KOFF & ASSOCIATES
GEORG S. KRAMMER
Managing Director, Compensation and Rewards Consulting
2835 Seventh Street
Berkeley, CA 94710
www.KoffAssociates.com
[email protected]
Tel: 510.658.5633
Fax: 510.652.5633
October 27, 2022
Total Compensation Study
Draft Report
City of Commerce
2835 Seventh Street, Berkeley, California 94710 | 510.658.5633 | www.KoffAssociates.com October 27, 2022
Ela Pappo
Human Resources Director
City of Commerce
2535 Commerce Way
Commerce, CA 90040
Dear Ms. Pappo:
Koff & Associates is pleased to present the Total Compensation Study Draft Report to the City of Commerce. This report documents the market compensation survey methodology, findings, and recommendations for implementation.
We would like to thank you for your assistance and cooperation without which this study could not have been brought to its successful completion.
We will be glad to answer any questions or clarify any points as you are implementing the findings and recommendations. It was a pleasure working with the City of Commerce and we look forward to future opportunities to provide you with professional assistance.
Very truly yours,
Georg Krammer
Managing Director, Compensation and Rewards Consulting
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TABLE OF CONTENTS
Executive Summary ................................................................................................................. 1 Background.......................................................................................................................... 1 Summary of Findings............................................................................................................ 1 Study Process ........................................................................................................................... 1 Benchmark Classifications................................................................................................... 1 Comparator Agencies......................................................................................................... 4 Salary and Benefits Data..................................................................................................... 5 Additional Benefits............................................................................................................... 7 Data Collection.................................................................................................................... 7 Matching Methodology ...................................................................................................... 8 Data Spreadsheets .............................................................................................................. 9 Market Compensation Findings ............................................................................................. 9 Base Salary...........................................................................................................................11 Total Compensation ...........................................................................................................12 Benefits.................................................................................................................................12 Internal Salary Relationships...................................................................................................14 Recommendations.................................................................................................................16 Pay Philosophy ....................................................................................................................16 Proposed Salary Structure ..................................................................................................16 Proposed Salary Range Placements.................................................................................16 Options for Implementation...............................................................................................17 Using the Market Data as a Tool ...........................................................................................19 Total Compensation Study – Draft Report
City of Commerce
LIST OF TABLES
Table 1. Benchmark Classification .............................................................................. 2 Table 2. Comparator Agencies................................................................................... 4 Table 3. Market Compensation Results Summary ..................................................... 9 Table 4. Social Security and Deferred Compensation............................................ 17 Table 5. Monthly Employer Health Insurance Contributions................................... 17 Table 6. Three-Year Implementation Proposal......................................................... 17
APPENDICES
Appendix I: Results Summary
Appendix II: Market Compensation Findings
Appendix III: Proposed Salary Range Schedule
Appendix IV: Salary Range Placement Recommendations
Appendix V: Additional Benefits
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1 EXECUTIVE SUMMARY
Background
In April-July 2022, Koff & Associates (“K&A”) conducted a comprehensive Total Compensation Study for City of Commerce (“City”). All compensation findings and recommendations are presented in this report.
This compensation review process was precipitated by:
The concern of the City Council and management that employees should be recognized for the level and scope of work performed and that they are paid on a fair and competitive basis that allows the City to recruit and retain high-quality staff; The desire to have a compensation plan that can meet the needs of the City; and The desire to ensure that internal relationships of salaries are based upon objective, nonquantitative evaluation factors, resulting in equity across the City.
The goals of the compensation study are to assist the City in developing a competitive pay and benefit plan, which is based upon market data, and to ensure that the plan is fiscally responsible and meets the needs of the City with regards to recruitment and retention of qualified staff.
Summary of Findings
This report summarizes the study methodology, analytical tools, and the total compensation (salary and benefits) survey findings. The results of the total compensation study showed:
The City’s base salaries, overall, in comparison to the market median, are 1.4% above the market.
The City’s total compensation, overall, in comparison to the market median is 8.6% above the market.
The City’s benefits package (which affects full-time employees only) puts the City in a more competitive position compared to the market. Typically, we would recommend basing salary decisions on total compensation results; however, due to the City’s somewhat unusual benefits package, we recommend focusing on base salaries first and addressing benefits separately.
K&A considers a classification falling within 5% of the median to be competitive.
