RD536 - Annual Report on the Discrepancies in Compensation between the Public and Private Sectors – 2016

Executive Summary:
To determine market position, DHRM uses indicators of market movement, as reflected in performance increase budgets and structure adjustments, gathered from a variety of sources. The theory underlying this approach is that an employer can maintain its competitive position by increasing its salaries the same percentage as other employers are increasing theirs. In other words, if other employers are increasing their employees’ salaries by an average of, for example, three percent each year, the Commonwealth can maintain its position if it also grants a three percent average increase. Other employers often use this same methodology to maintain their competitiveness.

In October 2008, the Joint Legislative Audit and Review Commission (JLARC) completed a comprehensive study by of the Commonwealth’s total compensation program, including salaries and benefits. This study provided the benchmark against which subsequent salary changes have been measured.

This year, the Department of Human Resource Management gathered projections of average 2015-2016 salary increases from a variety of sources. The primary sources were national compensation consulting firms because they provide consistent, reliable results by surveying large numbers of employers each year. This year, surveys by Empsight, Aon Hewitt, WorldAtWork, the Korn Ferry Hay Group, Willis Towers Watson, Compensation Resources, the Conference Board, and Culpepper and Associates were used to measure salary increase trends. Other sources were used to confirm these surveys, including the Employment Cost Index (ECI) published by the Bureau of Labor Statistics, a forecast from the Economic Research Institute, a Human Resource Association of the National Capital Area survey, and the 2016 Pay Structures and Practices Survey published by the National Compensation Association of State Governments (NCASG).

DHRM also compared the average salaries of Virginia state employees with salaries paid by other employers for comparable jobs. Twenty-five occupations were selected for the comparison based on their being representative of the array of state occupations. These occupations include 7.67% of classified state employees and 20 (35.7%) of the state’s 56 occupational career groups.

Again this year, no resources were available to purchase private salary survey data. Because previously purchased surveys are too old to age reliably, this year DHRM used an Occupational Employment Statistics (OES) survey provided by the Department of Labor’s Bureau of Labor Statistics. This survey compares Virginia state salaries with salaries in the private sector based on federal Standard Occupational Classification codes. However, because the latest data available was as of May 2015, aging the data was still necessary. DHRM aged the state salary data by 3.86%, the average amount of the fiscal year 2016 salary adjustments (a 2% general salary increase, a compression adjustment, a special 2% or $1,000 special increase for high-turnover roles, and a special compression appropriation for the Department of State Police) implemented August 10, 2015. The private industry salary data was aged by the average market movement in 2015 and 2016, 2.94% and 2.93% respectively.

The OES survey does not fully account for differences in the number of employees at the various levels of work or their specific duties within an occupation. Therefore, caution should be exercised in basing decisions on data for individual jobs.