Classification & Compensation Study. Executive Report. For. City of PARK RIDGE, IL

Transcription

1 Classification & Compensation Study Executive Report For City of PARK RIDGE, IL January 2018

2 McGrath Consulting Group, Inc. P.O. Box 190 Wonder Lake, IL Office (815) Fax (815) Copyright 2018 McGrath Human Resources Group. All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopy, recording or otherwise without the expressed written permission of McGrath Consulting Group, Inc. Page 2

3 Table of Contents Study Overview... 5 Methodology... 8 Data Collection... 8 Compensation Section... 9 Labor Market... 9 Market Data Solicited Pay Range Market Analysis Minimum Salary Comparison Market Rate Salary Comparison Maximum Salary Analysis Market Data Summary Compression Analysis Fire Department Police Department Current Compensation Systems Non-Union Schedule Issues with the Non-Union Schedule IAFF Schedules Issues with the IAFF Schedules Police Salary Schedules Issues with the Police Salary Schedules IUOE Schedule Issues with the IUOE Schedule ICOPS Salary Schedule Integrated Salary Schedule Analysis Recommended Salary Schedules Non-Union Recommended Schedule Non-Union Position Considerations Non-Union Schedule Implementation Annual Adjustments Other Compensation Issues Life Cycle of Salary Schedule Benefit Statements Compensation Summary Elected Official Salary Analysis Benefit Analysis Health Insurance Plan Design Overview Premiums Opt Out Program Dental/Vision Paid Time Policies Leave Time/Vacation Sick Time Page 3

4 Paid Time Off Payout Provisions Jury Duty Floating Holiday Longevity Summary Benefit Recommendations Appendix A: Recommended 2018 Non-Union Salary Schedule Table of Tables Table 1: Comparable Organizations Table 2: Market Analysis Summary of all City Positions Table 3: Elected Official Market Analysis Page 4

5 Study Overview McGrath Human Resources Group, Inc., an organization that specializes in public sector consulting, was commissioned by the City of Park Ridge to conduct a comprehensive classification and compensation study of all positions. The City requested an evaluation of all City positions in order to update the current system. The purpose of this study is to: Guide the City in creating, clarifying or confirming your pay philosophy including your desired position in the market, usage of performance-based pay, recognition of tenure, recruitment and retention priorities and other aspects of a sound compensation philosophy. Obtain and establish compensation within the external market through a survey of comparable entities. Obtain data to evaluate and recommend benefits, other pay practices and compensationrelated benefits such as skill/competency based pay, add-on pay, leave and cash-outs. Obtain information on each job title through position description questionnaires and employee interviews. Establish internal equity among positions within the City. Complete a compression analysis and, if found to be a problem, develop strategies to address compression during the design and implementation of the new system. Integrate the data from the external market, internal market, and job audit to a tailored classification and compensation system. Provide a plan for on-going maintenance of the system(s), in accordance with all applicable compensation practices by the City (movement through the range; COLA; merit, etc.) including a projection of the ongoing budget commitments necessary to provide a sustainable and consistent compensation system. Review and recommend compensation policy and procedure changes that will assure consistent implementation and application of the compensation system. Analyze positions for Fair Labor Standards Act to confirm appropriate exemption status as necessary. The Consultant would like to extend appreciation to the City Manager, Human Resource Manager, Human Resources Staff, and Department Directors for their time, cooperation, and sharing of information and perceptions with McGrath Human Resources Group. Page 5

6 Definitions The following are definitions that helped guide the development of the Compensation System for Park Ridge. Benchmark Position: A job that is commonly found and defined, used to make pay comparisons, either within the organization or to comparable jobs outside the organization. Classifications: Job titles. Compensation System: A system developed to compensate employees. This system includes a balance between internal equity and external competitiveness. Compensation Data: Data derived from information regarding the salary range and the rate of pay of the incumbent(s) holding a benchmark position of the identified labor market. Comp Ratio: The ratio of an actual pay range to the established position point (or average market rate). The Comp Ratio is used to measure and monitor an individual s actual rate of pay to the Position Point of the established pay range. In Park Ridge, a 50% comp ratio (+/- 10%) indicates an individual is being paid approximate to the established position point (or average market rate). Compression: Pay differentials too small to be considered equitable. The term may apply to differences between (1) the pay of supervisors and subordinates; (2) the pay of experienced and newly hired personnel of the same job; and (3) pay range midpoints in successive job grades or related grades across pay structures. CPI-U: Consumer Price Index Urban: A measure of the average change over time in the prices paid by urban consumers for a market of consumer goods and services. It reflects the spending pattern for three population groups: all urban consumers, urban wage earners, and clerical workers. This group represents approximately 87% of the total U.S. population. Demotion: The (re)assignment of an employee to a position in a lower pay grade or range in the organization s salary structure. Labor Market: A location where labor is exchanged for wages. These locations are identified and defined by a combination of the following factors: geography; industry; education, experience, and licensing or certification required; and job responsibilities. Page 6