STUDY PROCESS
Benchmark Classifications
The study included 78 classifications, including five (5) proposed classifications and we collected salary and benefits data within the defined labor market. Classifications that we would expect to provide a sufficient sample for analysis were selected as “benchmarks” to use as the basis to build the compensation plan. Benchmark classifications are those classifications that are Total Compensation Study – Draft Report
City of Commerce
2 compared to the market, and these classifications are used as a means of anchoring the City’s overall compensation plan to the market. Other classifications not surveyed will be included in the compensation plan and aligned to the benchmark classifications using internal equity principles.
The benchmark classifications are listed in Table 1.
Table 1. Benchmark Classification
Classification Title
1. Accountant II
2. Accounting Supervisor
3. Accounting Technician II
4. Administrative Assistant
5. Animal Control Officer
6. Aquatics Facility Maintenance Specialist
7. Aquatics Program Manager
8. Arts and Crafts Supervisor
9. Associate Civil Engineer
10. Associate Planner
11. Branch Library Supervisor
12. Bus Operator II
13. Cable TV Coordinator
14. Camp Cook
15. Camp Counselor
16. Cashier
17. Children’s Librarian
18. City Planner
19. Class Instructor - Arts and Crafts
20. Class Instructor - Dance
21. Code Enforcement Officer II
22. Code Enforcement Supervisor
23. Community Services Officer
24. Custodian
25. Day Camp and Kids Club Specialist
26. Deputy City Clerk
27. Employee and Labor Relations Manager
28. Environmental Coordinator
29. Facility CIP Project Manager
30. Facility Maintenance Specialist
31. Facility Maintenance Supervisor
32. Fleet Maintenance Manager
33. Fleet Mechanic
34. Food Services Supervisor
35. Graphics and Printing Specialist
36. Head Swim Coach
37. Information Technology Specialist
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3 Classification Title
38. Information Technology Supervisor
39. Librarian
40. Library Assistant
41. Library Circulation Supervisor
42. Library Page
43. Library Technical Services Supervisor
44. Lifeguard
45. Literacy Program Manager
46. Locker Attendant
47. Maintenance Worker II
48. Media Specialist
49. Office Specialist II
50. Painter
51. Park Maintenance Supervisor
52. Park Maintenance Worker
53. Payroll Specialist
54. Permit Technician
55. Producer/Editor
56. Public Information Officer
57. Public Safety Manager
58. Public Works Superintendent
59. Purchasing Manager
60. Purchasing Specialist
61. Recreation Center Supervisor
62. Recreation Coordinator
63. Recreation Leader
64. Recreation Program Manager
65. Recreation Program Supervisor
66. Reprographics Technician II
67. Senior Human Resources Analyst
68. Senior Management Analyst
69. Special Events Specialist
70. Sports Supervisor
71. Street and Tree Maintenance Supervisor
72. Street Maintenance Worker
73. Transit Analyst
74. Transit Dispatcher
75. Transit Equipment Service Worker
76. Transit Parts Assistant
77. Transit Supervisor
78. Travel Sports Coordinator
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4 Comparator Agencies
Another important step in conducting a market salary study is the determination of appropriate agencies for comparison. The City provided a pre-determined list of comparator agencies that had been selected based on the following factors:
1. Organizational type and structure – It is generally recommended that agencies of a similar size and providing similar services to that of the City be used as comparators.
When it comes to technical classes, the size of an organization is not as critical, as these classes perform fairly similar work. The difference in size of an organization becomes more important when comparing classes at the management level. The scope of work and responsibility for management becomes much larger as an organization grows.
Factors such as management of a large staff, consequence of error, the political nature of the job, and its visibility all grow with larger organizations. When it is difficult to find agencies that are similarly sized, it is important to get a good balance of smaller and larger agencies.
2. Similarity of population, staff, and operational budgets – These elements provide guidelines in relation to resources required (staff and funding) and available for the provision of services.
3. Scope of services provided – For the majority of classifications, it is important to select agencies providing similar services. Organizations providing the same services are ideal for comparators and most comparator agencies surveyed provide similar services to the City.
4. Labor market and geographic location – Today’s labor market reality is that many agencies are in competition for the same pool of qualified employees because large portions of the workforce do not live in the communities they serve, are accustomed to lengthy commutes, and are more likely to consider changing jobs in a larger geographic area than in the past. Furthermore, by selecting employers within a geographic proximity to the City, the resulting labor market data generally reflects the region’s cost of living, housing costs, growth rate, and other demographic characteristics to the same extent as competing employers to the City.
All factors mentioned should be considered in selecting the group of comparator agencies. The following fifteen (15) agencies were surveyed.
