Municipal Compensation Package 1986

By NORMAN WALZER and SCOTT R. SWANSON*

Municipal Compensation 1986

The fact that two-thirds or more of municipal expenditures are personal services makes negotiating the municipal compensation package one of the most important tasks facing municipal officials each year. Salaries and employee benefits are compared with private employers in the city as well as with other municipalities of comparable size or location. Labor groups have ready access to information on contracts negotiated in neighboring communities and throughout Illinois. Municipal officials must be equally informed to conduct effective negotiations.

The process of negotiation, from the employee point of view involves identifying areas in which the city offering is less compared with other cities and stressing improvements in these areas. The city representatives must have a clear understanding of the costs of providing the proposed increases, especially for benefits with hidden costs.

The Illinois Municipal League Annual Compensation Survey provides detailed information on annual salaries and wages for selected employee positions as well as data on many employee benefits in 228 Illinois cities of 5,000 and larger. This article presents a summary of the costs of providing an "average" compensation package in municipalities larger than 10,000 responding to the survey. While the estimation of costs for a basic compensation package presented in this article is no substitute for a detailed comparison of a specific city's compensation package, the averages provided offer a general yardstick for cities to see how they compare with the average.

Money Wages
The average salaries for a select group of municipal employee classifications (Table 1) reveal increases between 2.1 percent for labor superintendents to 8.9 percent for accountants. The relative markets for each of these positions differ accounting for differences in the rate of increase in wages. Comparisons of changes in pay plan maximum can also be affected by differences in the cities responding to the compensation survey in 1985 and 1986. However, the sample size and the relatively small variations in the cities responding suggest that this is not likely to be a significant source of variation.

A general rule of thumb, based on the comparisons in Table 1, is that municipal salaries increased at 4 to 5 percent between 1985 and 1986. Since the Consumer Price Index increased by 1.1 percent during 1986, it is clear that most of the municipal employee classifications experienced real income increases during this period.

Employee Benefits
The municipal compensation package also includes a comprehensive program of benefits ranging from pensions to coffee breaks. The number of benefits is too large to itemize in detail and to determine the cost of each, but there are several groups which are important enough to list separately and estimate a cost.

Benefits fit conveniently into two broad types: those providing workers with time off and those providing security during periods of interrupted employment. Many of the benefits increase worker productivity so the city, as well as the worker, benefits from these programs. Each benefit, however, represents a cost to the city involved and this cost should be recognized during labor negotiations. Also, there are other benefits available in many cities but are not included in Table 2. These benefits should be examined as well. For comparison, the salary of an average municipal employee must be used. In this article, a building custodian earning a minimum salary of $14,646 and a maximum of $18,842 per year was used.

a. Time Off Benefits. Based on overall averages of cities reporting, many of the benefits have not changed markedly in number of days off or other measures. The costs to the city increase, however, because of the wage rates involved. When wages and salaries increase, the costs of providing the same types of benefits increase as well.

The cost of providing a two week vacation (10 working days) each year was $644 in 1985 but increased to $677 in 1986. Estimating the precise cost to the city for vacation time is complicated by the fact that replacement help is often of a temporary nature and paid much less than the person being replaced. Thus, on a payment basis, the cost to a city is less but the work performed by the replacement help may be less.

Paid holidays average 10 days per year at a cost of $677. The same logic used with vacations is true for holidays. The difference, of course, is that holiday time is not usually replaced with temporary help. Employees are expected to complete their tasks and may

March 1987 / Illinois Municipal Review / Page 17

Table 1
AVERAGE SALARIES BY POSITION
	1985 Averages		1986 Averages			PCT Change
Position	Min	Max	Min	Max	Max
Accountant	$21,317	$27,127	$22,938	$29,531	8.9%
Computer Operator	15,322	18,442	16,081	20,326	4.5
Bookkeeper/Clerk	14,773	17,927	15,459	18,908	5.5
Accounting Clerk	14,336	18,350	15,013	19,134	4.3
Secretary	13,972	18,100	14,513	19,061	5.3
Clerk Typist	12,347	16,026	13,137	16,822	5.0
Engineer	34,198	40,782	35,867	43,678	7.1
Labor Supt.	22,484	28,323	23,376	28,928	2.1
Equip. Operator	18,788	22,920	19,332	23,535	2.7
Laborer	16,006	20,529	16,615	20,999	2.3
Auto Mechanic	19,112	24,611	20,056	25,653	4.2
Electrical Worker	22,099	27,588	22,814	29,138	5.6
Building Custodian	14,646	18,842	15,580	19,619	4.1
Police Officer	20,324	26,830	20,833	27,908	4.0
Firefighter	20,097	26,011	20,769	27,185	4.5
Source: 1986 Annual Compensation Survey (Springfield, IL: Illinois Municipal League, 1986).

have to work harder during the rest of the week. However, there may be additional costs for those employees considered essential and who receive overtime for working on holidays.