7 Market Data: The technique of creating the financial value of a position based on the going rate for benchmark positions in the relevant labor markets. Minimum Salary Range (Minimum): The minimum amount of compensation the organization has deemed appropriate for a position. Maximum Salary Range (Maximum): The highest amount of compensation the organization has deemed appropriate for a position. Market Rate (Market): The organization s best estimate of the wage rate that is prevailing in the external market for a given position. Market Average: Per the compensation philosophy of the City Alderman of Park Ridge, the philosophy to pay employees based upon the average market rate; or the average prevailing wage rate in the external market. Market Average Range: A pay range in which the minimum and maximum of the range is established around the Average Market Rate. Pay Grade: The grade, or placement of a position, within the salary structure. Pay Grade Evaluation: The (re)assignment of a job to a higher or lower pay grade or pay range in the salary structure due to a job content (re)evaluation and/or significant change in the average market rate in the external labor market. Performance Increase: An adjustment to an individual s base pay rate based on performance or some other individual measure. Promotion: The (re)assignment of an employee to a position in a higher pay grade or range in the organization s salary structure. Salary Schedule Adjustment: An adjustment to the salary structure; the increase or decrease of a pay range, minimum maximum. This is a method to maintain the salary range in relation to external market conditions. Step Schedule: Standardized progression pay rates that are established within a pay range. To move to the next step, one must have met acceptable performance standards. Salary Schedule: The hierarchy of job grades and pay ranges established within an organization. Spread: The range of pay rates, from minimum to maximum, established for a pay grade. Typically used to set individual employee pay rates. Page 7

8 Methodology Data Collection The project involved several steps: collection of data, interviews, and data analysis. The first step of this study involved the gathering of data that pertains to current compensation practices within Park Ridge. The Consultant received information relating to current salaries, collected market data, specific policies, and current job descriptions. This provided a basis on which to build a compensation system. Interviews were conducted with the City s senior staff, including the City Manager, Interim Human Resources Manager & HR Generalist, and Department Directors. The purpose of these meetings was first, gain an understanding of the City s current compensation practices and philosophy; second, solicit ideas and input from these stakeholders for future compensation methodologies and practices; and third, determine if there were any positions within the City that were difficult to recruit, retain, or were otherwise unique in the position s responsibilities. In addition, a second Consultant was made available to speak with employees to provide information, answer questions, and obtain input. Finally, employees were asked to complete a position questionnaire which provided extensive information about the positions. Pay Philosophy A pay philosophy is an organization s financial commitment to how it values its employees. The goal of a pay philosophy is to attract, retain, and motivate qualified people. A consistent philosophy provides a strong foundation in determining the type of total compensation package to offer employees. A common theme discussed among employees was that nothing was going to come from the compensation study since most felt the current compensation schedule even if negotiated was Page 8

9 considerably lower than the competitive market. Most employees felt that past administrations and elected officials did not value the employees who worked for Park Ridge. The City is in business to provide services to the citizens, businesses and visitors of the community. It does that through hiring qualified employees who lend their skills and talents to various positions within the organization. Without those individuals, the City would cease to provide adequate roads, public safety, and processes necessary to keep those systems in place. While employees do not expect higher than average salaries, they do warrant a compensation system that pays a fair wage for the skills, education, and responsibilities of the positions they hold. When elected officials state we will have to see if we can afford it on a continual basis, their worth feels degraded, and leads others to ask those elected officials if you can t afford it, should you be offering those services? Given the above, the following compensation philosophy has been developed to guide the City of Park Ridge: While maintaining fiscal responsibility, the City of Park Ridge is committed to compensating employees in a manner that is reflective of the external market and provides recognition for advancement. Specifically, our goal is to achieve the following objectives: Internal equity among all employees Ensure employees reach the 50 th percentile of the external market within a specific timeline Maintain Administrative efficiencies Compensation Section Labor Market In order to gain information from the external market, the Consultant established a list of comparables from interviews with the Department Directors and City administration. Each of the comparable organizations were contacted initially via telephone and then were provided an Page 9

