11. PRESENTATION OF CLASSIFICATION AND COMPENSATION STUDY

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1 SOUTHAMPTON COUNTY BOARD OF SUPERVISORS Regular Session i April 25, PRESENTATION OF CLASSIFICATION AND COMPENSATION STUDY As you recall, we contracted with Springsted, Inc. in late 2014 to prepare a new Compensation and Classification Study. Springsted is one of the largest and most established independent public sector advisory firms in the United States and has been providing organizational management and human resources assistance for more than a quarter century. The general objectives of this study were: 1. To review, update and/or create current position descriptions for all full-time positions; 2. To ensure all position descriptions are in full compliance with all applicable federal and state statutes and regulations; 3. To develop recommendations for a position classification system for proper internal equity, as dictated by the actual responsibilities of the position; 4. To develop compensation ranges for each position, which will provide for a competitive pay plan with other local government employers comparable to Southampton County; and 5. To provide the County with a new or updated classification manual that documents the classification methodology used in the study. While the work began in early 2015, it became apparent that it would not be complete in time for your consideration as part of the FY 2016 budget deliberations. Accordingly, at our request, Springsted deferred completion of the study so that it might be considered in FY Mr. Joel A. Davis, a Vice President who works out of their Richmond corporate office will be at Monday s meeting to present the study and their recommendations. As you re aware, the Initial Draft Budget for FY 2017 includes sufficient funding to begin phasing in Springsted s recommendations over a three-year period. MOTION REQUIRED: If the Board is so inclined, a motion is required to accept the Study, approve the Open Range salary schedule provided in Appendix C, approve the recommended salary schematics provided in Appendix D, approve the updated and/or new classification descriptions, and approve the plan to fund implementation of Option 3 over a three (3) year period.

2 Classification and Compensation Study Southampton County, Virginia April 2016

3 Table of Contents LETTER OF TRANSMITTAL 1 EXECUTIVE SUMMARY INTRODUCTION METHODOLOGY FINDINGS AND RECOMMENDATIONS IMPLEMENTING THE RECOMMENDED SALARY PLAN APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E APPENDIX F GLOSSARY SALARY SURVEY PROPOSED SALARY SCHEDULES LIST OF CLASS ASSIGNMENTS FRINGE BENEFITS CURRENT VS. PROPOSED TITLES Mission Statement Springsted provides high quality, independent financial and management advisory services to public and non-profit organizations, and works with them in the long-term process of building their communities on a fiscally sound and well-managed basis.

4 Springsted Incorporated 9097 Atlee Station Road, Suite 100 Mechanicsville, VA Tel: Fax: LETTER OF TRANSMITTAL April 25, 2016 The Honorable Dallas O. Jones, Chairman and Members of the Southampton County Board of Supervisors Administration Center Drive Courtland, Virginia Re: Classification and Compensation Study Dear Chairman Jones and Members of the Board: Springsted Incorporated is pleased to provide Southampton County with the County s completed Classification and Compensation Study. This study provides an overview of the County s current compensation system, as it relates to all County positions, and our final report including the methodology used to update the classification and compensation system, options for implementing the compensation system, addressing issues related to salary compression, and other compensation related pay issues. The study represents a thorough and comprehensive review of all aspects of the County s classification and compensation system and includes considerable employee participation. The recommendations offered, we believe, will increase the market competitiveness of the County s compensation program within the regional marketplace and provide increased internal equity among County positions. Implementation of these recommendations will assist the County in attracting new employees, when necessary, and in retaining current employees needed to meet the County s service demands. Springsted expresses its thanks to the County staff who completed Springsted s Position Analysis Questionnaires as we worked to verify their current job responsibilities. We particularly want to thank the members of the County s Management Team and staff who supplied us with data and answered numerous questions throughout the study. We also express our gratitude to Mr. Michael Johnson, your County Administrator and Mrs. Lynette Lowe, Deputy County Administrator/Chief Financial Officer, for providing direction and feedback through all phases of the study. Springsted appreciates the privilege of serving Southampton County and hope that we may be of assistance to you in the future. Respectfully submitted, John Anzivino John Anzivino, Senior Vice President Client Representative to Southampton County, Virginia Joel Davis Joel Davis, Vice President Consultant

