Item 4 - First 5 LA · Hay Group worked with First 5 LA leadership and HR to learn about First 5...

Item 4

Compensation and Benefits Study

13

First 5 LAClassification and Compensation Review

APRIL 15, 2014

14

2© 2014 Hay Group. All rights reserved DRAFT - CONFIDENTIAL

Contents

Introduction

Executive Summary

Methodology

Internal Analysis

Market Analysis

Benefits Market Analysis

Appendix 3 – Hay Group’s job evaluation methodologyAppendix 4 – Benefits valuation methodology

1

2

3

4

5

A

6

15


Introduction

16


Introduction

Introduction

First 5 LA asked Hay Group to review the organization’s compensation practices and develop recommendations for a salary structure that would enable the organization to provide equitable and competitive pay. Specific goals of this project include:

Internal Equity A review and assessment of the job and FLSA classification tools, job evaluation, compensation, and

pay delivery mechanisms An appropriate alignment of positions in an internally fair and equitable manner

External Competitiveness An understanding of how First 5 LA’s base pay practices and benefits compare to other organizations

in First 5 LA’s market for talent A compensation study that uses organizations within the market for talent as a basis for salary

comparison

Alignment A review of the existing compensation practices with recommendations for any changes based upon

an analysis of internal and external data Specific recommendations regarding appropriate levels of base pay

17


Executive Summary

18


Executive Summary

Methodology

Hay Group worked with First 5 LA leadership and HR to learn about First 5 LA’s business strategy, operating model, issues, opportunities, and challenges. Hay Group reviewed existing position descriptions for each role in the organization

Hay Group interviewed department and program leadership to gain further insight into their organization’s roles

Hay Group measured the content of all jobs in the organization using Hay Group’s Guide ChartSM - Profile Method of Job Evaluation

All job content findings were reviewed and validated by senior leadership and HR

19


Executive Summary

Methodology

Hay Group met with the Executive Leadership group to discuss which organizations First 5 LA attracts talent from and loses talent to, as well as its desired competitive pay philosophy

Hay Group applied our methodology to measure First 5 LA jobs by content

Job evaluation is a process to measure the size of jobs against appropriate and consistent criteria

Methodology focuses on the content of the job as currently designed

The Hay Group methodology measures three aspects of a job:

Knowledge required (input)

Problem solving involved (throughput)

Results expected (output)

The work measurement process reflects the culture and values of the organization

20


Executive Summary

Internal Analysis

As part of our study, Hay Group compared First 5 LA base salaries to job content levels agreed upon by the project team. This diagnostic practice is designed to highlight internal pay practices relative to First 5 LA’s existing value structure

We find that there is positive correlation between job size and base salary; that is, as job size increases, pay increases

Pay varies throughout the organization, typically due to:

Varying years of service

Employee’s salary previous to First 5 LA

Outstanding individual performance

Pay pressure in the external market on particular jobs and/or skill sets

An FLSA review was performed to provide First 5 LA with some guidance on the appropriate exempt/non-exempt classification for its positions

21


Executive Summary

External Analysis – Salary

Hay Group constructed an external market for comparison by utilizing a combination of sources representing organizations with which First 5 LA might compete for employee talent

Overall, base salary levels fall around the median of the market (the “competitive” level), with some variances by grade level:

Support, administrative positions and entry to mid-level professionals tend to be paid in line with the market

For seasoned professional roles and functional leaders, there is less differentiation in base salary between different grade levels than is seen in the market

Higher-level directors and executives generally fall below the market, but move closer to the market at the executive levels

22


Executive Summary

External Analysis – Benefits First 5 LA provides a full range of benefit programs to its employees that is above

market median for those earning up to $100,000 and below market median for those earning more than $100,000. The table below summarizes First 5 LA’s competitive market position by benefit program component:

Benefit AreaFirst 5 LA vs. Market

Salary ≤ $100,000 Salary > $100,000

Total Benefits P50 – P75 < P50

Retirement P25 – P50 P25 – P50

Healthcare > P75 > P75

Disability < P25 < P25

Death P75 P25 – P50

Other Benefits P50 – P75 P50 – P75

23


Executive Summary

Recommendations

Salary Structure

Based on our review of both job content levels at First 5 LA and external market levels, Hay Group has prepared a model structure for First 5 LA to consider implementing

This model takes the external market into consideration, blending market data with First 5 LA’s current pay practices. The recommended structure brings First 5 LA closer to a competitive target market

The investment to bring all employees’ salaries up to their recommended range minimum in the model structure is $55,112

