Designing and Implementing Compensation Plans

1. Designing and Implementing Compensation Plans Local Government Academy March 19, 2008Michael Weir, Ph.D.

2. Outline • Determining external competitiveness • Use of existing survey data • Conducting a survey • Comparing similar jobs and communities • Determining internal consistency • Equity • Techniques • Pitfalls

3. Association Surveys • International City/County Managers Association – last year, 2005 • Pa State Association of Boroughs • Borough Employee Salary and Benefit Survey, Borough Police Salary and Benefit Survey, Police Collective Bargaining Study • PA State Association of Township Supervisors - 2006 • Job listings in municipal association news letters

4. Bureau of Labor StatisticsLocal Pay • May 2006 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates Pittsburgh, PA • http://www.bls.gov/oes/current/oes_38300.htm • Interactive, can click on jobs to get more information • Can get brief job descriptions • Not specifically designed for pay setting purposes

5. BLS Job Descriptions 43-6014 Secretaries, Except Legal, Medical, and Executive Perform routine clerical and administrative functions such as drafting correspondence, scheduling appointments, organizing and maintaining paper and electronic files, or providing information to callers. Exclude legal, medical, or executive secretaries and administrative assistants 43-6011 Executive Secretaries and Administrative Assistants Provide high-level administrative support by conducting research, preparing statistical reports, handling information requests, and performing clerical functions such as preparing correspondence, receiving visitors, arranging conference calls, and scheduling meetings. May also train and supervise lower-level clerical staff. Exclude "Secretaries"

6. Bureau of Labor StatisticsLocal Pay • Pittsburgh–New Castle, PA National Compensation Survey January 2007 • http://www.bls.gov/ncs/ocs/sp/ncbl0943.pdf • For pay setting purposes • Includes mean and median hourly wages, breakdown by union and non-union and other detail • Table 4. State and local government workers – But primarily teachers

7. Bureau of Labor Statistics • May 2006 National Industry-Specific Occupational Employment and Wage Estimates • NAICS 999300 - Local Government (OES designation) • These national industry-specific occupational employment and wage estimates are calculated with data collected from employers of all sizes, in metropolitan and nonmetropolitan areas in every State and the District of Columbia, in NAICS 999300 - Local Government (OES designation). • http://stats.bls.gov/oes/current/naics4_999300.htm

8. Designing a Survey • Picking comparable communities with in the area • Survey design • Techniques for getting a response • Using the results

9. Survey of Comparable Communities • Should be of similar size and provide similar services • Other important factors are population, median family income, and other indicators of wealth within the community • Census Bureau - http://www.census.gov/ • The State Tax Equalization Board - http://www.steb.state.pa.us/ • The Department of Community and Economic Development - http://www.newpa.com/ • Many municipalities have websites

10. Survey Design • Establish and stick to specific goals • Begin with brief introduction – can be in cover letter • Be as clear and brief as possible • Pay attention to format • Pre-test

11. Salary Survey Sample Survey Form All data gathered in this survey will be held confidential and will be used for statistical purposes only. The final report will not permit the identification of data for individual governments. The final report will be provided at no costs to all of the governments that complete the survey. Municipality: Individual completing survey Title Telephone Number Email address Number of employees Full time Part time Seasonal Budget for Year XXXX General Fund All Funds Type of government Mayor-council Manager-council Commission Other

12. Position title If different, your title Salary Range Actual Salary W-2 Pay Bonus Years in Position Minimum Maximum Manager Assistant Manager Police Chief Etc. Salary Survey and Instructions Position title: When job matching, place the emphasis on the job content rather than the title Matching Title: List the position title in your organization Salary Range: If you have established a formal salary range for the position, report the minimum and maximum as of XX/XX/XX Actual Salary: The salary for this position as XX/XX/XX W-2 Pay: The compensation reported on the XXXX W-2 Bonus: Report any bonus for the year XXXX Years in the Position: Report years as of XX/XX/XX

13. Additional Consideration • Add brief job descriptions if there could be uncertainty • Consider using the BLS job descriptions where they are applicable. • Take the opportunity to ask additional questions – but only if you intend to use the information

14. Monthly Premium Paid by Employee Individual Husband/Wife Family Medical Dental Vision Outpatient prescription Other Benefit Survey Health Insurance Benefits

15. Monthly Premium Paid by Employer Individual Husband/Wife Family Medical Dental Vision Outpatient prescription Other

16. Number of Days Annually Holidays Sick Leave Vacation 5 Years Service 10 Years Service 15 Years Service 20 Years Service Employer Paid Life Insurance Paid Leave Retirement Defined Benefit Plans Employee Contribution as Percent of Salary Minimum Retirement Age Minimum years of service Minimum Benefit as Percent of Salary Defined Contribution Plans Maximum Employee Contribution as Percent of Salary Maximum Employer Contribution as Percent of Salary

17. Techniques for Getting a Response • Expect to get about one-quarter to one-third of the surveys back. This means that you should plan to send out thirty to forty to get ten back. • Address the survey to a specific individual who should fill out the survey, otherwise it could get lost. The person should be the top appointed or elected official. • Call the official when the survey is in the mail to inform them that the survey is coming. Do not ask for permission. It is already in the mail.

18. Techniques for Getting a Response • Promise to share the survey results. The results should not include salary information identified by individual municipalities. • Set a deadline • Provide a self addressed, stamped envelope • Provide a Fax number • Call back if the survey is not returned by the deadline

19. Using the Results • Two measures • The mean - the average - can be skewed by a few outliers • The median - the mid point – usually a better measure • Compare with the association and government surveys

20. Determining Internal Consistency • Equity • internal • individual • process • Techniques • Job worth hierarchy • Compensation matrix • Pitfalls

21. Internal Equity • Worth of the job relative to other jobs in the organization • Skill • Effort • Level of responsibility • Working conditions • Can be based on job descriptions

22. Individual Equity • Focus on merits of person holding job, not the job itself • Reward for effort and output • Potential problems • Overqualified for job, or • Overwhelmed by job • Unappreciated

23. Process Equity • Equity in administration of compensation system • Considerations • Openness • Communication • Participation • Grievance procedures

24. Job Worth Hierarchy • Establishes position relative to other positions in organization • Input • The organization chart • Job analysis based on job descriptions • Rating by employees • Line and staff distinctions

25. A Compensation Matrix • Establishes a grade and steps within the grade for each position • Based on job hierarchy • Should have face validity • Avoid fitting the numbers to existing pay structure • May result in red circled pay rates for some, raises for others

26. A Compensation Matrix

27. Using a Matrix • Each job has a grade • Steps – automatic increases or used to reward performance • Adjust whole matrix upward to reflect negotiated raises • Longevity pay a separate issue

28. Pitfalls • Gender differences • Technical expertise • Planners, finance directors, recreation specialists, code officers • Stuck in the top step