New Report Shows State Workers’ Compensation Non-Competitive
Saturday, May 18, 2013
State Employee compensation in Rhode Island is significantly below competitive rates nationally, according to an independent study commissioned by the State's Department of Administration (DOA).
A sample of 21 job titles were compared in a comprehensive benchmark test against six other states and three comparable municipalities as well as prevalent wages within private sector occupational wages. The DOA’s commissioned report found Rhode Island State employees’ compensation does not stand up by comparison.
The Segal Group’s Comprehensive Personnel Study Report, commissioned by Director Licht and counseled by a number of different committees, influences reform of the agenda for the Rhode Island State Department of Administration. Results of the study concluded, among other things, that the current pay system provides strong barriers to successful recruitment, retention, and motivation of a qualified and high-performing workforce.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAccording to the in-depth and comparative study, the concerns raised were many. The study compared the pay strategies of other states and municipalities as well as prevalent remunerations within private industry. A major shortcoming revealed was the lack of a formal compensation strategy. Internal pay inequities among similar jobs lead to low morale and “poaching” across agencies. Numerous pay schedules are hard to understand and administer. Below market pay ranges for many positions lead to difficulties recruiting and retaining talent.
Pay Ranges
Narrow pay ranges contribute to low morale, reduced motivation, and high turnover (most employees “top out” after two or three years on the job). Elimination of longevity pay, combined with reduction in benefits, has reduced potential career earnings, inspires low morale, and leads to significant difficulties retaining qualified and talented staff. Step-based pay plans are inflexible and hinder managers’ ability to recruit qualified employees at “market-competitive” rates.
Segal used the Economic Research Institute and the Towers Watson’s Compensation Survey. Compared to the public sector average, the State’s pay rates are 12% above market at the minimum of the range, but about 9% below at the maximum of the range. Compared to the private sector the State’s pay rates at both the minimum and the maximum of the range are below market. At the minimum of the range, the State’s pay rates are 7% below the private sector average. At the maximum of the range, the State’s pay rates are 18% below the private sector average.
Since longevity pay was eliminated, the State’s pay ranges are significantly narrower than those of the surveyed employers. In other words, the career earnings potential for Rhode Island state employees is lower than that offered by other employers for comparable work. While employees of other organizations can expect to see career pay growth of 21% to 58% over their starting rate, many State of Rhode Island employees are “topped out” at 10% to 14% above their entry rate.
In addition, most Rhode Island employees reach the maximum of the pay range in 2.5 to 3.5 years, compared with 8 to 24 years among these other states. While the State’s entry pay appears to be market competitive, an approximate 30 percentage point difference in career pay growth could result in a significant retention problem for the State.
Wages alone are not the only means by which total compensation can be measured. Health benefit compensation and retirement packages were also taken into consideration. However, with collective bargaining agreements expiring at the close of the fiscal year and negotiations only warming up, the factor of healthcare is purely speculative. Recent trends indicate an increase in employee contributions toward healthcare for state employees. State pensions are a matter for the courts and those who are privy to such sessions are compelled by law to remain silent on any and all details.
In June 2012, the State of Rhode’s Department of Administration hired Segal to assist with a comprehensive review of the State’s personnel programs, practices, and policies. According to the report, many of these policies and practices date back to the mid fifties and are “outdated and not sufficiently flexible to support the current business needs of State agencies.”
The review’s objectives included suggestions on how to streamline the state’s workforce practices and policies. Recommendations included ways to support State agencies’ ability to attract and maintain a high-quality and diverse workforce, give the State much more flexibility than it has currently in managing its human capital and improve efficiency and effectiveness.
Stakeholders - cross section
Ensure that the programs and policies are easily understandable by all stakeholders. The recognized stakeholders were 27 individuals, including agency leaders and managers, union representatives, legislative staff, and Governor’s staff. Segal interviewed these people in order to ascertain the degree to which the State’s personnel system is currently meeting the needs of its internal clients, as well as to discuss options to improve the state’s human resources.
The Advisory Committee included two leaders of the State’s Department of Administration, two department directors, three union representatives, and two outside representatives, as listed below. In addition, two State personnel administrators served as technical advisors to the Committee and to the Segal Consultants.
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