Table 2. Comparator Agencies
Agency
1. City of Bell Gardens
2. City of Carson
3. City of Cerritos
4. City of Los Angeles
5. County of Los Angeles
6. City of Downey
7. City of Lakewood
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5 Agency
8. City of Montebello
9. City of Norwalk
10. City of Pasadena
11. City of Pico Rivera
12. City of Santa Fe Springs
13. City of Santa Monica
14. City of Torrance
15. City of Whittier
Salary and Benefits Data
The last element requiring discussion prior to beginning a market survey is the specific benefit data that will be collected and analyzed. The following salary and benefits data was collected for each benchmark classification (the cost of these benefits to each agency was converted into dollar amounts and can be found in Appendix II [Benefit Detail] of this report; these amounts were added to base salaries for total compensation purposes).
1. Monthly Base Salary
The top of the salary range and/or control point. All figures are presented on a monthly basis.
2. Employee Retirement
Retirement reflects the benefits offered to the majority of the employees:
PERS Formula: The service retirement formula for each agency’s Classic plan. For agencies with retirement systems established under the County Employees Retirement Law of 1937 (“37 Act”), retirement formulas were converted to the equivalent PERS formula for purposes of comparison
Enhanced Formula Cost: The baseline PERS formula is 2%@62 for miscellaneous employees. There is typically a cost to the employer for offering a formula with a higher benefit than the baseline formula. For each enhanced formula, the cost to the employer is based on a state-wide actuarial percentage calculated by PERS. Single Highest Year: The period for determining the average monthly pay rate when calculating retirement benefits. The base period is 36 highest paid consecutive months. When final compensation is based on a shorter period of time, such as 12 months’ highest paid consecutive months, there is a cost to the employer. Similar to the enhanced formula, the cost to the employer is based on a state-wide actuarial percentage calculated by PERS.
The cost to the employer for each enhanced formula and final compensation are presented below.
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6 Miscellaneous Employees
Formula Enhanced Formula
% Cost
Final Compensation
% Cost
2%@60 1.3% 0.5%
2%@55 3.0% 0.5%
2.5%@55 5.3% 0.6%
2.7%@55 7.1% 0.7%
3%@60 8.1% 0.7%
Employer Paid Member Contribution: The amount of the employee’s contribution to PERS that is paid by the employer (Employer Paid Member Contribution). Social Security: If an employer participates in Social Security, then the employer contribution of 6.2% of the base salary up to the federally determined maximum contribution of $759.50 per month was reported.
Other: Any other retirement contributions made by the employer. Employee Cost Sharing: The amount an employee pays toward the required Employer’s PERS contribution. Full-Time employees in Commerce have 10.5% deducted from their paycheck to pay for this cost.
3. Deferred Compensation
Deferred compensation contributions provided to all employees of a classification with or without requiring the employee to make a contribution is reported.
4. Insurances
The employer paid premiums for an employee with family coverage was reported. The employer paid insurances included:
Cafeteria/Flexible Benefit Plan
Medical
Dental
Vision
Other
5. Leaves
Other than sick leave, which is usage-based, the number of hours off for which the employer is obligated. All hours have been translated into direct salary costs. Vacation: The number of paid time off (or vacation) hours available to all employees who have completed five years of employment.
Holidays: The number of holiday hours (including floating hours) available to employees.
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7 Administrative: Administrative (or management) leave is normally the number of paid leave hours available to Fair Labor Standards Act (“FLSA”) Exempt and/or management to reward for extraordinary effort (in lieu of overtime). This leave category may also include personal leave which may be available to augment vacation or other time off.
All of the benefit elements are negotiated benefits provided to all employees in the classification. As such, they represent an ongoing cost for which an agency must budget. Other benefit costs, such as sick leave, tuition reimbursement, and reimbursable mileage are usage-based and cannot be quantified on an individual employee basis.
6. Administrative Time
This benefit is currently available to full-time employees. The City pays full-time employees assigned to a 4/10 schedule, 45 minutes (.75) of Administrative Time each workday for a total of three (3) hours per 40-hour work period. This constitutes 7.5% of time paid but not worked.
Full-time employees assigned to a 5/40 schedule are paid 30 minutes (0.50) of Administrative Time each workday for a total of 2.5 hours per 40-hour work period. This constitutes 6.25% of time paid but not worked
The calculated amount we used to represent this benefit in our total compensation calculation is 6.25% of salary because the majority of affected employees work a 5/40 schedule.