5 Executive Summary 1 1. Executive Summary Springsted Incorporated completed a Classification and Compensation Study for Southampton County, Virginia in August The study period was extended, at the County s request, to allow the County to focus primarily on the development of the FY annual operating budget and the FY year-end audit, both of which occurred during the course of the study. In addition, the County s leadership felt that it was important to discuss, in more detail, the classification and compensation study with the members of the management team to allow them the opportunity to have more input and ownership of the process, which they felt was essential to the success of the study, as it has been ten (10) years since the last study was completed. The County s leadership also felt that it was important to spend additional time to carefully consider the findings and recommendations outlined in the study and then incorporate the study s recommendations into the County s FY budget. Springsted endorsed County leaderships approach outlined above as we believe that the more staff participation and understanding achieved in any study often results in employees responding more positively to the results of the study, which often contributes to improving and strengthening morale for the organization. The Deputy County Administrator/Chief Financial Officer contacted Springsted in February 2016 to schedule a meeting to review and discuss the study s findings and recommendations with both she and the County Administrator, which was held on February 29, At the request of the County Administrator, Springsted staff returned to the County on March 24, 2016 to meet with the County s Constitutional Officers individually to review the study s methodology, findings, and answer any questions pertaining to the positions in their department ensuring a high level of transparency with elected officials. The study represents a comprehensive review of the components that affect an organization s compensation program for specific positions a review of current class descriptions, current compensation structure, the County s compensation philosophy, regional market competitiveness of County salaries, the internal equity of salaries paid to comparable County positions, employee benefits and ongoing maintenance and administration of the compensation system. The County has encountered many situations that could be addressed by conducting a comprehensive classification and compensation study and implementing an up to date compensation system. Difficulty in recruiting and hiring new employees in certain departments, candidate pools lacking the skill sets required for the position being recruited and employee turnover in certain positions are all indications that the County s compensation program may not be competitive within the regional market. A classification and compensation system provides the framework for determining how employees will be paid. As a general rule, most organizations conduct new and comprehensive classification and compensation studies every five (5) to seven (7) years ensuring their ability to hire and retain qualified employees and maintain equitable internal relationships. The external market focus is important because it ensures that the compensation plan is adequate to attract new employees and retain existing employees. If compensation levels

6 Executive Summary 2 fall below those in the regional marketplace, the organization will experience difficulty hiring people and increased employee turnover as employees seek jobs with other organizations that will pay the market rates for their skills and abilities. Organizations should expect some employee turnover, typically in the 5% to 10% range annually, but when it becomes excessive, turnover has a serious impact on the organization s overall effectiveness. Advertising costs are a significant measurable cost of turnover, and as the County moves through the selection process, the time spent by current employees covering the void left by the departing employee often diverts their attention from their day to day responsibilities creating overtime demands and often frustration on the part of the remaining employees as they attempt to meet deadlines and maintain acceptable levels of service. These are some of the hidden and non-quantifiable costs associated with turnover. There is also a substantial cost for turnover that comes with training of new employees. Employees in well managed organizations receive significant on-the-job training which diverts the attention of other employees from their primary and regular duties to assist in training. Organizational effectiveness is affected as current employees train new employees and as those new employees endeavor to become proficient in their job. While these costs are not necessarily visible in County expenditure reports, they will show up in performance data in the form of reduced service outcomes. There is also a cost to turnover that comes with training new employees. Employees receive on-the-job training which diverts the attention of other employees away from their regular duties to assist in training. This is particularly true in the public safety area where significant State mandated training is required before a provider can serve effectively and to ensure quality services are provided to the citizens and visitors of the community. For example, several Sheriffs and Police Chiefs that we have worked with have estimated the cost of training a new law enforcement officer to range between $22,000 to $42,000 per selected candidate dependent upon the jurisdiction. Organizational effectiveness is often affected as current employees train newly hired employees and as those new employees work to become proficient in their jobs. While these costs are not necessarily visible in direct expense reports, they typically are demonstrated in performance data in the form of reduced service outcomes. As the County continues to experience change, it will also be important to offer competitive salaries to attract the best staff possible to serve the citizens of Southampton County in the future. Competition for a wide range of professions in the local government marketplace becomes more intense each year as the business community works to attract workers to higher paying jobs in the private sector, local government curriculums are decreased at the college level, standards for hiring at the local level remain constant and increase, benefit levels drop for local government employees and competing organizations systematically increase their salaries to remain competitive and to meet demands for service in their communities. The periodic review, which comes with completion of a comprehensive classification and compensation update, also enables an organization to account for changes in technology, changes in work processes, tools and equipment, and other factors that can affect job responsibilities. In today s fast paced world of