10 online questionnaire. Salary data for specific positions was solicited from the comparable organizations. The following organizations were contacted: Table 1: Comparable Organizations Park Ridge, IL 7,000 37, $24,189, $1,595,870, $19,490, Community/Municipal Body (Requested) sq. miles Population Property Tax EAV Payroll Arlington Heights mi² 75, $2,504,219, Buffalo Grove 9,200 44, $15,177, $1,425,060, $21,700, Carol Stream 10,000 41, $7,646, $1,394,186, $12,548, Des Plaines 14,300 58, $23,181, $2,394,677, $30,205, Downer Grove 12,000 50, $4,339, $1,511,368, not avail. Elmhurst 10,000 44, $22,247, $1,814,770, $27,046, Glen Ellyn 9,000 27, $6,459, $1,433,000, $8,049, Glenview 13,850 44, $10,934, $2,291,707, $32,233, Hanover Park 7,000 37, $9,981, $695,936, $20,371, Highland Park 12,000 29, $12,652, $2,178,857, not avail. Morton Grove 5,000 22, $8,005, $800,521, $14,940, Mt Prospect 10,280 54, $17,730, $1,356,598, $24,585, Niles 6,000 30, $7,557, $1,512,551, $22,246, Palatine 13,000 69, $21,731, $1,563,887, $51,033, Rolling Meadows 24, Westmont 7,000 26, $2,903, $591,748, $13,616, Wheeling 8,000 37, $14,000, $836,282, not avail. Wilmette 5,450 27, $14,080, $1,541,490, $19,896, REQUESTED- Did Not Participate Oak Park 4,000 52, $15,736, $1,740,601, $27,940, The Consultant was pleased with the response to the survey. All but one organization contacted provided data. The collection of this compensation data was utilized to analyze the average Market Minimum, Midpoint, and Maximum Rates per defined benchmark positions, as well as a comparison of the average salary of the positions to the salary of incumbents within Park Ridge. When necessary, evaluation of the comparable organization s job description (when available online) was utilized to resolve conflicts. Page 10

11 The labor market for Park Ridge was determined based upon several factors including location, size, recruitment areas, and discussions with Department Directors. During interviews, each Department Director was asked if there were certain municipalities they felt had similar positions. If so identified, the Consultant sought the salary and benefit data. The Consultant surveyed 76 positions within Park Ridge. In addition to the current positions within Park Ridge, the Consultant sought comparable data on positions that might have job responsibilities that are combined in Park Ridge but might be separate in other organizations. Also, many positions within Park Ridge have the same title despite being different positions. Where possible, these positions were identified and added to the survey. In some cases, the titles were altered to better align with the industry. All the positions may not be reflected in the data analysis. In some situations, data was not available in the external market, data was insufficient, or there were no City of Park Ridge internal matches at the time of the study. When there are no matches, other methodologies are utilized to place the position into the salary system, such as an analysis of the position s skills, qualifications and responsibilities and an analysis with similar positions within the City. Market Data Solicited The market surveys gathered the following information: 2017 Minimum, Midpoint, and Maximum salary for the position as well as the average salary of the incumbent(s). Salaries were then evaluated, and an average calculated. Upon examination, salaries were eliminated if they are statistically too high or too low to not skew the average typically those within one-two standard deviations beyond the average. Then, a new percentile amount was calculated with the remaining salaries. A great deal of time spent in data analysis to ensure that each position is scrutinized based on the data available as well as how it relates to the responsibilities of the organization we are aligning it to within the City. In addition to compensation data, the Consultant solicited data for a few employer-provided benefits, which will be discussed in the Benefits section of this report. Page 11

12 Pay Range Market Analysis It is standard compensation practice to establish a range around the Minimum or Market Rate to determine if the employee is being compensated fairly. Often, employees assume that if the average Market Rate is $25,000, then they should be making $25,000. However, compensation practices look at a range around the Average Market Rate where an employee should be by the time the employee is fully functioning within his/her position. Traditionally, organizations establish a 5-10% range around the market rate. Thus, if an employee is making between 40-60% of the Market Rate, the employee is fairly compensated. In order to analyze the salaries, a Comp Ratio is used. This is a ratio of the City s salary in relation to the external market data. A 50% Comp Ratio would mean that it is in line with the external Market. Again, the 10% range is utilized. Thus, if a ratio is within 40-60% the salary is within an acceptable range. Minimum Salary Comparison The analysis of the Minimum Salary Range gives the initial indication that starting salaries are within an acceptable Market Range. When building a salary schedule, a review of the average external market minimum in relation to the City s average starting wage is utilized to determine where the City currently fares in relation to the market, as well as where to set the minimums of the proposed salary schedules. Page 12

13 Figure 1: Minimum Salary Analysis All City Positions % 20-29% 30-39% 40-44% % 60+% 0-19% 20-29% 30-39% 40-44% % 60+% Number of Positions Percent of Positions 2% 11% 30% 17% 15% 19% 6% Overall, approximately 43% of the current job titles are below the average Market Minimums. There are an additional 17% of positions in the lower 40% comp ratio that is within the acceptable range; however, these are at risk of falling below market in the near future. Forty percent (40%) of positions are within the acceptable average Market Minimums. As such, the Salary Schedule(s) Minimums have not kept pace with the external Market. Market Rate Salary Comparison The next step in developing a compensation structure is to compare the current incumbents salaries to the average Market Rate. For this purpose, positions where there is more than one (1) incumbent, an average of the current employees is utilized. Later in the study, analysis was conducted for each individual employee in relation to the recommended Market Rate, and is submitted under separate cover. When employee salaries are compared to the average Market Rate of employee salaries, the City has not fared well. While considering the tenure of employees in single incumbent positions, 53% of the positions with the City are below the average Market Rate. There are another 18% of Page 13