Additional Benefits
Additional Benefits collected are as follows and were provided to the City as a separate document. The value of these benefits are not included in the Total Compensation data. Retiree Health Insurance (level of benefit and what the agency pays in terms of premium and policy vesting)
Sick Leave (accrual and any limit on accruals, Buy Back or Cash Out during employment, Cash Out at employment separation)
Part-Time Employee Benefits (this could include employer contribution to Deferred Compensation, Vacation Leave, Health Insurance contributions, etc.) Data Collection
Data was collected during the months of April through June 2022, through comparator agency websites, conversations with human resources, accounting, and/or finance personnel, and careful review of agency documentation such as classification descriptions, memoranda of understanding, organization charts, and other documents.
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8 Matching Methodology
K&A believes that the data collection step is the most critical for maintaining the overall credibility of any study and relied on the City’s classification descriptions as the foundation for comparison.
When K&A researches and collects data from the comparator agencies to identify possible matches for each of the benchmark classifications, there is an assumption that comparable matches may not be made that are 100% equivalent to the classifications at the City. Therefore, K&A does not match based upon job titles, which can often be misleading, but rather analyze class descriptions before a comparable match is determined.
K&A’s methodology is to analyze each class description and the whole position by evaluating factors such as:
Definition and typical job functions;
Distinguishing characteristics;
Level within a class series (i.e., entry, experienced, journey, specialist, lead, etc.); Reporting relationship structure (for example, manages through lower-level staff); Education and experience requirements;
Knowledge, abilities, and skills required to perform the work; The scope and complexity of the work;
Independence of action/responsibility;
The authority delegated to make decisions and take action; The responsibility for the work of others, program administration, and for budget dollars; Problem solving/ingenuity;
Contacts with others (both inside and outside of the organization); Consequences of action and decisions; and
Working conditions.
In order for a match to be included, K&A requires that a classification’s “likeness” be at approximately 70% of the matched classification.
When an appropriate match is not identified for one classification, K&A often uses “hybrids” which can be functional or represent a span in scope of responsibility. A functional hybrid means that the job of one classification at the City is performed by two or more classifications at a comparator agency. A “hybrid” representing a span in scope means that the comparator agency has one class that is “bigger” in scope and responsibility and one class that is “smaller,” where the City’s class falls in the middle.
If an appropriate match could not be found, then no match was reported as a non-comparable (N/C).
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9 Data Spreadsheets
For each benchmark classification, there are three information pages:
Top Monthly Base Salary and Total Compensation Data (2 sheets per benchmark) o One sheet is sorted by top monthly
o One sheet is sorted by total monthly
Benefit Detail (Monthly Equivalent Values)
The average (mean) and median (midpoint) of the comparator agencies are reported on the top monthly salary and total compensation data spreadsheets. The % above or below that the City is compared to the average and median is also reported.
The mean is the sum of the comparator agencies’ salaries/total compensation divided by the number of matches. The median is the midpoint of all data with 50% of data points below and 50% of data points above.
In order to calculate the mean and median, K&A requires that there be a minimum of four (4) comparator agencies with matching classifications to the benchmark classification. The reason for requiring a minimum of four matches is so that no one classification has undue influence on the calculations. Sufficient data was collected from the comparator agencies for 72 of the 78 benchmark classifications.
When using survey data to make salary range recommendations and adjustments, K&A recommends using the median, rather than the mean, because the median is not skewed by extremely high or low salary values.
MARKET COMPENSATION FINDINGS
The following table represents a summary of the market top monthly (base) salary and total compensation (base salary plus benefits [retirement, insurance, and leaves]) findings. For each benchmark classification, the number of matches (agencies with a comparable position) and percent above or below the top monthly salary market median and total compensation market median is listed. The table is sorted by top monthly salary in descending order from the most positive percentile (above market) to the most negative (below market).