7 Executive Summary 3 technological change, this is especially important as almost every governmental process is affected by advancements in technology and, as this occurs, employee s skills, knowledge and abilities, as well as their proficiency in the use of required tools and equipment, changes. Changes in job requirements, such as addition of new programs or assumption of duties for a vacated position, sometimes results in a new pay grade assignment. In order to properly maintain the compensation system, an ongoing process is needed to review job responsibilities and job class assignment to pay grades to ensure jobs are properly compensated. The following study documents the review and evaluation of the County s existing classification and compensation system and the methodology used to develop more competitive compensation levels. The study was conducted with extensive participation from the County Administrator, Deputy County Administrator/Chief Financial Officer, department heads, Constitutional Officers, and employees. Each County department head and Constitutional Officer was interviewed concerning the nature of their operations and discussed particular issues they were having with compensation and benefits issues and with employee recruitment and retention. The County s existing class descriptions and Position Analysis Questionnaires (PAQs) were then evaluated by Springsted using the Systematic Analysis and Factor Evaluation (SAFE ) system. The SAFE system provides a consistent and objective approach to evaluating jobs by applying standard criteria to the training and experience needed to perform the job, the level of complexity of the work performed, working conditions, the impact of end results and the consequences of errors, and other factors that relate to the type and level of the work performed. A compensation and benefits survey was developed and comprehensive wage data was collected from comparable regional employers. The results of the job evaluation and the salary survey data were used to create a salary curve which served as the foundation for creating a revised compensation program. The compensation program structure relied upon a review of compensation philosophy concepts that included: Providing fair and equitable compensation to employees in a highly competitive and changing labor market Maintaining a competitive pay structure that takes into consideration the County s fiscal resources Ensuring that employee compensation is based on individual performance that meets or exceeds expectations and reflects changing economic conditions Providing consistent administration of pay policies and procedures among all County departments Major findings of the study can be summarized as follows: Salaries paid to County employees are, for the most part, lower than the average salary rates paid in comparable regional organizations. Because salaries are below average market rates, the County may experience difficulty hiring and retaining employees in certain positions. The County also has experienced turnover in a few positions that are paid at a higher rate by comparable organizations with which the County competes for employees. Our analysis of benchmark organizations indicated that the County s minimum salaries overall are 12.30% below the survey average,

8 Executive Summary % below the midpoint salaries, and 17.05% below the maximum salary levels of the responding organizations surveyed. Based on the recommended salary schedule developed as part of this study, we found that 42% of the County s workforce is paid at a rate below the minimum salary rate of their newly assigned pay grade. Internal pay relationship inequities exist within the County. Positions that require similar minimum qualifications and have comparable responsibilities should be compensated at comparable levels. We evaluated each County job classification against standard criteria. Each class was assigned to a pay grade that reflected its internal relationship to other County positions thereby ensuring equitable pay relationships. The study offers a recommended Fiscal Year compensation plan and recognizes an implementation schedule which would be effective on July 1, The implementation schedule provides a strategy that ensures that all employees are paid at least at the minimum of their assigned pay grade. The proposed salary schedule ensures that new employees are recruited and hired at a more competitive wage, expanding the pool of qualified candidates. These options provide the County with a way to ensure new employees are not compensated at the same or higher level than current employees and serves to address existing compression issues.

9 Introduction 5 2. Introduction Southampton County, Virginia retained Springsted Incorporated to conduct a Classification and Compensation study in October Completion of this study reflects a significant effort by County staff to supply policies and human resources data. Throughout this study we have introduced the staff to new concepts and terms. A glossary is provided in Appendix A to share our terminology with the reader. The County identified five (5) major objectives for this update, which included: Review, update, and/or create current position descriptions for all full-time positions; Ensure all position descriptions are in full compliance with all applicable Federal and State statutes and regulations; Develop recommendations for a position classification system for proper internal equity, as dictated by the actual responsibilities of the position; Develop compensation ranges for each position, which will provide for a competitive pay plan with other local government employers comparable to Southampton County; and Provide the County with a new or updated classification manual that documents the classification methodology used in the study. A comprehensive salary and benefits survey was also conducted as part of this update with the County reviewing and approving the proposed jurisdictions to be surveyed. Survey recipients were selected based on demographics, comparable levels of services provided by the entity surveyed and geographic proximity to Southampton County. Thirty-three (33) benchmark positions were included in the survey of market area entities. Each position included as a benchmark was selected to ensure a wide range of different job types were included across all departments to provide a representative sample throughout the organization. In addition, one (1) benchmarked position for the County Administrator was included in the study and will be addressed under separate cover due to the non-classified nature of the position. The nineteen (19) entities listed below, were invited to participate in the survey: 1. County of Sussex 2. County of Isle of Wight 3. County of Surry 4. County of York 5. County of James City 6. County of Gloucester 7. County of Prince George 8. County of Greensville 9. City of Franklin 10. City of Suffolk 11. City of Newport News 12. City of Virginia Beach 13. City of Hampton 14. City of Chesapeake 15. Virginia State Police 16. Virginia Department of Corrections 17. Western Tidewater Community Services Board 18. Western Tidewater Regional Jail 19. Southeastern Public Service Authority Information from some benchmark organizations was difficult to obtain. Repeated requests by Springsted staff to some localities and organizations resulted in a strong representation of information being utilized from eleven (11) benchmark organizations. Springsted was not able to obtain information from the Counties of Isle of Wight, James City, Surry, and Gloucester, the

10 Introduction 6 Cities of Franklin and Hampton, Western Tidewater Community Services Board, and Western Tidewater Regional Jail. Survey respondents were asked to provide information on only those benchmark positions which they considered to be comparable to positions in their organizations. Therefore, survey respondents did not provide data for every position surveyed.