24


Methodology

25


Methodology

Project Steps

Hay Group worked with senior leadership and HR to learn about First 5 LA’s business strategy, operating model, issues, opportunities, and challenges

First 5 LA provided Hay Group with the following materials:

Organizational charts

Job descriptions for each position

Financial statements

Current salary practice information for each position and current compensation data for all incumbents in the study

Hay Group conducted presentations with employees to discuss key project steps and employee involvement in the project, and held “open hours” for employees to voice concerns and issues with current pay practices

Hay Group interviewed department and program leadership to gain further insight into their roles and the organization

Hay Group measured the content of all jobs in the organization using Hay Group’s Guide Chart - Profile MethodSM

of Job Evaluation, the leading job evaluation system in the world for over 60 years

All job content findings were reviewed and validated by senior leadership and HR

26


Methodology (cont’d)

Work Measurement Methodology

Hay Group met with the Executive Leadership group to discuss which organizations First 5 LA attracts talent from and loses talent to, as well as its desired competitive pay philosophy

Hay Group applied our methodology to measure First 5 LA jobs by content

Job evaluation is a process to measure the size of jobs against appropriate and consistent criteria

Methodology focuses on the content of the job as currently designed






27



Market Pricing Methodology

Market data was gathered, via local data sources and Hay Group’s compensation databases, in order to determine First 5 LA’s competitive market position

All compensation data was updated to reflect a common effective date of July 1, 2014

All data pulled from national data sources was adjusted by a geographic differential of 12.4% to reflect the cost-of-labor in the Greater Los Angeles Area*

After reviewing internal job levels and competitive market data, Hay Group developed a salary structure designed to help First 5 LA establish internal pay equity and external competitiveness

*Determined using Economic Research Institute’s Geographic Assessor and Hay Group’s 2013 compensation database.

28



Selection of benchmark positions

In order to study First 5 LA’s market competitiveness, 34 positions were selected to be surveyed

This sample represents 28% of the jobs and 67% of the incumbents in the organization

We chose jobs based on the following criteria:

A selection of different levels across departments and job families

“Journey” or fully-qualified level

Positions that can be reliably matched to the market (i.e., roles that tend to be found in most organizations)

Positions that were likely to have a significant number of matches among market data sources

A list of all benchmark positions can be found on the following slide

29



Benchmark positions Chief Operating Officer

Chief Program Officer

Chief Administrative Officer

Director of Research & Evaluation

Director of Policy

Director of Program Development

Assistant Director of Best Start Communities

Director of Information Technology

Program Officer III, BSC

Program Officer III, Community Investments

Finance Manager

Public Policy Manager

Program Officer III, Grants Management

Government Affairs Manager

Contract Compliance Manager

Marketing Manager, Place-Based

Program Officer III, Program Development

Program Officer II, BSC

Program Officer II, Community Investments

Research Analyst III

Policy Analyst II

Contract Compliance Officer II

Program Officer II, Grants Management

Program Officer II, Program Development

Research Analyst II

Economic Analyst II

Staff Accountant II

Webmaster

Graphic Artist

Network Administrator

Executive Assistant , CAO

Data Coordinator

Administrative Assistant, BSC

Accounting Technician

30


Internal Analysis

31


Internal Analysis

Job Levels by Content

We worked closely with the HR team and leadership at First 5 LA to validate job measurement findings and applied significant rigor to the job content analysis because we believe consistent internal measurements are important for employee development, salary structure development, overall fairness, and also provide a reliable map to the external market

We compared different roles at similar content levels across the organization, even if the type of job they do is different

We identified differences and relativities between senior and subordinate roles in a reporting ladder

This helps to check the evaluation of roles but is also an important tool for organizational design

Hay Group delivered a training seminar to the HR Staff in our job measurement methodology

All job evaluations and resulting internal relationships have been reviewed and validated by leadership and First 5 LA HR staff

32


Internal Analysis (cont’d)

Job Content LevelsLevel Descriptors

21+

Highly seasoned professional directors overseeing a major functional areas or departments. Focuses primarily on setting long-term strategies and objectives for a function which is relatively homogeneous nature with necessity for integrating into the overall business objectives of the company. Relatively high degree of autonomy in taking action to set operational goals given general managerial direction and functional policies.

20

Advanced level functional directors of homogeneous activities or departments. Involves the longer-term strategic planning and budgeting of all areas within the function with first-line managers responsible for daily operational implementation of action plans. Actions are typically directed by specific functional precedents and the achievement of circumscribed operational activity.