Table 3. Market Compensation Results Summary
Classification Title # of
Matches
Top Monthly %
Above or Below
Total
Compensation %
Above or Below
Lifeguard 15 18.1% N/A
Accounting Technician II 15 16.5% 20.1%
Locker Attendant 5 16.0% N/A
Cashier 8 15.5% N/A
Library Page 8 13.7% N/A
Cable TV Coordinator 7 13.6% 17.9%
Custodian 10 13.0% 16.2%
Class Instructor - Dance 5 13.0% N/A
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10 Classification Title # of
Matches
Top Monthly %
Above or Below
Total
Compensation %
Above or Below
Facility Maintenance Specialist 12 10.0% 14.1%
Class Instructor - Arts and Crafts 6 9.8% N/A
Office Specialist II 13 8.8% 15.8%
Graphics and Printing Specialist 6 8.4% 17.4%
Day Camp and Kids Club Specialist 10 7.4% N/A
Purchasing Specialist 8 7.2% 14.4%
Bus Operator II 7 6.7% 13.6%
Transit Dispatcher 4 6.4% 15.1%
Permit Technician 14 5.6% 8.6%
Transit Supervisor 7 5.5% 14.5%
Public Information Officer 10 5.4% 12.1%
Park Maintenance Worker 15 5.2% 13.5%
Transit Analyst 7 5.2% 14.0%
Community Services Officer 11 5.1% N/A
Payroll Specialist 14 5.0% 16.4%
Senior Management Analyst 13 4.9% 11.0%
Producer/Editor 5 4.8% 14.8%
Administrative Assistant 15 4.5% 15.2%
Media Specialist 7 4.0% 13.1%
Associate Planner 15 3.8% 12.4%
Reprographics Technician II 5 3.4% 9.0%
Animal Control Officer 5 3.0% 7.1%
Recreation Leader 15 2.4% N/A
Street and Tree Maintenance Supervisor 13 1.6% 8.0%
Children's Librarian 9 1.4% 9.6%
Librarian 9 1.4% 7.4%
Park Maintenance Supervisor 14 1.3% 8.2%
Accountant II 14 1.1% 11.1%
Sports Supervisor 8 0.9% 4.8%
Code Enforcement Officer II 13 0.6% N/A
Library Technical Services Supervisor 4 0.6% 12.0%
Recreation Coordinator 14 0.4% 7.4%
Deputy City Clerk 13 0.2% 9.1%
Fleet Mechanic 13 0.1% 11.0%
Code Enforcement Supervisor 6 -1.2% 9.0%
Arts and Crafts Supervisor 13 -1.2% 7.0%
Fleet Maintenance Manager 10 -1.4% 7.2%
Facility Maintenance Supervisor 14 -1.4% 5.5%
Library Circulation Supervisor 8 -1.5% 7.9%
Aquatics Program Manager 11 -1.8% 9.1%
Recreation Program Supervisor 15 -2.1% 7.2%
Aquatics Facility Maintenance Specialist 5 -3.0% 4.7%
Environmental Coordinator 4 -3.3% 4.5%
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11 Classification Title # of
Matches
Top Monthly %
Above or Below
Total
Compensation %
Above or Below
Recreation Center Supervisor 14 -3.6% 5.5%
Associate Civil Engineer 12 -4.8% 4.6%
City Planner 13 -4.8% 3.1%
Senior Human Resources Analyst 10 -6.0% 3.6%
Purchasing Manager 7 -8.5% 2.1%
Library Assistant 9 -9.1% N/A
Facility CIP Project Manager 9 -10.2% -1.4%
Accounting Supervisor 11 -10.4% 4.2%
Information Technology Specialist 11 -11.3% -1.5%
Employee and Labor Relations Manager 12 -11.9% -4.8%
Public Safety Manager 5 -12.7% -0.8%
Transit Parts Assistant 9 -18.8% 0.2%
Transit Equipment Service Worker 9 -19.6% N/A
Painter 6 -20.1% -5.7%
Information Technology Supervisor 6 -33.7% -21.1%
Branch Library Supervisor 6 -34.3% -19.3%
Camp Cook 1 Insufficient Data Insufficient Data
Camp Counselor 3 Insufficient Data Insufficient Data
Food Services Supervisor 1 Insufficient Data Insufficient Data Head Swim Coach 0 Insufficient Data Insufficient Data
Literacy Program Manager 1 Insufficient Data Insufficient Data Travel Sports Coordinator 2 Insufficient Data Insufficient Data Maintenance Worker II 15 Proposed Class Proposed Class
Public Works Superintendent 12 Proposed Class Proposed Class Recreation Program Manager 14 Proposed Class Proposed Class Special Events Specialist 7 Proposed Class Proposed Class Street Maintenance Worker 14 Proposed Class Proposed Class Base Salary
Base salary market results show that 25 classifications are paid below the market median and 42 classifications are paid above the market median.
# of Classifications <5% 5-10% 10-15% 15-20% 20-25% 25-30% 30-35% Total Below the Market
Median
12 3 5 2 1 0 2 25
Above the Market
Median
19 14 5 4 0 0 0 42
Five proposed classifications were surveyed and therefore, no comparison to the market could be established. Finally, six classifications resulted in insufficient market data (i.e., fewer than four matches).
