Setting Salaries: How Does Your Municipality Compare
(from Maine Townsman, January 1997)
By Jo Josephson, Staff Writer

Taxpayers are screaming that municipal salaries are too high. That they don’t make half as much as those who work for the town. Some of the elected officials in your town agree with them. You are experiencing a high turnover in staff. Recruits are asking for more than you are paying. Employees are threatening to form a union to negotiate for higher wages.

It’s time to look closely at what you are paying your employees. It’s time to start comparing your salaries with the marketplace, with the going rate.

Comparability. While acknowledging that the setting of salary is more an art than a science, some - but not all - say comparability is the most widely accepted standard for setting public sector pay next to, of course, what one perceives they have the "ability to pay". Which, if you follow the latter route, leads to the difficulty of measuring that ability and distinguishing inability from reluctance. Which leads to the fact that you often, but not always, "get what you pay for".

This article takes a broad look at the concept of comparability in regard to personnel costs; broad, in the sense that it looks at the concept both from an internal as well as an external perspective.

Internal Comparisons

How Do Our Personnel Costs Compare With Our Other Costs?

While most municipalities look at personnel costs within the context of each department, the Town of Falmouth (pop .7,902) takes a broader view of personnel costs, comparing the total cost of personnel with other major expenditures. In highlighting its FY 96-97 budget, town officials were able to note in the form of a pie chart entitled, "Object of Expenditure":

Falmouth Finance Director John McNaughton notes that benefits comprise about 20 percent of personnel costs. Falmouth’s total budget amounts to about $5 million.

How Does My Pay Compare With My Peers?

Some say that employees are more concerned with comparing their pay with the pay of others in the office than with what the market’s going rate is. In other words is one employee being favored over another?

One way of avoiding charges of "favoritism" is to institute what the City of Bangor has. In place since 1989, its pay system is built upon a pay classification system that is designed to provide "internal equity". Employees are grouped into one of five pay ranges within six job categories, depending on the "relative worth" of the job in comparison to other jobs in the same category.

Which is to say, Bangor is up front with its employees as to what it values. Jobs in each category are scored on the following factors:

Just How Much Am I Being Compensated?

For individual employees who do compare their wages with those in the marketplace, some employers, realizing that wages make up only a part, albeit a major one, in the whole compensation package, provide their employees with a detailed accounting of the monetary value of all benefits. Be it employer contributions to employee retirement plans, Social Security and Medicare withholdings, workers compensation, unemployment compensation, the monetary value of vacation, sick and holiday time, as well as the value of health care benefits. As they say, wages are only one slice of the pie.

External Comparisons

How Do Public Sector Wages Compare With the Private Sector?

Pretty close, according to figures provided by Janet White of the Maine Bureau of Labor Statistics. White reports that in 1995 the average weekly wage in the private sector in Maine totaled $432.43 while the average weekly wage in local government was $426.87.

But you should know the figure for local government includes school salaries as well as salaries of employees of county government. And you should also know the figures include all levels of employment from executive to laborer, as well as full and part time workers, for the year 1995.

It is interesting, but not surprising, to note that figures supplied by White indicate that of the three labor forces in the public sector, local government reports the lowest average weekly wage, with state government employees averaging $544 a week and federal government employees averaging $741 a week.

Who was it that said, local government employees are better paid than anyone else?

How Does Our Town Compare With the Marketplace?

The marketplace. If municipalities do not pay what the "marketplace" pays they will lose employees or prospective employees to it, says MMA’s Director of Personnel Michael Wing.

The marketplace can be as narrow as towns of similar size in your region, or it can be as broad as all towns in Maine with the specialty position you are trying to fill. And it need not focus just on what other public sector entities are paying. It should not, because the marketplace also includes what the private sector with similar positions is paying as well. If so, they are in your marketplace. And is that industry unionized? If so, it may have a major impact on your salaries (see sidebar).

Some Practical Advice When Setting Salaries (sidebar)

If you are going to give everybody a pay increase, do it in dollars and not in percentages, says Dwight Dogherty, Pittsfield’s town manager. It’s fairer to give everybody a 35 cent per hour increase than to give everyone a two percent. increase. It’s more equitable and those at the bottom of the pay scale will thank you.

Protect your employees from the sentiment of taxpayers that municipal employees should take vows of poverty, says Larry Post, St. Alban’s town manager. Put their salaries within their departmental budgets, don’t set them up as easy targets, don’t make them vulnerable to harassment at town meeting.