19Functional Managers with responsibility for managing the daily operations of department(s) or work unit while developing short to medium-term action plans for meeting functional goals. Work often accomplished through subordinate supervisors or project leaders. Consultative or research/analysis positions with a long-term development or advisory focus.

18

Primarily composed of functionally proficient positions typically managing the daily operations of a department or a group. Requires a high degree of human relation skills for managing subordinates or working with external contacts. Also may be advanced technical positions requiring a high degree of innovative and conceptual thinking. Problems solving skills focus on broad operational and strong functional issues and heavy tactical initiatives. Quarterly or annual focus.

17Primarily composed of seasoned professional positions with extensive experience. Typically a manager of a small department or area or team / project leader of a technical function. Problem solving skills focus on broad operational and strong functional issues. Monthly to quarterly focus.

16Primarily composed of highly proficient seasoned professionals. Managers of programs and events, senior individual contributor or entry managerial position over other junior level professionals. Interprets polices to develop procedures for others to use. Project based, weekly to monthly focus.

33



Job Content Levels (cont’d)Level Descriptors

15Primarily composed of professional positions responsible for running multiple programs / award categories. Typically functions as a supervisor of clerical or administrative positions or entry level individual contributor professional role - may work independently on routine assignments. Uses and administers complex and diverse procedures. Daily to weekly focus.

14This level has seasoned individual contributors with a focus on task execution and managing and delivery of medium to large projects. They interact and coordinate within and across departments to meet deadlines/ accomplish tasks. Weekly focus for planning and execution.

13Primarily composed of individual contributor positions involving planning, coordination and execution of small projects. Follows diverse procedures in conducting duties. Receives general work instruction and tends to be focused on daily progress and results.

12

Primarily composed of advanced or lead clerical jobs using specialized knowledge or skill; also seasoned technical jobs are found at this level. Jobs follow a number of more complicated procedures. Jobs at this level are typically confronted with multiple choice situations and through prior exposure/experience have learned which choice is most appropriate to the situation.

11Mid-level administrative, production, technical or customer service jobs requiring a thorough knowledge of area supported. Usually requires high school diploma plus a few years experience or additional technical training. Competence achieved in 1 to 2 years. Work generally consistent day to day with minor variation week to week. Work often process focused.

10Clerical, processing, or production jobs requiring an understanding of general office work routines and procedures in a vocational skill. Competence usually occurs within 6 months to one year. Work generally consistent day to day. Work often process focused, rather then task focused.

34



Evaluated job content (Hay Grades) This table shows a brief description of the type of role associated with each evaluated

job content level (Hay Grades)

Description Hay Grade

25242322212019181716151413121110

Administrative/ Support Staff

Executives

Functional leaders and highly seasoned professionls

Entry to mid level professionals

35



Findings

Hay Group examined the relationship between base salary and job content levels (determined during the job evaluation phase)

There is generally a positive relationship between evaluated job content and base pay (as job size increases, pay increases)

Pay dispersion is seen at some job content levels. This is an appropriate HR practice and is typically due to:

Varying years of service

Employee’s salary previous to First 5 LA

Outstanding individual performance

Pay pressure in the external market on particular jobs and/or skill sets

There are several positions we identified that appear to be paid inconsistent with their internal value to the organization

As noted, this re-confirms the need for a leveling structure which reflects the relative ‘size’ of each job

36



FLSA Review

Hay Group used job descriptions to assess the classification status under the Fair Labor Standards Act

A total of 45 positions were reviewed

Observations

Most classifications specifications were accurately reflective of the existing exempt/nonexempt rules set forth in the Fair Labor Standards Act

Exercise of discretion and independent judgment

Primary duties performed

Salaried or hourly pay

Hay Group does not practice law; we recommend the classifications be reviewed by a labor attorney to validate our findings.

37


Market Analysis

38


Market Analysis

Defining the Market

Hay Group and First 5 LA worked together to construct an external market for comparison by utilizing a combination of sources representing organizations with which First 5 LA might compete for employee talent:

Hay Group’s US Executive Compensation Report

Hay Group’s US General Market Professional/Managerial Report

Local city and county data, e.g. City of Los Angeles, County of Los Angeles

Local organizations from whom First 5 LA may recruit from/lose staff, e.g., UCLA, County of Los Angeles, etc.

