Total Compensation: A Review of Employee Pay

1
Total CompensationA Review of Employee Pay
Benefits

• Presented by
• Human Resources Department
• January 13/15, 2003

2
Presentation Overview

• What is Total Compensation?
• Why is Total Compensation important?
• Importance of competing against other employers
• What is required by law?
• What does the City of Dallas offer?
• Who is eligible?
• Total cost of major pay benefits elements
• How does the City compare to other employers?
• Sick leave policy and usage
• Summary

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What is Total Compensation?

• Anything given to pay or reward an employee for
  work or services done
• Composed of two basic elements
• Pay elementssalary, overtime, special pay, etc.
• Benefits elementshealth coverage, life
  insurance, paid leave, etc.

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Why is Total Compensation Important?

• To attract and retain qualified employees, pay
  and employer-sponsored benefits must be
• Perceived by prospective and current employees as
  valuable
• Commensurate with the value of the work performed
• Focused on Total Compensation, rather than
  individual elements
• Compliant with various laws and mandates

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Competing Against OtherEmployers

• Total compensation must be able to be
  measured/compared
• Benefits levels vary by type of organizations
• Public vs. private
• Different industries
• Challenges
• Spend tax dollars prudently
• Be an employer of choice (recruitment)
• Maintain quality workforce (retention)

6
What is Required?

• Federal and State laws
• Wages and special pay
• Hours, overtime
• Protected medical leave
• Discrimination
• Health care
• Unemployment
• Workers Compensation

7
What is Required?

• City Charter
• Chapter II, Section 1., (35) (36)
• Make provision for the care and sustenance of
  police, fire, and all officers and employees who
• Become disabled while in service of City e.g.
  disability pension
• Become incapacitated due to age or infirmity
  e.g. retirement, health care, sick leave
• Become incapacitated due to longevity of service
  alone e.g. retirement
• Provide aid and relief of widows, minor children
  and dependents
• Create funds for above purposes

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What is Required? (contd)

• City Charter (contd)
• Chapter XVI, Section 14. Adoption of Personnel
  System and establishment of rules and
  regulations, including
• Description of employment positions
• Methods of determining merit and fitness
• Hours of work, attendance, provisions for sick
  leave and vacation leave
• Equitable pay scales
• City Personnel Rules
• Health and life benefits
• Paid and unpaid leave

9
What Does the City of Dallas Offer?

• Pay Benefits Matrix (Appendix A)
• Categorized by
• Objective
• Name and description of element
• Legal requirements
• Mandated by local, state, or federal law
• Optional
• Eligibility
• History
• Cost to City
• Direct cash output
• Indirect staffing, resources, etc.

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Who is Eligible for Benefits?

• Various employee groups are eligible for all or
  some benefits
• Full time Employees
• Part time employeesmost benefits available on a
  pro-rata basis
• Retirees disabled former employees
• Access to subsidized health benefits some life
  insurance
• Elected officials (Mayor City Council)
• Access to unsubsidized health benefits

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Major Pay Benefits ElementsFY 2002
2002 Cost of Major Pay Benefits Elements
894,594,877
12
Major Pay Benefits Elements Average Civilian
Employee FY 2002
2002 Average Total Compensation for Civilian
Employee 53,252
13
Major Pay Benefits Elements Average Sworn
Employee FY 2002
2002 Average Total Compensation for Sworn
Employees 84,591
14
How Does the City Compare to Other Employers?

