June Interim

Total Compensation Study

Representatives from the Division of Human Resource Management (DHRM) reported that state employee base salaries continue to fall behind the market according to results from the 2021 Total Compensation Study performed by Arthur J. Gallagher & Co.

On June 14, 2022, The Retirement and Independent Entities Interim Committee reviewed the 2021 study results indicating that state employee total compensation, which includes healthcare and retirement benefits in addition to base salary, is “possibly misaligned” with market competitiveness – meaning the State’s compensation levels vary 10-15% above or below the market average. 

The study found that the state’s average annual salary has fallen 14.4% below market. While the state’s benefit package remains competitive with the market average, the relatively low base salary rate leads to possible misalignment, especially for those in the Tier 2 retirement program.

Based on these results, Gallagher recommended the state focus on addressing salaries for positions in which pay is 15% or more below market.  Because the state is more competitive when it comes to benefits and leave accrual, the state may consider “rebalancing total compensation value composition to ensure competitiveness from a base pay perspective while maintaining a competitive position with respect to benefits value.”

During the 2022 General Session, the legislature approved the largest total compensation package in over 15 years, which included funding for “Discretionary and Targeted Compensation Increases” to address below market positions. The legislature has asked DHRM to conduct a follow-up study to determine how this FY23 funding will impact the state’s competitiveness in the current market.