All market data were updated to July 1, 2014

Market figures represent a consensus of relevant position matches, using a combination of job content and size (not job title), from survey sources listed in this report

39


Market Analysis (cont’d)

Survey Matching Methodology Hay Group matched each benchmark position to survey data based on similar job

content levels

Market results are calculated according to the measures below: P25 is the 25th Percentile

75% of the data is above this point, and 25% below

P50 is the 50th Percentile

50% of the data is above this point, and 50% is below

P75 is the 75th Percentile

25% of the data is above this point, and 75% is below

Geographic Cost-of-Labor Differential for Hay Group market data In cases where LA County data cuts were unavailable for a position match, a

geographic differential was applied to the market data, to reflect a differential in pay practices in the LA County area versus national average

A geographic differential of 12.4% was used, based on data from the Economic Research Institute and Hay Group survey sources

40


Market Analysis (cont’d)

Benchmark Job Analysis Findings

Overall, some variation was found by grade level:

Support, administrative positions and entry to mid-level professionals (levels 13-15) tend to be paid at market

For seasoned professional roles and functional leaders (levels 16-20), there is less differentiation in base salary between different grade levels than is seen in the market –First 5 LA pay practice tracks lower than the competitive market

Higher-level directors and executives (levels 19 and above) generally fall below the market, but move closer to the market at the executive levels

41



42



First 5 LA provides a full range of benefit programs to its employees that varies in market competitiveness depending on salary:

The benefits program for employees earning up to $100,000 is above the market median, due in large part to the competitive health care program

The benefits program for higher paid employees approximates falls below the market median due to the less competitive retirement program and caps on death and disability benefits

The following pages summarize First 5 LA’s competitive position relative to the comparator market for each benefit component

The three page chart outlines First 5 LA’s market position and highlights the key drivers of that market position

The graphs show First 5 LA’s market position as a function of salary

Please refer to the appendix for a description of the benefits valuation methodology

A general market comparator group was used for this benefits analysis. There are 785 organizations in Hay Group’s current benefits database and include organizations from all industries, both public and private sector

43


Benefit Area

Market Position

Key Findings≤ $100K > $100K

Total Benefits

P50 – P75 < P50Total benefits position varies based on salary with employees at lower salary levels more competitive than higher paid employees

Total Retirement

P25 – P50 P25 – P50

First 5 LA provides a 403(b) retirement plan that matches employee deferrals based on service - 1% after 1 year of service up to 6% at 6 years of service – subject to 3 year vesting. First 5 LA’s match schedule is not prevalent in the market; however, the

level of match is competitive when compared to defined contribution programs. When considered on a total retirement basis, which includes the 32% of the

market that provides a defined benefit plan, First 5 LA’s market position decreases to below median. Any nonqualified plan First 5 LA may have was not considered in this

analysis

Benefits Market AnalysisFIRST 5 LA VS. BENEFITS MARKET

44


Benefit Area

Market Position


Healthcare > P75 > P75

First 5 LA requires NO employee premium contributions for medical (HMO only), dental or vision coverage. The PPO medical plan does require employee premium contributions; however, most employees are not enrolled in the PPO Prevalent market practice requires contributions of 20% to 25% premium

contributions for single and family coverage The HMO is the most prevalent plan for First 5 LA employees, which

maintains low out of pocket costs – no deductibles or coinsurance, low copayments (office visits and prescriptions) Prevalent plans in the market are PPOs that include deductibles,

coinsurance (percentage paid by employer/employee, typically 80/20 or 90/10) and higher out of pocket maximums Dental coverage is typically cost shared in the market and requires more

employee out of pocket costs, including a deductible and annual maximum Vision coverage is typically employee paid in the market

Death P75P25 –P50

First 5 LA’s basic benefit of 2 times base salary up to a $200,000 maximum is at the market P75, as a benefit of 1 times base salary is most prevalent in the market. The $200,000 maximum diminishes the market position, as salary increases


45


Benefit Area

Market Position


Disability < P25 < P25

First 5 LA provides 10 days of sick leave annually, with no maximum In the market, limited sick days combined with employer paid short term

disability (STD) coverage is prevalent First 5 LA also provides long term disability (LTD) coverage – 66 1/3%

benefit up to a $6,000 month, following a 90 day elimination period While the LTD benefit is aligned with the market, the limited income

replacement provided for short term disability decreases First 5 LA’s market position First 5 LA employees do contribute to the State disability program, which

improves the disability income replacement for all employees; however, the State program is not reflected in the value as it is not paid for by First 5 LA

