Subject Matter Minute, Episode #55 – Market Adjustment (Raises!) Process

I know us long-timers have been uncertain as to whether we would see another raise again anytime soon. But this is good news! Raises are coming and they are coming soon. I’m going to give you the background information and the timelines of this process. And since the state could use the same process in the future, this episode should be somewhat evergreen…. If you are watching it in the future.

First of all, the process to get us July raises began years ago. A&I HRD  currently uses 6 different salary surveys that are vetted and published yearly. Each year when the surveys are published, A&I HRD compares our current pay tables and actual employee pay to the relevant labor market which consists of other states and private entities. So, we are trying to compare apples to apples here.

If we look at a timeline over the course of the last two years, it may shed a little more light as to why it is not uncommon for the data to be up to 2 years dated by the time raises take effect: 

• 2020 – market data was collected and published towards the end of the calendar year. 
• 2021 (spring) – A&I HRD performed its market analysis and submitted proposals to the Governor.
• 2021 (fall) – The Governor reviewed these proposals, compared these to revenue forecasts submitted by the Consensus Revenue Estimating Group (CREG), and made a recommendation to the Legislature. 
• 2022 (spring) – The Legislature made adjustments and approved the compensation package for pay increases. 

Ok, next I want to break down some of what HRD’s market analysis looks like and how it led to the proposal that was eventually adopted. 

Each year a bunch of turnover metrics are tracked and published. Employees write letters relating to issues with pay. HRD also sent out the Employee Satisfaction Survey. They look at recruitment data and how long it takes to fill a position once it is advertised. They also look at vacancy rates, and how many positions sit vacant because we are unable to fill them. Market data and the cost to move employees to the new market rate is calculated. All of this is compiled in the Workforce Report which can be found on A&I’s website (refer to SMM #51).  Given the severity of the current market lag, HRD took this information a step further and compiled a 157-page document on Compensation Facts. This was sent to the JAC last December to support the paytable movement and pay increases for employees.

So, in this document, instead of looking simply statewide as HRD often does in their published documents, each agency had its own highlights which allowed directors to speak to the legislature about pay issues in their agency. This seemed to help.

At the time the Compensation Facts book was published, the Executive Branch was $97.8 million dollars per year behind the 2020 market in employee pay. We work on a 2-year biennium, which means to move employees to the 2020 market rate would have been an ask of almost $196 million dollars. So HRD created a more realistic plan to try and get employees closer to the market without breaking the bank. The first step –   move the pay tables to the new market rates. The second step –  implement the Market Merit Matrix. The Market Merit Matrix allocates a percent increase to an employee based on our performance and the relationship of our pay to MPP, or midpoint, of the pay grade. The last time a matrix was implemented was in 2015! 

 With support from the Governor’s Office and the Legislature, the Executive Branch was ultimately awarded $37.2 million in General Funds to adjust employee compensation.

So how do we not know exactly what each employee’s raise is today? Well, we don’t. Our workforce is anything but static. The first step is to move the pay tables to the 2020 rates from where we are currently, which are 2017 rates. The State Compensation Policy requires each employee to be paid at the minimum (at least) of the pay grade for their job. So we must first move each employee that is behind the paytable minimum to that new minimum.  

Once everyone is at the new minimum, the market merit matrix is implemented. Because the workforce is constantly in motion with new hires, transfers, and terminations, HRD had to implement a cut-off date of April 1st… meaning our pay and position details as of April 1st will determine the increase. (If you experienced a job change or pay change after April 1st, please consult your agency HR to see if you are eligible for a matrix increase.) Here’s what the matrix looks like without the actual percentages in it. Here is where the percent raise will be once the table is finished. So, the yellow fields on top numbered 7 through 1 are an individual’s position in the range based on the percent of market. So… bottom 10% here, all the way to the top 10% here. The performance aspect of the matrix, rows 0-14, are based on the employee’s PMI score from the 2020-2021 review period. 

As you know, we only see a word score at the end of our evaluation… so, “meets expectations” or “commendable.”  The decimal point figures in the matrix come from a background calculation that takes the total number of points awarded on the PMI and divides them by the number of scored competencies. This allows incremental improvement in work areas to be reflected in pay. 

As an example, let’s say a non-supervisor gets the following scores on their 6 competencies. Each has a point value associated with it. You add those points, divide by 6 (because there are 6 competencies) and that is your score with a decimal point. A supervisor would do the same but would add up 8 competencies and divide by those 8. 

The next big question you are probably interested in, is when we will know what our raises will be? HRD is working to allocate the matrix dollars and will send out individual letters with our matrix details, percent raise, and new pay rate by the end of June. . Our raise (or market adjustment 🙂 is effective July 1st – this means that you will see the difference in our July paycheck… so at the end of July.

Please know that HRD’s work does not, and has not stopped with this allocation and the matrix they are building. As noted before, HRD performs a market analysis each year. The Joint Appropriation Committee (JAC) has made employee compensation an interim priority topic for further discussion this year. This means that even as these raises take effect, discussions on employee pay are ongoing and happening in the background which… who knows…may lead to more good news in the future.