14 positions within the City in that lower 40% comp ratio that are in a position to fall below the average Market Rate in the near future. Were that to occur, approximately 71% of the positions within the City would fall below the average Market Rate. Only 29% of the positions are at or above the Market. The Table & Figure below are a summary of the City s standing with the external Market. Table 2: Market Analysis Summary of all City Positions Comp Ratio No of Positions Percentage 0-19% 1 2% 20-29% 5 10% 30-39% 21 41% 40-44% 9 18% 45-49% 7 14% 50-59% 5 10% 60+% 3 6% Figure 2: Market Analysis Summary % 20-29% 30-39% 40-44% 45-49% 50-59% 60+% 0-19% 20-29% 30-39% 40-44% 45-49% 50-59% 60+% No of Positions Percent of Positions 2% 10% 41% 18% 14% 10% 6% Page 14

15 Maximum Salary Analysis The Consultant has the information to compare the City s Salary Range Maximum to the average Market Maximum. However, due to the various types of salary range construction, the data is too dissimilar to be conclusive. Market Data Summary Overall, the City has not kept pace with the external Market when it comes to Market Minimums. The current salary schedules have fallen behind the average Market Rate with a number of positions that need adjustment to align with the market. With some of the salary schedules employees are not moving through the salary schedule, the number of salary schedules (which will be discussed) have not been in years, no longer reflect the external market, and have internal equity concerns. Compression Analysis Compression is when salaries of job classifications of a higher rank or authority are paid less than positions of a lower rank or authority. This usually occurs in public safety departments where salary plus overtime in lower ranks exceeds the higher ranks. Because of this issue, the Consultant asked for salary information (base + overtime) for the entire 2016 fiscal year for all job classifications. There were two departments that had compression issues that need to be addressed the Fire Department and Police Department. Fire Department The Fire Department runs on a 24/48 shift schedule. This schedule has built in overtime by design, resulting in overtime for a Firefighter just by working the schedule. However, unlike many fire departments, the department deducts for lunches and breaks to make it a hour day. In addition, paid sick leave is not counted as hours worked except in some specific situations. Both of these contract provisions should reduce overtime. Page 15

16 Some overtime can be minimized through the construction of a salary schedule. However, overtime, typically in excess of $7,000 - $8,000, cannot be absorbed within a revised salary structure and the City / Department needs to evaluate department practices and contract language to understand where excessive overtime stems from. In evaluating overtime within the Fire Department, there was overtime in excess of this amount by individuals within the ranks of Firefighter/Paramedic, Fire Lieutenant, and Battalion Chief, so much so that in 2016a Battalion Chief earned slightly more than the Fire Chief. In the case of the Fire Department, two factors are causing compression:1) the makeup of the salary structures, and, 2) an excessive amount of overtime for a few individuals. If the union is willing to negotiate a more market based, internally equitable salary schedule much of the compression issue can be resolved. However, for those individuals earning overtime in excess of $8,000 a revised salary schedule will not alleviate this type of compression problem. Police Department Within the Police Department there will always be some overtime due to hold-overs, such as training, court appearances, etc. Thus, $3,000 - $5,000 of overtime is typical depending on how busy the Department is and special pay components. With that said, there are several Officers with overtime in excess of $10,000, and the Department should evaluate this further. This has caused compression with several Police Officers earning more than Sergeants. As with the Fire Department, much of the compression within the Police Department is due to the construction of the existing salary schedule and the few individuals within the department earning excess overtime amounts. What is unknown is the number of grant or project funded programs driving overtime. If this is what is causing excessive overtime, only a few individuals are receiving these opportunities. Page 16

17 Current Compensation Systems The City currently has eight (8) different compensation systems. All but one is assigned to unions and must be negotiated. The following is an assessment of each of the compensation system. Non-Union Schedule The non-union schedule is a salary range with a minimum midpoint maximum. The range from minimum to maximum is 40% and is traditional for a salary range. The midpoint is the middle of the salary range and, although no one is certain, most likely represents the average market rate. The salary range, for most positions, is based on 1,950 hours or a 37.5-hour work week, except for positions within the police department which are 2,080 hours or 40 hours per week, or the fire officer position based on 2, hours. The City Manager is on the schedule without a salary range as this position is contractual. The salary is determined by the City Alderman. In addition to the Non-Union salary schedule, there is a part-time salary schedule for the positions of Mayor, Alderman, City Clerk, Crossing Guard, Fire Inspector, Volunteer Coordinator (civilian) and seasonal Laborer. These positions have either an hourly or monthly rate. Issues with the Non-Union Schedule The Non-Union schedule has not been updated in several years as evidenced by the external market data. While it is assumed that the midpoint is representative of the average market rate that was not confirmed. There is no objective methodology to place positions within this salary schedule. Finally, employees are not progressing through the salary schedule. Page 17

