Compensation review: smart governance

August 1, 2017

Rochester Hills City Council's effort to update policy regarding the classification and compensation of city employees is an example of sound governance that other municipalities would be smart to follow, if they haven't already done so.

As stated in an article in this month's Downtown newsmagazine, the city is expected to increase staff salaries by about .7 percent, or roughly $200,000 under a revised salary schedule approved by city council on Monday, July 17. The increase means the city will be paying its employees wages about 10 percent higher than the average market rate. However, the updated salary schedule is just part of a much larger classification and compensation study that looked into the employee structure, pay and morale within the city, and how those aspects compared to other municipalities in the market.

The study, which was conducted by McGrath Human Resources Group and authorized by council at the start of 2016, was the first comprehensive study of its kind in more than 15 years. In conducting the analysis, McGrath gathered salary data from 19 communities for 127 positions, as well as compensation and benefit information from five communities directly comparable to Rochester Hills. The analysis also included multiple visits to the city offices, where researchers held meetings with department directors, individual employees, focus groups, city council members and others.

Comprehensive studies are about more than money. A review of salary and benefits ensures employers are competitive in the market, thus attracting and retaining high quality candidates. Such studies also look at employee morale, or how happy they are in their jobs, which is as large a factor or more in retaining employees. 

A review of employee classifications ensures that positions are meeting the goals and objectives of the city and each individual department. Likewise, a thorough review of compensation ensures salaries and benefits are in alignment within the city and competitive when compared to other municipalities. For instance, such reviews may – and did in this case – reveal that some supervisor positions were being compensated at lower rates than some subordinate positions in the city. Externally, the study found about a quarter of positions were out of alignment with the market and in definite need of adjustment.

The findings aren't necessarily an indictment of the city's human resources policy, but rather a natural result of annual compensation adjustments among different positions and employee groups stratified by union groups, non-union employees, full- and part-time positions and contract employees. Considering the impact of a major recession on municipal budgets and differing rate of recovery in communities across the state and county, such internal and external inequalities should be expected.

It's for these reasons we commend Rochester Hills' efforts to look into its classification and compensation policy, and take steps to correct any inequalities. While adjustments may take several years to fully implement, considering budget restraints and current and future union negotiations, the study provides an accurate map and sound strategy for correcting any issues.

Municipalities that haven't conducted such comprehensive studies should consider undertaking similar projects sooner, rather than later. Failure to do so could result in frustration among municipal staffs, which ultimately translates to dissatisfaction among residents.

We also encourage the Rochester Hills City Council and other municipalities that have taken a deep dive into their compensation structure and policies to keep a handle on them by conducting regular updates on a set schedule. While most communities likes to promote themselves as the best place for residents to live, work and play, those lacking knowledge of their standing in the marketplace may have little basis for such claims. By keeping a fresh understanding of internal and external compensation trends, governing bodies are better equipped to plan annual budgets, as well as their position in the market.

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