Regulation S-K: HR, Are You Ready?

The SEC made a new rule called Regulation S-K. It says big companies must tell everyone about important things related to their employees. This is a huge change for HR (Human Resources) people. They must figure out which numbers are important for the company and which ones they can share.

What is Regulation S-K?

Regulation S-K is a set of rules that govern the disclosures that public companies must make to the SEC. In 2023, they updated the rules to include a new requirement for companies to show material human capital measures.

In simple terms, this rule says that companies that sell stocks to the public must tell everyone about their workers, also known as 'Human Capital'. So, for example, if a company wants to follow the new rules, they must tell everyone about their workers and what they want to do. This means stuff like how people work for them and what kind of skills they need.

Now, what is interesting is that the SEC is not saying exactly what these companies must share about their employees. They leave it quite open so that each company can decide what is important based on their unique circumstances that could change over time. This is good because every company is different, and what is important to one company may not be as important to another.

Turetsky Consulting has been working on this issue since September 2018. They wanted to help their clients use Regulation S-K to improve their People Analytics strategy.

What do material human capital measures mean?

Material human capital measures are metrics that are important to the company's business and that investors would want to know about. Examples of material human capital measures include employee turnover, diversity, and compensation.

How do I know which human capital measures are material?

The SEC does not supply specific guidance on what constitutes a material human capital measure. However, there are factors that HR professionals can consider when making this determination. These factors include:

• Size and complexity of the company
• Industry in which the company runs.
• Company's business strategy
• The company's workforce demographics
• Compensation practice

How do I disclose human capital measures?

Companies must show material human capital measures in their annual reports and proxy statements. The disclosures should be clear, concise, and understandable. Plus, companies should also explain how they calculate the measures and what they mean for their business.

What are the benefits of showing human capital measures?

There are benefits to showing human capital measures, which include:

• Increased transparency and accountability to investors
• Improved employee engagement and retention
• Enhanced corporate reputation.
• Reduced risk of regulatory scrutiny

Conclusion

Regulation S-KHR is a notable change for HR professionals. If HR people know the rules and work with a good consultant, they can use Regulation S-KHR to make their company's human resources better.