AGENDA #1b

BUDGET WORKING PAPER

TO: W. Calvin Horton, Town Manager

FROM: Patricia W. Thomas, Human Resources Director

SUBJECT: Cost Calculations on Pay System Alternatives

DATE: June 13, 2001

At the May 30 work session Council members requested cost information on an additional alternative for granting Town employee pay increases. Information on this alternative is discussed below and a new “Summary” sheet with alternatives in recommended priority order is attached.

The original Budget Working Paper from May 30 which details the other alternative calculations is also attached.

ADDITIONAL OPTION - OPTION 6:

A Council member requested calculation of costs and savings under a system with the following structure: salary ranges would increase by 0.72%, instead of 2.75% recommended by the Manager, the average merit increase would be 3.78% instead of the 4.5% recommended by the Manager, and the step increases would remain at the same level as recommended.

Average increases Town-wide would be approximately 4.2%.

Employees below the Job Rate:	Employees at or above the Job Rate:
.72 % range adjustment
+	3.78% average merit increase
3.78% career advancement step
TOTAL: 4.5%	TOTAL: 3.78%

Costs:

General

Fund

Transportation Fund

Housing Fund

Parking Fund

Total 10/5/2001

Annualized

Costs

Total

600,000

140,000

28,500

14,000

780,000

1,016,000

Savings over Manager’s Recommended

216,000

58,200

10,850

5,800

294,000

379,000

Advantages of this option:

· Reduces costs in 2001-2002.

· A salary range increase of 0.72% would provide a small increase in hiring rates and other rates in the salary range.

· Employees below the Job Rate would receive pay increases sufficient to reflect some growth in the labor market and to reflect career development with the Town.

Disadvantages of this option would be:

· Long-term employees above the Job Rate would receive an average merit increase that is 1 - 2% less than the average salary increase projected in the labor market as well as being 1-2 % less than the increase granted to employees below Job Rate.

· An average merit increase of 3.78% provides little flexibility for distributing merit increases among 5 performance levels for employees above the Job Rate.

· Town salary ranges would likely be less competitive than last year, because other employers are projecting hiring rate or range increases of 2.5% to 3% this year. The Manager’s Recommended Budget range increase of 2.75% would provide the more competitive level of increase.

COST DETAILS BY FUND, OPTION 6: 3.78% average merit for employees above the Job Rate, steps for employees below Job Rate, .72% range adjustment.

	General Fund	Transportation Fund	Housing Fund	Parking Fund	Total all funds – FY 2001-2002 (October 5, 2001)	Annualized Costs
.72% range adjustment	60,000	17,600	3,000	2,200	83,000
Step increase	287,200	82,900	14,750	10,600	395,450
3.78% merit	250,900	39,700	10,700	1,000	302,300
Total	600,000	140,000	28,500	14,000	780,000	1,016,000

SUMMARY

There are a variety of other options that would produce varying amounts of savings. Of the options presented in this paper, we recommend consideration of these options in the following priority order:

1^st priority: Manager’s Recommendation: We continue to believe that the pay increases in the Manager’s Recommended Budget are justified by the market and would help maintain competitive salaries. Cost: $816,000 General Fund, $198,000 Transportation Fund.

· 2.75% range pay range adjustments to maintain competitive salaries in the area market.