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Strategies to Attract and Retain a Capable Transportation Workforce (2011)

Chapter: Chapter 16 - Restructuring Benefits and Compensation

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Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
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Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
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Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
×
Page 116
Page 117
Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
×
Page 117
Page 118
Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
×
Page 118
Page 119
Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
×
Page 119
Page 120
Suggested Citation:"Chapter 16 - Restructuring Benefits and Compensation." National Academies of Sciences, Engineering, and Medicine. 2011. Strategies to Attract and Retain a Capable Transportation Workforce. Washington, DC: The National Academies Press. doi: 10.17226/14475.
×
Page 120

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114 Chapter 16: Restructuring Benefits and Compensation Well-designed benefit packages and organizational policies play a vital role in employee recruitment and retention. In a difficult economy, where salary freezes and even reductions are prevalent, agencies may adopt benefits programs that address some of the needs of employees, yet are more cost efficient than salary increases. In this chapter, we present challenges, strategies, and workforce practices related to “Restructuring Benefits and Compensation.” Exhi bit 16-1 provides a snapshot of the chapter. Exhibit 16-1 Snapshot of Chapter 16 Chapter Road Map Concept and Definition The restructuring of benefits and compensation systems enables agencies to remain competitive with other organizations’ recruitment and retention practices. Workforce Challenges …..……........ 115 Anti-Public Sector Sentiment High Expectations of an Employer Aggressive Wage Competition Better Compensation and Responsibility Industry Strategies .……………….. 115 Research Competitive Compensatio n Supplement wi th Alternative Benefits Packages Workforce Practices …..…………... 116 Santa Clara Valley Transportation Authority (VTA) Medical Opt-Out Program North Carolina DOT Competency-Based Pay Program Definition of Restructuring Benefits and Compensation: Involves adopting benefits programs that address the needs of employees. Often these benefits are more cost efficient than salary increases. As a result, these practices help agencies to better recruit and retain em ployees. Workforce Pipeline Target Area Target Career Stages K-12 Comm. Colleges 4 year Colleges Graduate School s Entry-Level Staff Mid-Career Staff Senior Leaders Retirees Restructuring Benefits and Compensation Chapter 16 Target Area TRANSPOR ATT ION WORKFORCE PIPELINE

16.1 Workforce Challenges. Programs related to “Restructuring Benefits and Compensation” are typically designed to address challenges associated with attracting and retaining qualified individuals who are likely to leave the organization for a competitor able to offer better benefits. These challenges should be carefully considered before selecting the program that would best fit the needs of your agency. For example, these are common challenges agencies face: Anti-Public Sector Sentiment. Some transportation agencies are facing anti-public sector sentiment in their local communities. Although these negative perceptions are not typically grounded by facts, they continue to guide people’s decisions about employment in the public sector and are detrimental towards recruitment and retention efforts. As a result, agencies should continue to invalidate these misperceptions and accentuate the notion of public service (i.e., value/meaning of work), and benefits (e.g., job stability, employee leave, retirement packages) associated with a career in the industry. High Expectations of an Employer. Younger workers tend to differ from older workers in terms of their expectations when it comes to salary, tenure, responsibility, and work schedule. Organizations are challenged with younger workers who attempt to negotiate their salary based on their perceived skill level. Hiring a younger individual at their requested salary could lead to dissension, especially if the offer is discovered by lower-paid incumbents. Organizations must be savvy about where they set their compensation levels and provide justification for doing so. Many younger workers feel that changing jobs around every 5 years is an important part of building their skill set; however, older generations consider 5 years to be a very short tenure with an organization and an indication of poor commitment. Lastly, the younger workforce expects to have flexible schedules. This expectation can be difficult to meet in jobs that work around tight schedules. Organizations are struggling to find ways to alter legacy jobs to meet these expectations. Aggressive Wage Competition. Organizations struggle to offer a compensation package that rivals the private industry. Almost every participant indicated that their agency loses applicants, especially those needed to fill middle to upper management positions, to the private industry for higher salaries and superior benefits packages. Furthermore, some applicants accept positions with public organizations for their training programs, but once certified, will leave and find work in the private sector where they receive a higher salary. Many organizations have succumbed to this wage competition instead of developing more strategic methods of recruiting workers. Organizations focus on filling unskilled positions without having long-term development plans for these new employees, leaving organizations “bottom-heavy” and forcing them to lay off employees when business slows down. Managers begin to perceive this transient workforce as an industry norm and do not motivate new unskilled employees to enroll in training programs because of the risk of losing those employees once skilled. The issue is that a cycle emerges which results in a lack of skilled workers. Better Compensation and Responsibility. Participants indicated that employees are often willing to leave their current positions for better compensation and benefits. Specifically, organizations struggle with retaining employees who are in the middle of their careers (e.g., 5 to 10 years) because this is about the time when private sector competitors may begin to offer much more than the public sector can. Participants also suggested that the private sector tends to offer greater responsibilities to new hires because these private sector organizations are not as deeply rooted in seniority-based systems. 16.2 Industry Strategies. Researchers and program managers identify the following programmatic strategies when describing industry efforts in “Restructuring Benefits and Compensation” (see Exhibit 16-2). While these strategies represent the general direction of human resource (HR) Restructuring Benefits and Compensation 115