Other Benefits & Allowances

> P50 > P50

First 5 LA provides transportation benefits to employees, up to a $60 monthly reimbursement for parking or transit First 5 LA also provides an EAP, discounted services, and pre-tax spending

accounts, which are all prevalent in the market Tuition reimbursement is also prevalent in the market, but is not provided by

First 5 LA Other Benefits includes: Transportation, telecommuting, adoption and tuition

assistance, access to pre-tax spending accounts, EAP and discount programs. Allowances include: car, club, and fitness


46


Benefit Area

Market Position


Holidays & Vacation

Above Market

First 5 LA provides 12 paid holidays, which is more than typical market practice of 10 holidays First 5 LA’s service based vacation schedule provides 10 days annually up

to 3 years, 15 days in the 4th year and 20 days thereafter First 5 LA provides a higher accrual at lower service levels to its employees,

but the 20 day maximum is on the low end the typical range of 20 to 25 days


47


Benefits Market Analysis –Findings & Observations

The mix of First 5 LA’s benefits is not aligned with the market and relies heavily on the strength of its health care program for its market position.

First 5 LA may want to consider the following changes to improve market alignment, increase market competitiveness, and enhance recruitment and retention of employees:

Healthcare – Cost sharing in the form of employee premium contributions or deductibles and coinsurance should be introduced. The health care program provides significant value to First 5 LA’s compensation package, especially for employees at lower salary levels. Any changes should be considered in conjunction with health care reform, as First 5 LA’s rich plan design may be considered a Cadillac plan if not reduced.

Retirement – While the level of contribution is competitive, the program design is not aligned with the market. In order to better compete with public sector employers, a 2 prong approach to retirement contributions is recommended – 403(b) match and non-elective employer contribution – along with changes to plan eligibility.

48



Disability – Introduce an employer paid STD benefit or enhance the sick leave accrual to ensure employees have adequate income replacement in the event of disability. The State disability program provides good income replacement, so adding employer paid STD may not be not critical for First 5 LA, given the current sick leave and LTD.

Death – First 5 LA may consider decreasing the basic death benefit to 1 times salary, as it exceeds market median practice. Alternatively, if First 5 LA maintains the 2 times salary benefit, it should consider increasing the maximum to ensure the benefit is not capped for higher paid employees

Tuition Reimbursement – First 5 LA should consider implementing a tuition reimbursement policy to be aligned with typical market practice and improve its ability to retain employees.

49



The change to the mix of First 5 LA’s benefits based on the recommended changes results in better alignment with the typical market practice, as shown below at the $50,000 and $100,000 salary levels:

$50,000

Salary

$100,000

Salary

10%

71%

2%1%2%

14%

Current

Retirement

Healthcare

Disability

Death

Other

Statutory

16%

61%

3%1%5% 14%

Model

17%

59%

5%1%2% 16%

Market Median

16%

56%

3%2%

2%

21%

Current

Retirement

Healthcare

Disability

Death

Other

Statutory

24%

46%

5%1%4%

20%

Model

24%

42%

8%1%

2%

23%

Market Median

50


Appendix – Hay Group’s job evaluation methodology

51


Job content

Overview of job content

Organizations use jobs as a tool for managing people

Jobs are defined by the results the jobholder is expected to deliver (outputs), and the types of capabilities and competencies the jobholder needs to have to be successful (inputs)

Job measurement

The process of comparing the content of one position/classification relative to another, based on a set of common factors

The focus of job measurement is on the relative weighting of positions

52


Work measurement: A definition

Determining the value of work to the organization, using measurement scales of common compensable factors

A process to measure the size of jobs against appropriate and consistent criteria

Focuses on the content of the job as currently designed

Factors not considered:

Individual qualifications, performance and longevity

Work measurement is about jobs, not people

Existing pay

Existing titles

External market

Labor prices are determined by supply and demand

53


Why work is measured

To reflect the values of the organization

To clarify organization structures and job accountabilities

To determine hiring criteria and qualifications

To develop a basis for performance management

To establish a credible and consistent hierarchy of job values for the organization

To facilitate the development of a pay structure

To enable comparisons to be made to assess internal pay equity, based on measured job content

To facilitate making pay comparisons to the external labor market

54


The basic premise and components

Basic premise:

All jobs exist to contribute in some way to the organization






It does not determine them

55


Work comparison process

Perceivable difference in measured job content is proportionate to that which is being measured (based on Weber’s Law of “Just Noticeable Difference”)

A “just noticeable difference” is defined in Hay evaluation terms as a 15% progression in point values in all of the work measurement charts

Examples: 5057 6666767687...87...

