Agenda May 9, 2005
RECOMMENDED COMPENSATION
FOR TOWN EMPLOYEES
FOR FISCAL YEAR 2005-2006
PURPOSE
The purpose of this report is to present and discuss compensation recommendations for Fiscal Year 2005-2006 for Town employees.
INTRODUCTION
The Human Resources Department conducted a pay survey and a benefits survey in December 2004 to compare the Town's pay and benefits programs with those area organizations with whom the Town competes for employees. See Attachment 1 and 2, pages 8 and 31 survey reports. 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.
DISCUSSION
PROPOSED PAY GOAL FOR THE TOWN
In June 1999, the Council passed a resolution (Attachment 3, page 37) which directed the Human Resources staff to gather and report data as compared to the 75th percentile of the area labor market. In recent years, the Council has not been able to provide sufficient resources to achieve the goal of maintaining pay ranges and employee pay at this level. We recommend that the Council change the Town's pay policy as follows, based on past practices.
For the past three years, the Human Resources department staff has been analyzing and reporting information on Town pay levels in comparison to the market average or 50th percentile of the labor market and recommending to the Council that the pay goal of the 75th percentile be changed to focus on achieving pay ranges and employee pay for Town jobs at the market average plus 10 percent.
We continue to believe that the goal of paying at the market average plus 10 percent is achievable in these difficult economic times. Using this goal would provide recognition and support of the high standards of performance and service at which Town employees perform and would provide a positive framework for recruitment and retention of effective and productive Town employees. We believe it is both reasonable and practical.
Attached is a resolution for the Council's consideration which would make this change effective July 1, 2005. (Attachment 4, page 38). Currently, a small number of Town jobs attain this goal: eight of the 43 jobs surveyed have range midpoints which fall above the market average by 10% or more. In the December 2003 survey, the number of Town jobs which attained this goal was 13. This reduction represents a significant decline in the pay comparison between Town jobs and the labor market.
We recommend that the Council approve use of the standard of paying at 10 % above the market average as the Town's goal for pay ranges and employee pay. We believe this strategy will serve the Council well in the achievement of the Town goal to provide essential services to citizens through a well-qualified, effective and stable workforce.
Summary of Survey Findings
The Human Resources staff analyzed the findings of the Town Pay Survey completed in December 2004. Forty-three (43) job titles were selected for use as benchmark classes for survey use. The selection and use of benchmarks is a standard means of compiling a survey sample which is representative of Town jobs as a whole.
Benchmark positions by definition either represent large numbers of jobs in the organization (such as Police Officers), or jobs found in a large number of departments (office support jobs such as Administrative Assistant) or jobs with pay rates which may change rapidly such as Information Technology jobs). Of the 43 jobs surveyed:
8 Town jobs (18.6% of survey) are more than 10 % above the market average.
10 Town jobs (23% of survey) are more than 5 % and less than 10% above the market average.
6 Town jobs (14% of survey) are less than 5% above the market average
9 Town jobs (21 % of survey) are less than 5 % below the market average.
10 Town jobs (23% of survey) are more than 5 % below the market average.
Forty-four percent (44 %) of Town jobs surveyed fall below the labor market average. We believe this is an unfavorable position for the Town as an employer. We believe that the peer organizations surveyed will be increasing their pay plans further within the next six months. Paying below the market average for Town jobs means that the Town is competing in the labor market with a substantial number of other employers paying more than the Town offers for the same job. The turnover rate has increased in the past quarter to 6%. (Attachment 5, page 39). If this trend continues, competitive pay rates will be a key factor in filling vacancies with competent employees to carry out essential Town services for citizens.
The Council took action in October 2004 by approving merit increases averaging 3.78 % for employees. This helped move employees' pay upward in their ranges; however, in some cases, Town employees' average pay is still below average employee pay in other organizations for the same job.
When the new Pay Plan was approved in 1999, the intention was that eligible employees would receive a step increase annually and that new employees would reach the job rate within four years. The Council expected to be able to fund both a step increase and a range increase for employees each year. This has not been possible in recent years. For Fiscal Year 2002-03, the Council approved a 3.78 % merit increase, for 2003-04 a 3% range increase and for 2004-05, a 3.78 % merit increase.
We recognize that the Council is faced with a challenging budget year and therefore are not recommending any increase to the current pay ranges this year. If the special grade and pay adjustments recommended for some jobs in the Police, Fire and Engineering departments later in this report are approved, the number of Town jobs falling more than 5% below the market average will be reduced from 10 to 6. This change will assist in recruitment and retention for these jobs.