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12 Total Compensation
Total compensation market results show that six classifications are paid below the market median and 48 classifications are paid above the market median. # of Classifications <5% 5-10% 10-15% 15-20% 20-25% 25-30% 30%+ Total Below the Market
Median
3 1 0 1 1 0 0 6
Above the Market
Median
9 17 14 8 0 0 0 48
Generally, a classification falling within 5% of the median is considered to be competitive in the labor market for salary survey purposes because of the differences in compensation policy, actual scope of work, and position requirements. However, the City can adopt a different standard.
Overall, the differences between market base salaries and total compensation indicate that the City’s benefits package puts the City at a more competitive advantage. Further analysis indicates that, on average, classifications are 1.4% above the market median for base salaries, while that figure changes to 8.6% above the market median for total compensation, which is a 7.2% difference (i.e., the City “gains” a 7.2% competitive advantage when taking benefits into consideration).
Benefits
The market benefits data reveals the major contributing factors that give the City a competitive advantage are the City’s contribution to and participation in Social Security, Deferred Compensation and providing the Administrative Time benefit. No other agency provides the Administrative Time benefit.
Retirement:
• Pension formula: the City’s classic PERS plan is 2% at age 55; seven of the comparators also provide that plan; five comparators offer a plan of 2% at 60 or less (such as a County retirement plan); three comparators offer a plan of 2.5% at 55 or higher. • Only one comparator pays a portion of the employee's contribution to the retirement plan. • The City offers Single Highest Year as part of its classic PERS plan; as do nine of the comparators.
• Only two comparators participate in Social Security in addition to a public pension plan such as PERS.
• The City requires employee cost-sharing towards the employer’s retirement cost at the rate of 10.5%. There was one other agency that required cost sharing, the City of Pasadena.
Depending on the bargaining unit, employees are required to pay 1% to 8% in cost sharing.
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13 Deferred Compensation:
• Five comparators contribute to a deferred compensation plan, as follows:
Table 4. Social Security and Deferred Compensation
Agency
Participates
in Social
Security
Employer Contribution to Deferred Compensation
City of Commerce Yes Up to 3% of base salary
City of Bell Gardens No N/A
City of Carson No Depending on bargaining unit, matching amounts range from $500-$2400/year
City of Cerritos No N/A
City of Downey No N/A
City of Lakewood No N/A
City of Los Angeles No N/A
City of Montebello Yes N/A
City of Norwalk No N/A
City of Pasadena No N/A
City of Pico Rivera No N/A
City of Santa Fe Springs No Matching amount up to 3% of base salary City of Santa Monica No Depending on bargaining unit, matching amounts range from $50 to 3.75%/month
City of Torrance Yes Depending on bargaining unit, matching amounts range from $33.33 to 0.5%/month
City of Whittier No N/A
County of Los Angeles No Matching amount up to 4% of base salary Health Insurance. Market data indicates that the average monthly employer contribution toward health insurance premiums (Medical, Dental, and Vision, if applicable) for employees is $1,925 per month, excluding the City. The City’s current 2022 contribution of $2,511 is $586 more than, or approximately 30.5% above the market average. Table 5 below summarizes all agency health insurance contributions.
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14 Table 5. Monthly Employer Health Insurance Contributions Agency Bargaining Unit
Monthly Health
Insurance
Contribution
(rounded)
City of Norwalk Management $2,560
City of Santa Monica All Full-Time Employees $2,521
City of Commerce All Full-Time Employees $2,511
County of Los Angeles Units 411, 412 $2,334
City of Cerritos All Full-Time Employees $2,245
County of Los Angeles Units 111, 112, 121, 122, 201, 431, 432, 501, 511, 512, 811
$2,292
County of Los Angeles Unit 2 $2,235
City of Whittier WCEA $2,133
City of Whittier Middle Management, Supervisory Management $2,131 City of Pasadena All Full-Time Employees $2,006
City of Downey DPSAA $1,947
City of Downey DCEA-Maintenance $1,936
Average Monthly Agency Health Insurance Contribution $1,925 (30.5%) City of Downey Confidential-Exempt, DCEA-Miscellaneous, MidManagement$1,924 City of Bell Gardens All Full-Time Employees $1,918
City of Santa Fe Springs All Full-Time Employees $1,913 City of Los Angeles All Full-Time Employees $1,899
City of Pico Rivera All Full-Time Employees $1,818
City of Norwalk NCEA $1,710
City of Carson All Full-Time Employees $1,681
City of Torrance All Full-Time Employees $1,551
City of Lakewood All Full-Time Employees $1,309
County of Los Angeles Units 995, 996, 999 $1,200
City of Montebello All Full-Time Employees $1,090
INTERNAL SALARY RELATIONSHIPS
Building from the salary levels established for identified benchmark classes, internal salary relationships were developed and consistently applied in order to develop specific salary recommendations for all non-benchmarked classifications.
