HR due diligence checklist for a European acquisition: what US buyers should check

In 2026, an HR due diligence checklist for a target in the Netherlands goes well beyond headcount and pay. Before signing, US buyers should confirm which employee bodies to consult and which collective agreements and pension funds apply. They should also check long-term sick leave, contractors who could count as employees, and key people needing retention plans.

Dutch rules serve as the worked example here, because most European systems share the same building blocks.

What should an HR due diligence checklist cover in a European target?

An HR due diligence checklist for a European target covers nine areas, from employee representation to key people. The table shows why each item matters and what to request from the seller during human capital due diligence.

Checklist item	Why it matters in Europe	What to ask for
Works council and unions	Under the Dutch Works Councils Act, companies with 50 or more employees must have a works council. It advises on any change of control.	Minutes, advice requests and merger clauses in CAOs.
Collective agreements and pensions	Statistics Netherlands (CBS) found that 72.5% of employees fell under a collective agreement (CAO) in 2020. Many sectors also have a mandatory industry pension fund.	Applicable CAOs, how the target applies them, and pension fund registrations.
Long-term sick leave	Dutch employers pay at least 70% of wages for up to 104 weeks of illness in 2026, says business.gov.nl. In that period, the employer generally cannot give notice.	Anonymized absence data and reintegration status, without medical details.
Dismissal cost	The Dutch government caps the statutory transition payment at €102,000 in 2026, or one annual salary if higher.	Service dates, salaries, planned exits and open settlement talks.
Contractors	The Dutch Tax Administration actively enforces the rules on false self-employment. Long-term contractors who work like staff can bring back taxes and claims.	Contractor list, contracts, engagement length and daily working practice.
Non-EU staff	Highly skilled migrant permits depend on an IND recognised sponsor. A change of employer can affect each permit.	Permit holders, expiry dates and the entity that holds sponsor recognition.
Cross-border staff	Staff working in more than one EU country usually need an A1 certificate. It shows which country’s social security applies.	A1 certificates, work locations and remote work arrangements.
Pay data	The Netherlands is implementing the EU Pay Transparency Directive, which adds pay gap reporting for larger employers.	Pay data by role and gender, plus the job grading structure.
Key people	Notice periods, non-compete clauses and incentive plans work differently from US practice.	Contracts, notice terms and incentive plans for critical roles.

For detail on three rows, read our guides to sick leave in the Netherlands, CAOs and the transitievergoeding 2026.

How does an HR due diligence checklist for Europe differ from a US one?

A US HR due diligence checklist assumes at-will employment and few consultation duties. Europe works the other way. In the Netherlands, a dismissal needs a permit or a court decision unless the employee agrees. Employee bodies advise before key decisions, and collective agreements set minimum terms. Therefore, process and timing matter as much as cost.

• Dismissal: the Employee Insurance Agency (UWV) decides economic and long-term illness cases. A subdistrict court decides most others.
• Consultation: the works council must get the chance to advise while its advice can still shape the decision.
• Collective agreements: when the government extends a CAO to a whole sector, it binds employers that never signed it.

For employment due diligence in the Netherlands, this means checking how the target makes decisions, not only what they cost.

Which findings on the HR due diligence checklist change the deal timeline?

Three findings most often move the timeline: works council advice, trade union notification and investment screening. Each has to happen before a binding decision or before closing. If a step comes too late, employee bodies can challenge the deal or completion can slip. Build these steps into the timetable from the first data request.

• Works council: if the company decides against its advice, a waiting period applies. The works council can also appeal to the Enterprise Chamber in Amsterdam.
• Trade unions: the SER Merger Code often requires both parties to inform unions and the SER before agreeing terms.
• Investment screening: targets in vital services or sensitive technology may need clearance under the Dutch investment screening act (Vifo Act). The deal cannot close until the Investment Screening Bureau decides.

What should be ready by signing?

By signing, the buyer should hold a red-flag list from its HR due diligence and a realistic consultation timetable. It should also know who will employ the team after closing. The buyer should also agree retention terms with key people, because some start looking elsewhere once a deal becomes public.

• A red-flag report with an owner and a budget line for each issue.
• Works council advice in hand, or a deal structure that keeps its advice meaningful.
• Union and SER notifications sent where the Merger Code applies.
• Investment screening filed, or ruled out in writing.
• Retention agreements signed with key people.
• A decision on the employing entity between signing and closing.

Moving your business from the US to Europe with compliance built in

Cross-border growth depends on people who can move, start work and stay protected under local rules. Since 1987, Octagon has helped organizations move talent into and across Europe. We are also an IND recognised sponsor.

During an acquisition, we act as your HR function in Europe until you build your own. You decide salaries, benefits and working arrangements, while we carry the employment administration and its compliance risk. To test your HR due diligence checklist before signing, email sales@octagon.nl.

Frequently asked questions

What is human capital due diligence?

Human capital due diligence is the review of a target company’s workforce before an acquisition. It covers contracts, pay, benefits, pensions, employee representation, disputes and key people. In Europe, it also checks consultation duties and collective agreements. The aim is to price people-related risk and plan integration before the deal becomes binding.

Do employees transfer automatically when a company is acquired?

It depends on the deal structure. In a stock or share purchase, the employer stays the same, so employment contracts simply continue. In an asset purchase that transfers a business, EU rules move the employees to the buyer automatically. They keep their existing terms, and the transfer itself is not a valid reason for dismissal.

Who should run HR due diligence in a cross-border deal?

A joint team usually works best. The buyer’s HR lead sets priorities, while local employment counsel reviews legal risk. Payroll and tax specialists check pay, pensions and social security. An in-country HR partner can add practical knowledge of works councils, collective agreements and sick leave. One person should own the final red-flag list.