1. FINDING THE RIGHT BALANCE
EMPLOYEE COMPENSATION SYSTEMS FOR ROAD COMMISSIONS
FINDING THE RIGHT BALANCE
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2. Municipal Consulting Services LLC
TOPICS TO BE COVERED
The fiscal environment and trends in compensation
The importance of an up-to-date pay grade structure
In-house vs. consultant usage
Components of a compensation plan and development
How to implement a compensation system
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3. THE FISCAL ENVIRONMENT
The economy is still recovering
Cost containment is a huge concern
Particularly acute for road commissions
MTF revenue trends have been negative and
road funding is in flux – local, state and national
Must focus on doing more with less
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4. TRENDS IN COMPENSATION - MACRO
CPI-U July 2014/July 2015 = 0.2%
July 2015 Unemployment Rate: 5.3% reduces slack
Compensation per Hour (non-farm): 3.1% (first quarter)
Up from 1.1% in 2013
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5. WHAT DOES IT MEAN FOR YOU?
Limitations on what you can do fiscally
However, there are downsides to not being competitive
Challenges in recruitment and retention
Particularly problematic with professional positions and top performers
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6. Municipal Consulting Services LLC
BOTTOM LINE
Pay decisions in your environment must be made from an informed basis
An up-to-date pay grade structure is the foundation to do this
Based on both internal and external conditions
The starting point for deciding when and how to expend scarce dollars
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7. WHO CAN DEVELOP THE PAY GRADE STRUCTURE/PAY SYSTEM?
Can we do it in-house?
Some HR Directors can do it
Many agencies use a consultant for design
An overview of the process may help with that decision or evaluating/selecting a consultant
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8. HOW TO DEVELOP A PAY SYSTEM – 4 PHASES
Understand each job explicitly “front end philosophy”
Understand the labor market
Develop a pay grade structure
Implement the pay system
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9. PHASE ONE: UNDERSTAND EACH JOB
A lot has changed since 2008
Employee involvement, participation, transparency
Employees or supervisors to review job descriptions
Update duties, reporting relations, education, experience and job descriptions in general
Good job description templates available if needed
Some communities/departments are more difficult
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10. PHASE TWO: UNDERSTAND THE LABOR MARKET
Different jobs have different markets
Local vs. national, public vs. private, etc.
Design market survey for multiple markets and sources
Primary market may be other road commissions and public works operations and secondary market may be local employers
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11. Municipal Consulting Services LLC
Continued…
Primary data source: written survey to other public employers
Secondary market: possibly canned data
Secondary data sources: ASE, TEA, BLS, Chambers, COGs, local employers, peer surveys
What is the lateral labor market for each position?
Who are we competing with?
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12. PHASE TWO: SURVEY DESIGN
Briefly describe each job and salient characteristics (PE)
Determine benefits to be surveyed
Overview of total compensation
Mail or electronic surveys or both
Canned data won’t require a survey – careful review
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13. PHASE 3: DEVELOPING PAY GRADES
Developing pay grades: point factor, market value or arbitrary assignment
Point factor is the consultant’s approach
Typically 8-10 job factors
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14. POINT FACTOR: A BASIS FOR GRADE PLACEMENT
Education & Experience
Judgment & Independence
Internal & External Relations
Supervisory Responsibility
Job Complexity
Responsibility for Others
Information Technology
Impact on Operations
Environmental Factors
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15. DEVELOP GRADE STRUCTURE
Each job evaluated based on each factor
Grades are then cut from the results
Grade
Point Parameters 1 2 3 4
Grades can also be set 5
based on market data
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16. PHASE THREE: DEVELOPING SALARY RANGES
Use the market data to develop pay ranges
Work from midpoint or maximum depending on sample
Typically 30% range width for administrative jobs
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17. DEVELOP PAY GRADE STRUCTURE
Point Parameters
Average Market Wage
Salary Range 1
$37,551
$32,653-$42,449 2
$42,245
$36,735-$47,755 3
$44,357
$38,572-$50,143 4
$48,793
$42,429-$55,157 5
$54,892
$47,732-$62,052
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18. Municipal Consulting Services LLC
PHASE 3: Result….
Final product: Pay grade structure is the foundation for your compensation system
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19. PHASE 4: IMPLEMENTATION
Perform compa-ratio for individual employees and the group as a whole
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20. EVALUATING THE RESULTS
A Balance Sheet (Grade 1 Example)
32, , ,449
Current Wage/MID = Compa-ratio
(e.g. 35,000/36,912 = .95)
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21. EVALUATING THE RESULTS – ASSESSING YOUR OPTIONS
Consider implementation options
If steps: consider how many and how high
Rationale for steps may differ from organization to organization
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22. STEP/RANGE MOVEMENT OPTIONS
Automatic step increases
Automatic step increases to midpoint only
Performance evaluation
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23. AUTOMATIC STEP INCREASES
Unionized application
Study provides starting point for negotiations
Range is typically narrower
Administrative application
Easier to administer
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24. AUTOMATIC STEP INCREASES TO MIDPOINT ONLY
Recognizes learning curve
Provides structure for possibly rewarding exemplary performers
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25. RANGE MOVEMENT: PERFORMANCE BASED
How to evaluate performance can be a quandary
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26. PHASE 4: PERFORMANCE EVALUATION
Ideally links performance to compensation – not easy to do
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27. ISSUES IN PERFORMANCE EVALUATION
Content: What are you measuring?
Public vs. private – different approaches
Bias: A multiple rater issue
Budget: How do you administer it?
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28. PERFORMANCE EVALUATION – WHAT I SUGGEST
Walk before you run
Check professional associations for templates
Establish acceptance before linking to wages
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29. PHASE 4: GOING FORWARD PAY SYSTEM ADMINISTRATION
A living system
Annual update of pay ranges
Reclassification and new position insertion – use the tools
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30. QUESTIONS AND COMMENTS
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