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229-26 RESOLUTION
Page 1 113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Resolution: 229-26 File Number: 2026-3000 A RESOLUTION TO ACCEPT THE MCGRATH HUMAN RESOURCES GROUP, INC. COMPENSATION AND BENEFITS STUDY AND TO ADOPT THE RECOMMENDED COMPENSATION PHILOSOPHY AND PAY STRUCTURES WHEREAS, on September 2, 2025, City Council passed Resolution 200-25 authorizing McGrath Human Resources Group, Inc. to provide compensation and classification consulting services; and WHEREAS, the scope of the project included an external market comparison using data from peer municipalities, compression analysis, internal equity review, and benefits benchmarking; and WHEREAS, the purpose of the study was to develop updated compensation structures and recommend practices for implementation and ongoing administration. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby accepts the Compensation and Benefits Study completed by McGrath Human Resources Group, Inc. and further adopts the compensation philosophy and the non-uniformed and uniformed pay structures recommended by the study, including a framework that may provide for annual cost of living adjustments to pay structures and salaries, mid-year merit increases for eligible non-uniformed employees, and step increases for eligible uniformed employees, subject to City Council approval through the annual budget process. PASSED and APPROVED on October 20, 2026 Approved: _______________________________ Molly Rawn, Mayor Attest: _______________________________ Kara Paxton, City Clerk Treasurer Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 Mailing address: 113 W. Mountain Street Fayetteville, AR 72701 www.fayetteville-ar.gov CITY COUNCIL MEMO 2026-3000 MEETING OF OCTOBER 20, 2026 TO: Mayor Rawn and City Council THROUGH: Jennifer Walker, Chief of Staff FROM: Missy Hutcheson, Human Resources Director SUBJECT: McGrath Human Resources Group, Inc. Compensation & Classification Study RECOMMENDATION: Staff recommends approval of a resolution accepting the McGrath Human Resources Group, Inc. Compensation and Benefits Study (the study) and adopting the compensation philosophy and the non- uniformed and uniformed pay structures it recommends. Future adjustments to the pay structures and funding for employee salaries will be considered through the annual budget process and remain subject to City Council approval and available funding. BACKGROUND: On September 2, 2025, City Council approved Resolution 200-25, authorizing McGrath Human Resources Group, Inc. to provide compensation and classification consulting services. The scope of the project included an external market comparison using data from peer municipalities, compression analysis, internal equity review, and benefits benchmarking. The purpose of the study was to develop updated compensation structures and recommend practices for implementation and ongoing administration. DISCUSSION: The McGrath Human Resources Group, Inc. Compensation and Benefits Study Final Report follows this staff memo and provides a summary of the study’s findings and recommendations. Approving this item will: • Adopt the compensation philosophy; • Adopt the proposed uniformed and non-uniformed pay structures; • Place non-uniformed employees within their assigned pay ranges, with adjustments based on years in the current position to recognize experience and reduce salary compression; • Place uniformed employees in the revised step structures; • Move incentive payments into base pay and create career ladders for future advancement; and • Ensure no employee’s pay decreases. The Study also recommends the following practices. This item does not approve or fund them: Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 Mailing address: 113 W. Mountain Street Fayetteville, AR 72701 www.fayetteville-ar.gov • A framework for annual cost-of-living adjustments to the pay structures and salaries, based on CPI-U; and • Mid-year merit increases for eligible non-uniformed employees and step increases for eligible uniformed employees. All future cost-of-living, merit, and step adjustments will be considered through the annual budget process and remain subject to City Council approval, available funding, and the City’s financial position. BUDGET/STAFF IMPACT: The estimated cost to implement the revised compensation structures for the remainder of 2026 is approximately $556,000. No budget adjustment is required because sufficient funding is available in the existing salary contingency. The estimated annual impact on salaries and benefits beginning in 2027 is approximately $5,527,000, consisting of: • $3,479,000 for non-uniformed employees; and • $2,048,000 for uniformed employees. The proposed 2027 Annual Budget will include the ongoing funding necessary to maintain the revised compensation structures. ATTACHMENTS: 3. Staff Review Form, 4. Compensation and Benefits Study Final Report – McGrath Human Resources Group, Inc. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 Page 1 City of Fayetteville, Arkansas Legislation Text 113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 File #: 2026-3000 A RESOLUTION TO ACCEPT THE MCGRATH HUMAN RESOURCES GROUP, INC. COMPENSATION AND BENEFITS STUDY AND TO ADOPT THE RECOMMENDED COMPENSATION PHILOSOPHY AND PAY STRUCTURES WHEREAS, on September 2, 2025, City Council passed Resolution 200-25 authorizing McGrath Human Resources Group, Inc. to provide compensation and classification consulting services; and WHEREAS, the scope of the project included an external market comparison using data from peer municipalities, compression analysis, internal equity review, and benefits benchmarking; and WHEREAS, the purpose of the study was to develop updated compensation structures and recommend practices for implementation and ongoing administration. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby accepts the Compensation and Benefits Study completed by McGrath Human Resources Group, Inc. and further adopts the compensation philosophy and the non-uniformed and uniformed pay structures recommended by the study, including a framework that may provide for annual cost of living adjustments to pay structures and salaries, mid-year merit increases for eligible non-uniformed employees, and step increases for eligible uniformed employees, subject to City Council approval through the annual budget process. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 9/15/2026 Submitted Date No 28,659,900.75$ -$ Budgeted Item? Does item have a direct cost? Is a Budget Amendment attached? Total Amended Budget Expenses (Actual+Encum) Available Budget Item Cost Budget Amendment Remaining Budget 97,698,124.00$ 69,038,223.25 Yes No -$ 28,659,900.75$ N/A Project Number Budget Impact: N/A Fund Various5XXX-XX Account Number Project Title City of Fayetteville Staff Review Form 2026-3000 Item ID 10/20/2026 City Council Meeting Date - Agenda Item Only Staff recommends approval of a resolution accepting the McGrath Human Resources Group, Inc. Compensation and Benefits Study (the study) and adopting the compensation philosophy and the non-uniformed and uniformed pay structures it recommends. Future adjustments to the pay structures and funding for employee salaries will be considered through the annual budget process and remain subject to City Council approval and available funding. N/A for Non-Agenda Item Action Recommendation: Submitted By Missy Hutcheson HUMAN RESOURCES (120) Division / Department Comments: Purchase Order Number: Change Order Number: Previous Ordinance or Resolution # Approval Date: Original Contract Number: Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 Compensation and Benefits Study Final Report for City of Fayetteville October 2026 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 2 McGrath Consulting Group, Inc. P.O. Box 865 Jamestown, TN 38556 Office (815) 728-9111 www.mcgrathconsulting.com ©Copyright 2026 McGrath Human Resources Group. All rights reserved. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopy, recording or otherwise without the expressed written permission of McGrath Consulting Group, Inc. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 3 Table of Contents Executive Summary ........................................................................................................................ 6 Methodology ................................................................................................................................... 9 Data Collection .................................................................................................................. 9 Labor Market ................................................................................................................... 10 Market Analysis ............................................................................................................................ 11 Minimum Salary Comparison ........................................................................................... 11 Maximum Salary Comparison........................................................................................... 12 Incumbent Salary Comparison ......................................................................................... 13 Uniformed Salary Comparison ......................................................................................... 13 Summary ..................................................................................................................... 13 Current Compensation System .................................................................................................... 14 Compensation Philosophy ............................................................................................................ 16 Employee Demographics ................................................................................................. 17 Public Sector Turnover/Recruitment Challenges ............................................................... 19 The Great Resignation and Private Sector Influence .......................................................... 20 Recommendations ........................................................................................................................ 20 Non-Uniformed Schedule ................................................................................................ 20 Job Families ..................................................................................................................... 21 Classification Structure ................................................................................................... 22 Position Placement .......................................................................................................... 23 Uniformed Salary Schedules ............................................................................................ 25 Position Placement .......................................................................................................... 26 Incentive Pays – Shift Differentials .................................................................................... 26 RTC .............................................................................................................................. 27 Transportation ............................................................................................................. 27 Fleet ............................................................................................................................ 27 Dispatch ...................................................................................................................... 28 Police .......................................................................................................................... 28 Fire .............................................................................................................................. 31 Elected Officials .............................................................................................................. 33 General Operational Guidelines ................................................................................................... 35 Maintenance of Salary Schedule ...................................................................................... 35 Salary Schedule Adjustments ........................................................................................... 35 Progression Through the Salary Schedule ......................................................................... 35 In-Range Adjustments ...................................................................................................... 36 Total Rewards ............................................................................................................................... 37 Benefits ......................................................................................................................................... 38 Current Benefit Trends ..................................................................................................... 38 Health Insurance ............................................................................................................. 38 Plan Design Overview ................................................................................................... 38 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 4 Premiums .................................................................................................................... 39 Expected Employee Cost .............................................................................................. 41 Maximum Employee Cost ............................................................................................. 43 Payment in Lieu of Coverage ......................................................................................... 45 Health Insurance Summary .......................................................................................... 46 Time-Off Benefits ............................................................................................................. 