18 The comp ratio of 50% indicates an employee, with 3-5 years of experience should be at the market rate if that individual is performing the functions of their position. Thus, on the City s salary schedule employees on the Non-Union schedule with 5 or more years of experience should be at or above mid-point. Thus, one should expect to see with the tenure of the City more comp ratios when comparing the City s incumbent salaries to the average market incumbent salary at 50% or higher. However, the vast majority of comp ratios are below 50% or below the average market rate. This indicates two issues: 1) as previously indicated, the salary schedule is below market; and 2) employees within this salary schedule are not moving toward the midpoint of the salary range. As the average market rate of the salary schedule is declining within the market employees are getting further behind. IAFF Schedules The IAFF has two schedules, although one could say there are three schedules. Employees hired after 5/1/2011 are on a different schedule. However, steps F I of the schedule for those hired prior to 5/1/2011 are the same as those hired after 5/1/2011. This schedule is for firefighter / firefighter-paramedics. The position of firefighter within this schedule is a grandfathered position and will be slowly phased out of the department. This salary schedule is uniquely designed in that the start through 2-year steps are 4%; there is an 8.16% step from step 2 to step 3, then it resumes to the 4% steps. After 8 years, the steps are not consecutive years, but a dollar amount is added to the steps at 10 years, 15 years, and 20 years resulting in a 1.45%,.49%, and.33% increase. The Lieutenant/Paramedic schedule consists of only 3-steps which are achieved within 2 years of achieving the rank. There is a 2.5% and a 5% step. The Lieutenant /Paramedic schedule previously had not kept pace with internal equity and there are currently three individuals who are off schedule and paid a rate that is not on the current Lieutenant/Paramedic salary schedule to maintain some internal equity with current employees. Page 18

19 Issues with the IAFF Schedules The salary schedule, although updated with contract negotiations, has no tie to the external market. There should be one step designed like the market making it easy to align with the market comparables during negotiations. The existing steps are rather expensive at 4%; these larger types of steps have been gradually reduced to be more in line with the economy which allows contract negotiations to keep pace with the market by placing dollars on the schedule. A topic that has be discussed is compression. With multiple salary schedules, it is difficult to ensure sufficient distance between superior/subordinate positions as evidenced in the positions within the fire department. There is insufficient distance especially when combining longevity and overtime to make it appealing to move to officer positions as one would take a pay cut. Another issue is the number of steps in the Lieutenant/Paramedic schedule. Other than the Sergeant s schedule, all other employees have several steps or range in which they can continue to progress. After two years, the Lieutenants are stopped from receiving any further steps and can only rely on what is negotiated to the step; further, they do not receive longevity payments. This is inconsistent with the rest of the salary schedules within the City and leads one to ask why this group of individuals is treated differently than all others. The Consultant was told that the firefighter/paramedics wouldn t negotiate any additional steps for the lieutenants; however, this short-sighted vision limits those who may want to move to the rank of lieutenant. Further, this limited schedule is inconsistent with the market. There is also the issue that the City has employees who are not on the salary schedule. Therefore, during negotiations the union and the City are negotiating for both the schedule and for individual salary increases a situation that both may prefer to eliminate. Police Salary Schedules The Police Salary schedule is negotiated through the Teamsters Union and is similar to the Fire/Paramedic schedule. There are 6-steps (Start, 6 months, 1 year, then 2 4 years). After 4- years, there is a large gap in step increases to a step increase at 10 years, 15 years and 20 years. Page 19

20 The step increases are larger than the fire department, and larger than most in the external market at 8.41%, 5%, 12.20%, and years 3 and 4 at 5%. Year 10 at 1.47%, 15 years at.50% and 20 years at.33% - or a flat dollar amount to the step. The Sergeant schedule is only 3-steps of 2.5% and 2%; however, after the promotion step the next step is after 2-years, then after 4 years. After 4-years the Sergeant is frozen at the step and receives no additional step increases unless the step is increased through negotiations. Issues with the Police Salary Schedules The Police salary schedule is extremely expensive in the steps. Transferring that cost to base pay, increasing the number of steps, and decreasing the percentage of the steps would better align the schedule with the market. This would also allow base salaries to align with the external market rather than have the dollars tied up in the step increase. The Consultant suggests that a step be designed as a market step again, during contract negotiations to ensure alignment with the average market rate. Further, the significant gap in step increases will prove to be problematic with the generation of officers coming into the department. This gap in steps is uncommon in other departments and will prove to be a deterrent in recruitment efforts. The Sergeant schedule has similar issues as the Fire Lieutenant in that it is short-sighted and treats a group of individuals differently than most of the employees within the City; limiting the pool of individuals to promote to this rank as it tops out quickly and has compression problems with the patrol rank. IUOE Schedule The IUOE Schedule is a very simple schedule, similar to the Police salary schedule 6 steps (start, 6 months, 1 year, 2 4 yrs; 10, 15, 20 yrs). The steps are somewhat expensive at 5% each. The flat dollar amount to steps 10, 15, and 20 make the step increases, 1.63%,.31% and.30%. Page 20