11 Methodology 7 3. Methodology Springsted Incorporated used the following methodology to develop a new and revised classification system and compensation program for Southampton County: 1. Springsted staff discussed the project with the County Administrator and Deputy County Administrator/Chief Financial Officer on December 16, 2014 to establish a working relationship, review current policies and practices relating to the County s existing pay practices, obtain data on the programs and materials currently in use, and to identify apparent strengths and weaknesses in the existing system. This meeting also provided an opportunity to discuss the County s goals in conducting this study. 2. The County provided copies of existing class descriptions, the County s current pay scale and compensation policies, benefits, personnel policies and a list of staff identified by employee name, title, current grade, and current salary for use during the study. 3. All department heads were also provided information explaining the purpose of the study and Springsted s approach to conducting the study. Individual meetings were conducted with each of the County s department heads on December 16 and 17, 2014 to collect data on department structure, operations, and staffing, along with identifying any specific departmental needs and concerns related to this study. Employee orientation sessions were also conducted by Springsted on December 16 and 17 to explain the study process and to answer employee questions. These meetings also provided an opportunity for employees to voice concerns and have input into the study. 4. All employees received Position Analysis Questionnaires (PAQs) with instruction sheets and were encouraged to participate in the study by completing the PAQ. Employees were asked to respond to questions on characteristics applicable to each position and all were encouraged to submit a response. Each employee s supervisor then reviewed the completed questionnaires for completeness and accuracy and provided any additional information they felt was relevant to the position. 5. The Springsted consultant team reviewed the PAQs completed by County employees upon their receipt and made preliminary classification decisions for the various positions in Southampton County. At this initial stage of the process, any apparent discrepancies, conflicts, or omissions were noted. Job audits were conducted to expand, clarify, or confirm available information provided on the PAQs. 6. All classification descriptions were updated, and/or new ones developed as needed. In some cases, the consultant recommended consolidating classification descriptions for certain positions that performed similar duties and required similar skills. 7. Springsted developed a comprehensive wage and benefits survey which included requests for general information on compensation policies, such as

12 Methodology 8 whether an open range or step system was utilized, years to maximum of the assigned pay grade, number of steps (if utilized) and percentage between steps and grades. This information was requested from nineteen (19) agencies identified in consultation with the County to determine the market for benchmarked positions. 8. Salary data for thirty-three (33) benchmark positions were solicited. Information was gathered on minimum, maximum, and actual wage information for all positions surveyed. In addition, information was gathered on hours worked, numbers of employees in the position, health insurance programs, bonuses, longevity, and deferred compensation Positions chosen were representative of all job types and represented all departments. Those positions for which data was obtained and not used were deemed not comparable to Southampton County s matched positions or had data that was not consistent with overall market analysis for the position. 9. Utilizing the salary data supplied by comparable organizations, all County positions were evaluated using Springsted s Systematic Analysis and Factor Evaluation (SAFE ) system to assist in assuring that the internal relationships of positions within the County were equitable. The evaluation ensured each position was assigned to the appropriate salary grade in the proposed compensation plan. 10. Guidelines for implementation and ongoing administration of the compensation program were developed. These guidelines provide for annual adjustments to the salary schedule ensuring that the County s pay scales stay current with changing economic and market conditions. The guidelines also provide for annual salary adjustments for employees based on employee performance that meets or exceeds job expectations. The implementation options and the estimated costs are provided as part of this study and have been updated to reflect the County s latest employee census. The estimated cost of implementation was developed utilizing payroll data provided by the County with the intent being to ensure market competitiveness for the County s employees based upon the data obtained from comparable communities.

13 Findings and Recommendations 9 4. Findings and Recommendations Developing a classification system and compensation program involves the analysis of substantial quantities of data collected from comparable employers and from the County. We have evaluated the County s existing compensation program based on our analysis of the study data and the survey results. Using this information, we have developed a compensation program for Southampton County, which is described below. Options for implementing the recommended changes conclude this section. A. Evaluation of the Current Compensation Program Discussions with personnel and review of compensation data indicate that a number of employees of the County are under-compensated in relation to other comparable regional organizations. Other findings discussed earlier during the study indicate a wage problem demonstrated by: Market adjustments have fallen significantly behind the regional market Concerns about possible employee turnover because employees may leave to take higher paying jobs with other employers Some departments experiencing difficulty hiring new personnel due to limited applicant pools Job classes with comparable responsibilities requiring comparable education and experience that are assigned to different pay ranges resulting in marked pay differences B. Compensation Philosophy A compensation philosophy guides the design of a pay plan and answers key questions regarding pay strategy. It generally takes a comprehensive, long term focus and explains the compensation program s goals and how the program supports the employer s long-range strategic goals. Without a compensation philosophy, compensation decisions tend to be viewed from a short-term standpoint apart from the organization s overall goals. Market competitiveness and internal equity are among the most important areas addressed in a compensation philosophy. In addition, movement of positions through the pay grades is an important topic for consideration of local governments. An organization s desired market position involves defining the market and identifying where the organization wants to be positioned within that market. Market position should balance what it takes to attract new employees and to retain skilled employees (in other words, eliminating higher pay as the reason employees leave the organization) with the organization s financial resources. Internal equity expresses an organization s desire to provide comparable pay to job classes with comparable duties and responsibilities. Movement of positions through the assigned salary grade is also an important consideration for employees and their supervisors to understand. Employees should have an understanding of how they may obtain pay increases whether it is by merit or some other form, so that they believe that they have a future in the community that they serve.

