Internal Proposal for Employee Incentives - PowerPoint by iix21392


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									              Survey Comparables

Survey Comparables & Proposal Costing
          Presented to NPELRA
             March 29, 2004
         Bruce G. Lawson, CCP
      Fox Lawson & Associates LLC
             (602) 840-1070
                     Market Position

•   Considerations in obtaining data
•   Alternative survey analysis methods
•   Sources of data
•   Conducting custom surveys
•   Survey data analysis
              Reasons for Obtaining Data

•   Pricing jobs
•   Trend analysis
•   Pay practices
•   Special Purposes

•   Purchased surveys
•   Participate in sponsored surveys
•   Custom third party surveys
•   Conduct your own custom survey
                      Decision Factors

•   Cost
•   Time
•   Reliability
•   Confidentiality
•   Availability
                    The Labor Market

•   Local
•   Regional
•   National
•   Industry
•   Function
•   Size
•   Varies by level/job type
                Conducting Surveys

• Select benchmark jobs
• Select organizations to be surveyed
  • Type
  • Size
  • Number
• Gather, review and verify information
• Analyze data and build model
• Report results to participants
                Selecting Benchmark Jobs

• Jobs should be matchable (Police Officer, Fire
• Jobs should reflect large numbers of
  employees within the organization when
• Jobs should reflect a cross section of
  occupational groups or job families
• Jobs should cover all hierarchical levels within
  the the group of jobs under study
• Job should be clearly defined
                  Collecting Benchmark Data

• Data collection instrument should contain
  benchmark summaries for participants to
  reference in matching their positions to
  benchmark jobs
• Summaries should contain pertinent
  information and be concise
  –   Level of job
  –   Title of who the job reports to
  –   Title(s) of who the job supervises, if applicable
  –   One sentence duty statements reflecting job content
  –   Education and experience requirements
                How Many Surveys
• Purpose of the survey
  • Determine structural pay practice
  • Price specific jobs/functions
• Organizational culture
  • Market competitiveness
  • Internal relationships
• Type of jobs
  • Benchmark or non-benchmark
• Reliability of data
                 Survey Participants

• Organizations that compete with your
  organization for employees (recruit from,
  lose to, or directly compete for the same
  talent pool)
• Employers that reflect the general labor
  market(s) in which you compete for
               Participant Guidelines

• No less than 50% of the size of your
• No more than 200% of the size of your
• Organizations that serve similar
  populations (both in terms of size and
  community character)
• Organizations that have similar economic
                Survey Participation

• Number of participants will depend on
  the number of labor markets and the
  number of jobs being surveyed
• Who are your competitors
• Consideration should be given to
  number of potential non-respondents
• Expect 50-70% participation rate
                 Survey Participation

• Minimum of 10 participants, although all
  jobs may not have 10 data points
• Under recent legal developments of
  Sherman Antitrust Act, at least 5 matches
  per benchmark are required for
  sufficient data to draw conclusions
• Survey output should be aggregated
  rather than showing individual
  organization data
                      Review of Data
• Review job match information
   – guidelines for matching job content is
     70% (variation in duties will always exist,
     but if 70% or more of the job content is
     similar, the match is considered a good
   – two different titles should not be
     matched to one benchmark job, this
     produces unreliable results
                       Review of Data
• Review job match information (cont‟d)
   – some practice applying a job-specific
     “adjustment” factor to increase or decrease
     market data based on perceived degree of
     match -- this should be used with discretion
     as it is subjective and cannot be factually
   – data can be “weighted” by organization if it
     is felt that the match is significantly better
     from one source than another
                        Review of Data
• Follow-up with participants on questionable
  matches or data, ask for their job description
• Look at titles, number of incumbents in job
  and salary rates reported for reasonableness
• Perform statistical analysis to determine „red
  flags‟ in data reported (outlier analysis, t-test)
                       Analysis of Data
• Statistical measures
  • Average (unweighted or weighted)
  • Place in market
  • Percentile (25th, 50th, 75th)
• Updating or trending data to current timeline
• Adjustments for geographic differences
• Your position versus the market
  • Job to job
  • Jobs by grade (Internal Equity)
   • Structure to structure
• • Overall trend comparison
                     Analysis of Data

• Regression Analysis
  • Line of best fit by job family or whole
  • Predicts market pay rate corresponding
     to job evaluation level
  • Produces two values which are utilized
     in equation to calculate predicted pay
     rate, given a job evaluation rating
                      Analysis of Data

• Regression Analysis
  • By plugging-in any job evaluation
     rating into the equation, the predicted
     pay for that level can be determined
  • Pay rate = (job evaluation rating times the
     x-coefficient value) + constant value
  • This predicted pay rate then becomes the
     anchor-point for new salary structure
     (i.e., midpoint of structure)
                  Valuing the Package

• Determine elements of total compensation
  • Base pay
  • Variable pay
  • Benefits
                         Base Pay

• The results of the compensation survey will
  generally provide a baseline amount or
  percentage that you are off the market.
• Determine whether you are making offer based
  on average off the market or on a job by job
• Cost base pay adjustment by applying to
  current employee population data file
                        Variable Pay

• Determine what is included in the variable pay
  component of the contract including:
  - Skill based pay
  - Educational incentives
  - Shift differentials
  - Labor market premiums
  - Performance pay
  - Bonuses
  - Longevity
                        Variable Pay

• Cost out any anticipated increases in the
  variable pay components
• Total the costs for variable pay
• Calculate a percentage of total payroll based
  on the total dollars being spent

• Determine which benefits are to be included in
  the total compensation mix. Typically, they will
  – Pay for time not worked (vacation, sick leave,
    holidays, bereavement leave, jury duty)
  – Insured benefits (medical, dental, life, disability)
  – Employer paid retirement contributions
  – Legally required payments (Social Security)
  – Other cash payments available to all employees

• For insured benefits, total the premiums paid for all
  coverages and calculate a percentage of payroll for
  these benefits
• Pay for time not worked is more difficult
• Total the number of days available to all employees
  and multiply that by the hourly rate of the applicable
  employee (this can be a significant effort if you have a
  large number of employees)
• Add the amounts for all employees together to
  determine a total cost. Divide total by total payroll to
  calculate a percentage of payroll.
                    Determine Offer Value

• Total the dollar amounts for each of the three
  components (base pay, variable pay, and benefits)
• Divide that total by total payroll
• The result is the percentage cost

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