A Responsible Approach to Compensation to Support Our Mission of Service

By Jennifer McMahon, Director of Human Resources

When you look at the political landscape today, the topic of compensation is included in the fray. Politicians are debating minimum wage, right-to-work laws, and disclosure of CEO pay. Locally, the City engaged in a year-long compensation study. When a public employer takes a look at pay, a natural response for its employees is worry or defensiveness and for residents, scrutiny and skepticism. Putting aside newspaper reporters’ proclivity for the hyperbole and disregard for context, let’s ask, what exactly is compensation and why should public employers examine it on a regular basis?

Compensation refers to wages paid by employers to employees in exchange for work. Wages are the foundation of a total compensation package because they establish the standard of living for employees. Wages also indicate the value the employer places on the position and on the contributions the employee makes. An employer has to balance paying competitive wages that attract qualified applicants and motivate high performance against the cost of labor in its budget.

For any given employer (public or private), the cost of labor is the most expensive component in their budget, typically 70 to 80 percent. Illinois public employers are required by law to disclose annual wages above $75,000. In light of fair pay laws, transparency, and the total cost, a periodic review of an organization’s compensation philosophy is good practice to limit liability exposure and as part of our commitment to the public trust. Are tax dollars being used wisely? Are residents getting the service levels they are paying for?

The compensation philosophy of the City of St. Charles is based on a commitment to hire and retain highly qualified and motivated employees at all levels within the organization. Towards that end, the City Council determined St. Charles will lead the market in order to attract top talent that will consistently deliver the high-end services our residents expect and deserve. The City Council takes their fiduciary responsibility seriously and instituted a regular review (every three years) of the City’s compensation philosophy to ensure it’s balancing the goals of responsible tax dollar spending with attracting and retaining top talent. The compensation study completed in November 2017 was that review.

The study affirmed that the City is achieving its goal of attracting and retaining top talent. This has manifested in recognition and awards for good work over the years across all departments from a Special Achievement award in GIS to Elevated Tank of the Year for Red Gate Water Tower. It’s demonstrated in leadership positions among professional organizations, with the City’s Finance Director leading the Illinois Finance Officers Association as president. It shows up in innovation with the implementation of the City’s Snow Fox Snow Management System, which maps snow plow locations and treated roadways in real time so staff can efficiently allocate resources where needed to keep the roads safe and clear during a snowfall. Employees have brought or attained a high level of education and certifications in the areas of human resources, technical rescue, architecture, water safety, elderly/juvenile care, building safety, zoning, finance, and much more. The study further noted that turnover is low, which saves the City money. And tenure is long, which contributes to the knowledge and experience base of the employees delivering services.

There are three salient points that came from this study that were missed in the news media. First was clarification that the compensation philosophy of paying at the 75th percentile means that employees have the opportunity to reach the 75th percentile through strong performance. The 75th percentile represents the top of the pay range for a given position, not the actual pay of each employee. Secondly, the City identified its competition for talent by using an empirical methodology to develop criteria that determines comparable communities. Finally, the City established a process to review its compensation philosophy, its comparable community criteria, and its market data every three years to ensure those support the service level demands of residents while reacting to the economic pressures in the community.

The City of St. Charles is committed to providing high level services to our residents and must attract, motivate, and retain high performing employees in order to do so. St. Charles residents deserve no less. The Council is also forever mindful of spending tax dollars and maintaining transparency on how compensation is administered. Regularly and thoroughly evaluating employee compensation supports the City’s mission of Service and ensures responsible and sustainable staffing now and into the future.