AGENDA #1a
MEMORANDUM
TO: W. Calvin Horton
Town Manager
FROM: Pam Eastwood
Director of Human Resources
DATE: January 15, 2004
SUBJECT: Report and Compensation Recommendations for Fiscal Year 2004-05
Each year the Town reviews pay in the defined labor market for Town jobs and makes recommendations to the Council for changes which will maintain competitive rates for hiring and retention of employees.
The Human Resources Department staff completed both a pay survey and an employee benefits survey in December 2003 and this memorandum contains detailed and summary reports from our study and analysis of this information.
We appreciate the opportunity to present our findings and recommendations on this important topic.
RECOMMENDED COMPENSATION INCREASES FOR FISCAL YEAR 2004-2005
PURPOSE
The purpose of this report is to present and discuss compensation recommendations for Fiscal Year 2004-2005 for Town employees.
INTRODUCTION
The Human Resources Department conducted both a pay survey and a benefits survey in December 2003 to compare the Town’s pay and benefits programs with those area organizations with whom the Town competes for employees. See Attachment 1, page 8 for the list showing the number of employees in each of the organizations surveyed.
Part I: Pay Survey
The organizations included in the pay survey were:
· City of Burlington
· Town of Carrboro
· City of Cary
· City of Durham
· Town of Hillsborough
· City of Raleigh
· Durham County
· Orange County
· Wake County
· Chapel Hill-Carrboro City Schools
· UNC Chapel Hill
· UNC Health Care System
· OWASA
Survey
The survey requested information on a selected group of Town jobs (called benchmark positions) which represent substantial numbers of positions (such as Fire and Police jobs) or which represent a variety of jobs with skill sets which the Town seeks in filling positions. Respondents were asked to provide information on:
· job titles
· hours worked
· minimum, midpoint and maximum of the pay range for each job
· the number of employees in each class title
· the average actual salary paid to each class of employees
Detailed study and analysis was conducted by Town Human Resources staff and follow-up calls were made to respondents to assure accuracy and completion of data.
Overview
Other area organizations surveyed took differing actions in adjusting their ranges and employee pay during Fiscal Year 2003-2004. (See Attachment 3, page 22 for detail). The pay survey data show the impact of these differing approaches.
Findings
The pay survey was completed in December 2003 (see Attachment 2, page 9 for detail). The majority of Town jobs compared positively to the market average midpoints (50th percentile) of the peer organizations surveyed.
Council actions in recent years to adjust pay ranges have been effective in maintaining the Town’s pay in comparison to other area organizations with whom the Town competes for employees.
.
The Council took action in October 2003 to improve pay ranges for Town employees and authorize additional adjustments for some Police and Fire Department employees. These actions were effective in bringing the pay ranges to closer alignment with the market average ranges; however, actual employee pay rates remain lower than the market average actual employee pay for a number of job classes in the Town. For example:
Recommendations
We believe no overall range movement is needed for the 2004-05 budget year and recommend that resources be directed toward increasing employee pay within the ranges by authorizing merit increases for both the below-job-rate group and the above-job-rate group. We recommend the following actions effective October 1, 2004:
a. Adjust all steps in the pay plan to 4% apart rather than the current 3.78% by adding .22% to each step. This action would simplify the pay plan, improve employee understanding and ease of administration, and make the Town’s steps more like those of other employers using pay steps. Authorize for all eligible employees below the job rate (355 employees, 55% of the employee group) a .22% increase to place them on the new steps.
b. Authorize a one-step increase of 4% for all eligible employees below the job rate (355 employees, 55% of the group) to move them through the pay range of the job.
c. Authorize a 4% merit increase for all eligible employees above the job rate (295 employees, 45% of the group) to reduce pay compression between the two groups.
COST OF RECOMMENDED ADJUSTMENTS
|
: |
|
|
|
||
|
|
A |
B |
C |
Additional |
Cost if |
|
|
0.22% |
4.00% |
4.00% |
Annual |
Implemented |
|
|
BJR |
BJR |
AJR |
Cost |
October 1, 2004 |
|
General Fund |
21,005 |
381,901 |
514,704 |
917,610 |
688,207 |
|
|
|
|
|
|
|
|
Transportation |
7,557 |
137,391 |
108,858 |
253,805 |
190,354 |
|
|
|
|
|
|
|
|
Housing |
740 |
13,461 |
18,183 |
32,383 |
24,288 |
|
|
|
|
|
|
|
|
Parking |
719 |
13,074 |
6,933 |
20,726 |
15,545 |
|
|
|
|
|
|
|
|
TOTAL |
30,020 |
545,827 |
648,677 |
1,224,525 |
918,393 |
|
|
|
|
|
|
|
Potential Grade or Title Changes
Classification and pay studies will be conducted throughout the year to identify any individual jobs or classes of work which may need to be reclassified; any actions needed would be presented to the Council for consideration. Departments would be required to fund these changes from their existing budgets. These studies and recommendations would be similar to those presented to the Council in November 2003.
