1987 MUNICIPAL COMPENSATION PACKAGE

By NORMAN WALZER and POH C. PNG°

Municipal Compensation Package 1987

Negotiating a municipal compensation package is a major task faced by Illinois municipal officials as additional cities engage in collective bargaining each year. These negotiations place added demands on participants for information about compensation practices and the costs associated with proposals. Some cities can contract with private agencies specializing in personnel issues to estimate these costs. Other municipalities rely on secondary information for cost comparisons.

The Illinois Municipal League compiles and publishes an Annual Compensation Survey which provides detailed information about wages, salaries, and benefits for municipal employee classifications in municipalities larger than 5,000. The 1987 survey contains information on 229 municipalities. With this information, municipal officials can compare wage requests from their employees with those provided in other communities throughout Illinois. In addition to knowing the dollar wage for each employee classification, it is useful to know the costs of benefits for a "representative" employee.

This article presents a relatively simple and straightforward method for determining the cost of the municipal compensation package, based on average wages and benefits paid to municipal employees in Illinois in 1987. The information in this article does not replace a careful analysis of wage and benefit costs on a city by city basis but offers general guidance about trends in the compensation package.

Money Wages

A comparison of average salaries for selected municipal employee classifications in 1986 and 1987 shows that the increases ranged from 2.05 percent for electrical workers to 6.96 percent for computer operators.

Table 1. Average Salaries by Position
	1986 Averages		1987 Averages		%Chg.
Position	Min.	Max.	Min.	Max.	Max.
Computer Operator	$16,081	$20,326	$17.395	$21,741	6.96
Bookkeeper/clerk	15,459	18,908	16,579	19,789	4.66
Accounting Clerk	15,013	19,134	15,674	19,880	3.90
Secretary	14,513	19,061	15,243	19,890	4.35
Clerk Typist	13,137	16,822	13,712	17,817	5.91
Engineer	35,867	43,678	36,716	45,303	3.72
Labor Supt.	23,376	28,928	24,182	29,544	2.13
Equipment Operator	19,332	23,535	20,156	25,255	7.31
Laborer	16,615	20,999	17,902	21,924	4.40
Auto Mechanic	20,056	25,653	20,682	26,528	3.41
Electrical Worker	22,814	29,138	23,258	29,736	2.05
Building Custodian	15,580	19,619	°15,845	20,315	3.55
Police Officer	20,833	27,908	21,696	29,164	4.50
Firelighter	20,769	27,185	21,466	28,191	3.70
° There is a misprint for minimum salary of building custodians in the compensation survey.
Source: 1987 Annual Compensation Survey (Springfield, IL; Illinois Municipal League, 1987).

These percentages are only broad indications of wage changes because the same sample of cities did not respond to the survey in both 1986 and 1987. In addition, the salaries shown are averages of the pay plan minimum and maximum and are not exact salaries paid to employees. An average 4.33 percent increase (pay plan maximum) for municipal employees compared with a negligible increase in the Consumer Price Index in 1986-87 shows that municipal employees received a real wage increase.

In comparing wage increases, readers must recognize that the impact of wage increases on city finances depends on the percentage change and the number of employees on the city payroll. For instance, a smaller increase paid to police officers or firefighters has a greater effect on total personal service costs than a higher percentage increase paid to a small employee classification. The largest categories, police officers and firefighters, on average, had increases of 4.5 percent and 3.7 percent respectively.

° Professor and research associate, Department of Economics, Western Illinois University. The authors thank the Illinois Municipal League for financial assistance in data collection and tabulation. Any errors of fact or interpretation belong to the authors alone.

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Employee Benefits

Municipal employees receive non-monetary benefits in addition to money wages. The number of benefits is large and space does not permit a detailed listing of each type. Not all cities provide benefits in each category and many other benefits are not described below.

Table 2. EMPLOYEE BENEFITS
Benefit Category	1986	1987
Time off:
Vacation (2 weeks)	$    677	$    695
Paid Holidays (10 days)	677	695
Sick Leave (12 days)	812	834
Breaks (30 min./day)	1,100°	1,130°
Security:
Social Security and IMRF	2,489	2,513
Hospitalization Insurance	2,183	2,308
Life Insurance	91.16	110.17
Workers Compensation (Class	959	1088
9410 @ $6.02 per 4100)
Total Benefits	7,888	8,243
Base Salary	17,600	18,080
Benefits as Pet. of Salary	44.8%	45.49%
°Not included in totals

In recent years, employee benefits increased more quickly than money wages and increased as a share of the compensation package. Employee benefits can be conveniently divided into two basic types: those providing workers with time off and those providing security during periods of interrupted employment. Many benefits improve the productivity of workers and, thus, benefit the city immediately as well as employees. The benefits represent a cost to the city, however, and should be recognized in labor negotiations. In city analyses, benefits not shown in Table 2 should be included to determine the full cost of the compensation package.