Municipal employees receive an average of 12 days of sick leave per year. The cost of this time was $773 in 1985 and increased to $812 in 1986. Not all employees take the full sick leave and a portion may accumulate for several years to a maximum amount. Nevertheless, a city is liable for these days off and a benefit package including sick leave days has a cost of $812 to the city.

Coffee breaks also represent a cost to a city government even though workers may be more productive because of the break. Assuming 30 minutes per day for break, the cost to the city is $1,100 per year. Because the rationale for the break is that productivity declines with continued work effort without a break, the cost of the breaks has not been included in the total employee benefit package. Nevertheless, the cost of a benefit that might seem as insignificant as 30 minutes per day should be recognized.

b. Security Benefits. A second set of employee benefits is intended to provide income to employees and their families during periods of interrupted work

Table 2
EMPLOYEE BENEFITS
Benefit Category	1985	1986
Time-Off:
Vacation (two weeks)	$ 644	$ 677
Paid Holidays (10 days)	644	677
Sick Leave (12 days)	773	812
Breaks (30 min./day)*	1,047	1,100
Security:
Social Security & IMRF	2,316	2,489
	(13.83%)	(14.14%)
Hospitalization
Insurance	2,284	2,183
Life Insurance	84.56	91.16
Workers Compensation
(class 9410 @$5.45 per
$100)	700	959
Total Benefits:	7,446	7,888
Base Salary	16,745	17,600
Benefits as PCT of Salary	44.5%	44.8%
*not included in totals.
Source: 1986 Annual Compensation Survey, Springfield, IL: Illinois Municipal League, 1986).

Page 18 / Illinois Municipal Review / March 1987

schedules such as sickness or upon termination of work such as retirement or death. These benefits, by far, represent the largest costs in the benefit categories.

The retirement cost for a worker evaluated at the pay for building custodian in 1985 was $2,316 and had increased to $2,489 by 1986. The average combined rate for Social Security and IMBT reported in 1985 was 13.83 percent and 14.14 percent in 1986. Thus, in addition to the average wage increases, the rate also increased.

The average reported cost of hospitalization insurance decreased slightly between 1985 and 1986 but we are not sure whether this represents a statistical aberration or is the beginning of a trend. In any event, the reported average cost for hospitalization insurance was $2,183 in 1986.

The cost of life insurance provided to employees was $91.16 in 1986 which was 7.8 percent above the comparable value of $84.56 in 1985. The life insurance program can be of substantial value to higher income employees because it is not treated as income.

Worker's compensation has been a significant cost to municipalities for the past decade and appears to have increased substantially between 1985 and 1986. To estimate the cost to cities of providing this insurance, the manual rate for employee classification 9410 is applied to the average wage of the building custodian. There are many rates applied by insurance companies with adjustments based on experience and other factors. Each municipal classification may have a different rate with more dangerous jobs associated with higher costs for protection. Classification 9410 is for a general municipal employee.

In 1985, the manual rate for the municipal employee classification 9410 was $4.18 per $100 payroll. The comparable rate for 1986 (July) was $5.45 per $100 pay. The revised rate means workers compensation insurance for the building custodian, in this example, cost $959.

The total costs of the benefits shown in Table 2 in July 1986 were $7,888. There are other benefits to which municipal employees are entitled including educational reimbursement, uniform allowances and other activities. Some benefits are unique to particular municipal groups such as police officers, firefighters, or sanitation workers. Certainly the pension program provided to police officers and firefighters differ from the figures reported in Table 2.

The benefit package costing $7,888 compares with an additional base salary of $17,600 computed above. Combined, the cost of a building custodian is $25,488. The nonmonetary benefits continue to represent an increasing portion of the total compensation package. In 1985 benefits represented 44.5 percent of the total package and in 1986 had increased to 44.8 percent. Given the manner in which the benefits are computed and the fact that not all benefits are included, this percentage is a conservative estimate.

Summary
Paying a competitive wage to municipal employees is essential for attracting qualified municipal employees. Personnel officers must compete both with local industry and other municipalities for a pool of qualified applicants. The importance of personal services in the municipal expenditure package means that negotiating a labor contract is especially important.

Effectively negotiating a labor contract requires detailed information about the costs for various employee benefits. Costing the nonwage benefits is not easy and always requires a significant investment of time and effort. The method used in this article provides a general overview of the costs of benefits commonly provided by municipalities. While this method is no substitute for a complete analysis of the costs, it serves as a quick, but useful, comparison of the costs for a representative municipal compensation package. •

March 1987 / Illinois Municipal Review / Page 19