PART II: RECOMMENDATIONS FOR PAY GOALS AND
PAY PLAN STRUCTURE CHANGES
PAY GOAL FOR THE TOWN
The Council adopted a Resolution in June 1999 directing the Manager to gather data and make recommendations for pay based on the 75th percentile of the labor market. The Resolution sets this percentile as the goal for pay for Town employees. In recent years, the Council has not been able to adhere to this standard because of economic challenges, and we believe this goal may not be practical in the current economic situation.
We propose that the Council consider the goal of achieving and maintaining pay ranges and average actual employee pay at the 60th percentile or 10% above the current market average. This would provide recognition and support of the high standards of performance and service which Town employees achieve and would provide a positive framework for recruitment and retention of high-quality Town employees. It may take several years to achieve this goal; however, we believe it is both reasonable and practical.
A number of Town jobs currently attain this goal: 13 of the 43 titles surveyed (approximately 30%) have ranges which fall at or above the 60th percentile of the market ranges.
Regular market surveys and review of the ranges and employee pay of those area organizations with whom the Town competes for employees will provide valid and objective data on which to base recommendations that will enable the Town to move steadily toward this goal.
We believe the strategy of paying at the 60th percentile will serve the Council well in the achievement of Town goals and objectives of providing essential citizen services through a well-qualified, stable and high-morale workforce.
RECOMMENDATIONS FOR PAY STRUCTURE CHANGES
Historically the hiring step (step 0) was 6% below the next step in each pay range and employees received a 6% pay increase after six months of employment. The purpose of the pay increase was to offset a 6% deduction for retirement system contribution that began after 6 months of employment. The practice of delaying participation in the retirement system for six months ended in 1998 but the 6% pay increase after six months of employment continues.
Those new employees who come in at the hiring step (step 0) move to the next step after successful completion of the six month probationary period. Those employees who come in above step 0 move to the next step of the pay plan after successful completion of the six-month probationary period. Those employees who come in at or above the job rate receive a one-time payment of 3.78% at successful completion of probation.
We propose deleting the hiring step from the Pay Plan and using the next step (now called the probationary step) as the new minimum for each range. No cost is associated with this action because departments calculate and budget the full amount needed for the year. This change would assist the goal of moving the Town’s ranges toward the 60th percentile range by improving the Town’s pay minimums at no additional cost. (This especially would be beneficial in the Fire and Police Departments where most new employees, those with no prior job experience, begin at the hiring step.)
If the above action is approved, it would be appropriate to cease the current policy of providing a one-step pay adjustment at the completion of six months probation. No cost is associated with this action because departments calculate and budget the full amount needed for the year. This change would improve the Town’s ability to make the most attractive initial offer when hiring.
No current employees would be affected by these proposed changes. The new policies would apply only to persons employed after October 21, 2004.
PART III: BENEFITS SURVEY RESULTS
Employee Benefits Survey
In December 2003, thirteen area government agencies were surveyed by the Town Human Resources department staff for information on their employer-paid employee benefits programs.
Organizations surveyed included:
· City of Burlington
· Town of Carrboro
· City of Cary
· City of Durham
· Town of Hillsborough
· City of Raleigh
· Durham County
· Orange County
· Wake County
· Chapel Hill-Carrboro City Schools
· UNC Chapel Hill
· UNC Health Care System
· OWASA
All employee benefits programs were surveyed:
· vacation/annual leave
· sick leave
· paid holidays
· funeral leave
· longevity pay
· health insurance
· dental insurance
· life insurance
· disability insurance
· local government retirement plan
· 401(k) supplemental retirement plan
· 457 supplemental retirement plan
· tuition assistance
Results were compiled in a table format (see Attachment 4, page 25 for detail) and each item was scored. The scale used was:
Total scores for each of the 13 organizations were ranked as shown in Attachment 5, page 30, arranged from highest to lowest score with the Town of Chapel Hill included in the ranking.
The analysis of this information shows that the Town of Chapel Hill employee benefits program ranks 11th among these organizations. Some of the ranking differences were because of higher employer contribution levels to dependent health insurance premiums, higher or total contribution for dental insurance or higher levels of paid life insurance.
The Human Resources Department will update this survey periodically and report on the Town’s ranking in the group. During the coming year, we will conduct in-depth analysis of each Town benefit and present recommendations for change to the Council.
CONCLUSION
These compensation recommendations are based on pay survey results and are presented as our best proposal for achieving competitive pay levels and employee pay for the Town in the upcoming budget year. We believe that approving and implementing this proposal will enable the Town to recruit and retain excellent employees with the skills and abilities required to carry out the Town’s goals and objectives effectively in the coming year.
ATTACHMENTS