Many benefits, particularly those representing time-off, are tied to salaries. Determining city costs requires a base salary. For present purposes, the salary of a building custodian earning an average maximum salary of $20,315 and a minimum of $15,845 in 1987 was used. The time off benefits are based on the average of the minimum and maximum or $18,080. Building custodians received an average increase of 3.55 percent.

  a. Time Off Benefits. Municipal employees vary in amount of vacation time received, but an average is two weeks or 10 working days. During vacations, municipal services are provided and vacation time is made up either by other employees working overtime or temporary replacement help. In some instances, it may be possible to postpone work activities or hire replacement help at lower cost. In this analysis, however, we assume that the cost of replacement is the same as the employee on vacation. Two weeks of an employee paid $18,080 costs the city $695, an increase from $677 in 1986.

Municipal employees also receive an average of 10

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paid holidays and the costs of providing holidays were calculated in the same manner as vacation time. A significant difference between holidays and vacations, however, is that because holidays do not occur in a continuous block, there may be less need to hire temporary help. Also, for services such as refuse collection which must be provided regularly, employees may have to reschedule their work plans to accommodate the time off. On holidays, some employees may receive overtime.

The sick leave benefits, on average, represent approximately 12 days per year. This time, if fully taken, represents an annual cost of $834 to the city. The full sick leave benefits are not always used, but the city is liable for this time should it be required.

Rest breaks are common in most work environments. The intent of rest breaks is to improve worker productivity so there should be an immediate benefit to an employer. Nevertheless, these breaks also represent a benefit to workers and should be considered a significant part of the compensation package. An average of 30 minutes per day represents "lost time" to the city amounting to $1,130. Because of the direct benefit in improved productivity, the cost of the rest breaks is not included in the total.

Based on the above calculations, the cost of time off benefits was $3,354 in 1987. The increases from 1986 occur mainly from increases in the average pay rate of the representative worker.

  b. Security Benefits. A second benefit group includes income to employees and families during work interruptions or death. Of the two groups, security benefits are the most costly. The average cost to cities of retirement benefits for the representative employee was $2,513 in 1987, an increase from $2,489. This represents a small increase, partly because of differences in the cities reporting in the two years. The average percentage IMRF and social security decreased slightly between the two years for the cities negotiating.

The cost of hospitalization insurance increased from $2,183 in 1986 to $2,308 in 1987. Some of these programs are tied to room rates and/or other services provided. In these instances, the costs are affected by medical practices and charges.

The reported life insurance contributions increased from $91.16 to $110.17 per year. While city payments represent a reasonable estimate of the costs to the city, the benefits may be greater to employees because of tax benefits.

The cost of workers compensation for a municipal employee is estimated using class 9410, which has a manual rate of $6.02 per $100 payroll. Wide variations exist among rates by employee classifications, and cities are not all charged the manual rate because of experience rating factors. The annual cost to the city at a rate of $6.02 per $100, however, is $1,088 for the representative employee.

The total annual cost of time off and security benefits in 1987 was $8,243, an increase from $7,888 in 1986. Compared with a base salary of $18,080, the nonwage benefits represent 45.6 percent. This is a slight increase from the 44.8 percent in 1986. One must remember that

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many other benefits such as education programs, clothing allowances, and personal days are provided but not included in this tabulation. The benefits vary with employee classification. Officials in each city must calculate the costs of the benefits provided. The point of this article is to illustrate the significance of the benefit categories. For instance, in the present analysis, the cost of employing a building custodian is not $18,080; rather it is $26,324, when the benefits described above are included, and these costs are conservative estimates.

Summary

Cities must be competitive in the labor market to attract high quality employees. Personnel officers must compete with local industries and with other public agencies for employees. Because personal services are the largest component of a municipal budget, negotiations are a critical part of municipal management and negotiators must have accurate and useful estimates of employee costs.

The limited comparisons in this article should not replace a careful detailed analysis of compensation costs in each city. Some cities hire consultants to undertake these analyses. Others conduct more limited analyses with existing staff. From the discussions above it should be clear that city officials who spend the time and effort needed to calculate these costs are much better prepared for the negotiation process. •

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