56


Work comparison process (cont’d)

Nostep

Not a significant difference in size.

Onestep

Just noticeable difference, perceived only after careful thought.

Twosteps

Clear difference, quite evident after some consideration.

Three steps

Very obvious difference, needing little or no consideration.

50

57

66

76

87

100

115

132

152

In other words, when comparing one job factor to another, and considering “steps” as “grades”…

57


The Know-How factor

To achieve results, jobs require a certain level of knowledge, skills, and experience

Know-How is the factor we use to measure the sum total of knowledge required of a job, however acquired

Formal education, experience, growth in skills

Know-How has three dimensions:

Technical and Specialized Knowledge

Management Integration

Communicating and Influencing Skills

The knowledge required of a job, or “input”

58


The Problem Solving factor

Using Know-How to achieve results, jobs are designed to analyze and resolve problems

Problem Solving is the factor we use to measure the nature and complexity of the problems and challenges that jobs must face

Self-starting thinking, reasoning

Problem Solving has two dimensions:

Thinking Environment

Thinking Challenge

The thinking, processing, analyzing or “throughput” of a job

59


Based on the premise that all jobs exist to achieve results

Accountability is the factor we use to measure the output of jobs

The answerability for an action and its consequences

What is the job designed to impact and in what way?

Accountability has three dimensions:

Freedom to Act

Impact

Magnitude

The accountability or “output” of a job

?

The Accountability factor

60


Benefits Valuation Methodology

61


The selected comparator organizations’ benefit programs are ranked according to the following percentile measures:

75% (P75) is a “high-end” measure

25% (P25) is a “low-end” measure

Median (P50) is a mid-market measure

Methodology:Comparator Database and Market Level

Marketplace data references for this report were drawn from the Hay Group Benefits Database. The comparator organizations valued by the Hay Methodology in this report include organizations contained in Hay Group’s current database plus.

75th Percentile (P75)

Median (P50)

25th Percentile (P25)

HIGHEST VALUE COMPANY

LOWEST VALUE COMPANY

62


Methodology:Hay Benefit Valuation Methodology

Hay Group utilizes a proprietary actuarial valuation methodology to evaluate benefit plans in terms of the cash equivalence of the benefits.

In establishing a program’s overall market competitiveness the Hay Benefit Valuation model uses “standard cost assumptions”, instead of a company’s specific costs, which eliminates the impact of such cost variables as demographics, geography, funding method, or purchasing power, etc.

The utilization of “standard or common cost assumptions” provides a uniform quantitative evaluation method which produces values based solely on the level of the benefit provided.

The valuation model places a relative value on each specific feature of a benefit program. The value for each plan is then compiled to produce an overall program value appropriate for market comparison. In general, the more generous a particular feature is the higher the relative value.

63


Methodology:Hay Benefit Valuation Methodology

The valuation method is applied to a full range of employee benefits including:

Healthcare Insurance (medical, dental, prescription, vision, physical exams);

Retirement Plans (defined benefit and defined contribution plans);

Death Benefits (employer paid and voluntary life insurance plans);

Disability and Sick Leave (sick leave, short-term, long-term disability plans); and

Other benefits such as Tuition Reimbursement, Flex Plans, Statutory Benefits, etc.

Benefit values are calculated on an “Employer-paid” basis. Employer- paid benefit values are discounted to reflect the relationship of any required employee contributions to the program’s total value. For fully employee-paid plans, the discount is 95% (some value remains due to such things as group purchasing power, etc.). For fully employer-paid plans, there is no discount, and for cost shared plans, a pro-ration is applied.

64


Methodology:Internal Equity

Internal equity is the inter-relationship between reward opportunities within an organization. Many benefit plans (death benefits, disability, retirement, etc.) have features or benefit levels that are related to salary. Internal equity is achieved in a benefit program when the relationships between the benefit level and the employee salary are consistent within each employee population (Note: While benefit program differences can often be found between employee classes, most organizations provide consistent policies within a class).

Organizations that wish to achieve internal equity within a benefit plan typically establish benefit levels that are based on uniform salary multiples (i.e. death benefits of one times salary or disability income replacement level of 60% of salary).

In order to observe the internal equity of an employee benefits program, benefit values are typically illustrated at several salary levels. For this review of benefits, values are shown for salaries from $20,000 to $300,000

65

Item 4 - First 5 LA · Hay Group worked with First 5 LA leadership and HR to learn about First 5...

Documents

Transcript of Item 4 - First 5 LA · Hay Group worked with First 5 LA leadership and HR to learn about First 5...