When it comes to employee compensation, it is the high and low ends of the spectrum that currently attract greatest focus. This article discusses executive compensation trends and minimum wage movement.

1. I D E A S T O H E L P
G R O W Y O U R
B U S I N E S S
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BY PRIYA J. KAPILA
A
s we were reminded in President Obama’s most
recent State of the Union address, middle class
interests remain top of mind. However, when it comes
to employee compensation, it is the high and low ends of
the spectrum that currently attract greatest focus.
Executive Compensation Trends
The second pay-related prominent rule to be established
as a result of the Dodd-Frank Act, following the “say on pay”
policy, is the CEO-to-worker pay ratio. The Securities and
Exchange Commission (SEC) published a proposed rule on the
ratio over a year ago; however, after a lengthy commentary
period, during which more than 20,000 letters were received,
there has been little progress toward finalizing the rule. The
complications highlighted several years ago continue to be
the likely cause of the stagnation; namely, there is confusion
as to how and if to include part-time employees, international
employees and contractors in the calculations and how to
calculate the value of equity grants to top executives.
Congress has set no deadline for compliance with this
provision of the Dodd-Frank Act, and it is speculated that the
SEC’s rule may give companies some degree of flexibility with
regard to determining the median worker pay level. Estimates
for the CEO-to-worker ratio in 2013 range from 296:1 to
331:1 among the largest 350 U.S. publicly traded companies.
Among privately held companies and non-profit
organizations, as well as publicly traded companies,
executive motivation and retention remain a key objective.
While this often results in grants of options or restricted
stock in a publicly traded environment, other forms of long-
term incentive compensation are more prevalent for other
organizations. Deferred compensation programs and other
cash-based, long-term incentives have gained considerable
popularity among non-publicly traded organizations.
Minimum Wage Movement
It is common knowledge that the Obama Administration
supports raising the federal minimum wage to $10.10 per
our business is growing yours
Human Resources
Compensation Trends at the Extremes: Executive Compensation
Growth & Minimum Wage Hikes
Article reprinted from Spring 2015GROWTHBIZS T R A T E G I E S
hour. This initiative is part of a broader push for income
equality that also supports the enforcement of pay equity
across gender and race.
In the meantime, many states and municipalities
have proactively increased the minimum range for their
residents. More than half of states have a minimum wage
that exceeds the federal level, ranging from $7.50 to
$9.47 per hour. Notably, SeaTac, Washington increased
the hourly minimum wage to $15.00 per hour last year,
and beginning in April, Seattle will implement a six-year
plan to increase its minimum wage to the same level.
SeaTac’s ordinance has affected approximately 1,500
workers and little impact to workers or businesses has
been reported.
Pew Research Center estimates that 24 million
American workers receive hourly wages of less than
$10.10, and fewer than 15 percent of these earn $7.25.
It is suggested that salary inflation may occur to alleviate
compression among workers should the minimum wage
dramatically increase. However, given the composition
of the 114th Congress, it is not probable that significant
adjustments will be made to the federal minimum wage in
the near term.
Middle Class Compensation
While there are public initiatives that could have
significant impact on executives and low wage earners,
most American workers will see little change in their
compensation this year. The average projected salary
increase in 2015 is 3.1 percent, which is within three-tenths
of a percent of the average raise observed in 2011 and
each year in between. Until the labor market constricts,
there is little motivation for businesses to provide sizable
increases to the general workforce. Instead, additional
payroll funds may be allocated to higher increases for top
performers or performance- or time-based bonus awards
that are aimed at retaining key employees.
PRIYA J. KAPILA
CBIZ Human Capital Services • St. Louis, MO
314.995.5558 • pkapila@cbiz.com
@PJKapila