Public-Sector Employers with Strong Compensation Philosophies Succeed

A couple of months ago, I wrote a compensation article talking about the survey tools we have for the public sector. This month, I want to talk about compensation planning.

Compensation planning starts with a compensation philosophy. There are several ingredients in a compensation philosophy in any organization, and there are some unique aspects for the public sector.

One of the main ingredients is affordability. Public-sector organizations are unique in that they must spend tax dollars to pay salaries. In terms of compensation philosophy, this means incentives may not be as common, because employees cannot bring in more money by selling a product. Therefore, what the employer can afford is finite.

A second ingredient is internal equity. What jobs are the most valuable to the organization? Thinking carefully about what purpose the municipality, agency, county, or district serves and whom it serves may help to clarify this. Many public-sector organizations have been around for a very long time. Internal equity can be baked into the system and may or may not make sense. If the current plan is causing issues with hiring or retention, this may be something you want to consider. A look at external equity may be the key to understanding why your compensation is not attracting the employees you need. Typically, the salary bands in a compensation plan are determined based on a look at both internal and external equity.

When considering the compensation plan, a look at total rewards is important. In the public sector, this may be dictated by a state retirement plan already in place by legislation or otherwise. If your benefits are particularly rich, you may use this as a tool in recruiting candidates. Recent articles have suggested that Millennials appreciate pension plans after seeing their parents unable to retire due to a lack of savings.

Once you consider all the ingredients for a philosophy, a wise step is to have a meaningful discussion about how the philosophy will be applied in reality with leaders in your organization. If you have general agreement philosophically, putting together the numbers in the plan is much easier, and you will have less disappointment among stakeholders.

A final consideration is whether the plan meets state and federal requirements. Developing a clear philosophy can help defend against charges of discrimination if the philosophy is well-articulated and followed through on the plan. A final check is to see if any state law will affect the implementation of the plan. Employers in Colorado, for example, will want to make sure that the plan they set up has appropriate job families, and that there are written job descriptions for all positions, and that plans for increases and promotions follow state laws.

One of the ways Employers Council serves members is by helping them with compensation planning, and we have helped many public-sector employers with their compensation plans. If you need help with yours, let us know.