The city of Mexico offers its employees one of the most competitive health insurance plans in the area, but its wages are falling behind the market.

Mexico City Council members approved a resolution adopting a new position classification and pay schedule for city employees at its Aug. 24 meeting. The new system was designed to be both competitive and flexible, and each schedule will be assigned a salary range with established minimum and maximum rates.

“We’ve had trouble maintaining staffing levels and continue to have levels far below authorized levels in the past couple years,” City Manager Bruce Slagle said, addressing the council members.

In an attempt to remain competitive, the city of Mexico entered into an agreement with McGrath Human Resources to conduct a competitive pay and benefit compensation study on April 13. Melanie Henry, a consultant with McGrath Human Resources Group, shared the official findings of its compensation study with council members at the Aug. 24 meeting. 

The data showed that 70% of the city’s minimum salaries are considered “under market.” Additionally, 17% of city salaries are aligned with the market and 13% are “at risk” of falling below the market. The city’s maximum salaries are even further behind at 85% under market, 11% aligned with the market and 4% at risk.

“If your minimums are behind, your maximums would naturally be behind as well, but they’re just even a touch more behind,” Henry said. “That’s to show us that the pay ranges themselves need to be adjusted.”

Despite its trouble maintaining staff levels, Henry said Mexico is in line with the average employee tenure for local governments — the city of Mexico’s is 6.85 years while the national average is 6.4 — so the next thing to look at is the age of the workforce.

“You have to try and understand what each generation is looking for,” Henry said. “We have older employees who are looking for retirement and younger employees who are looking for top salaries.” 

According to the study, a little over one-third of the city’s employees will be retiring soon, which is expected turnover, roughly 44% are under 40 years old.

“This group is more likely to leave if they find a better opportunity somewhere else,” Henry said.

Additionally, 50% of city employees have been at their job three years or less, which Henry said is something to be concerned about. When considering any payout costs, recruitment cost, new compensation for a replacement, new benefits and training, the expenditures really add up. Henry said turnover can cost 1.5-times the original employee’s salary — two-times the salary for public safety employees.

While McGrath included benefits such as retirement, paid time off and insurance in addition to salaries, Henry said that the number one objective was to make sure the city’s wages are market competitive. That meant considering the current policies and job positions as well as those positions’ internal equity and comparing that to external market data.

“The study started with interviews with administration and department leaders,” Henry said. “This is an important part of the process so we can understand what’s going on.”

As part of the study, Henry said McGrath also reached out to comparable area organizations such as Audrain and Callaway counties, Boonville, Centralia, Columbia, Fulton, Jefferson City, Marshall, Moberly, Sikeston, Warrenton, Mexico Public Schools, and MoDOT. She pointed out that Columbia and Jefferson City have a major impact on the region as the largest municipalities in the area. 

“People do travel to find work if they think they can be paid higher somewhere else within driving distance,” Henry said. 

There are three options when it comes to an organization’s compensation philosophy, Henry said. You can either lead the market, meet it, or follow it.

“When we discussed this with administration, we decided, based on budget and financial resources, we were going to maintain meeting the average market,” Henry said. 

What that looks like is a three salary schedule system that includes two step-range schedules for hourly employees and one range schedule for salaried employees. McGrath also recommended combining vacation time and sick leave into one pool of paid time off, which Henry said is a more attractive leave benefit.