Which is to say, don’t have too many people involved in setting salaries, says Richard Erb, Kennebunk’s town manager. In Kennebunk, the charter allows the selectmen and not the town meeting to have final say on salaries. Erb admits this is of concern to the budget committee which says it does not have any direct input into over 40 percent of the budget. Erb says they do have a general influence.

MMA Salary Survey. Perhaps the best basic tool for getting a handle on what comparable towns are paying their employees is the Maine Municipal Association’s Annual Salary Survey. Some 200 Maine municipalities contribute to it.

But remember, it’s only a starting point. The numbers should not be taken at face value. Salaries are just the tip of the iceberg, they don’t tell all, nor do job titles. So you will want to call other towns to get more details. What duties are covered under the job title? What is the background of the person holding the job title? They may have skills and training you do not require. They may have worked for the town for many years. What fringe benefits are they given in addition to the base pay?

As MMA’s Wing advises, lots of things are hidden, there are myriads of ways people are compensated, especially in contracts, so go beyond the base pay and get the full picture by calling the town.

Pay Classification Studies. Municipalities aside, the marketplace also consists of the private sector. And as noted above, salaries are just the tip of the iceberg, when making comparisons. To be sure you are comparing apples with apples, you will want to go beyond wages and job titles.

To conduct such a study, many towns, cognizant of the political nature of salary setting, hire out the job of conducting what is called a "position classification and pay study." The cost of such studies is usually based on the number of positions to be compared. They range between $100 and $200 a position. Some towns in the same labor market have been known to hire the same consultant and share in the costs. The towns of Kennebunk and Kennebunkport have reportedly done this in recent years.

The results of such a study are said to provide a basic structure for dealing with a variety of personnel matters including the effective recruitment and retention of employees, performance evaluation, and pay equity.

How Does Our Pay Plan Compare With Other Municipalities?

In an attempt to look at how the pay classification systems of "comparable" municipalities were operating, the City of Bangor recently conducted its own survey. In doing so, it targeted 15 towns and cities in Maine with populations over 10,000. Of those, 11 responded to the survey, which included 13 questions pertaining to classification policies.

Some of what it found follows:

The systems had been in use from one month to nine years, with all 10 systems (excluding Bangor’s) averaging six years.

Most municipalities provide step increases on a yearly basis, with a limit after an employee has reached the top step. The average number of steps was 11, with a high of 28 steps and a low of six steps.

The average increase between steps was 3.7 percent, however, there was a large variance in increases ranging from .5 percent to 6 percent. Four out of the 10 municipalities change their percentage increases according to the step.

The average increase potential in a range is 39 percent, with a high of 88 percent and a low of 22 percent.

Three municipalities indicated that performance played no role in increases; steps are automatic. Five municipalities stated that while steps were generally automatic, one can be withheld due to poor performance. Two said that a step increase is dependent on employee performance.

About 98 percent of all non-union employees receive step increases at the time they are eligible.

Half the municipalities offer other salary based incentives in addition to step increases. Three offer longevity payments; two provide tuition reimbursement; another allows for monetary rewards for employees who do not use sick time.

Millinocket Compares (sidebar)

To stress the importance of careful and appropriate comparison, the Townsman notes a recent exercise undertaken by East Millinocket Administrative Assistant Peggy Daigle. Faced with a mandate to cut $400,000 from the municipal budget in four years as a result of a settlement with the town’s largest employer Great Northern Paper Company, Daigle recently used the MMA Salary Survey to see if her town was "out of line" in its spending on personnel.

Daigle first compared East Millinocket (pop. 2,071) with the 52 other towns in the state of similar size (pop. 2,000 to 3,400) that were listed in the Salary Survey and found that the town was fourth from the top in personnel costs and second from the top in number of personnel. Of the 52 towns only one other - Baileyville (pop. 2,076) - was home to a paper mill and even there East Millinocket far outstripped it in both number of personnel and personnel costs.

But Daigle didn’t stop there. She then compared East Millinocket with 10 other paper mill towns in Maine, including Baileyville and found that it wasn’t as out of line as it first appeared. East Millinocket was eighth in its full-time salaries and ninth in number of full-time employees. However, it should be noted that East Millinocket was the smallest in terms of population.

As Daigle explains it, salaries in East Millinocket are high, reflecting years of mimicking the going rate at the paper mill. " Our unions were competitive with the mill. And our unions set the standard for what everybody else (non-unionized personnel) was paid," says Daigle.