The SEC's new pay ratio disclosure rules take effect in 2018, requiring public companies in the U.S. to be more transparent about how they compensate employees. Companies will be required to disclose the median annual compensation of all employees, excluding the CEO; the annual compensation of the CEO; and the ratio of those totals.
How will employees react to those numbers? That's U.S. companies' greatest concern, according to a recent poll by Willis Towers Watson. Half of all companies surveyed said their biggest challenge is forecasting how employees will react.
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That's if employees have any reaction at all. A minority of respondents do not plan to say anything about the disclosure to employees. Nearly half of respondents also said they haven't considered how or if they will share the disclosure with employees. Four in ten respondents are creating a plan with leadership, while just two in 10 respondents are preparing managers to lead discussions.
"It's somewhat surprising that so many companies haven't considered how or if they will communicate the ratio to their employees, given that so many are concerned about how they will react," said Jim Kohler, director, Communication and Change Management at Willis Towers Watson. "We believe this is a golden opportunity for employers to begin a dialogue with not only employees but also customers, investors and the media about pay positioning and pay transparency. In fact, we are working with several companies on developing a communication road map to guide them through the process."
Other challenges on companies' minds, according to respondents, include:
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39 percent: Determining the consistently applied compensation measure (CACM)
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38 percent: Getting accurate pay data
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37 percent: Deciding how to craft their required disclosure
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35 percent: Determining where their pay ratio stands compared with peers, the industry and the market
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Emily Payne
Emily Payne is director, content analytics for ALM's Business & Finance Markets and former managing editor for BenefitsPRO. A Wisconsin native, she has spent the past decade writing and editing for various athletic and fitness publications. She holds an English degree and Business certificate from the University of Wisconsin.
