employee salaries & benefits Commission on Employee Retirement - PowerPoint PPT Presentation

Octob ober 2016 Prior JLARC studies of state employee salaries & benefits Commission on Employee Retirement Security & Pension Reform

JLARC is a joint commission with 15 members General Assembly Senate House e of Delega egates es JLARC (15 Member mbers) s) 9 House Finance nce 5 Senate Appropri priat ation ions Commi mmitt ttee ee Commi mmitt ttee ee 1 ex officio 1 icio (2 member mbers) s) (5 member mbers) s) JLARC C Staff JLARC 2

2016 JLARC members Delegate Robert D. Orrock, Sr., Chair Senator Thomas K. Norment, Jr. ,Vice-Chair* Delegate David B. Albo Senator Ryan T. McDougle Delegate M. Kirkland Cox Delegate John M. O’Bannon III Senator Emmett W. Hanger, Jr.* Delegate Kenneth R. Plum Senator Janet D. Howell Senator Frank M. Ruff, Jr.* Delegate S. Chris Jones* Delegate Lionell Spruill, Sr. Delegate R. Steven Landes Martha Mavredes, Auditor of Public Accounts (Ex-Officio) Delegate James P. Massie III* *Also member of Commission on Employee Retirement Security & Pension Reform JLARC 3

JLARC conducts evaluations of state agencies and programs, and oversight  Informs policy makers  Ensures government programs comply with legal authority and funds are used appropriately  Enhances performance of agencies and programs  Improves effectiveness of services to citizens  Produces cost savings and efficiencies JLARC 4

General Assembly designates topics for evaluation by JLARC  Typical process is through a Joint Resolution of House or Senate  Periodically directed through other means (Appropriation Act, Resolution of the Commission) JLARC 5

Agenda  2008 study  2011 study  Lessons learned JLARC 6

Key Findings from 2008 JLARC study  Total compensation is an important, but not the only, factor that influences recruiting & retention  State’s total compensation was 96% of market median  More strategic and data-driven approach needed to managing total compensation JLARC 7

Employees chose state service for a variety of reasons, including job stability and benefits Best job available, 7% Believe in mission, 7% Misc. / Unique reasons, 23% Best fit for skills / interests, 11% Leave benefits, 10% Job stability / security, 18% Retirement benefits, 10% Health benefits, 14% Source: JLARC staff survey of classified state employees, 2008. JLARC 8

Employees left state service for a variety of reasons, including low salary and poor mgmt Misc / Unique Low salary, work-related 31% reasons, 15% Lack of career path, 10% Poor management, 15% Misc. / Unique non-work reasons, 29% Source: JLARC staff survey of employees who left state employment, FY 2008. JLARC 9

Salary mattered most among aspects of total compensation, but importance varied by age  Salary was most important aspect of total compensation for employees of all age groups  4x more important than second most important aspect (health insurance)  Less important as employees got older  Retirement plan was less important for younger employees 7x more important for employees 61 to 65 than for  employees under age 26  Work / life balance was 6x more important for employees under age 26 than for those age 61 to 65 JLARC 10

Mercer: Virginia’s cash compensation was below, but benefits were above, the market median (2008) % of Market Median 140% 120 Total Total Benefits = 108% 100 Compensation = 96% 96% Total 80 Cash = 88% 88% 60 Ret Ret Medical Dental Salary (DB) 40 (Medical) Ret 20 (DC) Bonus 0 JLARC 11

Mercer: Competitiveness varied by job type % of Total Range of Competitiveness # of Job Roles Job Roles (% of Market Median) in Range Benchmarked <90% 7 16.3% 90% - 110% 23 53.5 >110% 13 30.2  Job roles with above-average turnover tended to receive less competitive total compensation JLARC 12

Agency requests for salary increases often lacked information to assess need for funds  Reviewed FY 2009 agency budget decision packages requesting salary increases  Most packages did not sufficiently address Whether purposes of salary (recruit, retain, motivate) were  being achieved How salaries & benefits compared to other employers  Impact of the agency’s inability to achieve purposes  JLARC 13

2008 JLARC recommendations  Annual total compensation statement for each employee  Develop total compensation strategy  Create compensation advisory council  Create additional structure within job roles  Require budget decision packages requesting salary increases to address purpose, comparison, & impact JLARC 14

Agenda  2008 study  2011 study  Lessons learned JLARC 15

Key Finding from 2011 JLARC study  State’s total compensation had fallen to 94% and 90% of market median JLARC 16

Mercer: Total compensation for VRS Plan 1 employees was 94% of market (2011) % of Market Median 140% 120 Total 100 Compensation = 94 94% 80 Medical Ret 60 (DB) Salary 40 20 Ret (DC) 0 JLARC 17

Mercer: Total compensation for VRS Plan 2 employees was 90% of market (2011) % of Market Median 140% 120 Total 100 Compensation = 90% 90% 80 Medical Ret 60 (DB) Salary 40 20 Ret (DC) 0 JLARC 18

Total compensation has continued to evolve since completion of 2011 JLARC study  In 2011, Mercer partially attributed state competitiveness to the defined benefit retirement plan  Further changes made to retirement plans since completion of study, most notably the hybrid retirement plan  No comprehensive benchmarking performed since implementation of hybrid retirement plan JLARC 19

Agenda  2008 study  2011 study  Lessons learned JLARC 20

Analytical rigor, comprehensiveness, & specificity matter when comparing salaries & benefits  JLARC contracted with Mercer human resources consulting for both 2008 and 2011 studies  Rigorous methodology to monetize and compare benefits across employer types  Comprehensive access to data on public and private sector employer salaries and benefits  Job and employer-specific, rather than aggregate, comparisons  Much more useful if need to prioritize salary or other compensation actions to specific jobs or agencies JLARC 21

Mercer broadly analyzed total compensation (2008), then focused more on retirement plan (2011) Study Major Mercer er Deliv iverab ables es Cost st 2008 • Analysis of total compensation trends & best $318,450 practices • Assessment of effectiveness of state total compensation • Comparison of value of state employee salaries & benefits to other major employers • Options & impact 2011 • Value & effectiveness of retirement programs $143,800 • Comparison of value of state employee salaries & benefits to other major employers • Options & impact JLARC 22

Key questions for consideration  How has state’s relative competitiveness for salaries and benefits changed?  What matter more to workers; salaries or benefits?  Salary was more important for all age groups in 2008 JLARC study  Are there cost- effective ways to strengthen the state’s competitiveness in the employment marketplace? JLARC

Discussion? Questions? Justin Brown, Associate Director JLARC JLARC http://j tp://jlar arc.vi .virginia.g ginia.gov/ 24 (804) 786-1258 1258