Compensation Package

---

The compensation package for each entity (city, district, county, private, state, or federal agency) has an identity of its own. The amount of salary and benefits given each group is largely dependent upon local factors such as amount of revenue available to the jurisdiction; nature of the organization's mission; related risk factors within the community (the higher the community risk, the more demand for strong resources); political climate (pro-labor or satisfied with traditional approaches); economic climate; and quality and philosophy of local leadership (an innovative and motivated leadership style also affects the satisfaction of labor and the quality of the compensation package).

Some components of compensation packages apply to both career and volunteer personnel. Each is compensated in part by non-monetary benefits, such as recognition awards or dinners, free parking, use of tools or equipment, laundry service, etc. Studies in motivation show that monetary reward is not sufficient to keep paid members satisfied with their jobs, so career personnel need forms of recognition beyond the paycheck.

Likewise, with the need to attract and retain volunteers, agency leadership is turning to innovative methods of developing interest in the agency with programs such as a broadened mission to include more opportunity to serve the community; innovative and challenging training programs; constant encouragement and leadership support to take challenging ideas and turn them into realities; and aggressive fundraisers to purchase state-of-the-art equipment that will allow for more effective accomplishment of the mission.

First we will focus our attention on career agencies in which financial compensation is largely influenced by job classification and job evaluation, along with the potential impact of the collective bargaining process if applicable.

Direct Financial Compensation

In career emergency service organizations there are often multiple ranks or classifications of employees. Most organizations with multiple levels of responsibility usually adopt a salary schedule. The salary schedule identifies the range of salaries (starting step to top step) for each position classification within the organization. This is especially important for municipalities that include all position classifications employed by the jurisdiction. In larger organizations the schedule may begin with the lowest-paid position and increases by a set percentage for each potential salary classification up to the highest-paid employees. Each salary classification is usually numbered with an index number for easy reference.

The salary schedule is closely scrutinized by management and employees alike. When new classifications are developed, or changes occur in the duties of those occupying a given position (i.e., classifications), the salary schedule may be affected. Personnel managers use the job analysis, job description, and job evaluation to determine a specific job's proper position within the schedule. Many jurisdictions use a personnel commission (or civil service commission) as a neutral appeals board to oversee the salary schedule.

Job Evaluations and Direct Compensation

Salary schedules (and the corresponding salaries) are usually established as a result of job evaluation along with other sources of influence.

Job evaluation is a technical process that compares job classifications within the organization and the relative value of one job in relation to others (Mondy & Noe, 2005).

This process should be performed by objective and well-prepared personnel specialists who can rank (or position) job classifications based on specific job duties (determined from the job analysis). The methodology ranges from a simple rank ordering (comparing difficulty of task, competence requirements, danger associated with the task, and value of skill to the organization) to elaborate salary determination models that apply weighted scores to various job requirements or components.

While there are a variety of job evaluation methods, perhaps the most common is the point factoring method and specifically the Hay Guide (Mondy & Noe, 2005). As suggested, job evaluation, especially that using this method, is something that requires the attention of personnel or human resources specialists.

Are job evaluations valid? Obviously the answer is "hopefully." Otherwise internal equity suffers. The quality of the job evaluation is dependent upon the quality of personnel technicians and the process used to perform the evaluation. The evaluators must be objective and well prepared to judge each job. Job evaluators typically use a variety of tools including the job analysis, personnel surveys, questionnaires, interviews, work audits, and/or group discussion sessions to determine job requirements and attributes.

The reclassification of jobs that have added responsibility requires a focused job evaluation. Personnel specialists should work with agency management to evaluate the new job functions and determine the appropriate salary classification for the position. Obviously, this process can cause concern for and conceivably impact other or all of the positions within the job family (position classifications related to the classification being repositioned).

Examples of fire department positions that have been subject to reclassification are shift personnel cross-trained as firefighter/paramedics, and the addition of hazardous materials technicians to the firefighter position. These changes require an examination of the position regarding appropriate classification --- and pay.

