MUNICIPAL COMPENSATION 1985
By NORMAN WALZER and PENNY S. SYMPSON*

Municipal officials in Illinois and nationwide annually negotiate with employees to obtain a mutually agreeable compensation package. The variety of employee benefits has expanded in recent years, and negotiating an acceptable compensation package currently represents a major task. In some cities a fully staffed personnel office is available to cost various proposals while in others, the task is carried out by part-time officials with relatively little background and training. Often private consultants are employed to compile basic information but some cities are unable to afford these services.

Because personal services represent as much as two-thirds of city expenditures, information about the cost of employee benefits and wages is critical for effective negotiations. Parts of a contract can be determined at relatively low cost but the costs of others are more difficult to compute and may represent significant costs in future years.

This article presents a brief profile of the costs for municipal wages and major employee benefits and provides insight into relative changes between 1984 and 1985. The information will not substitute for a careful and detailed costing of the benefit program in a specific city or contract but can offer assistance to those who have not conducted a detailed analysis in the past. Using the methodology employed in this article, municipal officials can incorporate information from the Annual Compensation Survey compiled by the Illinois Municipal League to obtain at least a rough estimate of personnel costs.

"Professor of Economics and research assistant, Western Illinois University. The authors thank the Illinois Municipal League for financial support of the Municipal Compensation Survey from which this article was prepared. However, any interpretations or errors belong solely to the authors.

A municipal compensation package contains two main elements: money wages and employee benefits. In recent years, benefits have become a relatively large portion of the total compensation package and determining the ultimate cost of these benefits is usually more difficult than determining the cost of money wages.

a. Money Wages. A comparison of average maximum salaries for selected municipal positions reveals pay increases ranging from 2.9 percent for electrical workers to 9.1 percent for labor superintendents (Table 1). In general, average salary increases of 5 to 7 percent seem most common. Comparisons in Table 1 are limited by the fact that not all cities reporting in 1984 also reported in 1985. Thus, the percentage changes may be affected by reporting differences. However, given the relatively large number of cities reporting in both years, these variations most likely do not seriously affect the final results.

The comparisons in Table 1 clearly indicate that municipal wages and salaries increased more rapidly than inflation between July 1984 and 1985. This is a common pattern. During periods of relatively low inflation, workers in both the private and public sectors gain in purchasing power but tend to lose during inflationary periods exceeding 8 or 9 percent. One might expect municipal employees to regain purchasing power lost during the early 1980s with the relatively high inflation rates.

b. Employee Benefits. There are numerous employee benefits provided by municipalities. Depending on tax rates and income levels, nonmonetary benefits

		TABLE 1
	AVERAGE SALARIES BY POSITION
	1984 Averages		1985 Averages
Position Accountant Computer Operator Bookkeeper/Clerk Accounting Clerk Secretary Clerk Typist Engineer Labor Supt. Equip. Operator Laborer Auto Mechanic Electrical Worker Building Custodian Police Officer Firefighter	Minimum $20,160 14,654 14,335 13,738 13,403 11,707 32,660 21,598 18,311 14,973 18,516 20,599 13,890 19,129 18,988	Maximum $25,273 18,141 16,910 17,002 17,471 15,145 38,532 25,972 22,125 19,215 23,230 26,800 17,684 25,482 24,729	Minimum $21,317 15,322 14,773 14,336 13,972 12,347 34,198 22,484 18,788 16,006 19,112 22,099 14,646 20,324 20,097	Maximum $27,127 19,442 17,927 18,350 18,100 16,026 40,782 28,323 22,920 20,529 24,611 27,588 18,842 26,830 26,011	% Change Maximum 7.3 7.1 6.0 7.9 3.6 5.8 5.4 9.1 3.5 6.8 5.9 2.9 6.5 5.3 5.2

Source: 1985 Municipal Compensation Survey (Springfield: Illinois Municipal League, 1985).

February 1986 / Illinois Municipal Review / Page 13

may be preferred by employees and may at first glance represent a lower cost. No attempt was made to itemize every possible benefit provided by Illinois cities but the more common types are presented in Table 2 with an estimated cost in 1984 and 1985.

Benefits conveniently fit into two main types: time-off and security benefits which protect workers or families in cases of illness or death. Not every benefit is designed solely to benefit workers. For example, work breaks can mean greater productivity when not abused. Nevertheless, they represent lost working time and their costs are shown in Table 2. The work breaks are not included in the total benefit costs.

a. Time-Off Benefits. Municipalities provide vacation periods based on length of service. Assuming a fairly common two-week vacation period, the average cost for a representative municipal worker, building custodian, is $644, an increase of 6.5 percent from 1984. Cities may not pay the same salary to replace a vacationing worker and may, in fact, use summer help at lower wages. However, the replacement worker does not have the same skill and experience and the city is losing work effort during the vacation period.