We recommend that the Council approve a merit increase of 3.78% for the coming year which would move all employees in the steps up by one increment and provide an equivalent average increase for other eligible employees. This would have a positive effect on average employee pay for all levels and would help move the Town employees through their pay ranges.
If these recommendations are approved, we believe the Town's pay ranges and average employee pay will present a viable opportunity to jobseekers and enable the Town to maintain its workforce and meet citizens' needs.
RECOMMENDATIONS
We recommend the following actions be approved to be effective at the beginning of the first biweekly pay period which includes October 1, which begins September 27th.
a. Authorize an increase (3.78% of salary) for all eligible employees.
We believe this pay increase amount is justified based on survey data and on the change in the cost of living that already has occurred and is expected over the next several months. High fuel prices have had a significant adverse impact on the costs of commuting and are not likely to decrease. Of the 654 Town employees, 371 (56%) live outside Orange Count y and drive a considerable distance to work. Less than 20% of Town employees live inside the Town limits, and less than 30% live in a Chapel Hill zip code, according to the Town Data Book produced by the Planning Department (Attachment 6, page 40).
COST OF RECOMMENDED ADJUSTMENTS
|
|
3.78% Step Increase |
Special Adjustments |
12 month cost |
9 month cost |
|
|
|
|
|
|
|
General Fund* |
901,042 |
109,040 |
1,010,081 |
757,561 |
|
|
|
|
|
|
|
Transportation |
256,551 |
|
256,551 |
192,413 |
|
|
|
|
|
|
|
Housing |
31,156 |
|
31,156 |
23,367 |
|
|
|
|
|
|
|
Parking |
18,678 |
|
18,678 |
14,008 |
|
|
|
|
|
|
|
Stormwater |
11,241 |
3,243 |
14,484 |
10,863 |
|
|
|
|
|
|
|
Total |
1,218,667 |
112,283 |
1,330,950 |
998,212 |
*includes Vehicle Maintenance Fund
Special Adjustments (Pay Grade or Employee Pay Changes)
After analysis of the December 2004 Town Pay Survey, three groups of jobs fell significantly below the area labor market with job rates or employee average pay of 15% to 20% below the market average. These positions are in the Fire, Police and Engineering Departments.
We recommend changes in pay or grade for the specific jobs shown in the chart below.
| Department | Job Title and Action Recommended | Number of Positions |
Cost for 12 Months |
Cost for 9 Months |
|---|---|---|---|---|
| Police | Police Chief: change from grade 50 to 51 | 1 | No Change | No Change |
| Police Officer II: adjust employee pay by one step. No change in pay grade. |
38 | $63,694 | $47,771 | |
| Fire | Fire Chief: change from grade 49 to grade 50 | 1 | $5,613 | $4,210 |
| Deputy Fire Chief and Fire Marshall: change from grade 43 to grade 45 |
2 | $8,573 | $6,430 | |
| Battalion Chiefs and Assistant Chief- Training: change from grade 40 to grade 43 |
4 | $24,605 | $18,454 | |
| Engineering and Stormwater |
Engineering Technician: change in career progression from grades 29-31 to 32-34 |
3 | $9,798 | $7,349 |
| Total | $112,283 | $84,212 |
Purpose of Grade or Pay Changes:
Police Department: The purpose of the recommended increase of all Police Officer II employee salaries by one step is to improve retention of employees in this group and reduce the number of employees who would be able to move to other municipalities at a higher salary for the same work. The majority of employees are now at step 2 of the range. The change in grade for the Police Chief is based on market data.
Fire Department: The purpose of the recommended changes in pay grade and pay increases for employees in the command positions of the Fire Department are to restore market competitiveness of these jobs for situations when outside recruitment is necessary and to address retention of the employees in this group. Internal relationships in the career series also require alignment to remain appropriate.
Engineering Department: The purpose of the recommended changes in pay grade and pay increases for employees in Engineering Technician positions are to restore market competitiveness of these jobs, to recognize additional duties and responsibilities assigned and to address retention of the employees in this group.
Recommendation for Educational Incentive programs for Police Officers
We have worked with the Police Chief to develop an educational incentive program which we recommend the Council approve, with funding in the Police department budget. The program would provide 5% additional compensation for employees who hold a bachelor's degree. The cost of the program if implemented in October 2005 would be $74,000. The annual cost for Fiscal Year 2005-06 would be $98,000. The details of the program are contained in Attachment 7, page 42. We believe this program would serve as an effective recruiting and retention tool.
