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Salary movements in Local Government catching up to the private sector

Based on Mercer Human Resource Consulting’s remuneration database, salary increases passed on to Council staff over the past three years have demonstrated that the historic gap in salary increases between the Local Government and private sector is steadily closing. In 2003, the average salary increase for employees working in Local Government was 3.6%, compared to 4.4% across all industries (difference of .8%). In 2001, this gap was more profound at 3.4% for Local Government and 4.6% for all industries (difference of 1.2%).

Technical and professional staff working in Councils have been the biggest winners. Where average salary increases passed on were 31% below the general market three years ago, the gap stands at an average 14% below the market in 2003.

One reason for the accelerated increase in salary movements could be Councils’ difficulty in attracting and retaining quality staff with specialist skills. According to Council responses in the Local Government Report 2003/2004 published by Mercer each November, the main reasons for voluntary departure of technical and professional staff included: other employment opportunities (77% of Councils); dissatisfaction with remuneration (64%); and retirement (36%).

The report also shows that 44% of Councils see other Councils as their major competitor in terms of attracting and retaining technical and professional staff. However, the private sector is not far off with 32% of Councils seeing this sector as a key threat to attracting skilled workers away from Local Government. On the other hand, the salary increases received by Councils’ Senior Executives have been less pronounced. Based on Councils’ reported salary increases, although executives still receive the highest salary increases, the rise has been mild over the years compared to other staff categories. In 2001, the average salary increase for Local Government executives was 3.9%, compared to 5.0% for the all industries sector.

In 2003, executives received lower increases overall, with an average increase of 3.7% in Local Government and 4.4% in the All Industries. This may have resulted from constraints in pay increases in the State Government sector that are often used as a guide for senior executives within Local Government.

but...Local Government is still one of the lowest paid sectors in Australia

The chart above compares positions surveyed in the Local Government Report 2003/2004 to jobs of comparable size and complexity in the private sector. Each job has been evaluated using the Mercer Cullen Egan Dell Job Evaluation methodology to determine its Job Size, and this score has been used as a basis for comparison to jobs in the private sector with the same Job Size points score.

The private sector figures are based on Mercer’s ‘All industries’ criteria, which represents the general remuneration market. This is derived from Mercer’s extensive remuneration database which comprises data from over 1,000 organisations.

Mercer has charted the median of remuneration per annum against Job Size, taken the line of best fit to represent the Local Government market, and used its All Industries criteria to show how the median compares to the private sector. On average, Local Government pays 12% below the private sector. The difference is smaller for lower level jobs but increases proportionally to Job Size and complexity. In fact, the chart reveals that median remuneration in Local Government almost aligns with the 25th percentile remuneration in the private sector.

(Note: 25th percentile refers to the point where 25% of salaries in the market fall below this point and 75% of salaries fall above this point.)

Remuneration packaging trends for executives

Contemporary reward strategies include the concept of the remuneration package. A remuneration package approach exists when a Council calculates the costs associated with employing an individual over and above base salary. The package may be defined as total cash, total remuneration, employment cost or by some other term.

An analysis of the data collected in the survey shows that for executives and management staff, the total cost of employment is approximately 20–25% above base salary. Calculating the total cost of employment enables the Council and its employees to understand the full value of remuneration and make valid remuneration comparisons between jobs of similar size. Based on the results of Mercer’s Local Government Report 2003/2004, 84% of Councils reported using a remuneration package approach for executive staff. Aside from employer or employee superannuation contributions, the typical items available in the remuneration packages of executives are Council vehicles, mobile phones, laptops, professional association memberships and discounts on Council products.

About the Local Government Report

Mercer has published The Local Government Report for 17 years. The survey provides salary information for 106 positions specific to Local Government. The survey analyses salary information (106 roles) and Human Resources policies and practices specific to Local Government.

To find out more about the Local Government Report, please visit www.imercer.com/australia/lgr or call Linda Ada on 1800 645 186.

* Copy supplied by Mercer Human Resource Consulting.

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