HR considerations ahead of an IPO

Becoming a public company’s probably going to mean three things for human resources — more employees, more complexity and more scrutiny. Preparing for this transition can be critical to help facilitate a smooth IPO process and lay the foundations for both growth and heightened transparency.

Here are some of the more critical steps that HR can take to support the IPO.

Define the project plan and identify owners

Upfront alignment on key work-streams, milestones and owners can help HR better organize its IPO readiness activities — providing structure and clarity on the work that needs to be done. This can be especially critical in smaller organizations with a more limited HR footprint that may also need to plan for how to backfill any gaps in skills or experience. 

As a public company, understand how disclosure requirements apply

Public companies must make disclosures relating to the compensation and employment agreements of executives and boards of directors. In assessing how the disclosure requirements apply, it’s important to understand a number of factors. 

Emerging growth company status

What is your emerging growth company (EGC) status? EGCs are able to provide more limited disclosures and are not within scope of the “say-on-pay” regime. Your status can influence the level of transparency required and the extent to which your shareholders can have input on pay arrangements. From a practical perspective, it can also influence the level of effort required to prepare the disclosures.

IPO timeline and required disclosures

What is your IPO timeline and required disclosures? Your company may need to prepare multiple rounds of compensation disclosures using different years’ data. The specific disclosures and number of iterations required will depend on the length of your IPO runway, your route to listing (SPAC versus IPO) and the schedule you’re using to publish the filings. Companies should not underestimate the amount of time it might take to gather and validate the necessary inputs required for these disclosures.

Named executive officers (NEOs)

Who are your NEOs? Your named executive officers (NEOs) will have their individual pay details disclosed (the specific NEO criteria are dependent on your EGC status but generally includes your highest paid executives). While not relevant for determining the NEOs, companies should benchmark the levels of compensation for these individuals to assess market comparability, especially given the potential for increased scrutiny. To that end, ensure that executives (and stakeholders who influence compensation decision-making) are aware of this heightened transparency. 


Companies shouldn’t underestimate the amount of time and review required to gather the necessary information required for these disclosures and to arrange it into the appropriate format. Preparing for these disclosures as early as possible is critical.

Consider how executive and board compensation might need to change

The need to attract and retain a skilled leadership team has created a competitive talent environment. Companies should conduct a thorough review of compensation programs and policies ahead of their IPO. They need to consider how these need to change in order to attract and retain talent in a post-IPO environment. For executives, these changes often include changes to compensation levels and pay mix and the introduction of a more formal, regular cadence of equity awards. Changes also can include the addition of shareholder-friendly incentive plan performance metrics. Other shareholder friendly measures may include  shareholding requirements and clawback mechanisms (which are due to become a formal requirement under the listing rules).

Assess operational risks and remediate, and build controls

Organizations should assess their overall “HR health” and help mitigate any identified risks as soon as possible. The most common risks that we have seen in recent IPOs include:

  • 409A compliance issues related to legacy equity award programs (leading to potentially significant tax exposures for employees)
  • 401(k) operational compliance issues
  • Employee mobility issues (e.g., taxation of income between states)
  • Payroll and expense anomalies
  • Pay equity and transparency issues

In addition, we often see an immediate need to prioritize the formalization of processes, controls and decision-making protocols in order to support the firm’s broader alignment to Sarbanes-Oxley Act compliance.

Timely and considered preparation

While IPO timelines can be expedited, HR should make the most of any extended runway it may have to prepare. Compensation matters often involve sensitive and nuanced decisions and the time needed to make and implement them shouldn’t be underestimated. For example, an equity program could be implemented in months if needed, but the process can be laborious and often involves conducting market assessments, developing proposed grant levels and socializing plans with key stakeholders. Then, a vendor needs to be selected to administer the plan, and the plan itself must be implemented. HR should be proactive to make the reasonable use of whatever time it has available.

HR should also not be afraid to go-it-alone, and consider how it can appropriately engage and team with other third parties that will be critical to the process (for example, compensation consultants for both the board and management) and other third-party vendors (e.g., stock-compensation plan administrators and HR software vendors), as needed.

IPO grants

In our experience, the discussion of whether to provide an “IPO grant” to certain executives has increased in recent years. The purpose of these awards can differ between organizations — from “level-setting” equity ownership, rewarding a successful IPO or aligning to market comparables. Organizations should consider the implications of these grants holistically, as well as any potential scrutiny from shareholders - especially given their one-time nature, less frequent use in the market and the often higher levels of compensation they deliver. HR should assess how proposals compare to others in the market and discuss their merit with other decision-makers (e.g., the board, other owners), before determining the appropriateness of making such grants.

Review your current job architecture

A strong framework for organizing jobs can help your company more effectively and efficiently manage positions and align HR, talent, performance and reward programs. While some organizations overlook this important body of work, assessing the existing job architecture framework and facilitating that it remains fit-for-purpose is a critical step. It helps maintain a robust foundation to rapidly grow and scale the business after the IPO. It also helps to better maintain consistency and equity between the pay and treatment of like-roles.

Contact us

Craig O’Donnell

Principal, Workforce Transformation, PwC US


Chris Hamilton

Principal, Workforce Transformation, PwC US


Mike Bellin

Partner, Consulting Solutions, IPO Services Leader, Los Angeles, PwC US


John Gleason

Managing Director, PwC US


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