46 Holidays....................................................................................................................... 46 Vacation ...................................................................................................................... 47 Sick Leave .................................................................................................................... 48 Paid Time-Off ............................................................................................................... 48 Paid Parental Leave ...................................................................................................... 49 Retirement Plan ............................................................................................................... 49 Benefits for Future Consideration ..................................................................................... 50 Ancillary Insurance ....................................................................................................... 50 Adoption Assistance .................................................................................................... 50 Tuition Reimbursement ................................................................................................ 50 Paid Elder Care Leave ................................................................................................... 51 Volunteering Time Off ................................................................................................... 51 Childcare Assistance ................................................................................................... 51 Long Term Care Insurance ............................................................................................ 51 529 College Savings Plan .............................................................................................. 52 Lifestyle Saving Account ............................................................................................... 52 Wellness Program Enhancements ................................................................................ 52 Other Wellbeing Strategies ........................................................................................... 52 Longevity Program ........................................................................................................... 53 Appendix A: Compensation Policy Guidelines ............................................................................. 54 Appendix B: Non-Uniformed Staff Pay Plan ................................................................................. 57 Appendix C: Uniformed Police Step Plan ..................................................................................... 58 Appendix D: Uniformed Fire Shift Step Pay Plan .......................................................................... 59 Appendix E: Uniformed Fire Day Step Pay Plan ............................................................................ 60 Figure 1:: Minimum to Market Minimum Analysis – Non-uniformed ............................................ 12 Figure 2: Maximum to Market Maximum Analysis – Non-uniformed ............................................ 12 Figure 3: Percent of Employees by Age ........................................................................................ 17 Figure 4: Employee Demographics by Age Group ........................................................................ 18 Figure 5: Average Applicants per Government Job, 2019-2024 ................................................... 19 Figure 6: Job Family Classification Structure - Example .............................................................. 22 Figure 7: Total Rewards Visual ..................................................................................................... 37 Figure 8: Observed Holidays ......................................................................................................... 47 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 5 Table 1: Comparable Organizations ............................................................................................. 10 Table 2 : Police-Fire Positions Under Market Minimum ............................................................... 13 Table 3: Fleet Incentive Recommendation ................................................................................... 27 Table 4: Dispatcher Shift Differential Analysis ............................................................................. 28 Table 5: Police Recruitment/Sign On Bonus Analysis .................................................................. 28 Table 6: Fayetteville Police Education Analysis ........................................................................... 29 Table 7: Police Certification/Assignment Pay Analysis................................................................ 30 Table 8: Shift Differential Analysis................................................................................................ 31 Table 9: Fire Education Pay Analysis ............................................................................................ 31 Table 10: Certification/Assignment Pay Analysis ........................................................................ 32 Table 11: Health Plan Summary ................................................................................................... 38 Table 12: Single Plan Premium Comparison ................................................................................ 39 Table 13: Family Plan Premium Comparison ............................................................................... 40 Table 14: Single Plan Comparable Review ................................................................................... 41 Table 15: Family Plan Comparable Review .................................................................................. 42 Table 16: Single Plan Maximum Risk Comparative Review .......................................................... 44 Table 17: Family Plan Maximum Risk Comparative Review ........................................................ 45 Table 18: Current Vacation Model ................................................................................................ 47 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 6 Executive Summary The intent of the Executive Summary is to provide an overview of the most important issues and opportunities identified by the Consulting team during the Study. Recipients of this Report are highly encouraged to read the document in its entirety to gain an understanding of the recommendations presented within the Report. This introduction alone does not provide enough context or information upon which to base decisions or to evaluate the recommendations provided. McGrath Human Resources Group, Inc., an organization that specializes in public sector consulting, was commissioned by the City of Fayetteville (City), Arkansas, to conduct a comprehensive Classification and Compensation Study, including a benefits analysis. The Consultants utilized the following steps to make these compensation recommendations: • Discussions with the Mayor, Human Resources, Department Directors, members of the police and fire uniformed groups; • Analysis of the current salary schedule, compression, and current compensation policies; • External market data was solicited from 14 comparable public organizations, selected jointly between the Consulting team and the City and approved by department directors; • Position analysis based upon extensive information provided by incumbent employees describing job responsibilities, skills, and various competencies of the position in addition to a review of job descriptions; • Internal position analysis based upon all information collected and analyzed, and meetings with the Department Directors; and • Feedback on recommendations by Human Resources, Department Directors and Administration. The following recommendations have been developed as a result of the Study. Based on the market data, the Compensation Philosophy utilized for placement of positions within a salary range was the 60th percentile of Tier I comps or the median of Tier I/ II comps, whichever is greater. The market rate, however, is only one (1) of four (4) factors utilized to place a position. The compensation structure for merit employees is a quartile system. The Position Point, which represents the market rate, is 20% from the minimum with a salary range of 50% from minimum to maximum. The quartile system provides guidance for hiring, as well as a guide to monitor employee progression through the salary range. The Police and Fire uniformed personnel will remain on a ten (10)-step compensation program. The recommended structure is designed to maintain competitiveness with the external labor market by anchoring the entry-level rank in each department to appropriate market data. From that foundation, Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 7 varying percentage differentials are applied between ranks to preserve meaningful distinctions in responsibility and authority while minimizing rank compression. Additionally, the step progression has been standardized across the schedule to provide a consistent and equitable approach to employee compensation, reducing the potential for both under-compensation and over-compensation as employees advance through the pay structure. The City’s Code, Article II, governs compensation for the Mayor, City Clerk/Treasurer, and City Attorney. It is recommended that these positions receive the same cost-of-living adjustments and merit increases as non-uniformed employees. Merit consideration should align with the average merit increase provided to non-uniform employees. The current restrictive language within Article II limits market competitiveness and contributes to internal pay compression. Accordingly, a revision to Article II is recommended to ensure alignment with market practices and internal equity. The elected City Council Members’ salary information was also evaluated against Tier I 60th percentile and Tier I/II median comparables. There is no recommendation for change to compensation, other than the annual increase of these salaries, nor to the benefits provided. Policy recommendations have been provided for the City to manage compensation processes with the new structures. The City is recommended to adopt compensation policy recommendations which will establish an objective framework to effectively manage classifications and compensation going forward. In addition, General Operating Guidelines have been outlined for the City to maintain the Salary Schedule to help keep the model aligned and competitive to the external market and also outline the mechanisms in place to provide for employee salary adjustments within the new model. In addition to compensation, the Consultants have provided guidance on several benefits the City offers. These are long-term considerations and need to be evaluated to ensure these suggestions align with the strategic direction of the City. A brief summary of these recommendations include: • Continue to offer multiple health insurance options, with consideration to an enhanced HSA contribution for single coverage. • No significant recommendations to the City’s time-off benefits. • Other opportunities for future consideration: o Review of pension contribution structure o Ancillary insurance programs o Adoption assistance o Tuition reimbursement o Elder care leave o Volunteering time off o Childcare assistance Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 8 o Long term care insurance o 529 College savings plan o Lifestyle saving account o Wellness program enhancements o Longevity program consistency These recommendations provide a roadmap for the City to utilize best practices going forward, ensuring compliance and positioning itself to attract and retain a highly qualified workforce. The Consultants would like to extend appreciation to City Administration, Human Resources, Department Directors, and employees for their time, cooperation, and sharing of information and perceptions with McGrath Human Resources Group. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 9 Methodology Data Collection The project involved several steps: collection of data, interviews, and data analysis. The first step of this Study involved gathering data that pertains to current compensation practices within the City. The Consultants received internal information relating to current salaries, job descriptions, and specific policies, and collected external market data. Virtual interviews were conducted with Human Resources and Department Directors/Supervisors from each department. The purpose of these meetings was to first, gain an understanding of the City’s current compensation practices and philosophy; second, to solicit ideas for future compensation methodologies and practices; and finally, to determine if there were any positions within the City that were difficult to recruit, retain, or were otherwise unique in the position’s responsibilities. Further, since the study included benefits, the Consultants asked if any benefits needed to be reviewed or should be added by the City. Employees from each Job Classification were then asked to complete a Position Questionnaire (PQ) which provided extensive information about the positions. Because the City currently utilizes a broad classification model, the Consultants, with the departments, ensured positions with differing responsibilities under the same job classification completed the document. The Consultants utilized the Position Questionnaires completed by the employees, and reviewed by supervisory employees, to gain a better understanding of the job responsibilities, skills, and various competencies of the position. During the second virtual visit, the Consultants met with Human Resources to provide a summary of the City against the comparable market. The type of compensation models and compensation philosophy for the City were also discussed. Upon completion of the draft compensation schedule, the Consultants met with each Department Director and Human Resources to review the recommended Salary Schedule and gain the City’s perspective. After these meetings, Human Resources met with each department again, to review any recommended changes as well as provide another opportunity for department feedback. Any recommendations and feedback provided were reviewed by the Consultants and taken into consideration in both its relation to the position analysis, the external market data, as well as the impact to internal equity within the entire Compensation System. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 10 Labor Market In order to gain information from the external market, a list of comparable organizations was established. Selecting comparable organizations was an issue of concern from several different stakeholders. Many felt the ones that were traditionally utilized did not represent the complexities that the City of Fayetteville needs to encounter with a busy business district and the demands of a major university. Thus, two tiers of comparable cities were developed and approved by the City. Tier I represented the local market, with the exceptions of the additions of Broken Arrow and Little Rock, which had been used in previous compensation studies. Due to driving distance, these two (2) municipalities were added to the list. Tier II comprised an evaluation of the following criteria: population, general budget, university town, growth rate, median household income and median house value. Based on this criteria, Tier II municipalities were added. Each of the comparable organizations were contacted requesting current salary schedules and incumbent data. The following comparable organizations were used: Table 1: Comparable Organizations Tier I Local Market City of Bentonville, AR City of Broken Arrow, OK City of Little Rock, AR City of Rogers, AR City of Springdale, AR Tier II College Towns near Metroplex City of College Station, TX City of Columbia, MO City of Denton, TX City of Edmond, OK City of Lawrence, KS City of Lee's Summit, MO City of Manhattan, KS City of Norman, OK City of Richardson, TX Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 11 Market minimum, midpoint, and maximum annual pay rates were evaluated for each defined benchmark position. The collected compensation data was used to analyze the median, as well as the 60th, 65th, and 70th percentiles for Tier I positions, and the same analysis was also performed for Tier I and Tier II positions combined. In addition, a comparison was made between these two (2) groups of comparable incumbent salaries and the salaries of current City employees. When necessary, publicly available job descriptions from comparable organizations were reviewed to help resolve any discrepancies. In addition to current positions within the City, the Consultants sought comparable data on future positions/career ladders, and positions with job responsibilities that are combined in the City but might be separated in other organizations. In some cases, titles were altered to better align with the industry. Not all positions are reflected in the following data analysis. In some situations, data was not available in the external market, data was insufficient, or there were no internal matches at the time of the Study. Market Analysis To assess whether the City ’s salary schedule remains aligned with market standards, several analyses were conducted. These included a comparison of the schedule’s minimum, market (midpoint), and maximum pay levels to the corresponding averages in the external market. In order to analyze the ranges, a Comp Ratio is used. This is a ratio of the City ’s salary in relation to the external market data. A 50% Comp Ratio would mean that the salary is in line with the external Market while utilizing +/-5% range around each data point. Thus, if a position has a Comp Ratio of 45% or greater, the employee is considered aligned to the current market. However, positions with Comp Ratios under 50% may still be facing challenges with recruitment or retention due to the current labor market and have been identified separately. Based upon the analysis of the data, it was determined that two (2) data points would be considered – the 60th percentile of the Tier I comparables and the median of the Tier I/ II comparables. Minimum Salary Comparison The analysis of the Minimum Salary Range gives the initial indication whether starting salaries are within an acceptable Market Range, utilizing the 60th percentile of Tier I or median of Tier I/II. When building a salary schedule, consideration of this information will ensure the City’s Minimums are within an acceptable range to the average Market Minimum; however, this analysis is only the beginning in the development of a Compensation Schedule. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 12 Figure 1:: Minimum to Market Minimum Analysis – Non-uniformed *May not result in 100% due to rounding In the minimum analysis, 52% of the minimums at the 60th percentile or 67% of the minimums based on the median were out of line with the market and may need some adjustment. Thus, either 48% or 33% of the positions are within an acceptable starting salary. Maximum Salary Comparison A comparison was again conducted using the 60th percentile of Tier I and the median of the combined Tier I/II market. The results indicate that 60% of Tier I positions and 66% of Tier I/II positions fall within an acceptable market range. While the Consultant also reviewed maximum salary levels, these figures provide limited insight, as salary structures can vary significantly across organizations. Figure 2: Maximum to Market Maximum Analysis – Non-uniformed 0% 5% 10% 15% 20% 25% 30% 35% 0-19 20-29 30-39 40-44 45-49 50-59 60+ 1% 5% 23%23% 30% 14% 4%0% 10% 32% 25% 16%13% 4% Pe r c e n t o f B e n c h m a r k P o s i t i o n s Comp Ratio Minimum to Market Minimum Analysis Tier I 60th Tier I/II Median 0% 10% 20% 30% 40% 0-19 20-29 30-39 40-44 45-49 50-59 60+ 1%8% 23%28% 19%17% 4%1% 9% 33% 23% 15%15% 4% Pe r c e n t o f B e n c h m a r k P o s i t i o n s Comp Ratio Maximum to Market Maximum Analysis Tier I 60th Tier I/II Median Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 13 Incumbent Salary Comparison While the salary schedule appears to require some updates, a comparison of employee pay to the 60th percentile of Tier I and the median of the combined Tier I/II market indicate that employees’ overall compensation remains competitive. Only 35% of Tier I benchmark positions and 47% of Tier I/II positions fall below market levels. As will be discussed in the demographics section, the concentration of employees at the lower end of the pay range is not unexpected, as many are relatively new to the organization and have not yet progressed through the salary structure. Uniformed Salary Comparison A comparison of the minimum and maximum of the uniformed step schedules was conducted. Rather than evaluating by a comp ratio, the current compensation methodology evaluates the percentage difference from the market. Thus, the percentage difference from the minimum and maximum was determined using the same criteria – 60% of Tier I and the median of Tier I/II. This data was utilized in the development of the step schedules for both Police and Fire. Similar to a comp ratio, a percentage variance greater than 5% would be an indication that the salary range has fallen below the determined market. The following positions may need adjustment to the new compensation philosophy. Table 2 : Police-Fire Positions Under Market Minimum Police Fire Police Chief Fire Chief Deputy Chief of Police Assistant Fire Chief Police Sergeant* Division Chief Fire Captain* Driver/Operator/FF* *Either Tier I OR Tier I/II Market Summary Overall the City’s non-uniformed salary schedule has not remained competitive with the external market and needs adjustment. With that said, most employees have competitive salaries, which explains the minimal cost in the recommended salary schedule. Including Tier II municipalities proved highly beneficial, as it expanded the dataset to capture positions not represented in Tier I and strengthened the overall analysis. For future compensation studies, it is recommended to retain the two (2)-tier approach, with the caveat that any data points be excluded if the minimum, maximum, or incumbent salary exceeds 25% of the City’s corresponding salary. Retaining such outliers can skew the resulting percentiles and median values. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 14 Most of the Uniformed salary schedule is competitive to the market. Each department has positions that need to be realigned with the new compensation philosophy. Current Compensation System The City currently has four (4) different salary schedules. Non-uniformed employees are on a merit- based salary range schedule, whereas the Fire and Police uniformed employees are on a step system. Non-Uniformed employees have 34 pay grades with a range from minimum to maximum of 49%. Every other year the City increases the salary schedule through a salary survey. Then an employee moves through the salary range based upon merit. Thus, the cost of living and merit are given simultaneously. Each department is provided with a merit pool to distribute among employees in the department, as each deems appropriate. There is a concern that merit is not distributed consistently throughout the City. Further, many department directors, when asked, felt that the merit was primarily utilized to ensure a competitive wage; rather than a reward for performance. Uniformed employees are compensated based on step schedules. Each schedule has 10 steps. The Fire department has two (2) schedules – one for shift personnel and another for day or 40-hour personnel. The annual salary for shift personnel is determined by multiplying the hourly rate by 2,912 and other personnel the standard 2,080 hours per year. Each year eligible employees move to the next step. The structure is adjusted every other year based on survey data. The step schedule applies to sworn personnel up to a specific rank, then administrative sworn personnel are on the Non-Uniformed schedule. The City did conduct a compression analysis in 2022; however, higher ranked Police and Fire administration expressed a concern that the department was on two (2) different schedules. A unique aspect of both the Police and Fire salary schedules is the number of market variables and formulas used to establish each salary range. Under the previous compensation study, the Consultant combined base pay and holiday pay to calculate an average market rate for each rank. This average was then adjusted using a geographic weighting factor to determine the final market rate. The resulting percentage difference between the current minimum and maximum pay rates was applied independently to each rank, increasing both the minimum and maximum salary levels. A separate formula was then used to calculate the dollar value between the ten (10) salary steps within each rank. The Consultant has several concerns regarding the current compensation methodology. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 15 A. Geographic Adjustments: Geographic differentials can be used in compensation studies, but they should be applied carefully and only when they are supported by a clear compensation philosophy and reliable data. Most public-sector compensation consultants do not adjust market salaries using a separate geographic formula when they are already comparing an organization to an appropriately selected labor market. Instead, they select comparable jurisdictions that reflect the labor market from which the organization recruits and retains employees. In that approach, geographic differences are inherently reflected in the market data. Then, the focus is on the cost of labor rather than the cost of living. Many compensation professionals would argue that the strongest methodology is: 1. Select an appropriate labor market. 2. Collect actual market compensation data. 3. Eliminate statistical outliers. 4. Determine the desired market position (e.g., median, 60th percentile, 65th percentile). 5. Build salary structures that maintain internal equity and appropriate differentials between classifications and ranks. Under this approach, geographic differences are addressed through market selection rather than through a separate mathematical adjustment. This tends to produce more transparent and defensible results, particularly for Police and Fire compensation studies where rank relationships and compression are significant concerns. B. Compression: When salary ranges for Police and Fire departments are adjusted by applying a market percentage independently to each rank, compression between ranks can occur. The current methodology evaluates and adjusts each rank separately, without considering its relationship to other positions within the organizational hierarchy. As a result, appropriate pay differentials between ranks may erode over time, reducing the financial incentive for promotion and advancement. C. Step Increase: The annual recalculation of step increases through a formula-based approach can result in inconsistent salary progression for employees. Because the resulting step adjustments are not necessarily aligned with actual market changes, employees may receive increases that exceed or fall short of market movement, creating inequities within the salary structure and challenges in maintaining market competitiveness. The current compensation system contains numerous variables and calculations that are not commonly supported by standard compensation practices. With so many moving parts, it becomes increasingly difficult to maintain consistent alignment with both the external market and internal pay Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 16 relationships. As a result, the system lacks simplicity, transparency, and structural integrity necessary to provide a sustainable foundation for managing compensation and addressing compression concerns over time. Compensation Philosophy A compensation philosophy is an organization’s financial commitment to how it values its employees. The goal of this philosophy is to attract, retain, and motivate qualified people. A consistent philosophy provides a strong foundation in determining the type of total compensation package to offer employees. There are foundational aspects of compensation to assist with the development of a compensation philosophy to ensure the goals of compensation align with the goals of the organization. First, there are basic questions to consider: 1. What is considered a fair wage? 2. Does the compensation system reflect the value of positions within the organization? 