Part II: RECOMMENDATIONS FOR PAY GOALS AND PAY PLAN STRUCTURE CHANGES
We are recommending two changes to current pay policy and practice:
1. Eliminate the policy of awarding a probationary increase to new employees.
Historically, the minimum step of each grade in the Town pay plan has been 6 % below the next step; employees who begin at the minimum step receive a 6% pay increase after six months of employment. The original purpose was to offset a 6% deduction from employee pay for Local Government Retirement system contribution in the past when eligibility to participate in the retirement system and the employee deduction began after six months of employment
The practice of delaying employee participation in the retirement system for six months ended in 1998 while the practice of awarding a pay increase after six months of employment has continued.
Currently all new employees are awarded a pay increase after successful completion of the six months probationary period. For those employees hired at the minimum step, the amount of the pay increase is 6 %, as explained above. For those employees hired at a step higher than the minimum (based on qualifications and experience) the pay moves to the next step (3.78 %) after successful completion of six months probation.
This practice is not found among area organizations with whom the Town competes for employees. It results in situations where the Town makes a job offer and the candidate decides to accept another offer with a higher starting salary (and with no scheduled pay increase after probation).
We propose eliminating the policy of starting new employees at a point lower than their qualifications justify and increasing their pay after completion of the six-month probation period.
We believe changing this policy to allow departments to make the best offer initially, rather than requiring the new employee to begin at lower pay and receive a pay increase after completion of six months probation, will improve the Town's ability to compete in the labor market. It will also simplify the pay plan and make it more understandable to employees.
All departments budget for new and vacant
positions using the amount required for the entire fiscal year, so this
change in policy would not increase the budget. No current employees
would be affected by the proposed change. The new policy would apply
only to persons employed after July 1, 2005.
2. Eliminate the policy of promotional probation and awarding a one-time check on completion of promotional probation.
The Town Ordinance specifies that when a Town employee is promoted to a higher position, the employee serves a promotional probation period of six months and upon successful completion of this period, receives a one-time check in the amount of 3.78% of salary. If the employee's performance in the new position is not satisfactory after six months probation, the employee may be demoted to the former position. We believe these practices are no longer necessary.
The Town has performance review processes which serve to measure satisfactory performance and provide feedback as needed for improvement of employees who have been promoted. This practice of promotional probation followed by a one-time check is not found among area employers with whom the Town competes for employees. The promoted employee receives a pay increase on the effective date of the promotion.
This one-time promotion payment was linked to the practice of providing a six-month increase probationary increase for new employees. We believe that if that policy is deleted, it is reasonable to delete this one at the same time. This change would simplify the pay plan and make it more understandable to employees. Career progressions are not included in this practice and would not be altered. We recommend that the above-described policies be amended effective July 1, 2005.
CONCLUSION
We believe the recommendations presented here would be effective in recruitment and retention of excellent employees for the Town. We recommend that the Council approve these proposals, and will be pleased to provide any further information needed.
ATTACHMENTS
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Pam Eastwood, Director of Human Resources
SUBJECT: Summary of Methods and Terms Used in Town Pay Survey
DATE: May 3, 2005
PURPOSE
The purpose of this attachment is to explain the method and terminology used in the Town Pay Survey and to present the findings.
INTRODUCTION
The Human Resources Department conducted surveys in December 2004 to compare the Town's pay and benefits programs with those area organizations with whom the Town competes for employees.
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
• 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. The information was organized to show comparable data for all survey respondents for each job title surveyed. In the comparison chart, the job title used by the organizations responding is shown, with the minimum, midpoint and maximum amounts of the pay range used by the survey respondent. Also shown are the number of employees in the organization which hold similar positions, and the average pay amount for this group of employees.
Below this information is shown the raw average of these figures, the weighted average of these figures and the relevant data for this job title at the Town. Below this in the shaded line are ratios which compare the Town's range minimum, midpoint and maximum amounts to the weighted average of the data from the survey respondents. The term used to describe this ratio in compensation work is a comparison-ratio.
This ratio serves as a simple indicator of whether the Town data is less or greater than the weighted average for each amount. Use of the weighted average rather than the raw average is a best practice in compensation work. These comparisons form the basis for the Human Resources department staff's observations and any recommendations for changes in pay ranges and average employee pay.