Survey Comparables

Survey Comparables & Proposal Costing Presented to NPELRA

March 29, 2004Bruce 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

Alternatives

• 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

structure(s)• Report results to participants

Selecting Benchmark Jobs

• Jobs should be matchable (Police Officer, Fire Fighter)

• Jobs should reflect large numbers of employees within the organization when possible

• 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 personnel

Participant Guidelines

• No less than 50% of the size of your organization

• No more than 200% of the size of your organization

• Organizations that serve similar populations (both in terms of size and community character)

• Organizations that have similar economic bases

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 match)

– 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 defended

– 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

structure• 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 basis

• 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

Benefits

• Determine which benefits are to be included in the total compensation mix. Typically, they will include:– 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

Benefits

• 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