AGENDA #3
Budget Working Paper
TO: W. Calvin Horton, Town Manager
FROM: Pam Eastwood, Human Resources Director
SUBJECT: Net Pay Changes After Increase in Medical Insurance Premiums for Pay Plans with Steps of 3.78%, 3% and 2.5%
DATE: June 15, 2005
PURPOSE
The Council requested information on the effect on employee salaries of the increased cost of premiums for medical insurance when compared to pay plans having steps of 2.5%, 3% and 3.78%. This report presents information on this topic.
The outcome of negotiations with the Town�s medical insurance provider, United Health Care, is a 4.9% proposed increase in premiums. The Town pays 100% of the employee premium and 50% of the additional cost of dependent coverage premiums for family members the employee elects to cover in the plan. For the examples below, we used current pay and deduction information for two Town employees who carry dependent coverage at the family level; one employee is a Transit Operator II (bus driver) and one is a Solid Waste Collector in the Department of Public Works.
Comparison of pay increases with medical insurance increases
Shown here are examples of how the weekly and annual net take-home pay of a Bus Driver and Solid Waste Collector would be affected by implementation of each of the potential pay plans under consideration (2.5%, 3% and 3.78%) and the medical insurance increase. The examples show the net take-home pay (weekly and annually) for these two employees who carry and pay for 50% of the cost for family insurance coverage for each increase amount being considered.
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Current Weekly Net Take- Home Pay |
Difference in Weekly Net Take- Home Pay After Insurance Change |
Change in Annual Net Take- Home Pay After Pay Change |
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Solid Waste Collector: current annual salary $28,944 |
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Current net take-home pay (after deductions) |
$257.21 |
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Current net take-home pay and new medical insurance rate |
$255.28 |
-$1.93 |
-$100.36 |
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Net take-home pay after increase under new Pay Plan with 2.5% steps and new medical insurance rate |
$264.99 |
$7.78 |
$404.56 |
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Net take-home pay after increase under new Pay Plan with 3.0% steps and new medical insurance rate |
$266.96 |
$9.75 |
$507.00 |
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Net take-home pay after increase under present Pay Plan with 3.78% steps and new medical insurance rate |
$270.05 |
$12.84 |
$667.68 |
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Current Weekly Net Take- Home Pay |
Difference in Weekly Net Take- Home Pay After Insurance Change |
Change in Annual Net Take- Home Pay After Pay Change |
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Transit Operator II: current annual salary $33,513 |
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Current net take-home pay (after deductions) |
$373.98 |
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Current net take-home pay and new medical insurance rate |
$372.01 |
-$1.97 |
-$102.44 |
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Net take-home pay after increase under new Pay Plan with 2.5% steps and new medical insurance rate |
$383.37 |
$9.39 |
$488.28 |
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Net take-home pay after increase under new Pay Plan with 3.0% steps and new medical insurance rate |
$385.93 |
$11.95 |
$621.40 |
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Net take-home pay after increase under present Pay Plan with 3.78% pay steps and new medical insurance rate |
$389.36 |
$15.38 |
$799.76 |
CONCLUSION
As shown above, if the Council does not authorize a pay increase, the net take-home pay for both the employees in this example would go down after the premium increase for medical insurance goes into effect on August 1, 2005.
If the Council authorizes a pay plan with 2.5% steps and a 2.5% pay increase, after the premium increase for medical insurance goes into effect, the take-home pay goes up by $7.78 per week after deductions for the Solid Waste Collector. The take-home pay for the Transit Operator II would go up by $9.39 per week.
If the Council authorizes a pay plan with 3% steps and a 3% pay increase, the change in weekly take-home pay for the Solid Waste Collector would be $9.75 and the change for the Transit Operator II would be $11.95.
If the Council authorizes a pay plan increase with 3.78% steps, the take-home pay for the Solid Waste Collector would change by $12.84 weekly, and the net change for the Transit Operator II would be $15.38 weekly.
RECOMMENDATION
We recommend that the Council approve the Manager�s recommendation of a 3.78% merit increase for all eligible Town employees based on the need to maintain competitive wages in recognition of the good work performance of Town employees and also taking into consideration the increased costs involved in commuting to and living in this area.
We believe approving this recommendation will allow Town employees to continue coverage for their dependents under the Town�s medical insurance plan and will be effective in recruiting and retaining an excellent group of employees who deliver the high quality of services expected by citizens in Chapel Hill.