CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Approve the recommended pay structure for the City’s non-union positions (Item 1 of 2)
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DEPARTMENT: Human Resources
SUBMITTED BY: Helga Oles, Director of Human Resources
BOARD/COMMISSION REVIEW:
N/A
BACKGROUND:
The City maintains a pay schedule of position classifications and pay ranges for non-union employees. The pay ranges are established based on ranges for other position classes, requisite qualifications, and general rates of pay for comparable work in other public and private organizations in the area. The City’s schedule for pay ranges includes a Minimum, Midpoint and Maximum salary.
As part of the strategy to address the organization’s workforce related to recruitment and retention, staff was tasked with completing a comprehensive Classification and Compensation Study of all non-union, permanent positions. The goal was to identify an appropriate pay structure and placement of positions within that structure as compared to, and equitable with, equivalent municipal, public sector, and private sector employers both locally and nationally.
In October of 2023, the Human Resources department issued an RFP to hire a qualified consultant to conduct this study and make recommendations on the City’s non-union classification system and pay structure. McGrath Human Resources Group (“Consultant”) was awarded the contract with a term which began in March of 2024.
Anticipating that the Consultant would make recommendations for salary adjustments, staff requested, and the City Council approved, $500,000 in the annual budget for 2025. This amount is sufficient to implement the recommended pay structure outlined below which is Phase 1 of this initiative.
DISCUSSION:
Methodology:
The project involved the following three steps:
1. Data collection
2. Interviews
3. Data analysis
The first step of the study involved gathering data that pertains to current compensation practices and non-union pay structure within the City. (Exhibit I)
The Consultant received information relating to current salaries, specific policies, and current job descriptions.
Interviews were conducted with the City Manager, Deputy City Manager, Human Resources Director, Human Resource Manager, department directors, and other management personnel within each department.
The purpose of these meetings was to gain an understanding of the City’s current compensation practices and philosophy, to solicit ideas and input from department leaders for future compensation methodologies and practices, and to determine if there were any positions within the City that were difficult to recruit, retain, or had unique responsibilities.
Employees from each job classification were then asked to complete a questionnaire which provided extensive information about the position. After the questionnaires were reviewed by department supervisors and directors, the Consultant utilized the questionnaires to better understand job responsibilities, skills, and various competencies of each position.
Labor Market:
Information from the external market was critical to the project so a list of comparable organizations was established. Each of the comparable organizations was contacted requesting current salary schedules and incumbent data. The 26 comparable organizations included:
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Arlington Heights |
Elgin |
North Aurora |
DuPage County |
Naperville Park District |
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Aurora |
Elk Grove Village |
Rockford |
Lake County |
Fox Valley Park District |
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Batavia |
Evanston |
Schaumburg |
Will County |
School District 203 and 204 |
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Bolingbrook |
Joliet |
St Charles |
DuPage County Forest Preserve District |
Oswego Fire District |
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Downers Grove |
Libertyville |
Winnetka |
MWRD of Greater Chicago |
Fox Metro Water Reclamation District |
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Fox River Water Reclamation District |
The collection of this compensation data was used to analyze the average market Minimum, Midpoint, and Maximum rates per the defined benchmark positions. A comparison of the average salary of the positions to the salary of incumbents within the City was also performed. When necessary, an evaluation of the comparable organization’s job description was used to resolve conflicts. In some cases, titles were altered to better align with the industry or specific responsibilities.
The market survey gathered Minimum, Midpoint, and Maximum salary for the positions as well as the average salary of the incumbents. Upon examination, salaries were eliminated if statistically too high or too low as to not skew the average (typically within one or two standard deviations). Then, a new percentage was calculated with the remaining salaries. A great deal of time was spent on the data analysis to ensure that each position was examined based on the data available and how the responsibilities of each position align within the City.
Data Analysis:
In order to analyze salaries, a Compa ratio was used. This is a ratio of the City’s salary in relation to the external market data. A 50% Compa ratio would mean that the salary is in line with the external market while utilizing +/-5% from each data point.
Minimum salary range
The analysis of the Minimum salary range gives the initial indication if starting salaries are within an acceptable market range. When building a pay structure, consideration of this information ensures the City’s Minimum salaries are within an acceptable range compared to the average market Minimum. This is the beginning of the development of a pay structure.
The Consultant found that approximately 79% of the benchmarked job titles in the City were below the average market for Minimums and are falling short of competitiveness. Overall, 21% of all positions in the City are within the acceptable average market Minimum.
