Top Challenges (And Solutions) to Designing a Public Sector Pay System


Creating a fair, market-based pay system is challenging in any industry.  Creating it in the public sector is uniquely challenging. In my 15 years of working with various compensation systems in the private, public, and nonprofit sectors, I have found that solving these three challenges are paramount to the success of any pay project.

#1 – Accurate, Affordable Data.

As a public organization, both fiscal responsibility and market competitiveness are important.  Keeping data in line with both the public and private sector is important too. Finding regional public sector pay data is easy enough (albeit time-consuming) but finding private sector data on a budget is even more challenging.  

Here are pay surveys I found to be affordable and provide a good cross section of jobs in both the public and private sectors.

#2 – Enough Time.

So now that you have the data, it’s time to match jobs, compare average actual pay of your employees who are in the jobs to the market data, determine how far off you are from the market, adjust or create your pay grades, and figure out how to adjust individual employee pay rates.  Assuming that you started with a sound pay strategy, policy, and accurate job descriptions, right?

Completing a compensation project is time-consuming.  Depending on the scope of the project, it could take 4-8 weeks.  As with most HR departments right now, public sector HR is busy recruiting to fill positions in this tight talent market.  Beyond daily duties, it’s difficult to find the hours required to complete a pay project. Determining pay equity and market competitiveness are key to retaining your best people so executing a pay project is essential.

# 3– Objectivity.

A key component to any compensation project is objectivity – finding an experienced, unbiased professional to complete the work.  Why is this so important? Internal influences in any organization can make it difficult to stay objective. I recommend having someone with no vested interest in how the data shakes out. This is typically someone outside the organization – who understands your business, your project goals, and is well-experienced at completing this type of work, but isn’t easily influenced (or directly supervised) by the leadership of your organization.  This element is critical to creating a fair pay system, and is key to achieving leadership and employee buy-in.

Next up: Benefits - Stay tuned for a future article on on why it’s so important to compare “total compensation,” taking benefits into account when comparing to the market.

Are you looking for a compensation expert to find the data, save you time, and be objective?  

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Skye Mercer