21 Each position has its own salary range, except for the Maintenance Worker III and Mechanic I which have the same salary schedule. The range between each pay grade (or position) is 10%, 2.39%, and 4.91%. Issues with the IUOE Schedule The salary schedule is expensive with the 5% steps. In the future, such step increases will not be sustainable. Although most employees are above these percentage step increases, the department will be facing turnover in the future due to retirements, and the cost of this schedule will definitely hit the City s budget, impacting contract negotiations as the percentage negotiated on the schedule will need to decrease. An important point to consider is that when negotiating a 2.5% adjustment to the salary schedule the result is a 7.5% increase for someone who is proceeding through steps A F. Conversations with supervisors and employees centered around the differences between a Maintenance Worker I and II with very little difference noted. Therefore, is there a need for two positions with a 10% difference in pay grades? One could argue that a Maintenance Worker I is performing the same work as a Maintenance Worker II while earning less pay for the same job responsibilities. Accordingly, a recommendation for changing the positions has been made. Finally, as with the other schedules, no step has been identified as a market comparable to make contract negotiations easier for market comparisons. ICOPS Salary Schedule The ICOPS Salary Schedule is extremely problematic. There is a starting wage that has not been updated in the last few contract negotiations. Most of the positions have their own salary range; however, there are a few with the same range. With that said, there is no mechanism to place positions within the salary schedule. The steps are 2%, starting at year one and ending at year 10 with employees receiving consecutive, annual increases. The schedule is unique as it has a back-ended increase of 9.48% when moving from step 9 to 10. Page 21

22 As with the other schedules, there is no alignment to the external market. During contract negotiations it will prove difficult to determine where within the market the schedule aligns. Integrated Salary Schedule Analysis The issue with all the Salary Schedules is internal equity. The Consultant placed all the Salary Schedules together to evaluate internal compression. It is not uncommon not to look at this as the City deals with the non-union schedules during budget time and the union schedules during contract negotiations. Analyzing the integrated schedules, there are significant concerns: There are supervisory positions that are paid less than, or very close to, subordinate positions. There is compression among positions, so there is insufficient distance between positions. This causes individuals to be dissuaded from taking promotions or moving to higher level positions as the pay increase is potentially insignificant, nonexistent, or may even result in a reduction. Similar positions have different titles and are in different pay grades and wage rates; however, upon examination, there may be little difference in responsibilities. In relation to the external market analysis, this is probably more of a problem for the City of Park Ridge than salaries to the external Market. Recommended Salary Schedules The following is the non-union salary schedules recommended by the consultant. It is understood that other than the non-union full and part-time positions, all other recommended schedules are subject to contract negotiations and therefore are not provided within this report. Accordingly, the goal of all recommended compensation systems are as follows: Consistency in schedule structure between all schedules within the City Tie to the external market Page 22

23 Elimination of longevity and integration into the salary schedule Consistent and objective methodology for placement of positions within the compensation system o Has internal equity among positions utilization of a point factor system for nonsworn positions o Minimizes compression Between superior and subordinate positions Salary plus overtime Recommendation for initial implementation of the system Recommendation for maintenance of the system to ensure it correlates with the external and internal market As the union salary schedules are negotiated, it is hopeful that they are given serious consideration as significant time and effort was spent to ensure alignment with the external market and within the City of Park Ridge. Non-Union Recommended Schedule The Non-Union Salary schedule (Appendix A) has been changed to a combination of a steprange schedule. The Consultant recommends a 2% step be awarded annually mid-year (October) upon completion of satisfactory performance to ensure that employees reach the average market rate Position Point. Step F represents the average market rate. After Step F, there is a salary range extending out to the maximum. The minimum to maximum of the recommended salary range is slightly smaller than the Non-Union s current range. Therefore, as employee s reach the maximum, the City can extend the maximum out and still be in line with traditional salary schedules. Two percent steps have been recommended to ensure that employees are moving through the system to reach average market rate. Movement beyond the average market rate, or within the range, is based upon a percentage amount determined during the budget process. This step increase should be like the percent increase provided to union employees; however, the range Page 23