14 Findings and Recommendations 10 In consultation with the County s Management Team, Springsted staff developed a compensation philosophy framework guiding the compensation program development and the direction of this study. As part of this study, we recommend that the County consider these concepts in the adoption of a formal compensation philosophy: Providing fair and equitable rates of pay to employees Developing a system of pay grades that state the minimum and maximum rates that the County will pay individuals within a job class and identify the midpoint of the range as the market rate Defining the County s market area based on the nature of the job class requirements and the availability of potential candidates locally, state-wide, or regionally Establishing rates of pay that allow the County to successfully compete for new employees within its market area Establishing a market position that is fiscally responsible with public resources Ensuring that pay rates for employees are based on individual performance that meets or exceeds expectations and reflects changing economic conditions Developing pay administration policies and procedures that ensure their consistent application between departments Ensuring that the compensation program is understandable to employees, managers, the Board of Supervisors, and the public C. Evaluating Job Classes County employees completed individual Position Analysis Questionnaires (PAQs). Supervisors reviewed the PAQs and provided information for each position. Employees and supervisors both responded to questions regarding education and experience, various factors affecting positions, working conditions, and the physical requirements of each job in compliance with the Americans with Disabilities Act (ADA). Employees also provided information regarding essential duties and responsibilities. Based on the information provided in the PAQs, class descriptions were updated for each County job class, and new ones developed as needed. Class descriptions are different from position descriptions; they provide a broad description of the essential functions, examples of work performed, and minimum requirements for each job class, but they do not provide an exhaustive list of tasks performed by each position. In this way, class descriptions can cover a group of positions, some of which may be in different departments, which share comparable levels of responsibility, perform comparable work, and have comparable minimum requirements. For example, an administrative assistant job class could include administrative assistant positions assigned to different departments or divisions. While the subject matter of each position may be different, there are many similarities in the work performed, which may include answering the phone, greeting visitors, preparing and filing documents and entering data. All job classes were reviewed to determine those positions that qualify as exempt from the overtime provisions of the Federal Fair Labor Standards Act (FLSA) consistent with the regulations which took effect on August 23, 2004.

15 Findings and Recommendations 11 Utilizing Springsted Incorporated s SAFE job evaluation system, each job class in the County was evaluated, rated, and ranked to establish preliminary class assignments. Springsted staff then reviewed each position, assigned it to one (1) of six (6) skill levels, and evaluated the job based upon the nine (9) job factors listed below: Training and Ability Experience Required Level of Work Human Relations Skills Physical Demands Working Conditions/Hazards Independence of Actions Impact on End Results Supervision Exercised In addition, all positions were evaluated in accordance with market data and the recommended salary schedule. Our analysis resulted in recommended changes to position titles, which can be found in Appendix F. D. Developing a Salary Schedule The process of developing a salary schedule draws substantially from market data obtained in a compensation and benefits survey. This data is obtained by conducting a comprehensive survey of other comparable employers within the County s defined market area; that is, who does the locality compete with for employees when vacancies occur? Respondents are asked to provide information about the structure of their pay plans and the minimum, maximum, and actual salary rates of their corresponding benchmark positions, hours worked, years to maximum, number of steps (if applicable), and information on additional compensation. Survey Results. A salary survey was conducted on behalf of Southampton County and data was sought from nineteen (19) agencies. A variety of information was obtained from eleven (11) entities providing a strong base of information. The salary survey included a series of questions designed to obtain information on a variety of pay practices. Eleven (11) respondents provided information on their pay plans. Eight (8) respondents with a system in place reported using an open range system, which provides a minimum, midpoint, and maximum level of pay for each pay grade, while one (1) reported using a step system. The distance between pay grades varied from 4% to 10%, with an average of 6%. On average, survey respondents indicated that the spread within their pay grades, or the difference between the minimum and the maximum of the pay grade, was 60%, with a low of 50% and a high of 73%. The survey included thirty-three (33) benchmark positions covering a full range of job classes from administrative support and maintenance positions to professional employees and department heads. A general summary of survey results appears in Appendix B. Job titles marked DNU on the Salary Survey Summary were not used in developing the salary curve because positions did not match the position being surveyed or data received was inconsistent or inadequate. Designing the Salary Schedule. The first step in designing a compensation plan is to create a salary curve using the salary survey data for the County s benchmark positions and the corresponding job evaluation point factors for each benchmark position. This data produced the salary curve shown in Figure 1. Any given point on the salary curve identifies where the market salary rate and the job evaluation point factors intersect.