In the future, the City may need to utilize internal alignment practices if the number of staff grows and additional classifications are added or classifications change. While analyzing internal relationships, the same factors analyzed when comparing the City’s classifications to the labor market are used when making internal salary alignment recommendations.
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15 In addition, the following are standard human resources practices that are commonly applied when making salary recommendations based upon internal relationships:
A salary within 5% of the market average or median is considered to be competitive in the labor market for salary survey purposes because of the differences in compensation policy and actual scope of the position and its requirements. However, the City can adopt a closer standard.
Certain internal percentages are often applied. Those that are the most common are:
• The differential between a trainee and experienced (or journey) class in a series (I/II or Trainee/Experienced) is generally 10% to 15%;
• A lead or advanced journey-level (III or Senior-level) class is generally placed 10% to 15% above the journey-level.
• A full supervisory class is normally placed at least 10% to 25% above the highest level supervised, depending upon the breadth and scope of supervision. When a market or internal equity adjustment is granted to one class in a series, the other classes in the series are also adjusted accordingly to maintain internal equity.
Internal equity between certain levels of classifications is a fundamental factor to be considered when making salary decisions. When conducting a market compensation survey, results can often show that certain classifications that are aligned with each other are not the same in the outside labor market. However, as an organization, careful consideration should be given to these alignments because they represent the internal value of classifications within job families, as well as across the organization.
For the purposes of this study, K&A utilized market data to develop the salary recommendations for all of the benchmarked classifications and used internal equity principles to make the salary recommendations for 66 classifications that were not benchmarked. For the non-benchmarked classifications, internal alignments with other classifications will need to be considered, either in the same class series or those classifications that have similar scope of work, level of responsibility, and “worth” to the City. Where it is difficult to ascertain internal relationships due to unique qualifications and responsibilities, reliance can be placed on past internal relationships.
It is important for City management to carefully review these internal relationships and determine if they are still appropriate given the current market data.
It is also important to analyze market data and internal relationships within class series as well as across the organization, and make adjustments to salary range placements, as necessary, based on the needs of the organization.
The City may want to make internal equity adjustments or alignments, as it implements the compensation strategy. This market survey is only a tool to be used by the City to determine market indexing and salary determination.
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16 RECOMMENDATIONS
Pay Philosophy
The City has many options regarding what type of compensation plan it wants to implement. This decision will be based on what the City’s pay philosophy is, at which level it desires to pay its employees compared to the market, whether it is going to consider additional alternative compensation programs, and how great the competition is with other agencies over recruitment of a highly qualified workforce.
Proposed Salary Structure
Currently, the City has a salary structure with ranges that vary from one another and include half ranges. Each salary range has 5 steps with percentages that vary between each step. It is recommended that the City adopt a 5 step Salary Structure where the differential between each range is 2.5% and 5% between each step in the 5-step range. Appendix III contains the proposed salary range structure.
It is important to note that the salary range structure connects all salary ranges, and their steps, by formula, thereby allowing for COLAs to be applied to only one-dollar figure in the table/matrix, which then automatically updates the entire table. Due to the formula that connects each range to the next (with 2.5% differentials between each range), there is a compounding effect when drawing relationships that span several ranges. For example, with 2.5% differentials between ranges, four ranges should represent a 10% differential. However, because the compounding effect of 2.5%, on top of 2.5%, on top of 2.5%, and so on, the differential between Range 1 and Range 5 is not exactly 10%, but it is slightly greater.
Proposed Salary Range Placements
Appendix IV illustrates the proposed salary range placement for each classification based on the market data as well as the internal relationship analysis. The recommendations are based on base salary market results. The following calculation was used:
1. Multiplied the City’s current top monthly salary by the percentage difference between the City’s base salary market median to calculate the Market Placement Salary.
2. The classification was then placed within the proposed salary range with a Step 5 salary closest to the Market Placement Salary.
K&A also modified the current internal alignment in certain instances where it seemed warranted based on market-supported groupings and/or compaction issues.
For all classifications, this primary implementation procedure must be completed only at the initial time of implementation. In the future, if the City decides to implement annual across-theboard cost of living adjustment increases, only the salary schedule that was developed and included herein needs to be increased by the appropriate percentage, and each individual salary range will move up with this adjustment. This will ensure that the internal salary relationships are preserved and the salary schedule remains structured and easily administered.
