Designing and Implementing Compensation Plans Local Government Academy March 19, 2008 Michael 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 Job listings in municipal association news letters

4 Bureau of Labor Statistics Local Pay May 2006 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates Pittsburgh, PA – –Interactive, can click on jobs to get more information –Can get brief job descriptions –Not specifically designed for pay setting purposes

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 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" BLS Job Descriptions

6 Bureau of Labor Statistics Local Pay Pittsburgh–New Castle, PA National Compensation Survey January 2007 – –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 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 Local Government (OES designation).

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 - –The State Tax Equalization Board - –The Department of Community and Economic Development - / –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 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 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 Salary Survey

12 Salary Survey and Instructions Position title If different, your title Salary RangeActual Salary W-2 PayBonusYears in Position MinimumMaximum Manager Assistant Manager Police Chief Etc. 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 Health Insurance Benefits Monthly Premium Paid by Employee IndividualHusband/WifeFamily Medical Dental Vision Outpatient prescription Other Benefit Survey

15 Monthly Premium Paid by Employer IndividualHusband/WifeFamily Medical Dental Vision Outpatient prescription Other

16 Employer Paid Life Insurance Paid Leave Number of Days Annually Holidays Sick Leave Vacation5 Years Service 10 Years Service 15 Years Service 20 Years Service 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