after close.
Should we run HR diligence if we are the ones being acquired?
Yes, and earlier than most companies do. Finding your own issues gives you time to fix them, quantify them accurately, and present them on your own terms. Having them found for you during the acquirer's diligence converts each one into a price negotiation at the worst possible moment.
How is this different from legal due diligence?
Legal diligence examines contracts, litigation and corporate records. People diligence asks whether the workforce will still be there in a year, whether the statutory exposure has been quantified rather than assumed, whether the compensation structure will survive integration, and whether the culture can absorb the transaction. There is overlap on employment contracts and disputes, and the two should be run alongside each other rather than in place of each other.
Related
POSH Compliance & External Member
Internal Committee constitution, external member appointment, training and annual filings under the POSH Act, 2013.
Fractional CHRO
CHRO-grade judgement on a part-time retainer, for companies that need the thinking without the salary.
HR Function Set Up From Scratch
The complete people infrastructure — policies, letters, onboarding, payroll structure and compliance — built once, properly.