16 Findings and Recommendations 12 Southampton County, Virginia Compensation Survey y = 113.9x R² = , ,000 80,000 Survey Mid-Point (y) 60,000 40,000 20, SAFE Total Points (x) (Figure 1) As a result of the compensation comparisons, and in consultation with County staff, we are recommending the conversion of the existing step system to an open range system. Jurisdictions find open range systems allow for more flexibility when determining amounts for salary increases, merit increases, and cost of living increases as compared to a step system. When a step system is used, a fixed percentage between steps has been established and is followed when providing step increases. For example, if steps are separated by 2.5%, typical merit increases are 2.5%, 5%, or some other fixed amount to allow for increases to steps. In order to provide a differing amount, the entire system requires revision to adjust for percentage increase variations. In an open range system, jurisdictions have more flexibility in terms of establishing salaries and providing annual merit and/or cost of living adjustments. For example, increases equivalent to 1.5% or 3.4% can easily be accommodated within an open range system. As we continue to observe and monitor the local government environment, more jurisdictions have and continue to migrate away from a step system to an open range system for general government employees. Southampton County s existing pay plan is a step plan that has twenty-six (26) grades and nine (9) steps. The distance between pay grades in the current pay plan is 5%, which is consistent with the survey average. The distance between steps is 7%. Using survey data and in order to maintain competitiveness with the regional labor market, a new salary schedule was developed for the County. The County s proposed pay plan is an open range plan and contains thirty-three (33) pay grades that are 5% apart with a minimum to maximum spread of 55%, making the plan more consistent with the market data. The recommended Fiscal Year compensation plan for Southampton can be found in Appendix C of this report. The recommended pay plan is the result of the analysis of the data received and obtained and reflects the market ranges of salaries as reflected by competitors in the area.

17 Findings and Recommendations 13 The consultants then assigned each position to the appropriate salary grade in the Fiscal Year salary schedule. The List of Classes and Assignment to Salary Grade is shown in Appendix D.

18 Implementing the Recommended Salary Plan Implementing the Recommended Salary Plan To estimate implementation costs, Springsted was provided the most recent employee salaries by the County for all departments and calculated three (3) levels of implementation ranging from identification of those positions that fall below the required market minimum to resolving issues of concern identified such as compression of salaries within the established ranges. Each is explained in greater detail in the text below. There were fifty-nine (59) employees who were identified as being below the recommended pay range and include the following positions (some classification descriptions apply to more than one incumbent): Accountant Administrative Assistant I Assistant Commonwealth s Attorney I Assistant Registrar Communications Officer Cook Custodian Deputy Clerk of the Circuit Court I Deputy Clerk of the Circuit Court II Deputy Commissioner of the Revenue I Deputy Commissioner of the Revenue II Deputy Sheriff-Corrections Deputy Sheriff-Law Enforcement Deputy Treasurer II Finance Manager Information Technology Director Lead Utility System Operator Maintenance Supervisor Public Service Worker II Public Service Worker III Public Works Director Utility System Operator IV Consistent with staff s direction, we have estimated implementation costs using County personnel data as of March 2016, making the following assumptions: Recommended compensation program will be effective when designated by the County. Implementation options provided in this report recognize full year implementation on July 1, Implementation will address internal equity by making sure that no employee is paid below the minimum rate of their assigned salary grade. All implementation options include moving employees to the minimum of the new pay scale or Option 1 as shown below. Option 1 Move to Minimum of the Recommended Pay Grade. Under this option all employee salaries were raised to the minimum of their proposed pay grade on the proposed pay scale. Of the County s one hundred forty-two (142) employees, fifty-nine (59) employees, or 42% of the County s workforce, are