As suggested, the primary purpose of job evaluation in the placement of the position on the salary schedule is to ensure internal equity. Internal equity refers to the payment of employees according to the relative value of their position within the same organization (Mondy & Noe, 2005). Every single job within the organization is needed and valued; this reference to "value" alludes to the differences in mental, physical, and perhaps psychological components of the particular position. This is where the ranking or point factoring comes into play.

Another tool frequently used in establishing salaries is the salary survey. The job evaluation process should not be confused with a "salary survey." The difference between the two personnel management tools is significant. The job evaluation considers inside relationships between job classifications and the technical skills, knowledge, and abilities that have compensatory value. The salary survey considers the job's relationship to external factors such as comparable jurisdictions' compensation rates, availability of qualified candidates, general salary position expectations of the jurisdiction's leadership (i.e., position on the mean of comparable jurisdictions), value of the entire compensation package, and comparability of job functions (some organizations have special needs not experienced by other jurisdictions).

While job evaluation promotes internal equity, salary surveys tend to promote greater external equity. External equity is the payment of one's own employees at a rate comparable to those with similar jobs and responsibilities in other like organizations (Mondy & Noe, 2005).

Other Issues in Financial Compensation

There are many other considerations regarding financial compensation. Some of the more prevalent ones follow:

Cost of Living Increases

Cost of living increases may be included in the establishment of future salaries using a local area cost of living adjustment (COLA). For instance, a COLA index is provided for the San Francisco Bay Area that is used in most jurisdictions surrounding the Bay Area. The Department of Labor provides COLA indexes for most major municipalities throughout the country.

Equal Pay and Comparable Worth Issues

You'll recall from our earlier discussion that the Federal Equal Pay Act of 1963, an amendment to the Fair Labor Standards Act, requires that men and women working for the same organization be paid the same rate of pay for work that is substantially equal in skill, effort, responsibility, and working conditions. Men and women who perform work that is substantially equal (based on a job evaluation determination) should be equally compensated.

While originally this was taken to mean "identical" by some organizations, in subsequent court cases the courts have ruled that the jobs need not be identical but rather substantially equal (Mondy & Noe, 2005).

The Equal Pay Act also requires that jobs of comparable worth be paid equally. For many years pay trends for jobs predominantly held by women (such as nursing) were lower than for jobs of equal value and difficulty held by males. The comparable worth standard states that women and men should have salary and benefits packages of equal value for comparable jobs.

Compensation Levels

The salary schedule, produced from a job evaluation, should give the jurisdiction an objective and substantial compensation plan whereby job responsibilities are compensated in a logical fashion. Each position classification typically has five or six salary steps, usually separated by a three to five percent difference for each salary step.

Probationary employees usually enter at Step A or Step 1. When the jurisdiction recruits lateral transfers (employees already performing the job), management, or technical candidates who already have job-related skills, knowledge, and ability, they may start higher than the first step.

Receiving a higher salary step after an employee performance evaluation indicates that the employee successfully performed during an established period of time (usually one year between performance evaluations and step increases). Local jurisdiction personnel policies usually indicate that worthy employees should receive salary step increases. Most often, step increases can be withheld for inadequate performance. Personnel policy may allow a reduction of salary to a lower salary step for poor performance. The latter requires consultation with your human resource specialists and perhaps your jurisdictional attorney. There may well be other issues which might preclude this from being a "good" policy.

Compensation levels also are adjusted as a result of labor-management negotiation. In career departments where the majority of employees are covered by a collective bargaining agreement, salary and benefits are subject to negotiations. Collective bargaining arrangements have been the subject of many state and federal laws. The methods of bargaining, procedures for communicating between the employer and employees, and notice and content of the employee contract have become complex processes for larger, unionized organizations.

While salary is negotiable, it is recommended that internal salary adjustments for selected positions (proposed to be underpaid) be performed only after a proper job evaluation has been completed. Changing the salary of positions can have a domino effect on other job classifications within the salary schedule.

The collective bargaining process will be discussed further a bit later in this module.

References

Mondy, W. & Noe, R., Human Resource Management. 9th Edition. Upper Saddle River: Pearson, 2005.

---