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Compensation Inequity between Two Comparable Positions

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Reviewed Date: March 29, 2021

Original Author: 
Hardy, Pat
Date of Material: 
May 24, 2011


Subjects:
Personnel--Compensation
Personnel--Classification
Utilities--Personnel

Compensation Inequity between Two Comparable Positions

Summary: 
MTAS assisted with the analysis of and recommendations for two similar positions, which, due to market effects, were being compensated at different rates.




May 24, 2011

Angie Lyons
City of Elizabethton
136 South Sycamore Street
Elizabethton, Tennessee 37643

Dear Ms. Lyons,
I met with yourself and Johann Coetzee concerning a “classification and compensation” problem. Following our meeting I interviewed Wastewater Construction Supervisor/Pretreatment Coordinator Eric Davis. I have also examined pertinent Job Descriptions, Job Class Code Listings, and the City’s Position Classification Plan.

The problem you confront has arisen over time, and as with many classification and compensation problems, time itself amplifies discrepancies in a Plan. In this case the problem began a number of years ago when the Water Treatment Plant Manager was hired at a higher rate than the person he replaced. The significant increase in salary coupled with the overtime/standby/call out pay for this position greatly increased the cost for the position. But it also resulted in a situation where the position was paid significantly more than their supervisor. Thus the WaterSystems Director salary was adjusted. Because the WaterSystems Director had pay parity with the Director of Wastewater/Engineering, the pay of this position was also adjusted. I mention this situation because it marks the first in a set of circumstances highlighting the “snowball” effect of adjustment in one part of the Plan and the effect it has on positions in another part of the Plan.

More recently, the Director of Water Systems replaced the Water Distribution Construction Supervisor position at a rate higher than his predecessor. Because this position traditionally had pay parity with the Wastewater Construction Supervisor/Pre-treatment Coordinator, this has created a situation of inequity between these two positions.

When hiring the new Water Distribution Construction Supervisor, the Director of Water Systems indicated she could not find a qualified person willing to be paid the City’s previously funded rate for the position. She instead negotiated a higher rate, thus creating the inequity. My examination of the two positions confirms what the City has known for a number of years. In fact the two positions should be paid the same. One can argue about the number of employees each supervises or the variations in the job responsibilities of each, but these arguments don’t hold water, and for years the City has recognized this. For example, although the Water Distribution Construction Supervisor is responsible for three three-man crews as opposed to wastewater’s two three-man crews, the Wastewater Construction Supervisor/Pre-treatment Coordinator is responsible for both distribution and pre-treatment.

As you can see, one deviation from the City’s Position Classification Plan can create a “snowball” effect, wherein the pay of one position affects the pay of others. This is why it is extremely important to have a “stop-gap” measure in the compensation system, and that measure should be the City’s PersonnelDirector. They should play a key role when deviations from the Plan are considered. In addition, the PersonnelDirector should be used to assist department heads in the recruitment of key personnel. An excellent example is shown in the recruitment of the Wastewater Treatment Plant Manager when difficulty finding an employee willing to work within the City’s funded pay scale occurred. In this case the PersonnelDirector worked with the Director ofWastewater/Engineering to utilize special recruiting techniques, which resulted in a good hire for the City at a rate commensurate with the existing wage scale.

It should be noted that a “market effect” is part of what has created a dysfunction it the City’s Position Classification Plan. When a pay plan is not funded for a period of years the wages therein don’t keep pace with wages paid in the market. This being the case, when a new employee is hired from outside they may expect wages commensurate with what is being paid in the market, not the lower wages paid by the City’s non-funded pay plan. At that point if a quality succession plan is not in place the only choice the City would have is to hire a lesser qualified applicant or to hire above the previously funded pay scale (the latter of which has created the situation described above).

Based on my analysis I would recommend the following:

1. That the Wastewater Construction Supervisor/Pre-treatment Coordinator be paid the same as the Water Distribution Construction Supervisor. The pay rate should be $23.49/hr., which is the rate the Water Distribution Construction Supervisor will be paid after completion of their certification (which the Wastewater Construction Supervisor/Pre-treatment Coordinator already possesses). I would recommend this adjustment be made retroactive for the Wastewater Construction Supervisor/Pre-treatment Coordinator to the point at which the Water Distribution Construction Supervisor was hired.
2. That no deviation from the City’s Position Classification Plan should occur without the approval of the City’s Personnel Director, unless such a deviation is authorized by the City Manager. The Personnel Director should be considered the “manager” of the Plan and as such should be responsible to maintain the integrity of the Plan. Only in extremely rare cases should a deviation occur.
3. All negotiations of pay extended to potential new hires, which are off the position’s minimum pay rate, as set by the City’s Compensation Plan, should be approved by the CityManager and/or the Personnel Director.
4. The City should consider contracting for another classification and compensation plan within the next few years or as funding becomes available. This is necessary because alterations to the Plan as described above have altered the classification-based relationship between positions, which is the foundation on which the Plan rests.
5. Status as an “exempt” or “non-exempt” employee should be based on the Fair Labor Standards Act, not on the City’s overtime policy. An employee can be “exempt” (from the overtime provisions of the FLSA) and none the less be paid overtime by the City.
I hope this brief analysis helps as you deal with a difficult situation. As discussed above the situation is brought about by forces you cannot control (movement of market wages) and forces you can control (offering wages to new employees above the existing pay scale). If I can provide any further assistance please feel free to call.

Sincerely,

Patrick Hardy
Municipal Management Consultant


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