• Other citiesMetroplex, Texas and other major
  city surveys
• Hay Group comparison of pay benefits (including
  private sector)
• Hay Group 2002 Total Remuneration Survey
• Private public sector employers
• Methodology
• Hay Group assigns values to all pay and benefits
  elements to obtain value of total compensation
  offered
• Salary survey comparison of attached jobs

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Public Sector Comparisons (Excluding Sick Leave)
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City of Dallas vs. Public Private Sector

• Hay Groups General Industry Database includes
  over 1,000 organizations in the US of all sizes
  and types (public and private sector). Examples
  
• American Airlines Burlington Northern
• Baylor College of Medicine Texas Utilities
• Bell Helicopter Textron Neiman Marcus
• Blockbuster Dallas Morning News
• FedEx J.C. Penney
• Tarrant County Kimberly-Clark
• Ft. Worth Transportation SPRINT
• Authority

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City of Dallas vs. Public Private Sector

• Civilian positions
• Compared to both public private sector
  employers
• Approximately 50 benchmark positions at the
  City were used for this comparison
• Grouped into one of four levels, based on salary
• Category 1-Entry to mid-level positions
• Category 2-Professional/Supervisory
• Category 3-Senior professional/Manager
• Category 4-Department Director
• Uniformed jobs
• Compared to other municipalities nationwide
• Compared by rank

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Total Compensation Hay Group Survey Data

• Total compensation includes Base Pay, Total Pay
  (Base plus Annual Bonus), and Benefit Values
• Market Data is analyzed and broken down into
  percentiles
• 75th percentile means that 75 of organizations
  are below this point
• 50th percentile means half of organizations are
  above, half are below this point this is the
  goal of most organizations
• 25th percentile means that 25 of organizations
  are below this point.

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City-Civilian vs. Public Private Sector for 2003

• The charts on pages 23-25 show the value of City
  civilian pay and benefits
• Total Compensation results
• In Category 1 (entry to mid-level positions), the
  City is at the 75th percentile. This means that
  our total compensation package value for these
  types of employees is equal to or better than 75
  of all employers surveyed.
• In Category 2 (professional/supervisory), the
  City is at the 25th percentile. This means that
  our total compensation package value for these
  types of employees is lower than 75 of all
  employers surveyed.

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City-Civilian vs. Public Private Sector for
2003 (contd)

• Total Compensation results (contd)
• In Category 3 (senior professional/manager), the
  City is below the 25th percentile. This means
  that our total compensation package for these
  types of employees is lower than 75 of all
  employers surveyed.
• In Category 4 (department directors), the City is
  below the 25th percentile. This means that our
  total compensation package for these types of
  employees is lower than 75 of all employers
  surveyed.

21
City-Civilian vs. Public Private Sector for
2003 (contd)

• Base pay results
• In Category 1 (entry to mid-level positions), the
  City is above the 75th percentile. This means
  that average base pay for these types of
  employees is better than 75 of all employers
  surveyed.
• In Category 2 (professional/supervisory), the
  City is at the 50th percentile. This means that
  average base pay for these types of employees is
  equal to or better than 50 of all employers
  surveyed.
• In Category 3 (senior professional/manager), the
  City is below the 50th percentile. This means
  that average base pay for these types of
  employees is lower than 50 of all employers
  surveyed.

22
City-Civilian vs. Public Private Sector for
2003 (contd)

• Base pay results (contd)
• In Category 4 (department directors), the City is
  below the 25th percentile. This means that
  average base pay for these types of employees is
  lower than 75 of all employers surveyed.
• Employer-paid benefits results
• In all job categories the City is below the 25th
  percentile. This means that value of
  employer-paid benefits for all employees is lower
  than 75 of all employers surveyed.

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City-Uniformed vs. Public Sector for 2003

• The charts on pages 30-35 show the value of City
  uniformed pay and benefits
• Base Salary Benefits Results
• For Police Officer, the City is just above the
  25th percentile. This means that our total base
  salary benefits value for this rank is lower
  than 50 of all municipalities surveyed.
• For Fire Rescue Officer and Fire Captain, the
  City is just below the 50th percentile. This
  means that our total base salary benefits value
  for this rank is approximately the same as 50 of
  all municipalities surveyed.
• For Police Sergeant and Police Lieutenant, the
  City is at the 50th percentile. This means that
  our total base salary benefits value for this
  rank is approximately the same as 50 of all
  municipalities surveyed.
• For Fire Battalion Chief, the City is at the 25th
  percentile. This means that our total base
  salary benefits value for this rank is lower
  than 75 of all municipalities surveyed.
• For Assistant Police Chief, the City is above the
  50th percentile. This means that our total base
  salary benefits value for this rank is better
  than 50 of all municipalities surveyed.