19 Implementing the Recommended Salary Plan 15 being paid below the minimum salary rate of their proposed pay grade according to our analysis of data. The annual cost for salaries for bringing each of the County s employees to the minimum salary rate of their recommended pay grade is estimated to be $142,976. This amount is equivalent to 2.55% of the County s approximate $5.61 million annual payroll for employees. Implementing this option and bringing employee salaries up to the minimum salary rate of their proposed pay grade will address internal equity and increase market competitiveness and comparability for the County and is the minimum level of implementation required to ensure competitiveness of salaries. Option 1 - Move to Min # of Staff Current Salary Proposed Salary Difference % Increase Totals 142 $ 5,616, $ 5,759, $ 142, % Employee Below Min 59 $ 2,024, $ 2,167, $ 142, % Employee Within Range 83 $ 3,591, $ 3,591, $ - Employee Above Max 0 $ - $ - $ - Option 2 Move to Minimum or 2% Salary Increase Whichever is Greater. In this option, employee salaries are brought to the minimum of the proposed pay grade or provided a 2% increase, whichever is greater. To apply this strategy, we first brought all employees with salaries below their proposed minimum salary rate up to the minimum rate of the proposed pay grade. Those employees who fell naturally within the proposed pay grade were placed within the range and given a 2% increase, moving them away from the minimum level of pay unless this increase brought them above the maximum, in which case they were moved to the maximum or remained at their current salary level, whichever was greater. The estimated annual cost of this option is $207,898. This is equal to 3.70% of the County s $5.61 million annual payroll for employees. Implementation of this option will increase market competitiveness and comparability for the County and begin to address the issue of wage compression. Option 2 - Min or 2% increase # of Staff Current Salary Proposed Salary Difference % Increase Totals $ 5,616, $ 5,824, $ 207, % Employee Below Min 59 $ 2,024, $ 2,169, $ 144, % Employee Within Range 83 $ 3,591, $ 3,654, $ 62, % Employee Above Max 0 $ - $ - $ - Option 3 Years of Service. Individual employee salaries were also placed within the proposed pay grade based on the number of years of service reflecting a more accurate picture of market based increases for the employee and the experience they have gained with the County. On average, the tenure for a Southampton County employee is eleven (11) years of service. For example, if an employee has been serving the County for eleven (11) years, the employee would receive a 5.50% increase based on the eleven (11) years of service. This option not only recognizes employees for longevity, it also recognizes the value of length of service and the development of skills and abilities in regard to performing the tasks of the position. The estimated cost of providing a 0.5% increase for each year of service for those employees that fell within the new pay grade is $242,082 and $210,366 for those employees that fell below the minimum of the new grade for a total implementation cost of $452,448 which is equivalent to 8.06% of the County s $5.61 million annual payroll for employees. Implementation of the full plan via Option 3 would allow the County to provide salaries which meet current market conditions, based upon the market survey, and recognizes the value of

20 Implementing the Recommended Salary Plan 16 employees experience and past salary increases thus reducing the opportunity for compression of salaries. Option 3 - Min +.5% per YOS # of Staff Current Salary Proposed Salary Difference % Increase Totals $ 5,616, $ 6,068, $ 452, % Employee Below Min 59 $ 2,024, $ 2,235, $ 210, % Employee Within Range 83 $ 3,591, $ 3,833, $ 242, % Employee Above Max 0 $ - $ - $ - Phase In Implementation of Option 3 Over 3 Years. Due to the significance of the financial impact upon the County and after having discussions with the County Administrator and Deputy County Administrator/Chief Financial Officer, Springsted suggested to the County that they phase in our recommended implementation option over a period of time. The County asked Springsted to divide the cost of Implementation Option 3 over a three (3) year period in an effort to lessen the financial impact on the County. Under this option in year one (1), all employees that fell below the proposed minimum were brought to the minimum of their proposed pay grade on the proposed pay scale, and the remaining employees who fell within the range receive approximately 0.167% increase per year of service. In years two (2) and three (3) those employees who fell within range continue to receive approximately 0.167% increase per year of service, and those employees who were brought to the minimum in year one (1) receive approximately 0.25% increase per year of service so that by year three (3) of the phased in option all employees will have received an approximate cumulative total of 0.5% increase per year of service. In addition a 2% cost of living adjustment was included in years two (2) and three (3) to account for annual market adjustments using the CPI. This option addresses those employees who fell below the recommended minimum, while also providing those employees who fell within the range a percentage increase. The information below provides estimated salary impacts over the three (3) year period. The phased in option and its present day costs are as follows: 3 YEAR PHASE-IN OPTION Incl. 2% COLA Year 2 and 3 YEAR 1 # of Staff Current Salary Proposed Salary Difference % Increase Totals 142 $ 5,616, $ 5,845, $ 229, % Employee Below Min 59 $ 2,024, $ 2,173, $ 148, % Employee Within Range 83 $ 3,591, $ 3,672, $ 80, % Employee Above Max 0 $ - $ - $ - For employees 142 $ 5,616, $ 5,845, $ 229, YEAR 2 # of Staff Current Salary Proposed Salary Difference % Increase Totals 142 $ 5,845, $ 6,011, $ 166, % Employee Below Min 59 $ 2,173, $ 2,248, $ 74, % Employee Within Range 83 $ 3,672, $ 3,763, $ 91, % Employee Above Max 0 $ - $ - $ - For employees 142 $ 5,845, $ 6,011, $ 166, YEAR 3 # of Staff Current Salary Proposed Salary Difference % Increase Totals 142 $ 6,011, $ 6,182, $ 170, % Employee Below Min 59 $ 2,248, $ 2,326, $ 77, % Employee Within Range 83 $ 3,763, $ 3,856, $ 93, % Employee Above Max 0 $ - $ - $ -

