Public sector compensation management in a changing world

Times have changed: faced with the urgency of the “Great Recession”, public employers are finally dropping long-standing compensation management methods and adopting alternative ways of setting salaries. Some of these have proved effective but employers generally have little experience with such rethinking, and there is no one textbook answer. Borrowing methods of the private sector, such as performance-related pay, is a strong trend and bound to continue. Other trends are the delegation of responsibility for managing pay from a central office to agencies and ministries, and individualised pay for knowledge jobs. How information is collected for job descriptions is key, since inaccuracies can lead to costly grade inflation. Any restructuring undertaken is now more practical thanks to technology, but each employer must decide on the appropriate balance between internal salary hierarchy (perception of fairness) and external differential increases in occupational pay due to supply and demand in the labour market.