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City-Uniformed vs. Public Sector for 2003
(contd)

• Base Salary Benefits Results
• For Assistant Fire Chief, the City is at the 75th
  percentile. This means that our total base
  salary benefits value for this rank is better
  than 75 of all municipalities surveyed
• Base Pay Results
• For Police Officer and Fire Rescue Officer, the
  City is at the 50th percentile. This means that
  average base pay for these ranks is approximately
  equal to 50 of all municipalities surveyed.
• For Police Sergeant, the City is at the 75th
  percentile. This means that the average base pay
  for this rank is equal to or better than 75 of
  all municipalities surveyed.

28
City-Uniformed vs. Public Sector for 2003
(contd)

• Base Pay Results (contd)
• For Fire Captain, the City is at the 50th
  percentile. This means that average base pay for
  this rank is approximately equal to 50 of all
  municipalities surveyed.
• For Police Lieutenant, the City is at the 75th
  percentile. This means that the average base pay
  for this rank is equal to or better than 75 of
  all municipalities surveyed.
• For Fire Battalion Chief, the City is at the 50th
  percentile. This means that the average base pay
  for this rank is approximately equal to 50 of
  all municipalities surveyed.

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City-Uniformed vs. Public Sector for 2003
(contd)

• Base Pay Results (contd)
• For Assistant Police Chief, the City is just
  below the 75th percentile. This means that
  average base pay for this rank is better than
  approximately 75 of all municipalities surveyed.
• For Assistant Fire Chief, the City is above the
  75th percentile. This means that the average
  base pay for this rank is equal to or better than
  75 of all municipalities surveyed.
• Employer-paid benefit results
• For all Police and Fire ranks surveyed the City
  is lower than the 25th percentile. This means
  that our total base salary benefits value for
  these ranks is lower than 75 of all
  municipalities surveyed.

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Benefit Values vs. Public Private Sector for
2003

• The bar charts on pages 40-42 show employer paid
  benefit values at three different salary levels
  30,000, 50,000, and 80,000
• Compares City (Civilian Uniformed) with Market
  (includes both public and private sector
  employers) for major benefits elements (see
  legend)

37
Benefit Values vs. Public Private Sector for
2003
Bar Chart Legend

• Other Benefits
• Tuition reimbursement
• Parking
• Car allowance
• On site cafeteria
• Holiday/Vacation
• Retirement

• Social Security
• Health Care
• Disability
• Death
• Statutory
• Unemployment
• Workers Compensation

In order shown on bar chart, from the top down
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Benefit Values vs. Public Private Sector
Results

• Other Benefits City is below 25th percentile
• Holiday/vacation leave In line with other
  employers (at approximately 50th percentile)
• Retirement and Social Security combined At or
  below 25th percentile

39
Benefit Values vs. Public Private Sector
Results

• Health care Below 25th percentile
• Disability At 50 percentile because sick
  leave and disability retirement are included in
  this category
• Death Below 25th percentile

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Dallas Area Public Sector Top ExecutivesJanuary
2003
44
Sick Leave Policy Usage

• City of Dallas Sick Leave policy
• Eligibility usage
• Annual accrual
• Maximum accumulation
• Termination payout
• Comparison with other employers public and
  private sector
• Sick leave as disability protection
• Retiree sick leave usage

45
Citys Sick Leave Policy (Personnel Rules, Sec.
34-22)

• Eligibility
• All permanent employees eligible upon initial
  appointment
• Part-time permanent employees accrue hours on a
  pro-rated basis
• By state law, sworn employees may take 30 sick
  leave days each calendar year
• Fire Rescue 360 hours (30 12-hour days)
• All other sworn employees 240 hours (30 8-hour
  days)
• Sick leave taken in excess of amount accumulated
  will be charged to other paid or unpaid leave