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17 Options for Implementation
While the City may be interested in bringing all salaries to the market median, in most cases this goal may not be reached with a single adjustment. In this case, one option is to move employees into the salary range that is recommended for each class based on this market study and to the step within the new range that is closest to their current compensation. If employees’ current salaries are significantly below market so that their current compensation falls below the bottom of the newly recommended range, then larger adjustments would be needed to move those employees at least to the bottom of the new salary range.
Another option is to use a phased implementation approach. Normally, if the compensation implementation program must be carried over months or years, the classes that are farthest from the market median should receive the greatest equity increase (separate from any cost-of-living increase). If a class falls within 5% of the market median, it would be logical to make no equity adjustment in the first round of changes. However, if a class is more than 5% (or in this case, more than 20%) below the market median, a higher percentage change may be initially warranted to reduce the disparity.
For example, if the City decided to implement the recommendations over a three-year period, then the following guidelines could be applied for the initial increase of the three-year implementation plan:
Table 6. Three-Year Implementation Proposal
Market Disparity % Increase
0 to 4.99% 0 to 2.49%
5.0% to 9.99% 2.5% to 4.99%
10.0% to 14.99% 5.0% to 7.49%
15.0% to 19.99% 7.5% to 9.99%
20.0% and above 10.0%
The initial first year adjustment would provide a portion of the equity increase and place the class into the closest step (but not below) where they are now. Subsequent increases would be spaced on a similar schedule (at annual intervals) based upon the remaining disparity after each adjustment.
Please note that typically, for those classes that had a market disparity of 0 to 4.99%, we recommend a 0% increase in the first year and an adjustment in the second year. Depending upon the City’sfinancial situation, which will have to be reviewed before each further adjustment is made, all market disparity adjustments are intended to be completed by the third year. The City may also consider a similar implementation plan over a longer period of time, like a five-year implementation plan.
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18 The City may spend additional time going through a process of deliberation and decision-making as to what compensation philosophy it should implement to attract, motivate, and retain a highquality workforce. However, the City may want to consider adjusting those classifications’ salaries that are currently below the market median as soon as possible, assuming that incumbents’ performance meets the City’s level of expectation.
When classifications are over market, K&A typically recommends Y-rating employees whose current pay exceeds the maximum of the recommended range until the market numbers “catch up” with their current salary. To Y-rate an employee means to keep the employee’s salary frozen and to provide no salary increases (including no cost-of-living adjustments) until the employee’s current salary is within the recommended salary range. This will result in no immediate loss of income but will delay any future increases until the incumbent’s salary is within the salary range.
Other options to “freezing” a classification’s salary in place until the market catches up are:
“Grandfathering” of salary ranges: This means that the salary range for the classification is adjusted down to what the market numbers are. However, current incumbents would continue being paid at the current rate of pay (which would put them outside of the new and adjusted salary range for the class) until they separate from employment with City.
Any new hires would be paid within the newly established salary range. Single-incumbent classes: If a class only has one incumbent, an option would be to wait until the person separates from employment with City and then adjust the salary range for the class according to the market.
Recent hires: Some employees who have recently been hired may still be at one of the lower steps within their current salary range. So, even if the top of their current salary range is above market, the incumbents are currently still paid below the market maximum because they are not at the top of their current salary range. In this case, an immediate salary range adjustment could be made to bring the salary range within the market. This would bring the affected incumbents either to the top of the market range or very close to it, but they would not technically be Y-rated or lose any pay.
Another option, of course, is to actually reduce salaries down to the market. However, from an employee relations perspective this may not be a viable option.
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19 USING THE MARKET DATA AS A TOOL
K&A would like to reiterate that this report and the findings are meant to be a tool for the City to create and implement an equitable compensation plan. Compensation strategies are designed to attract and retain excellent staff; however, financial realities and the City’s expectations may also come into play when determining appropriate compensation philosophies and strategies.
The collected data presented herein represents a market survey that will give the City an instrument to make future compensation decisions.
It has been a pleasure working with City on this critical project. Please do not hesitate to contact us if we can provide any additional information or clarification regarding this report.
Respectfully submitted by,
Koff & Associates
Georg Krammer
Managing Director, Compensation and Rewards Consulting
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Appendix I
Results Summary
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Appendix II
Market Compensation Findings
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Appendix III
Proposed Salary Range Schedule
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Appendix IV
Salary Range Placement Recommendations
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Appendix V
Additional Benefits