AGENDA #5i
BUDGET WORKING PAPER
TO: Mayor and Town Council Members
FROM: W. Calvin Horton, Town Manager
SUBJECT: More Information on Net Pay Changes After Increase in Medical Insurance Premiums for Pay Plans with Steps of 3.78% and 3%
DATE: June 27, 2005
PURPOSE
The Council requested information on the effect on employee salaries of the increased cost of premiums for medical insurance when compared to a pay plans having steps of 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 three 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 and the third is a Lieutenant with the Police Department. Deductions include FICA, Medicare, Federal Income Tax, State Income Tax, Local Government Employee’s Retirement System and Health Insurance.
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, a Solid Waste Collector, and a Lieutenant would be affected by implementation of each of the potential pay plans under consideration (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. All examples are of Above Job Rate employees.
|
|
|
Net Take Home Pay* |
Difference Between Net Take Home Pay After Changes |
Net Change in Annual Take Home Pay |
|
Solid Waste Collector: Annual Salary 28,944 |
|
|
|
|
|
|
Weekly Gross Salary |
556.62 |
|
|
|
|
Current net take home pay after deductions |
383.63 |
|
|
|
|
Current net take home pay and new health insurance rate |
381.70 |
-1.93 |
-100.36 |
|
|
Proposed 3.0% pay increase net take home pay with new health insurance rate |
393.38 |
9.75 |
507.00 |
|
|
Proposed 3.78% pay increase net take home pay with new health insurance rate |
396.47 |
12.84 |
667.68 |
|
|
|
|
|
|
|
Transit Operator II: Annual Salary 33,513 |
|
|
|
|
|
|
Weekly Gross Salary |
644.48 |
|
|
|
|
Current net take home pay after deductions |
464.51 |
|
|
|
|
Current net take home pay and new health insurance rate |
462.58 |
-1.93 |
-100.36 |
|
|
Proposed 3.0% pay increase net take home pay with new health insurance rate |
476.30 |
11.79 |
613.08 |
|
|
Proposed 3.78% pay increase net take home pay with new health insurance rate |
479.68 |
15.17 |
788.84 |
|
Police Lieutenant: Annual Salary 59,732 |
|
|
|
|
|
|
Weekly Gross Salary |
1,148.70 |
|
|
|
|
Current net take home pay after deductions |
768.06 |
|
|
|
|
Current net take home pay and new health insurance rate |
766.245 |
-1.81 |
-94.38 |
|
|
Proposed 3.0% pay increase net take home pay with new health insurance rate |
788.195 |
20.14 |
1,047.02 |
|
|
Proposed 3.78% pay increase net take home pay with new health insurance rate |
791.695 |
23.64 |
1,229.02 |
|
|
|
|
|
|
CONCLUSION
As shown above, if the Council does not authorize a pay increase, the net take-home pay for all three employees in the above examples 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 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 $11.79. The take-home pay for the Police Lieutenant would go up by $20.14 per week.
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 $15.17 weekly. The take-home pay for the Police Lieutenant would change by $23.64 per week.
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 delivery the high quality of services expected by citizens in Chapel Hill.