46
Citys Sick Leave Policy (Personnel Rules, Sec.
34-22)

• Sick leave may only be granted/taken when
• An employee is incapacitated for the performance
  of duties due to an illness, surgical procedure,
  or off-job injury
• A medical, dental, or optical examination or
  treatment is necessary
• An employee is incapacitated by or recovering
  from pregnancy, miscarriage, abortion, or
  childbirth
• It is necessary to care for an immediate family
  member who is ill or incapacitated
• An employee has been exposed to a contagious
  disease
• It is allowed under the citys wage
  supplementation plan
• It is allowed under the citys administrative
  directives governing the administration of the
  Family Medical Leave Act

47
Citys Sick Leave Policy (Personnel Rules, Sec.
34-22)

• Notice of unexpected absence
• Required within two hours before to within 30
  minutes after starting time, depending on
  departmental procedures
• In 24-hour operation, required at least one hour
  before reporting time on first day of absence
• Supervisor can require notification on each
  succeeding day of absence
• Failure to give notice can result in employee
  being declared absent without leave and subject
  to disciplinary action
• Documentation
• Upon request by a supervisor, a department
  director, or the director of human resources, an
  employee may be required to
• Furnish a statement from an attending physician
  demonstrating the existence of circumstances to
  substantiate usage
• Submit to a physical or mental examination by a
  healthcare provider selected by the city

48
Citys Sick Leave Policy (Personnel Rules, Sec.
34-22)

• Annual Accrual
• Fire Rescue 144 hours (12 12-hour days)
• All other employees 96 hours (12 8-hour days)
• Maximum Accrual
• Fire Rescue 2,160 hours (180 12-hour days)
• All other employees 1,440 hours (180 8-hour
  days)
• Termination payouts upon retirement or
  termination with 20-years service
• Fire Rescue 1,080 hours (90 12-hour days)
• All other employees 720 hours (90 8-hour days)

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Sick Leave Policy Public Sector Comparison
50
Survey of Paid Leave for Public Sector Employers
Prepared for City of Dallas by Fox Lawson,
April 2002 28 Respondents-all major
municipalities
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Sick Leave as Disability Protection

• City provides internal short-term disability
  (STD) for permanent employees who have worked for
  at least one year
• Pays 60 of weekly base salary, up to 500/week
• 30 day waiting period, from date employee became
  disabled
• Payment for 5-month period
• Employee must exhaust 80 of sick leave balance
  remaining at end of waiting period before STD can
  be used
• STD program is not funded by annual
  appropriations
• Cost and usage are low because program is heavily
  supplemented by sick leave accruals
• FY2002 cost 281K
• FY2002 usage approximately 111 employees
• City does not provide long-term disability
  program
• Disability retirement provided by pension plans

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Sick Leave as Disability Protection

• If City were to provide Long Term Disability
  Insurance (LTD)
• Requested proposals
• Proposal submitted by Standard Insurance Company
• Annual premium of 2.8 million
• What LTD would provide
• 90 day waiting period (partially or totally
  covered by sick leave)
• 60 of salary up to 15,000 per month
• Payable to age 65
• 100 taxable income

53
Sick Leave Earned for All Employees (2001)

• 553 max-ed out
• 0 days of sick leave taken over 15 yrs
• Employees at maximum accrual therefore earned no
  sick leave
• 125 earned less than one day
• 635 earned less than six days
• 11,136 earned six to twelve days
• (12,449 total employees)

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Sick Leave Usage for All Employees 2001
55
Sick Leave Usage for Retiring Employees (during 6
mos. prior to retirement)
Civilians
Sworn
All Employees
For 251 employees who retired from November 2001
to August 2002, approximate sick leave usage
during 6 months prior to retirement
56
Retiring Employees Sick Leave Usage Reasons