3. Is your compensation strong enough to retain employees? 4. Are wages sustainable and in keeping with the financial health of the organization? 5. Do you currently have a defined compensation philosophy? 6. If so, is your compensation philosophy keeping in line with labor market change, industry change, and organizational change? The City is in business to provide services to the residents, businesses, and visitors of the community. It does that through hiring qualified employees who lend their skills and talents to various positions within the organization. Without those individuals, the City would be unable to maintain the critical systems and functions that support daily operations. Employees expect and deserve competitive pay that reflects the skills, education, and responsibilities of their roles, particularly as the City competes with nearby communities and organizations that lead the regional market in wages. To remain competitive in retaining current employees and attracting qualified candidates for future vacancies, the City needs to establish a position within the market. It is recommended that the City set a compensation philosophy aligning to the 60th Percentile of Tier I, or aligning to the median of Tier I/II combined whichever is greater (with eliminating a data point that is 25% or greater) of the market in order to meet its market competitiveness goals. The compensation philosophy of the City is as follows: The City of Fayetteville’s compensation philosophy is rooted in equity, transparency, and fiscal responsibility. We are committed to providing equitable and market-competitive compensation that Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 17 attracts, retains, and motivates a skilled workforce in service of the public good. This philosophy informs our compensation plan, in accordance with the following principles: - Internal equity: Positions are evaluated using a consistent methodology to ensure fair and equitable pay throughout the organization. - Strong market position: Compensation is designed to remain competitive with relevant labor markets to attract and retain qualified employees. - Transparency and consistency: Compensation practices are administered in a clear, consistent, and objective manner. - Recognition of experience and performance: Relevant experience, skills, and sustained performance are recognized through the City's compensation practices. - Fiscal Responsibility: Compensation decisions are made in a manner that is mindful of the City's long-term financial sustainability. The City strives to position base wages above market, targeting the 60th percentile of the Tier I regional labor market or the Median of Tier I/II labor market whichever is greater. Base wages are reviewed regularly to ensure consistency, transparency, and alignment with organizational goals and community needs. Employee Demographics In reviewing the City ’s employee demographics for positions covered in the Study, the tenure of the organization ranges from new hire – 51 years. The overall tenure of the employees is 8.79 years. The national average in the public sector is currently 6.4 years (Local Government-Bureau of Labor Statistics, September 2024), showing the City is above average in overall tenure, which is positive. In order to have a full picture of the City, one needs to explore these demographics further. These findings are in the following Figures. Figure 3: Percent of Employees by Age 0% 5% 10% 15% 20% 25% 30% UNDER 20 30-39 40-49 50-54 55-59 60-64 65+ 22% 29% 25% 9%8% 4%4% Percentage of Employees by Age Average Age: 41 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 18 Figure 4: Employee Demographics by Age Group The above Figures show those in age groups 50 and above have among the longest tenure and represent 24% of all employees. This is the group of personnel that will be considering retirement over the next decade. The City should expect ongoing steady turnover simply due to retirements over the next decade and beyond. When these employees leave the City, the average tenure of the organization is likely going to decrease. A turnover ‘spike’ may be an indication of a decline in job satisfaction, or a wage/benefit issue, so this data should be monitored at least annually. Another significant finding is that the City ’s demographics illustrate 51% of the workforce is age 39 and under. National workforce trends indicate that employees in this age group tend to be more mobile, place a high value on work/life balance, and consider a broader range of total rewards elements, beyond base pay, when evaluating employment decisions. This group is also more likely to change employers earlier in their careers, often in pursuit of career advancement or increased compensation, as reflected by an average tenure of approximately 3.6 years within this age group. Experienced professionals within the age 40-49 band are also critical, as their level of experience and skill makes many of them uniquely qualified to have multiple job opportunities, so having a competitive wage and benefit package will facilitate retention. The City is recommended to monitor its demographics periodically to properly respond to shifts within the organization as needed. Although the Consultants acknowledge compensation is not the only reason for unwanted turnover, it is a consideration of the larger picture. In order to ensure competitive recruitment/retention, the City is recommended to follow the compensation philosophy to ensure the City can stay competitive to support retaining its qualified personnel as long as possible. 0 2 4 6 8 10 12 14 16 18 20 UNDER 20 30-39 40-49 50-54 55-59 60-64 65+ 2 5 12 16 15 16 20 Average Years of Service by Age Average Years of Service: 8.79 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 19 Public Sector Turnover/Recruitment Challenges To provide broader labor market context for the City ’s workforce demographics and long-term staffing considerations, the following summarizes key public sector recruitment and retention trends observed nationally. After several years of applicant shortages and intense competition for talent, public sector hiring conditions are beginning to stabilize. More candidates are choosing government work for its reliability and purpose as private sector volatility persists. Even with this momentum, day-to-day pressures still remain. Many organizations continue to face a cycle in which vacancies drive workload intensification and burnout, which in turn contributes to turnover. In addition, hard to fill roles continue to trail the market average in applicant volume, so targeted strategies are still required to stabilize staffing in those roles. These trends suggest the market is recalibrating: candidate interest and quality are improving, but the Public Sector must still address challenges such as burnout, skills gaps, constrained flexibility in frontline operations, and technology limits to sustain gains and shorten the time-to-hire. The figure below illustrates that public sector job openings have declined slightly in 2024, while applications have increased by 3.8% since 2019. Figure 5: Average Applicants per Government Job, 2019-2024 (Source: The Hopeful Horizon of Recruitment, NEOGOV, 2025). This is not necessarily a new issue, but some employers do state it has become increasingly problematic for operations. Public employers have been experiencing ongoing challenges of this nature for almost a decade. The following are areas to consider when recruiting talent: Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 20 • Demographics: Retirement eligibility remains elevated, creating persistent replacement demand and experience gaps. Pair succession planning with early career pipelines. • Staff Burnout: Vacancies compound workload in essential services. • Skills and credentials: Specialized competencies are in higher demand; shift to skills-based hiring to widen applicant pools. • Flexibility: Not all roles can support remote/hybrid options; emphasize other value propositions (stability, purpose, development, predictable schedules). • Technology constraints: Legacy processes can slow recruitment efforts. Adoption of digital screening tools, communication platforms, and streamlined workflows can improve candidate volume and reduce hiring manager burden. • Employer brand: Candidates are increasingly prioritizing mission, values, and culture. These trends reinforce the importance of the City ’s recommended compensation, benefits, and total rewards strategies, particularly as the organization plans for retirement, succession, and ongoing competition for skilled talent. The Great Resignation and Private Sector Influence Compounding the public sector recruitment challenges, the broader labor market has been marked by inflation, record retirements, turnover, and periods of private sector prosperity, causing all industries to compete for limited talent and raise wages to attract and retain staff. While recruitment and retention pressures persist across industries, recent private sector volatility and layoffs have shifted many job seekers toward roles that offer stability and purpose. As a result, the public sector is increasingly well positioned to compete, especially when agencies highlight job security, community impact, and growth opportunities, and reduce friction in the hiring process. Recommendations Non-Uniformed Schedule The recommended compensation system continues to be a range system for non-uniformed personnel. The schedule is built off the 60th Percentile of Tier I or the median of Tire I/II market minimum, and actual incumbent salary (which represents the position point). The range is 50% from minimum to maximum. There is 8-10% between pay grades to assist with compression between positions. Rather than a midpoint, the schedule has a Position Point which represents the external market rate. The position point is 20% above the minimum to ensure employees get to the market rate quicker. An employee should be in the Market Range within 5-9 years of employment. This means that the employee is fully capable of performing the responsibilities of the position. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 21 The salary range is divided into four (4) quartiles. The Position Point is representative of the 60th percentile of Tier I or the median of Tier I/II of the external market rate. The use of quartiles will assist Human Resources in providing guidance for hiring, as well as ensuring employees are progressing through the salary range. For administrative purposes, three (3) ranges have been identified within the quartile system: 1. Hiring Range: With assistance from Human Resources, a candidate – with previous experience – can be hired within the first quartile, 2. Market Range: Employees with five (5) to nine (9) years of experience should be within the second quartile and beginning of quartile three (3); and 3. Performance Range: Employees with ten (10) or more years of experience should be within the third/fourth quartile. Note: Years of experience equate to years within the position. These are benchmarks for the organization to strive to achieve. Thus, an annual evaluation of the penetration range should be performed to see if employees, with acceptable performance, are moving through the salary range. Job Families A job family is a grouping of jobs that involve similar types of work and require similar skills, knowledge, and/or expertise. The grouping of jobs within a family is based on the functions of the position, not the organizational structure. The following families have been developed for the City: • Administrative & Operational Support Positions that provide administrative, clerical, customer service, records management, program support, or operational coordination services. Work is generally performed within established procedures and supports the effective delivery of departmental programs, services, and operations. • Skilled Trades & Labor Positions that perform manual, mechanical, maintenance, construction, equipment operation, or trade-related work requiring specialized vocational training, apprenticeships, certifications, licenses, and/or demonstrated technical skills. Work typically involves the operation, maintenance, repair, or construction of facilities, infrastructure, equipment, or systems. • Technical Positions that require specialized technical knowledge, training, certifications, or experience in a specific field. Work involves the application of established technical principles, procedures, and methodologies to support operations, programs, services, or professional functions. These Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 22 positions often require independent problem-solving and generally operate within defined standards and practices. • Professional Positions requiring advanced knowledge typically acquired through a bachelor's degree or higher, professional licensure, certification, and/or extensive specialized experience. Work is characterized by analytical thinking, interpretation of complex information, policy or program development, independent judgment, and responsibility for making recommendations or decisions that impact organizational outcomes. • Supervisory & Management Positions that are responsible for directing, coordinating, and overseeing the work of a minimum of two (2) FTE employees, programs, divisions, departments, or organizational functions. Responsibilities may include workforce planning, performance management, budgeting, policy implementation, strategic planning, operational oversight, and accountability for achieving departmental and organizational objectives. Figure 6: Job Family Classification Structure - Example Utilization of job families places greater emphasis on internal equity of positions within the job family and alignment to the market, rather than on equity across positions within the City. Therefore, there may be an overlap of job families within the same pay range. Classification Structure During the Study, there was an opportunity to better align job titles with responsibilities, moving away from the current general classification title and working title structure currently in place. Some job titles were revised to either have consistency throughout the organization, or to become more current with the external market/respective industry. These changes have been reviewed with department directors and are reflected in the recommended salary schedule. It should be noted that not all titles will follow the new classification structure if the title needs to be specific for statutory/funding/regulatory reasons, or simply due to alignment with local government industry practices. The following classification hierarchy is recommended, and the City should begin to move to this classification structure. Skilled Job Class Administrative Job Class Technical Job Class Professional Job Class PG Title Title Title Title 100 Sr Parts Technician Administrative Assistant II AP Analyst Communications Specialist 100 Benefits Specialist Chemist 100 Claims Administrator Engineering Tech 100 Financial Engineering Specialist Evidence Tech-Digital 105 Automotive Technician Special Events Coordinator Budget & CIP Analyst Assistant Planner 105 Building Inspector Recruiter 110 Equipment Technician I Business Systems Analyst Human Resources Generalist Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 23 Director: A senior leadership position within the organization responsible for establishing strategic direction, departmental goals, and organizational priorities. Directors routinely interact with elected officials, the Mayor, executive leadership, external stakeholders, and community partners. They are accountable for the overall administration, performance, budget, and policy implementation of a department or major functional area. Directors report to the Mayor, Chief of Staff or Chief Financial Officer. Manager: A mid- to senior-level management position responsible for overseeing a division, program, or major operational function within a department, and/or supervises individuals who are classified as a supervisor. Managers typically report to a Director and are responsible for translating departmental goals into operational plans and measurable outcomes. Managers are accountable for program administration, budget development and monitoring, workforce planning, policy implementation, and strategic initiatives. Managers exercise substantial decision-making authority and are responsible for ensuring effective service delivery and organizational performance within their assigned area of responsibility. Supervisor: A first-line management position responsible for the day-to-day oversight of employees, work activities, and operational functions. Supervisors typically report to a Manager, Director, or Administrator, depending on the organizational structure. The position is responsible for directing and evaluating the work of at least two (2) FTE direct reports and performs key personnel management functions, including hiring recommendations, training, scheduling, performance management, coaching, and the administration of corrective and disciplinary actions within established policies and procedures. Supervisors ensure work is completed efficiently, safely, and in accordance with departmental standards while serving as the primary link between management and staff. Position Placement Placement of positions in the respective salary schedule is based upon several criteria: • Point factor system • Market analysis • Compression analysis • Internal equity The point factor system is a system that evaluates a position based on 13 competencies. Information in these categories is obtained through the completion of a PQ by employees and reviewed by the supervisor. This system evaluates a position on the following criteria: • Education • Licenses/Certifications • Procedures/Guidelines • Job Complexity Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 24 • Consequence of Errors • Confidential Information • Contact with Others • Equipment, Machinery, Tools • Use /Type of Technology • Financial • Leadership/Supervision • Work Environment • Physical Requirements This point factor system will remain confidential. Often when supervisors and employees know the point factor system, an objective evaluation of the position becomes suspect, as the PQ addresses the criteria rather than the true responsibilities of the position. It is essential for the City to understand that a combination of factors make up the recommended compensation plan – not just one (1) factor. These include: • Minimum salary, • Market salary, • Point Factor system, and • Maintenance of a sufficient spread between positions To implement the recommended salary schedule, employees whose current salaries fall below the minimum of their assigned pay range will be moved to the new minimum rate. Employees whose salaries already fall within the recommended pay range will not receive an additional adjustment as part of the implementation process, as no salary movement is required to align them with the market- based structure. Employees whose salaries exceed the maximum of the recommended pay range would be designated as "red-circled." Red-circled employees are not eligible for base salary increases until such time as the salary range is adjusted and their salary falls within the established range. In these situations, the employee's compensation exceeds the market value of the position as determined through the compensation study. At the time of initial placement, however, no employees were identified as being above the recommended maximum salary range. It should be noted that prior to the completion of the compensation study, non-uniformed employees received a 3.5% salary increase. As a result, the implementation cost associated with the new salary structure was reduced because many employees had already received movement toward market- competitive pay levels. While some employees still require additional salary adjustments to reach the minimum of their assigned pay range, the majority of employees are already positioned within the recommended salary structure and therefore do not require further compensation adjustments at implementation. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 25 Following implementation, the Consultant recommends conducting an in-range compression analysis to identify employees whose placement within the salary range does not appropriately reflect their tenure, experience, performance, or progression in the position. In particular, longer-tenured employees who are paid near the minimum of the range may be disproportionately compressed when compared with newer employees entering the same position. The analysis would provide the organization with a consistent methodology for determining whether targeted in-range adjustments are warranted to recognize employee progression and maintain appropriate salary differentiation. Conducting this analysis separately from the initial market adjustment allows the organization to distinguish between market alignment and internal salary progression. It also provides a structured approach to addressing compression, supports internal equity, recognizes employee tenure and experience in the position, and helps ensure that employees have a reasonable opportunity to progress through their assigned salary range over time. Any recommended in-range adjustments should be based on established criteria and the organization’s available fiscal resources. Uniformed Salary Schedules The Police and Fire salary schedules will continue to operate under a step-based system. Uniformed employees in these departments who were previously on a merit-based schedule will be transitioned to the step schedule. The City’s prior consultant applied a methodology that weighted salaries based on geographic market indicators. However, McGrath Human Resources does not utilize this approach, as there is no standardized or validated method for determining appropriate geographic weighting. Additionally, the selection of comparable organizations involved multiple factors, making it impractical to apply a consistent or meaningful weighting to the data. The City's current compensation structure incorporates a formula to recognize holiday compensation. Under the previous compensation plan, salary ranges were developed using a pay rate that included both base pay and holiday pay. As a result, the City established a calculation methodology to isolate the base pay component from the total compensation rate. The recommended salary schedule has been developed using base pay only as the foundation for all salary range calculations. Consequently, the holiday pay calculation was revised to align with the new compensation structure. Under the revised methodology, the hourly base pay serves as the anchor rate. The hourly base pay is multiplied by 104 hours, representing the annual holiday hours, to determine the annual holiday pay amount. The calculated holiday pay is then added to the employee's annual base salary to determine total annual compensation. This ensures holiday compensation is paid to uniformed employees in a manner consistent with requirements under State Code. As previously noted, the City’s current public safety compensation structure contains too many variables and calculations, making it difficult to administer and maintain consistently over time. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 26 Instead, the Consultant recommends implementing a straightforward 10-step salary schedule. The schedule would be anchored to the market minimum, based on either the 60th percentile of Tier I comparators or the median of the combined Tier I and Tier II comparators. A fixed 3.5% progression would separate each step, providing consistent and predictable salary growth. The percentage spread between ranks would be established to minimize overlap and maintain appropriate pay differentials, thereby reducing compression concerns. Overall, the proposed structure is easier to understand, simpler to administer, and provides a consistent methodology for annual compensation adjustments. Position Placement Employees on the fire step schedule were placed on the step corresponding to their current placement. Employees on the police step schedule were placed at the closest step that provides a pay increase. For command staff that are new to the step schedule, they have been placed on the step closest to the current salary without a pay decrease. Incentive Pays – Shift Differentials There are some positions/departments within the City that receive incentive pay to incent employees to earn more education, certifications, and/or licenses. The following is a summary of these programs provided by the City of Fayetteville versus some of the comparable organizations. Both Tier I and Tier II data is represented. This section does not address Bilingual pay or incentives that no comparable data was found or provided. In some departments, incentive pay has been transitioned into structured career progression through multiple levels of the same position, such as Street Maintenance Technician I and Street Maintenance Technician II. This approach embeds skill development and increased responsibility directly into the classification structure rather than compensating through separate incentive payments. Departments utilizing this model should review and update job descriptions to clearly define the criteria required for advancement between levels. These criteria may include additional training, certifications, licenses, demonstrated competencies, and expanded job responsibilities associated with the higher pay grade. Employees should be advanced to the next level once they have met all established requirements and demonstrated satisfactory performance, with the increase applied at the next appropriate pay period. To ensure proper budget planning, the City should consider budgeting at the higher level for positions with anticipated movement during the fiscal year. Job descriptions should also clearly distinguish whether advancement to the next level represents skill attainment or a formal promotion. For example, if a Level III classification functions as a lead worker role, the City may establish a defined number of authorized lead positions to maintain organizational structure and control span of supervision. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 27 RTC This department offers a flat dollar amount based on attainment of certifications. Step 1 - $1.90/hour – after completion of a 6 months working a recycling route Step 2 – Basic Training - $40/week Flat pay Step 3 – Safe Driver Certification - $40/week There is specific criteria under each of these steps, which have not been converted into position levels. With the increase in the salary ranges, the City may wish to discontinue this program. All incentive pay earned should be rolled into base salary and the certification pay eliminated. Transportation Similar to RTC, there are three (3) levels/steps where an employee can earn an extra $1/hour to a maximum of $3/hour. There is currently only one (1) title; thus, once these incentives are achieved, the employee remains in the same pay grade. The recommendation is to create three levels of Maintenance Worker III titled Street Maintenance Tech I, II and Street Maintenance Tech III. All employees begin at the Street Maintenance Tech I level and need to complete the required courses/certifications to advance to the next level. Thus, the incentive pay should be discontinued. All earned incentive pay should be rolled into base pay. Fleet This department has multiple opportunities for additional pay. The department currently has three (3) levels of positions – Equipment Mechanic I, II, and III. Attainment of each level is based only on years in the position. In addition, there are numerous certification opportunities to achieve ASE or EVT (Emergency Vehicle Tech) at either $200 per certification to a maximum of five (5) certifications; plus pass up to six (6) tests in either the ASE and/or EVT to add from $4.50/week to $34.00/week. Rather than base movement to the next level on years of service, the recommendation is to align the certifications to the position level. Thus, once defined certifications are achieved, the individual moves to the next level with its own salary range. Table 3: Fleet Incentive Recommendation Title Certs/Level Type Equipment Mechanic I Level I/2 Certs ASE or EVT Equipment Mechanic II Level 3/4 Certs ASE or EVT Master Mechanic Level 5/6 Certs ASE or EVT Add $200 additional certs after Master (max 5) Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 28 These levels and certifications should be reviewed and modified by the Department to ensure they are beneficial to the responsibilities of the position. As such, the earned incentive pay should be rolled into base salary and the extra pay discontinued. Dispatch Shift Differential: Many organizations do provide an incentive to work non-traditional work hours, especially in public safety departments that are required to provide service 24 hours a day/7 day a week, including holidays and weekends. These are sometimes perceived as non-desirable shifts. Based on the analysis below, the current shift differential of $1.50 per hour is within, if not higher than the comparable organizations. No change is recommended at this time, but the City should keep an eye on the comparable organizations and adjust as needed in future budgets. Table 4: Dispatcher Shift Differential Analysis City Shift Differential City of Fayetteville, AR $1.50/hour City of College Station, TX TC05 $0.50/hr; TC06 $1.25/hr; TC07 $1.75/hr; TC08 $2.50/hr City of Edmond, OK $40/PP 2nd shift; $80/PP 3rd Shift Police The incentives provided in the Police Department include – education pay, specialized pay and shift differential. In addition, there is longevity pay that is addressed in a different section. Recruitment/Sign On Bonus: Due to the difficulties of recruitment of police officers, the City offers a recruitment/sign-on bonus. This was a trend since COVID; however, many departments are getting rid of this incentive. Here are a few comps that provide a recruitment/sign on bonus. (Note: The City also offers a non-certified sign on bonus. Since the comps did not indicate such a program, there was no comparison completed.) Table 5: Police Recruitment/Sign On Bonus Analysis Recruitment/Sign On Bonus Type Bonus Bonus Bonus Fayetteville Certified $2,000 at hire $4,000 -FTO $4,000 - 18 mo City of Little Rock, AR Recruit/referral $500 City of College Station, TX Referral $1,000 Certified $3,500 City of Richardson, TX Pass Exam $50 Post Certified $500 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 29 Of the Tier I, II comps only three (3) provided information on a recruitment bonus program. The City of College Station has a referral bonus, and a bonus when the employee becomes a certified officer. The City of Richardson, TX incentivizes when the employee passes the exam and then once certified. This is money that could be put to use elsewhere. The City should evaluate if the cost of this program is bringing in and retaining quality employees into the department. Education Pay: The education incentive is a percentage of salary for achievement of an associate’s degree; bachelor’s degree, or a master’s degree. Table 6: Fayetteville Police Education Analysis Educational Pay AA/PP BA/PP MS/PP City of Fayetteville, AR 3% Base pay 6% Base pay 7% base pay (Police Officer Step E) $78.86 $157.73 $184.02 City of Bentonville, AR $35.00 $100 $150 City of Broken Arrow, OK $34.62 $57.69 $92.31 City of Little Rock, AR $39.24 $72.12 $86.54 City of Rogers, AR $50.00 $100.00 $115.38 City of Denton, TX $53.08 $99.23 City of Richardson, TX $34.62 $57.69 $69.23 Average $38.70 $73.43 $252.11 A number of comparable organizations continue to offer educational incentives; however, many have shifted away from ongoing compensation for earning a degree and instead provide tuition reimbursement programs. The City’s educational incentive exceeds the average level offered by comparable organizations. As a result, there is an opportunity to reduce or eliminate the current incentive program. The City should carefully evaluate the long-term viability of this benefit. Among the comparable organizations reviewed, only the City of Fayetteville provides an educational incentive calculated as a percentage of base pay. If the City elects to continue offering an educational incentive, consideration should be given to reducing the benefit or offsetting its cost through smaller annual salary schedule adjustments. The combination of increasing base wages and a percentage-based educational incentive creates a compounding compensation cost that may not be financially sustainable over the long term. Certification / Assignment Pay: Historically, many police departments provided incentive pay for a variety of specialty assignments and certifications. Over time, however, a number of agencies have Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 30 incorporated these responsibilities into career development levels within the Police Officer classification rather than maintaining separate incentive programs. Regardless of the approach used, funding specialty assignment and certification incentives divert compensation dollars away from base pay and can contribute to salary compression between ranks and career levels. A review of comparable organizations, as well as numerous police compensation studies, indicates that incentive and assignment pay practices are highly department-specific. Assignments and certifications considered critical in one organization may not hold the same value in another. Additionally, incentive structures vary significantly, with some agencies providing hourly premiums, others offering monthly stipends, and still others utilizing annual lump-sum payments. Due to this lack of consistency and standardization among comparable organizations, it is difficult to establish a market-based recommendation for certification and assignment pay. As illustrated below, the prevalence, type, and amount of incentive compensation varies considerably across departments, making local operational needs and organizational priorities the primary factors in determining whether such incentives should be maintained. Table 7: Police Certification/Assignment Pay Analysis Certification/Assignment Pay Certifications Pay Max City of Fayetteville, AR ERT/CNT; Peer to Peer; FTO; Honor Guard; Accident Reconstruction; Drug Recognition Expert 2% of Base Pay Max 4 Certs (8%) City of Little Rock, AR FTO while training; Acting pay 3 hours per 8 hour shift City of Rogers, AR Instructor $300/yr; Basic $300/yr; General $600/yr; Intermediate $900/yr; Advanced $1,200/yr; Senior $1,500/yr; FTO cert $300/yr City of College Station, TX Cert built into pay range - Entry officer, Basic, Intermediate, advanced & master City of Lawrence, KS PTO = $125/shift as a PTO; City of Lee's Summit, MO ESS, HNT, Bomb Squad, FTO Sgt = $55/PP The only consistent practice identified among comparable organizations is providing compensation for employees who assume Field Training Officer (FTO) or Police Training Officer responsibilities. However, these organizations typically provide a flat dollar stipend rather than an incentive calculated as a percentage of base pay. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 31 The department should evaluate each existing incentive to determine whether it delivers a measurable operational benefit, supports departmental objectives, or enhances service delivery to the community. Incentives that do not provide a clear return on investment should be reconsidered or eliminated, allowing resources to be redirected toward base wage improvements. Focusing compensation dollars on base pay can strengthen overall market competitiveness, improve recruitment and retention efforts, and provide a more sustainable compensation strategy over the long term. Shift Differential: Many organizations do provide an incentive to work non-traditional work hours, especially in police and fire which requires service 24 hours a day/7 day a week, including holidays and weekends. These are sometimes perceived as non-desirable shifts. Based on the analysis below, the current shift differential of $1.50 per hour is within, if not higher than the comparable organizations. Table 8: Shift Differential Analysis Shift Differential Amount City of Fayetteville, AR 1.5/hour City of Columbia, MO $1.00/hour City of Denton, TX $200/month (50% of the time) City of Lawrence, KS .60/hour (2nd shift) City of Lawrence, KS .85/hour (3rd/4th shift) City of Lee's Summit, MO $0.60 second shift / $0.85 third shift City of Norman, OK Shift 2: $0.30/hr; Shift 3: $0.40/hr; Shift 4: $0.35/hr Fire The Fire Department offers two incentives – Education pay and Certification/Assignment pay. Longevity is also offered but will be addressed in a different section. Table 9: Fire Education Pay Analysis Educational Pay AA/PP BA/PP MS/PP City of Fayetteville, AR $25.00 $100.00 $150.00 City of Rogers, AR $50.00 $100.00 $115.38 City of Richardson, TX $34.62 $57.69 $69.23 Only two (2) comparable fire departments provide a monetary incentive added to base pay for earning a degree. Most departments have moved toward tuition reimbursement programs that support employees in obtaining a degree without creating an ongoing compensation obligation. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 32 While educational incentives can encourage professional development, the direct relationship between a college degree and the daily duties of many fire service positions is often difficult to quantify. Funds allocated to educational incentives could instead be directed toward base wages, helping improve recruitment, retention, and overall market competitiveness. Given the limited use of educational incentive pay among comparable fire departments and its long- term financial impact, the City should consider eliminating the incentive; however, if the City wishes to continue, then maintain the fixed dollar amount. This approach would continue to support employee development while allowing the department to focus compensation resources on maintaining a competitive salary structure. Certification/ Assignment Pay: A review of comparable fire departments, as well as broader fire compensation studies, indicates that certification and assignment incentives are highly variable and largely department-specific. What is considered essential or incentivized in one organization may not hold the same value or operational priority in another, reflecting differences in service delivery models, staffing structures, and community needs. Additionally, there is no consistent market standard regarding the form of incentive compensation. Across comparable agencies, certification and assignment pay may be provided as hourly premiums, monthly stipends, or annual lump-sum payments, with significant variation in both structure and amount. As a result of this lack of consistency, it is difficult to establish a clear market-based recommendation for certification or assignment pay. Table 10: Certification/Assignment Pay Analysis Certification/Assignment Pay Type of Certification/Assignment Pay Pay Max City of Fayetteville Hazmat Tech, ARFF Certified, ERT Team, Peer Team, FTO, Bilingual 2% No Max City of Fayetteville Hazmat Team Leader; ARFF Team Leader 4% No Max City of Rogers, AR ARFF Entry $1,203/yr; ARFF Full $2,105/yr; ARFF Advanced $2,556/yr; ARFF Coordinator $3,008/yr; SOT Entry $1,203/yr; SOT Full $2,105/yr; SOT Expert $3,008/yr; SOT Supervisor $3,910/yr; AHA Training Coordinator $2,176/yr; ADEM HazMat Coordinator Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 33 Certification/Assignment Pay Type of Certification/Assignment Pay Pay Max $1,504/yr; NFPA 1403 Live Fire Instructor $544/yr. City of Norman, OK EMS Instructor $375/yr; HazMat $100/mo; Search & Rescue Tech $100/mo City of Little Rock, AR EMT $2,400/yr City of Springdale, AR All EMS incentives City of Edmond, OK All EMS incentives City of Lee's Summit, MO All EMS incentives; Fire Investigator $0- $50/hr Incentive pay that is commonly utilized in the fire service is incentives tied specifically to EMS certifications such as EMT, Paramedic, and Preceptor. Given this limited use among comparable organizations, the City should evaluate whether these incentives provide a measurable operational benefit or return on investment. Incentives that do not directly support departmental priorities or improve service delivery may be reconsidered or eliminated. As with other forms of specialty pay, compensation dollars allocated to certification incentives could instead be redirected toward base wage adjustments, which benefit all employees and strengthen overall market competitiveness and long-term salary sustainability. If these incentives are maintained, moving to a flat dollar amount, rather than percentage of pay is recommended. Elected Officials Non-department head elected officials were included in the study, while department head elected officials were evaluated within the non-uniformed market data set. The same Tier I and Tier II comparators used for other non-uniformed positions were applied to assess elected official salaries and benefits. Reported compensation among comparables ranged from approximately $6,271 to $25,000, with the 60th percentile of Tier I at $15,270 and the median of Tier I/II at $14,000. Within the comparator group, the Cities of College Station and Edmond serve in a volunteer council capacity and may receive only reimbursement for expenses incurred. The City of Norman provides a monthly stipend structure, with council members receiving between $5,400 and $7,800 per month based on role classification (2022 data). Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 34 With the exception of the City of Little Rock, most Tier I comparables provide elected officials with benefits comparable to those offered to employees. Based on this analysis, no changes are recommended to the current benefits structure for elected officials. The City’s Code, Article II, governs compensation for elected officials. Given the City’s Mayor-Council form of government, the Mayor functions as a full-time administrator. Article II also establishes compensation provisions for the Mayor, City Clerk/Treasurer, and City Attorney. It is recommended that these positions receive the same cost-of-living adjustments and merit increases as non-uniformed employees. Merit consideration should align with the average merit increase provided to non- uniformed employees. The current restrictive language within Article II limits market competitiveness and contributes to internal pay compression. Accordingly, a revision to Article II is recommended to ensure alignment with market practices and internal equity. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 35 General Operational Guidelines Maintenance of Salary Schedule It is important for the City to have a standardized procedure to adjust the Salary Schedules for consistency and for budgetary forecasting. It is the Consultant’s recommendation that on a set date each year, all of the Salary Schedules be adjusted by the Consumer Price Index – Urban (CPI-U) percentage or by a local economic indicator, if preferred. For example, since budgeting is done at approximately the same time each year, the City should establish a specific month in which to capture the average of the previous twelve (12) months of the selected economic indicator for a recommended adjustment. Thus, if the City begins its budget process in September, then utilizing the 12 months previous to September could be used. Another method is to select a month, i.e., September, and look at a three (3) year average. The City will still maintain control if conditions and finances fluctuate in a specific year. The City’s current practice of evaluating salary schedules at two (2) year internals should be eliminated. Rather, annually monitor the economics of the region and adjust the schedules accordingly. Salary Schedule Adjustments The Salary Schedule should be adjusted annually to reflect economic conditions and maintain market competitiveness. Without routine adjustments, the Salary Schedule will gradually fall below market levels, ultimately requiring larger, more costly corrections in future years to restore competitiveness. This principle applies to all compensation structures, including both quartile and step-based salary schedules. Consistent annual adjustments help ensure that all pay ranges remain aligned with the labor market and reduce the need for periodic, significant market realignments. It is important that the City budget for annual adjustments to all salary schedules. While there may be limited instances in which economic conditions do not support an increase, these should be the exception rather than the norm. When applied consistently, across-the-board schedule adjustments also ensure that employees within established salary ranges maintain their relative position within the range, preserving internal equity and pay structure integrity. Progression Through the Salary Schedule Annually, eligible non-uniformed employees receive a merit increase. The City allocates dollars to each department for distribution to employees. Human Resources may want to take a look at the distribution of merit increases, as some departments had the perception dollars were not allocated based on performance. By maintaining the salary schedule and providing employees with that adjustment, the schedule should be maintained and competitive. Thus, the need to use merit as a way to keep salaries competitive should be minimized. In fiscally tight years, the City may need to determine if the allocation is to the Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 36 salary schedule to keep it competitive, or to the merit increase to progress employees through the range. Employees on the step schedules continue to move to the next step based on City compensation policy. In-Range Adjustments The quartile system enables Human Resources to perform an annual review to ensure employees are progressing through the salary range in alignment with their years of service in the position. If an employee falls below the expected quartile and performance is not a contributing factor, targeted in- range adjustments may be made to support market competitiveness, reducing reliance on merit increases for this purpose. These adjustments are not guaranteed and will only be implemented when it is demonstrated that the employee is not advancing appropriately within the range. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 37 Total Rewards How does an employer create compensation and benefits programs that support their ability to attract the right talent, retain that talent, and help to engage that talent now and in the future? By using a total rewards approach - a combination of salary, benefits, rewards, wellbeing, and engagement to make up the employment experience. In today’s current market, there is a shift in the focus from an ‘employee’ that is part of a standardized group that offers one size fits all benefits to “personal” individualized benefit options that are responsive to individual preferences that are applicable for all phases of life. A Total Rewards model considers the following areas: Figure 7: Total Rewards Visual A total rewards model provides a framework for designing, implementing, and assessing the rewards packages offered throughout the organization. Organizations should always consider various influences, both internal and external, that help shape an organization’s unique culture and human resources strategy. It will be important for the City to focus on that balance going forward, with the current labor market conditions and acknowledging what is valued and important to multiple generations that make up current and future employees. This framework can be supported with the information provided in the Benefits Section and Opportunities Section of the Report. Wages Benefits Well-being Professional Development Recognition Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 38 Benefits In addition to compensation, the City asked that a comparison of major benefits be completed. The following is a summary of how the City is fairing in the market for health insurance and paid time benefits, which are two (2) of the most important benefits to employees. Current Benefit Trends Employers are offering more flexible and tailored benefit packages to meet the diverse needs of their workforce. Many workforces have multiple generations within their employees, resulting in diverse needs, preferences, and life circumstances. As such, employees have a growing expectation of being treated as individuals rather than a singular group that receives identical benefits. Providing options where employees can select benefits that suit their unique preferences is a major trend. There is also an expanded focus on mental health and well-being. Mental health is continuing to receive more attention in the total rewards package. Beyond traditional healthcare, employers are investing in benefits that support the mental and emotional well-being of their staff. Employee Assistance Programs (EAPs) are expanding to offer more comprehensive counseling, stress management resources, and resilience training. Mental health days, flexible work arrangements, and improved work- life balance policies continue to gain traction as employers aim to support their employees' holistic well-being. Offering flexibility can make employees feel more supported in their personal lives, reducing stress and improving productivity. This is still a challenging topic for many public employers. Health Insurance Plan Design Overview The City of Fayetteville offers two (2) medical plan options for employees and their families to choose from. All plans are administered by Arkansas Blue Cross Blue Shield. The plans vary by benefit and cost; summarized as follows: Table 11: Health Plan Summary PLAN DESCRIPTION DEDUCTIBLE AMOUNTS (S/F) MONTHLY EMPLOYEE CONTRIBUTION (S/F) Traditional PPO $1,000/$2,000 $244.28/$1,073.62 High-Deductible Health Plan (HDHP) $3,400/$6,800 $67.48/$216.30 Across the nation, many organizations have adopted higher deductibles and coinsurance limits in health plans, shifting more costs to end users - a trend that has become standard. By offering multiple plan options, the City gives employees the opportunity to select the coverage that best suits their individual needs, enhancing the overall benefits package. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 39 Employers frequently provide contributions to Health Savings Accounts (HSAs). Comparable organizations reported annual HSA contributions between $120-$1,700 for single coverage and $120- $3,400 for family coverage. The City’s HSA annual contribution is $1,050 for single and $2,280 for family. The City appears to be at the average of the market. How this impacts their overall position in the market, however, is described later in the report. Premiums It is extremely difficult to compare health insurance, as the number of plans and the plan designs are significantly different among organizations. What can be compared is the amount the employee contributes toward the cost of that insurance. As the City is aware, the cost of health insurance is a significant budget item for any organization. Health insurance is also often the single largest benefit looked at by potential new hires with the City, so a review of employee contributions to this benefit is imperative for offering a comprehensive benefit package. The Consultants conducted a comparison between the City’s health plans and the comparable organization’s health plans for a more accurate assessment of insurance within its specific peer group. Below are the results from comparable entities that provided benefit data, categorized into single and family coverage. Note: Tier I comparables - no color; Tier II comparables - green Table 12: Single Plan Premium Comparison Comparable Plan Description Single Monthly Premium Deductible Amount City of Bentonville, AR BCBS of AR $6,650 HDHP $0.00 $6,650.00 City of Columbia, MO Anthem HDHP with HSA $0.00 $3,400.00 City of Edmond, OK ACO $0.00 $500.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus $0.00 $750.00 City of Lee's Summit, MO Cigna HDHP with HSA - Local Plus $0.00 $3,400.00 City of Lee's Summit, MO Cigna HDHP with HSA - Broad) $13.77 $3,400.00 City of Columbia, MO Anthem PPO $36.26 $1,500.00 City of Richardson, TX BCBS HDHP (Green) $48.00 $3,400.00 City of Bentonville, AR BCBS of AR $4,000 HDHP $60.58 $4,000.00 City of College Station, TX HDHP with HSA $62.00 $2,000.00 City of Fayetteville, AR High-Deductible Health Plan (HDHP) $67.48 $3,400.00 City of Richardson, TX BCBS PPO (Red) $69.00 $2,000.00 City of Edmond, OK Standard $74.00 $1,000.00 City of Columbia, MO Anthem PPO; closed to new participants $76.79 $750.00 City of College Station, TX PPO plan $88.00 $1,000.00 City of Little Rock, AR Base Plan $108.33 $3,000.00 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 40 Comparable Plan Description Single Monthly Premium Deductible Amount City of Little Rock, AR HDHP $108.33 $2,500.00 City of Lee's Summit, MO Cigna Base PPO - Broad $122.94 $750.00 City of Edmond, OK Enhanced $124.00 $750.00 City of Rogers, AR Blue Advantage $142.33 $750.00 City of Springdale, AR Copay Plan $148.92 $500.00 City of Springdale, AR HDHP $151.45 $6,000.00 City of Bentonville, AR BCBS of AR $1,750 HDHP $184.75 $1,750.00 City of Little Rock, AR Buy-Up Plan 1 $190.88 $2,000.00 City of Little Rock, AR Buy-Up Plan 2 $220.63 $1,000.00 City of Fayetteville, AR Traditional PPO $244.28 $1,000.00 Table 13: Family Plan Premium Comparison Comparable Plan Description Family Monthly Premium Deductible Amount City of Bentonville, AR BCBS of AR $6,650 HDHP $145.36 $13,300.00 City of Bentonville, AR BCBS of AR $4,000 HDHP $176.22 $8,000.00 City of Lee's Summit, MO Cigna HDHP with HSA – Local Plus $190.43 $6,800.00 City of Fayetteville, AR High-Deductible Health Plan (HDHP) $216.30 $6,800.00 City of College Station, TX HDHP w/HSA $252.00 $4,000.00 City of Edmond, OK ACO $272.00 $1,500.00 City of Richardson, TX BCBS HDHP (Green) $342.00 $5,400.00 City of Edmond, OK Standard $385.00 $3,000.00 City of Springdale, AR HDHP $416.01 $12,000.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus $445.59 $1,500.00 City of Richardson, TX BCBS PPO (Red) $447.00 $4,000.00 City of Lee's Summit, MO Cigna HDHP with HSA - Broad $505.17 $6,800.00 City of Edmond, OK Enhanced $509.00 $2,250.00 City of Bentonville, AR BCBS of AR $1,750 HDHP $537.31 $3,500.00 City of Springdale, AR Copay Plan $537.66 $1,000.00 City of College Station, TX PPO plan $561.00 $2,000.00 City of Columbia, MO Anthem HDHP with HSA $682.51 $6,800.00 City of Little Rock, AR HDHP $737.99 $5,000.00 City of Columbia, MO Anthem PPO $738.44 $4,500.00 City of Little Rock, AR Base Plan $777.49 $6,000.00 City of Lee's Summit, MO Cigna Base PPO - Broad $785.36 $1,500.00 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 41 Comparable Plan Description Family Monthly Premium Deductible Amount City of Rogers, AR Blue Advantage $789.04 $1,500.00 City of Columbia, MO Anthem PPO; closed to new participants $1,000.58 $2,250.00 City of Little Rock, AR Buy-Up Plan 1 $1,025.14 $4,000.00 City of Fayetteville, AR Traditional PPO $1,073.62 $2,000.00 City of Little Rock, AR Buy-Up Plan 2 $1,114.36 $2,000.00 The information above indicates the City’s HDHP plans is among the top of the market when comparing premiums, while the Traditional PPO has among the highest premiums compared to the market. However, that is not a comprehensive picture because employees have actual claims costs as well. Expected Employee Cost Because premiums and deductibles are varied in the region, when considering the cost of the monthly premium plus the deductible, with the utilization of the HSA, this is a truer look at the expected employee cost. This calculation shows a truer position in the market as shown in the Tables below. Table 14: Single Plan Comparable Review Comparable Plan Description Single Annual Premium Deductible Amount HSA Contribution Expected Annual Risk To Employee City of Edmond, OK ACO $0.00 $500.00 $500.