Municipalities provide an average of 10 paid holidays and the cost of these holidays at the salary paid to

TABLE 2

EMPLOYEE BENEFITS
Benefit	1984	1985
Time-off
Vacation (2 weeks) Paid Holidays (10 days) Sick Leave (12 days) Coffee Breaks (30 min/ 50 wks)	$607 $607 $729 $986*	$644 $644 $773 $1,047*
Security
Social Security & IMRF	$2,098**	$2,316
	(13.29%)	(13,83%)
Hospitalization	$2,153	$2,284
	(179.41/mo)	(190.32/mo)
Life Insurance	$81.70	$84.56
	(.56/$1000/ mo. with average policy of $11,718)	(.56/$1000/ mo. with average policy of $12,583)
Worker's Comp	$734	$700
(class 9410 @ $4.18/100)
Total Benefits	$7,010**	$7,446
Base Salary	$15,787	$16,745
Benefits as % of Salary	44.4%**	44.5%

building custodians was $644. Holidays represent a difficult benefit to cost because some employees such as refuse collectors who work on a fixed schedule may have to adjust to the holiday by doubling up during the remainder of the week. Alternatively, in other situations, overtime may be paid for employees needed during the holiday period. For simplicity, straight-time pay has been used in calculating holiday time but municipal officials computing the costs of benefits may wish to use other assumptions.

Municipalities provide an average of 12 days of sick leave. At the building custodian salary, the cost to the city is $773 per year. Certainly, not all employees take the full sick day allotment but the city is essentially exposed to this cost. When sick leave can be accumulated, it is entirely possible that in a particular year the cost incurred will be higher than represented in Table 2. Information on the number of sick days used by employees is not regularly collected as part of the compensation survey.

As mentioned above, the cost of coffee breaks has been computed but is not included in the total. It is interesting to note, however, that lost work time at the representative salary for two 15-minute coffee breaks per day is $1,047, well in excess of either vacation or sick leave benefits.

b. Security Benefits. The second main type of benefit protects employees and their families from income losses because of illness or injury and provides retirement income. Social security and Illinois Municipal Retirement Fund contributions, as a percent of salary, were up slightly from 13.29 percent to 13.83 percent of base salary. Estimated at the representative salary, the cost to municipalities was $2,316.

The cost for hospitalixation insurance increased from an average of $179.41 to $190.32 per month. This premium increase represents an annual cost increase from $2,153 to $2,284 for the average city. Costs of hospitalization have increased markedly in recent years and it is too early to determine the ultimate effect of the recent cost-containment programs.

The life insurance premium per $1,000 of insurance was .56 and the average policy increased from $11,718 to $12,583. Thus, the cost of insurance increased from $81.70 to $84.56 per employee.

Workers compensation has been a significant cost to municipalities for nearly a decade following the increase in benefits. The rate paid for workers compensation insurance varies with experience ratings and other factors. To estimate a cost for this presentation, the manual rate for a general municipal employee classification is included. It is interesting to find that the manual rates for code 9410 actually declined slightly. The

Page 14 / Illinois Municipal Review / February 1986

cost per $100 payroll in 1985 was $4.18 compared with $4.65 one year earlier. However, the rates charged to a municipality may differ because of other cost elements included. Based on the manual rate and representative salary, the cost to a municipality in 1985 was $700, not an insignificant amount.

The total cost of employee benefits in 1985, based on the above assumptions, was $7,446 compared with $7,010 in 1984. There is no question but this is an understatement of the cost for most cities because many other benefits are provided. Educational programs and uniform allowances are two which immediately come to mind. When compared with base salary, the employee benefits in 1985 were 44.5 percent contrasted with 44.4 percent in 1984.

Summary

Developing a municipal compensation package acceptable to employees but also affordable by a city is no easy task. The assignment is particularly complicated by the fact that employee representatives have access to compensation packages in both private and public organizations. Thus, they are often in a position to point out the limitations of the compensation package offered by a city. Municipal officials must have similar data to formulate proposals which the council can accept.

The methodology presented in this article in no way substitutes for a careful analysis of the costs of compensation packages proposed in a specific city. However, with the methodology in this article, local officials can quickly estimate the costs of major employee benefits proposed. Given the complicated and costly nature of municipal negotiations, efforts to accurately determine costs are needed and represent time well-spent. •

Page 15 / Illinois Municipal Review / Febuary 1986