24 increase allows for more flexibility within the City to adjust to market conditions higher percentages in good economic times and less in leaner times. Employees who are on a performance improvement plan should not receive the step or range increase until performance has been improved. Positions 500 and up have been placed on the schedule through a combination of the point factor system, the external market data (aligned with Step F), and finally a compression analysis. Thus, there are multiple factors utilized for the placement. Part-time positions have been placed based upon market factors. Non-Union Position Considerations During a compensation study, there is an opportunity to review titles and organizational structures. The position title changes are reflected in the recommended compensation schedule. Any reorganization or career progression positions have been provided to the Human Resources Generalist and City Manager. Non-Union Schedule Implementation For purposes of implementation, employees were placed at the Minimum of the Pay Range if under Step A. If above Step A, an employee was placed on a step closest to the current salary, regardless of time in the position. In most organizations, this type of placement proves problematic, as employees feel that if they have more tenure in the position they should be higher within the Salary Range. Although there is merit to this argument, placement on the Schedule by years in the position proves to be costly and something most municipalities cannot afford. Employees who are within the range portion of the Salary Schedule did not receive an increase. This is not to say they do not deserve an increase, but for schedule implementation purposes, nothing is needed to place them on the Schedule. Once the final cost of the schedule s Page 24

25 implementation has been calculated, the City should evaluate if individuals who did not receive an increase or received a nominal increase warrant one as funding allows. Annual Adjustments The City must seriously consider adjusting the Salary Schedule annually, taking into consideration cost of living increases. The amount plus the percent step increase should be close to some defined index, or similar to the City s overall compensation adjustment. Without maintaining the Schedule, salaries will fall behind the Market, and the City will be in a position of expending dollars to keep up. A suggestion may be that the schedule increases in May of each year. Other Compensation Issues The Consultants read through the labor agreements and found a few areas that pertained to compensation and possible issues pertaining to labor laws. It should be noted that contractual language does not allow or protect a union or City from violating any federal or state labor laws. These issues have been provided to the City Manager under separate cover as they are subject to contract negotiations or involve policy changes. Life Cycle of Salary Schedule One of the main concerns of any salary schedule is the ability to keep it current. Often, an organization spends a lot of time and resources to review and re-evaluate their Salary Schedule, resulting in significant increases to employees or Pay Grades because either the position or the schedule was not in line with the external Market. To avoid this, public sector organizations must build in some mechanism for maintaining the system with the average cost-of-living increases. Page 25

26 A Salary Schedule has a typical life span of five (5) years, at which time market conditions typically necessitate a review. The City can strive to prolong the life of the Schedule if it commits to maintaining the Schedule to retain its competitiveness with the external Market through annual adjustments to the salary schedule. Benefit Statements Employees, especially in government where benefits are typically more generous than those in the private sector, do not realize the true cost to the municipality for providing benefits. The Consultant recommends the City continue to create an annual benefit statement that details the total cost of compensation for an employee. This often has a dramatic effect on employees who only see their net pay, rather than the total cost an employer actually pays for an employee. Typical benefits statements include: Gross Salary Employer cost of FICA, FUTA Employer cost of federal and state taxes Employer cost of insurances (health, life, LTD, etc.) Employer cost for employees to participate in a sponsored Employee Assistance Program or a wellness program Employer cost of unemployment Employer cost of worker s compensation Employer cost of pension fund(s) or other retirement programs Employer cost of other benefits provided Total compensation for the employee Compensation Summary Overall, the City s salary schedules have not kept pace with the external market. In addition, especially in the non-union salary schedule, employees have not progressed through the salary schedule, causing them to fall further behind the external market. The failure of the City to maintain competitive salary schedules is starting to have an effect with several positions turning over and difficulty in attracting qualified employees. Recommendations have been made for all union and non-union salary schedules. In addition, recommendations for elected official compensation has also been provided. Finally, issues Page 26

27 pertaining to the Fair Labor Standards Act have been identified for the City to discuss with their labor attorney. Elected Official Salary Analysis The Consultant was asked to evaluate the salaries of the elected officials. The same list of comparables was utilized for this analysis, as well as the same process of developing the average. Thus, for comparison purposes, the salaries were reduced to a monthly amount, and any salaries that were too high/low were eliminated as to not skew the average. Since elected officials salary is determined through a process prior to an election (vice a salary range), only the current incumbent salaries are illustrated. Table 3: Elected Official Market Analysis 2017 Avg Job Title Description Salary of Incumbents Mkt Avg Incumbent Comp Ratio Aldermen $ $ % Mayor $1, $ % City Clerk $ $ % The Aldermen would appear to be underpaid in comparison to the market. It is understood that elected officials do not serve their community for the compensation; however, it is necessary to provide a reasonable amount of compensation to encourage individuals to run for office. The compensation provides funds for transportation, babysitting, to offset time away from work, etc. and allows a wider range of individuals to run for office. The Mayor s compensation is slightly higher than the average market rate and therefore no changes are currently recommended. This City Clerk is compensated higher than the market comparables. With that said, there is limited data on this position as many are moving to an appointed City/Village Clerk rather than an elected position. It is the Consultant s understanding that the City may be considering this move at the end of the current City Clerk s term of office. This would be recommended by the Page 27

