Dear Riders and Taxpayers,
Metra has recently taken steps to implement a fair, consistent and competitive pay structure for its non-union workers. As a result of this process, the salaries of many of those workers are being adjusted. I want Metra riders and area taxpayers to understand why we felt it was important and necessary to take this action, and what it means as we move forward.
We are at the end of an open, deliberative process that began in 2011. That year, our consultant Blackman Kallick recommended that Metra address competitive compensation issues. Also that year, I started at Metra, and I realized that Metra had never conducted what’s called a Classification and Compensation Study for non-executive positions. Such studies are done routinely by well-run companies. They want to be in the best position to attract and retain qualified workers by insuring they pay their professionals properly and competitively for the work they perform.
What is a Class and Comp study? A class and compensation study looks at an organization’s jobs to determine the proper grouping of jobs into job categories, and the associated compensation for each job category or grade. Classification involves grouping jobs that do similar types of work, based on duties and responsibilities into groups or grades. A compensation study reviews an organizations job groups or classifications to determine a fair and competitive salary range. Both types of studies include a review of both internal and external data on job duties and responsibilities and compensation. It’s not about giving agency personnel a performance pay raise; rather it is about identifying and correcting structural problems in the pay system, and ensuring Metra can attract and retain qualified personnel.
Two other considerations are worth noting. Nearly a third of Metra’s non-contract workforce is eligible to retire with full benefits or retire early with partial benefits under Railroad Retirement and/or the RTA pension over the next three years, making it all the more important that we attract and retain the best workers. In addition, the salaries of Metra’s approximately 438 non-contract workers have been frozen since 2009. During that time Metra’s unionized workforce of about 2,400 employees has received 3 percent negotiated annual pay increases.
In November 2011, we hired an independent, third-party consultant, Public Sector Personnel Consultants, to conduct the study. Metra staff made periodic updates to the board as the report progressed, and major presentations were made in public sessions of the board meetings on March 16 and June 8, 2012.
A key component of the study was to compare Metra pay to that of our commuter rail peers, other transit agencies and private sector businesses. Those included Chicago Metropolitan Agency for Planning, BNSF, CSX, Chicago Public School System, City of Chicago, Cook County, the CTA, the RTA, and transit agencies in Boston, New York, New Jersey, Philadelphia and Washington, D.C.
The report found that base pay for many Metra occupations is generally lower than comparable public and private sector averages. It also found that:
- Metra’s contribution toward employee pension accounts is greater on average than private sector corporate contributions to employee 401(k) accounts.
- Metra’s Tier 1 contribution to the Railroad Retirement Board is generally equal to mandatory Social Security contributions in the private sector. Tier 2 contributions, available only to select employees in the rail industry, is less than peer commuter rail agencies in New Jersey and Massachusetts.
- Metra provides employee health benefits at a level competitive with other employers.
- Many private sector employers offer bonuses and profit-sharing opportunities.
The study also endorsed a new compensation strategy based on pay-for performance rather than automatic increases to incentivize all employees to earn future raises based on merit (subject to annual budget constraints). That strategy will be implemented during 2013.
Out of 424 positions reviewed, the study does not recommend immediate salary adjustments for 122 positions. It did recommend salary adjustments for 279 positions because the salaries are below industry averages. The recommended adjustments were intended to achieve competitive pay somewhere near the industry median. The salary for the remaining 23 positions has yet to be determined.
In terms of the impact on the Metra budget, the salary adjustments total $1.51 million in 2013. Adjustments will be phased in over several years, because we are capping the annual increase at 9 percent. That means the rest of the salary adjustments and fringe benefits will come in year 2 through 6, and the Metra Board of Directors will be asked to approve the classification and compensation implementation each year. We estimate the total base salary adjustments will total $2.6 million and the total with fringe benefits will be about $3.6 million.
- Year 1 budget impact: $1.51 million
- Year 2 budget impact (subject to board approval): $1.23 million
- Year 3 budget impact (subject to board approval): $0.57 million
- Year 4 budget impact (subject to board approval): $0.18 million
- Year 5 budget impact (subject to board approval): $0.04 million
- Year 6 budget impact (subject to board approval): $0.01 million
The 2013 budget impact represents about 1/5 of 1 percent of Metra’s total operating budget of $713.5 million. In addition, we budgeted $2.9 million for the classification and compensation study in 2013, but the result came in less than estimated, at $1.51 million.
We hope our riders and the taxpaying public understand why we undertook this critical study. Hiring top talent, holding them accountable to perform at the highest level, and rewarding success ultimately serves passengers and taxpayers by helping to ensure that we have the best-run transit agency in the country.