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Ways companies can ease the pain of pay ratio calculations

Joe Mont | April 11, 2017

Arguments both for and against the Securities and Exchange Commission’s pay ratio rule probably won’t go away any time soon. The debates, however, don’t change the fact that, for now, the SEC expects companies to comply.

The good news is that as far back as 2015, the SEC began offering concessions intended to make compliance easier.

Companies need only identify the median employee once every three years, not annually. They can also select any date within the last three months of the most recently completed fiscal year for the calculations.

Registrants can exclude up to 5 percent of non-U.S. employees when determining their median employee. Employees in a foreign jurisdiction with data privacy laws that prohibit pay information from being transmitted can be removed from the metric. Employees acquired through a merger or acquisition can also be excluded from the median employee calculation until the next fiscal year.

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