Theme 2: Review and Modify State Employee Compensation

The following goals were established to review and modify State employee compensation to increase efficiency, support public policy, assure equitable treatment, and promote attraction and retention among the State's public employees.

2A. Systematically change the mix between State employee salary and benefits to better reflect the private sector.

Details

The average salary of State employees is 16.8% below private sector employees, while State employees’ average benefits are 19.5% greater. In today’s economy and with a rising generation of employees who are more often interested in “take home” pay than in future benefit streams, that mix presents challenges to attracting and retaining quality employees. Therefore, the State should seek to better align compensation of its employees with the private sector.

The Commission examined three alternative plans proposed by the Department of Human Resource Management, the Public Employees Health Program, and Utah Retirement Systems, which could be used to guide future changes to the total compensation package. While changes would be automatically implemented for all new hires, existing employees could be given the option to retain the current mix or move to the new system.

Target Outcomes

Develop short- and long-term plans for shifting costs from benefits into salary in order to have a total compensation mix that is more comparable to market in order to attract and retain a quality workforce. Having a total compensation mix that is more aligned with the private sector allows the state to see where it exceeds the market and where it lags. Limited dollars appropriated to employees can then be strategically placed where they provide the best return on the investment.

Status

Report from the Hay group is complete. The Department of Human Resource Management is working with the Governor’s Office and Legislators on next steps.

Target Completion Date

Pending results of total compensation study (item 2b).

2B. Obtain accurate compensation comparison data from independent sources

Details

Engage an outside consultant to complete an annual in-depth analysis of compensation and benefits for State employees to provide accurate, independent data with comparisons to the relevant private market on a sector-by-sector basis.

In the past, the Department of Human Resource Management has obtained data from the U.S. Chamber of Commerce at no cost. The Chamber recently discontinued distributing this data, which had significant limitations in its comparability, particularly in the benefits arena.

Target Outcomes

This study provides the state with an independent third-party review of the state’s total compensation mix. The study provides the state with a starting point in order to determine areas for further review/modification. The study will provide the Department of Human Resource Management with options for continuing the study in future years.

Status

Report from the Hay group is complete. The Department of Human Resource Management is working with the Governor’s Office and Legislators on next steps.

Target Completion Date

September 16, 2011

2C. Implement a consolidated review to total compensation for State employees

Details

Salaries and benefits should be reviewed by a single entity for the express purpose of looking at total compensation. A consolidated review could result in a better balance between wages and benefits, while keeping the State competitive with the market. This would break from the tradition of looking at salary, insurance, and retirement independent of one another.

Three separate entities (Department of Human Resource Management, Utah Retirement Systems, and Public Employees Health Program) gather data, ask for resources, and present to different entities at different times. A total compensation model is not created, and thus, not considered. The funding order for compensation decisions has historically been that retirement rate increases are funded first, medical rate insurance rate increases are funded second, and salary increases are considered third, and only if there is funding that remains.

Without continually examining State employees’ total compensation and assessing the optimal levels of benefits and better pay, the consequence is that benefits will continue to consume any funds that may be better directed to increasing pay. Eventually, the low starting wages and lack of opportunity for higher pay throughout an employee’s career will make the State uncompetitive with the market.

Target Outcomes

1. Each year during the Governor’s Office of Planning and Budget’s annual budget cycle, the Department of Human Resource Management (DHRM), the Public Employees Health Program (PEHP), and the Utah Retirement Systems (URS) will present data and recommendations in a total compensation format, in one report and one joint meeting. Recommendations will be a joint effort and will reflect what is needed in order to keep the total compensation mix competitive. Funds may not be recommended in a manner that reflects past practices, but may instead manifest the compensation mix that is needed from a global perspective.

2. Information provided to the legislature will also be provided from a total compensation perspective from DHRM, PEHP, and URS, and should be discussed jointly instead of independently. Ultimately funding for employee total compensation is appropriated in a manner that reflects a total compensation perspective and a shift from benefits to salary.

Status

Report from the Hay group is complete. The Department of Human Resource Management is working with the Governor’s Office and Legislators on next steps.

Target Completion Date

First consolidated review—October 31, 2011, then ongoing.

2D. Conduct a careful review of supervisory positions to adjust to an appropriate "span of control" for each state agency

Details

"Span of control" refers to the number of subordinates a supervisor can effectively manage. On average, the current span of control among Executive Branch agencies is 6.7, with a range from 2.5 to 19.9. Each State agency should work with the Department of Human Resource Management to target its optimal span of control through careful consideration of its specific mission and conditions. Every agency should include a span of control benchmark on its balanced scorecard.

Target Outcomes

In conjunction with the Governor’s Office of Planning and Budget and the Department of Human Resource Management, agencies will review and adjust span of control ratios to achieve optimal levels of management to employee for efficient operations.

Status

The Department of Human Resource Management is working with agencies on improvements and on-going reviews in alignment with business and operational requirements.

Target Completion Date

Complete