departments across the nation, it is important that the specific needs of your agency are used to guide the development and implementation of a program in your agency. Exhibit 16-2 Industry Strategies: Restructuring Benefits and Compensation Strategy Strategy Description Research Competitive Compensation Public agencies often find the salary differential between public and private sector jobs to be a significant factor in job decisions. To ensure public sector agencies remain competitive, they should conduct regular assessments to determine whether adjustments need to be made to the baseline as well as to determine the frequency of salary adjustments. Recent research indicates that im proving compensation practices such as the structure and timing of wages can increase employee retention (KFH Group, Inc., 2008). Organizations who participated in our benchmarking study indicated that wages are a primary tool for affecting retention. Participants from both public and private organizations used salary surveys to determine how much em ployees in a particular job are typically paid. Organizations have started using different salary scales in parts of the state where there are a lot of private industry competitors. At times, when market research identifies significant compensation differentials, adjustments can lessen the competitive advantage of private industry. Some organizations are able to offer matching compensation for in-demand skill areas. If a potential candidate can provide evidence that they have been offered a stronger compensation package, the organization may attempt to match the offer. Supplement with Alternative Benefits Packages Organizations have begun to supplement their traditional benefits with telecommuting, schedule flexibility, and job autonomy. Employees might see these benefits as a reason to remain with the organization even though they have an opportunity to make more money elsewhere. Some organizations indicated that an effort to redesign their benefits programs helped to retain their younger workers (e.g., school options, technology training, and schedule flexibility). These redesigns include allowing employees to pick the benefits that meet their specific needs (i.e., cafeteria-style benefits). Retirement and development (tuition) benefits were also mentioned by organizations as strong solutions to retention challenges. 16.3 Workforce Practices. Fourteen workforce practices that were designed to assist in making the process of “Restructuring Benefits and Compensation” within transportation agencies efficient and effective were reviewed, and we identified two workforce practices that were the most noteworthy within this context: Santa Clara Valley Transportation Authority (VTA) Medical Opt-Out Program North Carolina DOT Competency-Based Pay Program For these two practices, we conducted a case study. Summaries of the two case studies are presented below. The full case studies can be found on the TRB website at http://trb.org/Main/Blurbs/164747.aspx 116 Strategies to Attract and Retain a Capable Transportation Workforce

as part of Volume II: Supplemental Materials. The full case study descriptions detail each practice’s background, implementation, maintenance, evaluation, and transferability. Restructuring Benefits and Compensation 117

118 Strategies to Attract and Retain a Capable Transportation Workforce Santa Clara Valley Transportation Authority (VTA) Medical Opt-Out Program Job Type: All ROI: Short-term Generation: All Key Program Highlights: o Addresses a desire by employees to have a choice when it comes to health insurance options and to not be required to pay for health insurance when they are already covered by another plan o Offering greater flexibility when it comes to health insurance coverage has increased morale and satisfaction among employees o Effective method of addressing high costs while ensuring that all employees have health insurance coverage Santa Clara Valley Transportation Authority (VTA) Medical Opt-Out Program. The Santa Clara Valley Transportation Authority (VTA) employs roughly 2,100 people, of which 650 work in maintenance. In addition, VTA is combined with the Congested Management Agency (CMA), which adds another 800 employees to the total workforce. VTA’s Opt-Out program has been in existence for 10 years. VTA has a policy that all employees must have health insurance to be employed. Originally, employees were required to enroll in VTA’s health insurance. The Opt-Out program was intended to address a desire by employees to have a choice when it came to health insurance options and to not be required to pay for health insurance when they are already covered by another plan. VTA’s Medical Opt-Out program provides full-time employees with the opportunity to choose not to participate in the agency’s health insurance program and receive a taxable monthly payment if they have other coverage. For example, employees may have other coverage through their veteran status or because they are covered under the health insurance of a family member that works outside of the agency. The option provides an incentive of 50% of the employer cost meaning that if the employee (1) has other coverage and (2) chooses to opt out, he/she will be receive the extra money in his/her paycheck. Around 1998, the HR Manager for VTA developed a written proposal and submitted it to the General Manager of VTA for evaluation and approval of the Opt-Out program. In the proposal, the manager included evidence of the program’s success at another agency (i.e., BART), the cost savings to employees, and the potential cost savings for the agency. The manager also highlighted the potential for increased morale and satisfaction among employees who were given more flexibility when it comes to health insurance coverage. Once approved, employees were notified by an agency-wide memo explaining the new Opt-Out program. New employees learn about the program during new hire orientation. The program has produced the desired results. From anecdotal conversations with employees, VTA has concluded that all employees are more satisfied that they have an option when it comes to health insurance and the 5% of employees that use the Opt-Out option because of alternative coverage are even more satisfied due to their financial incentive. This program is an effective method of addressing high costs while ensuring that all employees have health insurance coverage. This program is specifically useful during periods where health insurance costs are increasing.

