Helping Compensation Catch up
Five Practices for Getting Progressive About Pay

It’s not news that the working world has changed dramatically in the last five decades. But despite significant shifts in management philosophies, perspectives and practices within public sector organizations, the model for employee compensation has largely remained stuck in the past. While there are many reasons this arena of human resources management has not kept pace, there’s clearly greater urgency than ever before to change that fact.

Thanks to the economic environment, in particular, HR professionals are finding the need to get much more creative in their approach to compensation and in overcoming the long-standing issues that make public sector compensation so unique.

Of course, one of the most difficult challenges we face in bringing new thinking to public sector compensation is the Catch 22 of needing to make change during a financial crunch—when, historically, the solution has been to cut personnel, cut hours, mandate furlough days or cut pay.

Following are five critical ideas about moving compensation forward in the public sector that are not reliant on external forces for success.

5 Practices for Getting Progressive About Pay

Practice #1: Help Leadership Understand the Complete Compensation Picture

The problem with cutting personnel to decrease the cost of compensation is that decreasing staff has major costs of its own:

  • Loss of institutional knowledge
  • Time lost managing gaps in job responsibilities
  • Decreased productivity while those employees who are filling in learn additional skills
  • Decreased staff morale due to increased workload
  • Projects that are not completed
  • Decreased performance thanks to disheartened and dissatisfied staff

Human resources has the responsibility of educating leadership and providing a cost-benefit analysis before the staffing budget is called into question. No matter how obvious this may seem, a formal and thorough analysis is, more often than not, absent from the decision-making process.

Practice #2: Breakout of the Compensation = Retention Box

The costs outlined above are also incurred when an employee leaves his or her position voluntarily. This points to the substantial role compensation plays in retention—so much so that cities, counties, state agencies and other public sector organizations literally can’t afford to be anything less than progressive when designing retention policies and programs in tough economic times.

Studies have shown that employees consider many factors beyond compensation when deciding whether or not to accept a position. More importantly in terms of retention, research shows that when benefits are creative, quality of life is high and employees feel valued and recognized by management, compensation can be less than competitive and the employee more than satisfied. But designing a creative benefits package that doesn’t come with a high price tag requires real out-of-the-box thinking. Perks such as dry cleaning pick-up and drop-off cost literally nothing, yet have tangible value to staff. Employers can also tie perks into wellness program goals by offering discounted memberships at the local gym or even to yoga, Zumba and other fitness classes on site. Additionally, lunchtime or after-work programs that further personal and professional development, foster cohesiveness and provide challenge and opportunity can offer great rewards for the employee in terms of job satisfaction and enlargement while increasing productivity for the organization.

Practice #3: Talk Openly About Reality

As mentioned in #2, if we want engaged, committed employees, we need to talk more openly about the financial realities our organizations are facing.

What human resources managers tend to forget is that employees are almost always the public sector organization’s most loyal advocates. It’s not rare for staff to go above and beyond—even to make personal sacrifices—if they feel they’re being told the truth. While staff members would not likely turn down a raise, the point is that there are many other ways to keep employees engaged until a pay increase is possible.

Thorough communication is equally essential when an organization can afford to increase pay. Change (even when it’s positive and particularly when it involves money) causes stress; stress leads to decreased performance, health problems and the like; but stress is very easily overcome through increased clarity. It’s human resources’ responsibility to bring that clarity by making sure employees understand compensation policies and that they are updated about changes well in advance.

Practice #4: Consider Creative Pay Structures

Pay-for-performance, although not problem-free, is a solid starting point for exploring alternative compensation structures that might reduce costs, reward high performers and create a high-performance culture. Pay-for-performance, specifically, has the added advantage of helping public sector organizations over come:

  • Taxpayer frustration around having to tolerate subpar performance from well-paid public sector employees.
  • The culture of entitlement that can sometimes arise when jobs are secure and compensation is based on on number of years in service.
  • The fact that decisions in the public sector are sometimes based on human fears (such as not being reappointed come election time), rather than by what’s the best choice for the state, county, agency, community or organization.

Flextime, job sharing and other innovative ways of working are becoming more common as possibilities for public sector compensation, and the public sector is often better equipped to manage these types arrangements than private sector corporations thanks to their inherent ability to create stable and supportive infrastructure.

And this is where it gets challenging.

These ideas are not that new. We simply haven’t had too many role models in the public sector to show us how they can be implemented effectively.

Which brings us to the final practice for getting progressive about pay:

Practice #5: Participate More Actively in the Compensation Conversation

There are many articles like this one that put forth ideas about what needs to change in public sector compensation. There are also wonderful conferences and events where the dialogue can be continued. But what we’re missing is an ongoing effort toward solving the challenges—in practice.

The public sector must find a way to experiment with the innovative ideas that already exist and monitor progress. If at some point we don’t stop thinking and start talking meaningful, measured action, it may be another decade or two before we see change.

This entry was posted in Compensation. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *