Right The Ship With Equity Adjustments

February 2016

Compensation strategies are designed to attract and retain excellent staff. Today’s public sector environment is one where there are competing demands for talent and an onslaught of retiring employees. At the same time, there is an expectation that agencies are working towards enhancing services and aligning spending with results. Recent changes in the Affordable Care Act (ACA), Public Employee Pension Reform Act (PEPRA) and increased cost sharing for benefits programs may mean that benefits which were once an attraction/retention tool to entice candidates to public sector jobs are no longer as effective as they once were, putting pressure on market based pay equity among both public and private sector employers.

Without continual maintenance to stay current with these evolving changes, compensation systems lose alignment to the organization’s targeted market philosophy leading to pay inequities. For example, the practice of applying across-the-board Cost of Living Adjustments (COLAs) to all classifications for long periods of time ignores other market realities that influence pay; this strategy results in reduced competitiveness and an inefficiency in the allocation of budget dollars. The good news is there are choices and strategies an organization can implement to create an equitable compensation plan, starting with equity adjustments.

Equity adjustments are a mechanism designed to address salary inequities which can occur for a number of reasons; a common reason we have seen over the last few years has been the emergence of agencies out of the recession and the need to reevaluate the impact of compensation decisions made during that time. Equity adjustments can be used by an organization to align employee compensation with a targeted market reference point in order to remain competitive. This alignment is important not only for those classifications where pay is below the targeted philosophy but for those that are above market as well. Market alignment ensures that all classifications are paid in a consistently fair and equitable manner, resulting in the most effective distribution of limited budget dollars. Equity adjustments “right the ship” and are an effective tool for establishing a competitive recruitment and retention strategy.  In public agencies where funds are limited and retention of talent is critical, it is important to evaluate how your current practices are helping or hindering your ability to attract and retain qualified and engaged staff.

There are myriad approaches to implementing equity adjustments ranging from immediate to multi-year adjustments. Financial realities and an agency’s unique expectations are overriding considerations that come into play when determining appropriate compensation philosophies and strategies. However, a review of the market on a continual basis, and consistently analyzing your current pay position relative to your competition, are necessary methods to remain a best practice employer. Contact Koff & Associates to discuss the specific characteristics of your own organization.

Koff & Associates