Restructuring Benefits and Compensation 119 North Carolina DOT Competency-Based Pay Program Job Type: All ROI: Short- to Mid-term Generation: All Key Program Highlights: o Applies to transportation workers, supervisors, engineers, technicians, and the information technology group o Competency blocks were developed based on the initial skill block system in order to be used across state jobs o Due to a lack of funding, competency blocks are only used for personal career development North Carolina DOT Competency-Based Pay Program. The North Carolina Department of Transportation (NCDOT) employs roughly 13,000 people, of which 7,500 work within the Division of Highways. NCDOT’s competency-based pay system was implemented based on an unfunded mandate by the Office of State Personnel (OSP). The OSP was seeking to implement a system that could be used across all state offices. When they realized the skill block system implemented in the late 1990s could not be used across state jobs due to its specificity, the blocks were generalized and broadened into competencies. The five skill blocks were collapsed into three groupings of competencies. The OSP chose to pilot the program first with NCDOT before moving to other state agencies. For the competency-based pay system, there are three levels within three competency block groups: contributing, journeyman, and advanced. For example, a contributing transportation worker can be a Level 1, Level 2, or Level 3. Employees are granted the competency once they demonstrate proficiency in the competency. Some of the agency’s competencies have a specified time frame before the competency is obtained. For example, for a lead worker, the competency blocks require specific training and demonstration of the competency for 6 months prior to the employee being granted the competency block. Competency-based pay for transportation workers is based entirely on function. Competency blocks are set up based on the complexity of the function performed. For the agency’s supervisors, there are four different competencies. These competencies include: Planning and Organizing Work, Human Resource Management, Fiscal/Budget, and Technical Competency. NCDOT wanted to have a less subjective rating scale for the competencies than the “never,” “sometimes,” “always” convention so the agency conducted focus groups with workers and identified work examples that helped to define each of the competency blocks and make the process of assessment both more flexible and more refined. While the time required to develop these work examples cost the agency money, NCDOT has not specifically tracked the cost of the program. One of the challenges with the success of the program is that no funding has been provided to allow NCDOT to compensate employees who have achieved specific competency blocks. Thus, at this time, the competency blocks are simply used for personal career development and not used to make administrative decisions. At this time, the program only applies to transportation workers, supervisors, engineers, technicians, and the information technology group. The agency is still working through their accounting and clerical classifications. The ultimate goal is to have all the jobs and all of the state government positions switched to competency-based pay.

Other Example Practices To serve as an additional resource for agencies interested in “Restructuring Benefits and Compensation,” we have included a list of other practices that transportation agencies have implemented for this purpose. Additional information on each of the following practices can be found in one- to two-page summaries within the supplemental materials. Application of Malcolm Baldrige National Quality Award Criteria APTA Solutions for Workforce Challenges Digest Compensation and Benefits Packages Florida DOT Deferred Retirement Option Program HealthQuest State of Kansas Health and Wellness Program Incentive Premiums Job Benchmarking Performance Evaluations and Individualized Training Plans Salary Survey Telework Santa Clara Valley Transportation Authority Complete Compensation Workforce Development for the U.S. Freight Railroad The practice summaries include information, such as the lead organization, practice description, practice purpose, targeted participants, return on investment (ROI) timeline, influence of the economy, innovativeness, and resources to find out more information on the individual practices. 120 Strategies to Attract and Retain a Capable Transportation Workforce

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TRB’s National Cooperative Highway Research Program (NCHRP) Report 685: Strategies to Attract and Retain a Capable Transportation Workforce includes straight-forward, implementable practices that transportation Human Resources (HR) managers and hiring professionals can use to help improve the recruitment and retention of qualified employees in their organizations.

The report provides information on workforce challenges, industry strategies, and detailed descriptions of noteworthy practices within each of 15 recruitment and retention categories.

Volume II: Supplemental Material is available online as an ISO image, which can be used to produce a CD-ROM. Volume II includes an introductory document summarizing the content of the supplemental materials and provides full case studies and summaries of other example practices related to the recruitment and retention practices.

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