How to better leverage compensation data for your local government

By Michael Mooney, SPHR, SHRM-CP

SUMMARY

Local governments can struggle to reconcile the results of market rate studies with real-world hiring experiences, especially in the current labor market. This article explains why taking a close look at pay grades, broadening comparable markets, and reviewing compensation data more frequently can help cities make more informed compensation decisions. It also highlights the importance of pairing compensation data with practical insights to better attract, retain, and develop employees. See Frequently Asked Questions.→

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In a recent meeting with a local government client, we were reviewing the results of a compensation and classification study when our client said, “I’m surprised by the rates you found for the Assistant City Manager position. We just posted a job advertisement for this role and many candidates said they’d have to take a pay cut to come here.”

Over the past four years of working almost exclusively in Minnesota public sector compensation, I’ve heard this type of feedback somewhat regularly. And I understand the frustration. When a city’s recent experiences contradict the findings of a study, it can be hard to trust the results—even when they’re based on reliable market data.

To help your local government better leverage compensation and classification studies and structure your compensation plans, here are a few things to consider.

Pay attention to pay grades

When evaluating local government salary data during our compensation study work in 2025, we consistently saw that incumbents were at least two-thirds of the way through their pay range.

Most organizations will try to place new hires in the first three steps of a 10-step plan, or in the first 30% of a pay grade. But with the average employee already 70% through their current grade, it becomes very difficult to find an employee whose pay expectations will align with the first three steps of a plan. This is especially true for candidates looking for a lateral transition.

With this survey data in mind, consider getting creative with your recruitment strategies. Find ways to create wage growth opportunities internally by adding senior or lead positions. Keep employees from becoming “topped out” too quickly by evaluating the number of steps on your plan. If needed, loosen your hiring requirements and look for less experienced candidates that may be more aligned with the early steps of the range.

By staying on top of where employees are in their pay grade, you’re better positioned to strengthen your recruitment efforts and mitigate pay compression.

Take a broader view of the market

I find clients often struggle when asked to identify other cities that should be included in their compensation and classification study. It can be tempting to narrow a comparable group to a handful of cities that are similar in population sizes, geographic areas, and/or past union negotiations. At face value, this is a good exercise.

However, the smaller your comparable group is, the more volatile your city’s labor market becomes.

One way to broaden your view of market data is to include the private sector. While not all positions have relevancy in both the public and private sectors, it can be valuable to know what the private sector is paying for comparable positions. And yes, this requires letting go of the belief that the public sector can’t compete with the private section in terms of compensation.

Historically the private sector has paid more for certain positions, but the public sector’s almost unanimous adoption and consistent application of cost-of-living adjustments (COLAs) has slowly chipped away at the pay gap between these sectors. We’ve seen this firsthand in recent projects with clients in both sectors. It’s my view that in 2026, many public sector positions pay as well or better than their private sector counterparts (in terms of base salary only).

By widening your comparable market group of cities and including the private sector in your market rates study, you could increase the likelihood of having sufficient data for each of your positions, increasing the stability of your market benchmarks.

Frequently review market data

Over the past several years, union negotiations and dramatic COLAs in response to high inflation—paired with a challenging labor market—has made for a highly volatile compensation market. It can be shocking to learn how much the market has shifted, especially if it’s been several years since your city’s last market rate study.

To avoid surprises, consider keeping tabs on market trends annually and making small adjustments to your compensation as needed each year. In doing so, your city will be in a much less reactive position—and less likely to lag behind market compensation rates after a long gap in market analysis.

Taking this approach can also extend the life of your plan, reducing the frequency of comprehensive compensation and classification studies, as your compensation plan is maintained year over year.

Move forward with a solid compensation strategy

Establishing a compensation strategy for your local government can be challenging, especially in a volatile market. Adopting a broader perspective, staying on top of market data, and considering pay grades can help your organization confidently plan its next steps.

The Abdo Workforce Solutions team is here to support you in the process. From conducting a compensation and classification study to helping you create a solid compensation plan, we’ll guide you toward a clearer path.

To learn more about how we can help, contact us today.