Midpoint salary range
The Midpoint of the pay structure represents the average market rate. In analyzing the City’s Midpoint of the salary schedule, the Consultant found that 78% of the benchmark positions in the City have a lower Midpoint than the average market rate. Overall, there are 22% of positions in which the Midpoint is representative of the average market rate.
Maximum salary range
The Maximum of the current pay structure was compared to the average market Maximum. The current pay structure has 56% of the benchmark positions under the average market Maximum. There are positions within the current structure that have a lower earning capacity than market comparables. 44% of positions have a similar earning capacity and are in line with the average market Maximum.
Consultant finding
Overall, the Consultant found that the City’s pay structure was not in line with the average market rate.
Compensation Philosophy:
A compensation philosophy is an organization’s financial commitment to how it values its employees. The goal of this philosophy is to attract, retain, and motivate qualified people.
The Consultant recommended that, in order to be competitive in the current labor market, the City establish a compensation system that allows employees to reach the average market rate.
The Consultant summarized the following reasons that public employers are battling for their talent:
• 30%-40% of local government workers have been identified as eligible to retire, and there is a workforce gap.
• Long-term employment has less appeal for the younger workforce.
• There is a real or perceived decline in public support for government workers.
• Public employers struggle to compete with salaries and benefits as benefits erode and the private sector is more competitive.
• There is a growing skills gap. Many government jobs now require specialized education or training. Fewer positions are learned on the job.
• Public employers are not able to offer the same level of flexible work arrangements to all employees.
• Limitations in technologies prevent efficiency and automation.
• There are limited financial resources.
• Not all work cultures are satisfying and supportive.
• Public sector does not usually market themselves as a career industry.
The latest trend that has impacted human capital is inflation. Persistent inflation has pushed many in today’s workforce to live paycheck to paycheck, cut back on expenses, dip into their savings and stop contributing to their retirement accounts, etc. Offering competitive wages that keep up with the rising cost of living is crucial not only for retaining employees but also for ensuring their well-being, so employees do not feel they have to leave simply because they cannot afford to stay.
Recommendation:
The recommended pay structure continues to be a range system. The schedule is built from the average market Minimum and actual incumbent salary (which represents the position point). The range is 50% from Minimum to Maximum. (Exhibit II)
The salary range is divided into four quartiles. The Position Point is representative of the average market rate. The use of quartiles will assist Human Resources in providing guidance for hiring, as well as ensuring employees are progressing through the salary range.
Implementation:
To implement the recommended pay structure on July 1, 2025, employees currently below the Minimum of the new pay range will be placed at the Minimum. Employees above the Minimum will not receive an increase as they are already within the recommended salary range.
Maintenance:
Annual adjustments will keep the pay structure competitive.
Cost of Living Adjustment (COLA)
The structure will be adjusted annually by a COLA increase which will be determined by the lesser of 3% or the percentage increase in the Consumer Price Index for the 12-month period preceding May 1. This is consistent with COLA terms in the Municipal Code regarding the City Council.
The term "Consumer Price Index" refers to the Chicago-Naperville Area Consumer Price Index for all Urban Consumers for all items as published by the Bureau of Labor Statistics of the United States Department of Labor.
Employees within the new range should also receive the increase; thus, maintaining their place and not fall below the Market and out of alignment with the structure. The Consumer Price Index as of May 1 of each year will be used in budgeting for the following year’s pay structure adjustment and employee COLA increases. If the index is a negative number, then there will be no decrease in the schedule and salaries will remain the same as the previous fiscal year.
Merit
Annually, employees may also receive a merit increase based on performance. The City has a performance evaluation system and each year the City will identify the budget available to be attached to these ratings.
Market and In-Range Adjustments
The pay structure may be adjusted for economic reasons so as not to fall below the market and to remain competitive. The quartile system will allow Human Resources to conduct an analysis to see if employees are moving through the salary range, dependent on performance and time in position. In-range adjustments are not an expected increase and will only occur if it is shown the employee is not appropriately progressing through the range.
The City will annually budget dollars for any Market or in-range adjustments or for increases to the overall pay structure.
FISCAL IMPACT:
To implement the recommended pay structure as Phase 1 of the initiative, employees currently below the Minimum of the new pay range will be placed at the Minimum. Employees above the Minimum will not receive an increase as there is no cost to get the employee within the recommended salary range.
$500,000 was approved in the City’s 2025 Budget and is sufficient to implement the recommended pay structure.
Any future fiscal impacts will be included in the proposed annual budget.