• Ultimately, individual supervisors are
  responsible for approving the use of sick leave
• 63 of these 251 employees took 5 or fewer sick
  leave days and/or submitted appropriate
  documentation
• 21 had illness (or family member with illness)
  known to department
• 7 took non-consecutive leave
• 6 did not specify reason, but took less than 10
  days
• 3 did not specify a reason, and took greater
  than 10 days (8 employees)

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Retiring Employees No Reason, More than 10 Days

• 8 employees took more than 10 days of sick leave
  with no specific reason given for absence
• Convention Center 2 employees
• Park Recreation 3 employees
• Planning 2 employees
• Streets 1 employee
• 3 of total group fell in this category (8 out of
  251 total employees)
• Human Resources staff to further investigate
  these particular situations
• Where inappropriate usage discovered, HRD will
  recommend appropriate disciplinary action to be
  taken by departments against individual
  supervisory personnel
• HRD will work with departments to ensure
  supervisory awareness of sick leave usage policies

58
Citys Total Compensation Package (Benefits Pay)

• Was designed to
• Attract employees willing to receive lower salary
  dollars for higher benefit levels
• Encourage those employees to stay for long
  periods of time, which provides
• Stability
• Knowledge base
• Lower training needs/costs
• Reward long-term employees with
  service/seniority-based incentives
• Is comparable to pay benefits packages offered
  by other municipalities

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So, as a result

• The average city employee has a tenure of 13.8
  years
• Of the current employee population
• 76 have over five years of service
• 58 have over ten years of service
• 29 have over twenty years of service

Current Employee Tenure - Breakdown
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Andemployee turnover is relatively and
consistently low
The U.S. national median turnover rate for year
2000 for governmental entities across all regions
is 15 (U.S. National Median Value from Bureau
of National Affairs Inc, Washington D.C. year
2000 permanent separation.)
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Going Forward

• Previous Councils guided the development of
  current total compensation package
• Current package developed over many years
• Input from current Council will shape future
  total compensation package
• Changing the Citys compensation philosophy will
  affect the behavior of both prospective and
  current employees
• Does total package need to be changed?
• What work behavior do we want to encourage?

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Total Compensation Drives Recruitment Retention

• Current total compensation package has
  facilitated retention and attendance
• A changing labor market prompts the question Is
  this what is needed in the future?
• Important Considerations
• Take a holistic approach examine the total
  package, not just individual elements
• Does it produce desired behavior?
• How do current employees respond?
• Can we attract the future talent we need?

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Total Compensation Drives Recruitment Retention
(contd)

• Important Considerations (contd)
• Something different may cost more than what we
  have
• What can we afford?
• What are we willing to pay?
• Legal issues

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Where do we go from here?

• Current sick leave program contributes to Citys
  total compensation position at below the 25th
  percentile
• Changes in this policy change this ranking
• Therefore, with regard to sick leave
• Maintain annual and maximum accruals
• Current program provides disability protection
  (e.g. maternity leave, long-term illness, etc.)
• Most efficient way to provide disability
  protection

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Where do we go from here? (contd)

• Therefore, with regard to sick leave (contd)
• Maintain termination payouts for current
  employees
• Recognizes commitments to and expectations of
  employees
• Eliminate termination payouts for new employees
  hired on or after March 1, 2003
• Differing expectations in todays labor market
• Over time, possible savings
• Provide active monitoring of sick leave usage for
  all employees to ensure policy compliance

Any changes to this recommendation may delay
implementation date
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Where do we go from here? (contd)

• With regards to Total Compensation
• Review total compensation package
• A long-term strategy is necessary
• Personnel policies and pay/benefits programs are
  interrelated
• Changes to individual elements could cause
  unintended consequences
• Legal ramifications of changes
• Within 60 days, Human Resources will provide a
  plan (short and long-term) to review total
  compensation package
• Legal issues regarding this plan will be briefed
  to Council in executive session