Making Sure Your Government's Personnel Budgeting Is Aligned with Its Goals.

• Author: Purcell, Melanie
• Position: Best Practices

Whether a government's personnel decisions are based on a conscious strategy or a more informal approach, it needs to have a thorough analysis and understanding of its personnel budget.

Most local government budgets are dominated by personnel costs, with total compensation expenses often exceeding 75 percent of resources. Given the amount of money represented and the effect of workforce on the services delivered, governments need to thoroughly analyze and understand their personnel budgets.

GETTING STARTED

The basic terms of compensation are usually outlined in labor contracts and/ or personnel manuals, and the human resources (HR) department typically provides interpretation when questions of intent or language arise. HR also manages other elements of compensation that aren't specified in contracts, such as training or development, wellness programs, workers' compensation, and voluntary insurance and savings plans. Accordingly, HR, along with the risk management, labor relations, and executive management departments, is a critical source of information in building the personnel budget and ensuring position control. All of these departments can provide trend information about turnover, vacancies, salary growth, and benefit costs. They can also assist in non-traditional analysis, including productivity, morale, industry trends, and benefits provided by other organizations the government may be competing with for top talent.

Measures of productivity and morale provide some quantitative insight into less concrete influences on the personnel budget, especially over the long term. If the workforce is unstable, there will be increased (but not explicitly identified) costs associated with recruitment, training, and performance. Measures a government can use to provide insight on issues that might be influencing forecasts include retention rates for both seasonal and permanent employees, average and median employee tenure, the number of resignations versus the number of retirements (especially over time), and complaints or morale indicators such as absenteeism, tardiness, late evaluations, and employee surveys.

In forecasting near- and long-term employee costs, determine which positions are likely to be vacated because of retirements, and when. Factors affecting eligibility for retirement typically include age, years of service, vesting requirements, and ability to purchase or transfer prior service. But market conditions also influence an employee's decision to retire; these include inflation, returns on savings and investments, and the...