21 Implementing the Recommended Salary Plan 17 Ongoing Administration and Policy Considerations After initial implementation of the study s recommendations is achieved, the County should develop and maintain administrative procedures that provide for annual market analyses and salary adjustments based on market and economic conditions, the County s ability to pay and adjustments that recognize individual performance. It should be recognized that as the market shifts, employee s base salaries should shift with adjustments in the County s compensation schedule to maintain market competitiveness. In addition, employees demonstrating higher levels of performance should be recognized and advanced through the salary range on an appropriate and consistent basis. Increases in compensation are typically provided by the means which follow. Base adjustments. In Fiscal Year , and subsequent years, it will be necessary for the County to adjust the salary schedule and grades based on market adjustments and other factors such as the ability to recruit new, highly skilled employees in a growingly competitive market place. A tool the County may wish to consider is establishment of a guideline for determining annual base adjustments. For example, the County could base its adjustment on the Consumer Price Index (CPI). The County could also contact comparable jurisdictions to find out what percentage adjustment they are making to their pay scales as a second level of verification of the pay range adjustment and provide an average of those increases. This would also ensure that the County maintains marketability among comparable regional organizations. If the CPI, for example, is 2.5, a 2.5% increase would be applied to the wage rates of each pay grade. In addition, all employees with performance that meets or exceeds job expectations would receive the 2.5% increase applied to their base salary. Performance adjustments and progressing through the salary ranges. Employees typically move through their salary grade at a more rapid pace early in their career as opposed to the latter stages of their employment with an organization or community. This occurs because employees are typically hired by an organization at the minimum or near the minimum of their pay grade because they lack certain knowledge, skills, and abilities that an employee who has been with an organization for eight (8) to ten (10) years may have gained through training and immersion in the work force and community. Consequently, the midpoint of the salary range is recognized as the market rate at which employees have gained the knowledge, skills, and abilities to perform at a level commensurate with those of their more experienced peers. For that reason, many communities and organizations typically experience a more rapid growth in employee salaries toward the midpoint of the salary range during the first eight (8) to ten (10) years of employment as they recognize the employee s growth in their job. As a result, employees often progress at a slower rate of salary growth once they have attained the midpoint and until their retirement. We would suggest that the County develop a formal policy that establishes a goal of having employees reach the midpoint of their salary grade during the initial eight (8) to ten (10) year period of employment utilizing well defined performance evaluation criteria. This could be accomplished by recognizing employee s performance in a range of 1 to 3% over the initial period and then adjusting annual performance based increases into the 1 to 2% range for the duration of the employee s career, which is typically calculated to be twenty-five (25) years.

22 Implementing the Recommended Salary Plan 18 As noted an employee s progression through the pay grade should be based on individual performance. Supervisors can recognize an employee s contribution to department and organizational goals through performance adjustments. With the ability to recommend performance adjustments, supervisors will have an important role in linking pay and performance. When compensation is based on performance, employees look for assurance that managers will objectively evaluate performance and not inflate ratings in order to obtain a higher salary for particular employees. Generally, such systems provide for a review by the County Administrator s Office to provide a mechanism that assists managers in applying performance standards consistently for all employees. When pay is based on performance, the evaluation system often provides for reviews at six (6) or twelve (12) month intervals, so employees know how supervisors view their performance and have the opportunity to improve performance and their prospect for a merit pay increase. By recognizing the value of employee performance on a consistent basis, the County will encourage productivity and reward those demonstrating a higher level of skills, effort, and ability. If this objective is pursued, the Board of Supervisors will need to dedicate funding to support merit increases, in addition to any cost of living adjustments. Recommendations Southampton County is a service oriented organization. The County delivers services through its employees, who are a major investment in the organization s infrastructure. The report which precedes these recommendations contains significant amounts of information, which has been gathered from a variety of sources, carefully and objectively analyzed, and structured in a way that will provide a sound and fair system of compensating employees if followed carefully. It is our independent judgment that has resulted in the following recommendations. We urge the County to: 1. Approve the proposed Open Range salary schedule provided in Appendix C of this report. Adoption of the revised salary schedule, developed utilizing market data, will result in an up to date compensation schedule, which will better equip the County to recruit for vacant positions, retain existing employees, and provide for flexibility in rewarding for performance. 2. Approve the recommended salary schematics provided in Appendix D, which assign various job classes to the proposed salary grades. The schematics developed via analysis of market data, utilizing objective analysis of data, will allow for establishment of internal equity among the various positions of the County. 3. Approve the updated and/or new classification descriptions. Adoption of the classification descriptions will result in all employees having an up to date and accurate description of the knowledge, skills, abilities, education, and experience required to perform a particular job in conformance with applicable Federal and State standards. 4. Approve Implementation Option 3. Adoption of this recommendation will establish more equitable compensation levels for all employees, address