28 Consultant as this position has become one that is extremely important with the scope of duties. Hiring an individual with the skills and experience necessary for the position is more effective for the City rather than relying on obtaining one through an election. No changes in the compensation for the City Clerk are recommended. Benefit Analysis In addition to compensation, the City asked that an internal comparison of other benefits also be conducted within the City between the union and non-union positions, as well as with the Market. The following is a summary of these comparisons. The City currently has five (5) Collective Bargaining Agreements (CBA) in addition to City HR Policies that encompass all non-represented employees. Because they are negotiated, benefits may not be consistent across all employee groups, and, often during negotiations, there is no analysis of the impact to the entire organization. Having variations may be confusing and frustrating for employees and managers, and it is very likely a significant administrative burden to the administrative staff who set up and monitor benefits. The recommendations of the Consultant are not intended to disrupt the overall negotiating strategy for the City, but are intended to provide a comparison within the organization and offer recommendations to the benefits for non-represented employees. Health Insurance Plan Design Overview The City participates in the Intergovernmental Personnel Benefit Cooperative (IPBC), which is an entity created under Illinois law, allowing municipal organizations to pool together for insurance. There are at least 65 municipalities who belong to the IPBC, and, as a result, the IPBC offers a variety of plan options to its members, at competitive rates. The selection of the plans currently offered by the City are largely in part due to the language of the current collective bargaining agreements in place with the City, in which the language (although slightly varied in each CBA) in essence requires the City to maintain the benefit levels currently in place. This Page 28

29 means the City cannot unilaterally change a plan design without bargaining, nor can it offer nonunion employees an alternative health plan without offering it to union groups as well. This limits the City s opportunity to make benefit changes in the future for financial sustainability of the health insurance program without engaging all unions, and likely a quid quo pro for any union concessions. The City currently offers three (3) different health plans. The HMO Plan is a zero-deductible plan with small co-pays for services, and the lowest Out of Pocket Maximum (OOP). The premium for this plan in dollars is the lowest of all plans offered by the City, which does not promote good consumerism of utilization of the health plan. It was reported that approximately 35% of the employees select the HMO. The City s PPO1 Plan has the second lowest OOP and is also the most expensive plan, but has an estimated 50% of employees electing this plan. The City s PPO2 Plan with the highest OOP has the least participation, at 5%, but costs less than the other PPO in terms of employee contributions. The City s HMO s plan design is becoming more of an exception than the norm in the industry. The overall monthly premiums for these types of plans are typically higher than other plans because there is a lower out-of-pocket cost risk to the employee on a no/low deductible plan, requiring the Plan to pick up the majority of medical expenses. Municipalities therefore will typically place higher employee contribution amounts to low deductible plans to drive better consumerism by employees. There is not enough difference between the two (2) PPO Plans to retain both Plans, so the Consultant recommends the City eliminate the PPO1 Plan. When comparing potential costs employees could incur between both premiums and medical expenses, employees are currently willing to pay more in premium to ensure a lower OOP, which is very seldom reached. This is the likely reason the City has a 50% election rate for this Plan. It is possible that employees do not yet realize they are often in a better financial situation when they enroll in a plan with a larger deductible amount to save on monthly premium costs, and shift their financial responsibilities from a guaranteed monthly premium deduction to an actual expense should they need to use the health plan while being a good consumer of health care. The employee Page 29

30 contribution for the remaining PPO2 Plan should then be set at a lower rate than the HMO, because there is more financial risk. With the recommendation to eliminate the PPO1 Plan, the Consultant recommends the City offer a High Deductible Health Plan (HDHP) as the third plan option, setting the lowest employee premiums of all plans offered, since the employee would be electing a Plan with the greatest financial risk. Moving to a HDHP can often be unnerving for employees because they must be better consumers of their health care and manage the expenses as they occur. This concern may be alleviated if the City also offers an option for a Health Savings Account to provide a financial cushion. Employees do not always know what an HSA is, or how it benefits them, so education is a key component to driving effective health care consumerism with this type of plan design. Therefore, it is recommended the City develop an education program on the health insurance programs offered by the City, so employees understand the direct link between utilization of the Plan and the correlation to annual premiums. Often, because a $20 or $50 copay is inexpensive, consumers don t think twice about visiting medical providers unnecessarily. This will also be the City s opportunity to educate employees on other health care resources, like the HSA. Premiums It is extremely difficult to compare health insurance as the number of plans and plan designs are significantly different among organizations. What can be compared is the amount the City contributes toward the cost of that insurance. As the City is aware, the cost of health insurance is a large budget item for any organization. Health insurance is also often the single largest benefit looked at by potential new hires with the City, so a review of employee contributions to this benefit is imperative when offering a comprehensive benefit package. The City pays 87% of the premium for all health plans offered. A total of 34 different health plans were reviewed. The following summarizes the findings: For Single Plans, the average of all reported employer premium contributions are 87%. For Family Plans, the average of all reported employer premium contributions are 88%. Page 30