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus) $0.00 $750.00 $750.00 City of Columbia, MO Anthem PPO; closed to new participants $921.48 $750.00 $1,671.48 City of Edmond, OK Standard $888.00 $1,000.00 $1,888.00 City of Columbia, MO Anthem PPO $435.12 $1,500.00 $1,935.12 City of College Station, TX PPO plan $1,056.00 $1,000.00 $2,056.00 City of Lee's Summit, MO Cigna Base PPO - Broad $1,475.28 $750.00 $2,225.28 City of Edmond, OK Enhanced $1,488.00 $750.00 $2,238.00 City of Springdale, AR Copay Plan $1,787.04 $500.00 $2,287.04 City of Rogers, AR Blue Advantage $1,707.94 $750.00 $2,457.94 City of College Station, TX HDHP w/HSA $744.00 $2,000.00 $700.00 $2,744.00 City of Richardson, TX BCBS PPO (Red) $828.00 $2,000.00 $2,828.00 City of Columbia, MO Anthem HDHP with HSA $0.00 $3,400.00 $1,700.00 $3,400.00 City of Lee's Summit, MO Cigna HDHP with HSA - Local Plus $0.00 $3,400.00 $600.00 $3,400.00 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 42 Comparable Plan Description Single Annual Premium Deductible Amount HSA Contribution Expected Annual Risk To Employee City of Lee's Summit, MO Cigna HDHP with HSA - Broad $165.24 $3,400.00 $600.00 $3,565.24 City of Little Rock, AR Buy-Up Plan 2 $2,647.58 $1,000.00 $3,647.58 City of Little Rock, AR HDHP $1,300.00 $2,500.00 $120.00 $3,800.00 City of Fayetteville, AR Traditional PPO $2,931.36 $1,000.00 $3,931.36 City of Bentonville, AR BCBS of AR $1,750 HDHP $2,217.00 $1,750.00 $600.00 $3,967.00 City of Richardson, TX BCBS HDHP (Green) $576.00 $3,400.00 $1,000.00 $3,976.00 City of Fayetteville, AR High-Deductible Health Plan (HDHP) $809.76 $3,400.00 $1,050.00 $4,209.76 City of Little Rock, AR Buy-Up Plan 1 $2,290.60 $2,000.00 $4,290.60 City of Little Rock, AR Base Plan $1,300.00 $3,000.00 $4,300.00 City of Bentonville, AR BCBS of AR $4,000 HDHP $726.96 $4,000.00 $1,200.00 $4,726.96 City of Bentonville, AR BCBS of AR $6,650 HDHP $0.00 $6,650.00 $1,350.00 $5,300.00 City of Springdale, AR HDHP $1,817.40 $6,000.00 $1,316.00 $7,817.40 Table 15: Family Plan Comparable Review Comparable Plan Description Family Annual Premium Deductible Amount HSA Contribution Expected Annual Risk To Employee City of Edmond, OK ACO $3,264.00 $1,500.00 $4,764.00 City of College Station, TX HDHP w/HSA $3,024.00 $4,000.00 $1,200.00 $5,824.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus $5,347.08 $1,500.00 $6,847.08 City of Fayetteville, AR High-Deductible Health Plan (HDHP) $2,595.60 $6,800.00 $2,280.00 $7,115.60 City of Springdale, AR Copay Plan $6,451.92 $1,000.00 $7,451.92 City of Richardson, TX BCBS HDHP (Green) $4,104.00 $5,400.00 $2,000.00 $7,504.00 City of Edmond, OK Standard $4,620.00 $3,000.00 $7,620.00 City of Bentonville, AR BCBS of AR $4,000 HDHP $2,114.64 $8,000.00 $2,000.00 $8,114.64 City of Edmond, OK Enhanced $6,108.00 $2,250.00 $8,358.00 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 43 Comparable Plan Description Family Annual Premium Deductible Amount HSA Contribution Expected Annual Risk To Employee City of Lee's Summit, MO Cigna HDHP with HSA - Local Plus $2,285.16 $6,800.00 $600.00 $8,485.16 City of College Station, TX PPO plan $6,732.00 $2,000.00 $8,732.00 City of Bentonville, AR BCBS of AR $1,750 HDHP $6,447.72 $3,500.00 $1,000.00 $8,947.72 City of Richardson, TX BCBS PPO (Red) $5,364.00 $4,000.00 $9,364.00 City of Lee's Summit, MO Cigna Base PPO - Broad $9,424.32 $1,500.00 $10,924.32 City of Rogers, AR Blue Advantage $9,468.42 $1,500.00 $10,968.42 City of Columbia, MO Anthem HDHP with HSA $8,190.12 $6,800.00 $3,400.00 $11,590.12 City of Bentonville, AR BCBS of AR $6,650 HDHP $1,744.32 $13,300.00 $3,000.00 $12,044.32 City of Lee's Summit, MO Cigna HDHP with HSA - Broad $6,062.04 $6,800.00 $600.00 $12,262.04 City of Columbia, MO Anthem PPO $8,861.28 $4,500.00 $13,361.28 City of Little Rock, AR HDHP $8,855.86 $5,000.00 $120.00 $13,735.86 City of Springdale, AR HDHP $4,992.12 $12,000.00 $3,097.00 $13,895.12 City of Columbia, MO Anthem PPO; closed to new participants $12,006.96 $2,250.00 $14,256.96 City of Fayetteville, AR Traditional PPO $12,883.44 $2,000.00 $14,883.44 City of Little Rock, AR Base Plan $9,329.84 $6,000.00 $15,329.84 City of Little Rock, AR Buy-Up Plan 2 $13,372.32 $2,000.00 $15,372.32 City of Little Rock, AR Buy-Up Plan 1 $12,301.64 $4,000.00 $16,301.64 When considering deductible amounts alongside premium costs and employer HSA contributions, the City’s health insurance strategy becomes unclear. Employees will fare better on the Traditional PPO Plan for single coverage, which is counterproductive to the City, because it is the more expensive plan. Strategically, the HDHP should be more advantageous for the employee. The City can make a simple adjustment to the HSA contribution to flip this rating quickly. The HDHP Family plan is among the most competitive in the market. Next, we examine how the City compares in terms of out-of-pocket maximums. Maximum Employee Cost The following tables demonstrate that employees who experience a major medical event exceeding their deductible will face an average overall risk with the City’s plan compared to comparable plans, particularly when considering the maximum out of pocket expenses. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 44 Table 16: Single Plan Maximum Risk Comparative Review Comparable Plan Description Single Annual Premium Out Of Pocket Maximum HSA Contribution Highest Annual Risk To Employee City of Lee's Summit, MO Cigna HDHP with HSA - Local Plus $0.00 $3,400.00 $600.00 $2,800.00 City of Lee's Summit, MO Cigna HDHP with HSA - Broad $165.24 $3,400.00 $600.00 $2,965.24 City of Edmond, OK ACO $0.00 $3,000.00 $3,000.00 City of Fayetteville, AR High-Deductible Health Plan (HDHP) $809.76 $3,400.00 $1,050.00 $3,159.76 City of Columbia, MO Anthem HDHP with HSA $0.00 $5,000.00 $1,700.00 $3,300.00 City of Bentonville, AR BCBS of AR $1,750 HDHP $2,217.00 $1,750.00 $600.00 $3,367.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus $0.00 $3,500.00 $3,500.00 City of Bentonville, AR BCBS of AR $4,000 HDHP $726.96 $4,000.00 $1,200.00 $3,526.96 City of Richardson, TX BCBS HDHP (Green) $576.00 $4,000.00 $1,000.00 $3,576.00 City of Little Rock, AR HDHP $1,300.00 $2,500.00 $120.00 $3,680.00 City of College Station, TX HDHP w/HSA $744.00 $3,750.00 $700.00 $3,794.00 City of Rogers, AR Blue Advantage $1,707.94 $2,750.00 $4,457.94 City of Columbia, MO Anthem PPO; closed to new participants $921.48 $4,000.00 $4,921.48 City of Lee's Summit, MO Cigna Base PPO - Broad $1,475.28 $3,500.00 $4,975.28 City of Edmond, OK Enhanced $1,488.00 $3,750.00 $5,238.00 City of Springdale, AR Copay Plan $1,787.04 $3,500.00 $5,287.04 City of Bentonville, AR BCBS of AR $6,650 HDHP $0.00 $6,650.00 $1,350.00 $5,300.00 City of Edmond, OK Standard $888.00 $4,500.00 $5,388.00 City of Columbia, MO Anthem PPO $435.12 $5,000.00 $5,435.12 City of Richardson, TX BCBS PPO (Red) $828.00 $5,000.00 $5,828.00 City of Fayetteville, AR Traditional PPO $2,931.36 $3,000.00 $5,931.36 City of Little Rock, AR Buy-Up Plan 1 $2,290.60 $4,000.00 $6,290.60 City of Springdale, AR HDHP $1,817.40 $6,000.00 $1,316.00 $6,501.40 City of Little Rock, AR Buy-Up Plan 2 $2,647.58 $4,000.00 $6,647.58 City of College Station, TX PPO plan $1,056.00 $6,000.00 $7,056.00 City of Little Rock, AR Base Plan $1,300.00 $6,500.00 $7,800.00 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 45 Table 17: Family Plan Maximum Risk Comparative Review Comparable Plan Description Family Annual Premium Out Of Pocket Maximum HSA Contribution Highest Annual Risk To Employee City of Fayetteville, AR High-Deductible Health Plan (HDHP) $2,595.60 $6,800.00 $2,280.00 $7,115.60 City of Bentonville, AR BCBS of AR $4,000 HDHP $2,114.64 $8,000.00 $2,000.00 $8,114.64 City of Lee's Summit, MO Cigna HDHP with HSA - Local Plus $2,285.16 $6,800.00 $600.00 $8,485.16 City of Bentonville, AR BCBS of AR $1,750 HDHP $6,447.72 $3,500.00 $1,000.00 $8,947.72 City of College Station, TX HDHP w/HSA $3,024.00 $7,500.00 $1,200.00 $9,324.00 City of Richardson, TX BCBS HDHP (Green) $4,104.00 $8,000.00 $2,000.00 $10,104.00 City of Bentonville, AR BCBS of AR $6,650 HDHP $1,744.32 $13,300.00 $3,000.00 $12,044.32 City of Lee's Summit, MO Cigna HDHP with HSA - Broad $6,062.04 $6,800.00 $600.00 $12,262.04 City of Edmond, OK ACO $3,264.00 $9,000.00 $12,264.00 City of Lee's Summit, MO Cigna Base PPO - Local Plus $5,347.08 $7,000.00 $12,347.08 City of Springdale, AR Copay Plan $6,451.92 $7,000.00 $13,451.92 City of Edmond, OK Standard $4,620.00 $9,000.00 $13,620.00 City of Little Rock, AR HDHP $8,855.86 $5,000.00 $120.00 $13,735.86 City of Springdale, AR HDHP $4,992.12 $12,000.00 $3,097.00 $13,895.12 City of Columbia, MO Anthem HDHP with HSA $8,190.12 $10,000.00 $3,400.00 $14,790.12 City of Rogers, AR Blue Advantage $9,468.42 $5,500.00 $14,968.42 City of Edmond, OK Enhanced $6,108.00 $9,000.00 $15,108.00 City of Richardson, TX BCBS PPO (Red) $5,364.00 $10,000.00 $15,364.00 City of Lee's Summit, MO Cigna Base PPO - Broad $9,424.32 $7,000.00 $16,424.32 City of College Station, TX PPO plan $6,732.00 $12,000.00 $18,732.00 City of Fayetteville, AR Traditional PPO $12,883.44 $6,000.00 $18,883.44 City of Little Rock, AR Buy-Up Plan 1 $12,301.64 $8,000.00 $20,301.64 City of Little Rock, AR Buy-Up Plan 2 $13,372.32 $8,000.00 $21,372.32 City of Little Rock, AR Base Plan $9,329.84 $13,000.00 $22,329.84 City of Columbia, MO Anthem PPO $8,861.28 $15,000.00 $23,861.28 City of Columbia, MO Anthem PPO; closed to new participants $12,006.96 $12,000.00 $24,006.96 When considering maximum utilization, employees on the HDHP will have among the best plans in the market. Payment in Lieu of Coverage During the Study, employees expressed interest in the City offering a payment-in-lieu-of-health- insurance program for individuals who decline coverage. While such programs can provide employees with additional compensation, they also create several financial and administrative challenges for the organization. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 46 Under federal wage and hour regulations, payments made in lieu of health insurance generally must be included in an employee's regular rate of pay when calculating overtime compensation, unless they are contributed directly to a qualified retirement plan. This requirement increases overtime costs and adds complexity to payroll administration and compliance. In addition, payment-in-lieu programs often encourage younger and healthier employees to opt out of the City's health plan. As these lower-utilization participants leave the plan, the overall risk pool may become less favorable, resulting in higher claims experience and increased health insurance premiums for both the City and remaining participants. Given the potential for increased overtime expenses, additional administrative burdens, and the likelihood of adverse impacts on the City's health insurance costs, the Consultant does not recommend implementing a payment-in-lieu-of-health-insurance program at this time. Health Insurance Summary The City's multiple health plan options are a valuable benefit for employees. While some newer members of the workforce may not fully appreciate the importance of health insurance, most existing employees and more experienced applicants recognize its value. By maintaining competitive employee premiums, continuing to offer multiple plan options, and sustaining and enhancing the HSA contribution for single coverage, the City can maintain a competitive health benefits package. Time-Off Benefits Time-off and work/life balance continue to be top areas candidates and employees look at when considering employment and retention. Therefore, the City’s paid time-off benefits were also reviewed. Holidays Currently the City offers a total of 12 observed holidays. The comparables that provided holiday information reported total observed holidays between 10-12 days. The figure below displays the observed holidays based on the number of comparables that reported them. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 47 Figure 8: Observed Holidays The City also provides non-uniformed staff 16 hours of Personal Leave per year. The comparables reported providing 1-2 personal days/floating holidays/birthday day off per year. These types of flexible days are beneficial when the City does not observe a federal holiday or for an individual religious holiday or traditional practices that do not align with the City’s holiday schedule. State statute provides Police and Fire are to be compensated for the legal holidays established by the governing body. There are no recommendations for holiday adjustments. Vacation The City’s vacation model is summarized as follows: Table 18: Current Vacation Model Levels Of Accrual Minimum Annual Accrual Maximum Annual Accrual Years To Reach Maximum 8 10 days 26 days 29 years The comparables provide a range of 10-15 days the first year of service. The maximum number of vacation accruals range from 20-25 days, which occurs between the 10th - 26th year of employment with most between 20-25 years. Although it takes longer to reach the City’s maximum of 26 days, this maximum accrual is the highest of the comparable market, and the other level of accruals are in alignment. Although the City has 8 levels of accrual versus 3-7 levels in the comparable market, there is nothing problematic with the schedule. The City is facing a challenge in that the comparable market used for the Study provides a narrower perspective of time-off benefits, yet the region did report comparables that offer greater balances at time of hire. The City must balance paid time benefits against every department’s ability to provide time-off, in addition to any substantial elevation of balances that could create financial challenges to Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 48 fund the liability on the financials. Therefore, a non-accumulating bank of time could be added to the City’s time-off program to address the current market. Sick Leave The City offers 12 sick days per year for non-uniformed staff. The comparables report an annual accrual of 12-15 days. The City’s sick days also meets or exceeds the statutory requirements for Police and Fire personnel. Currently, upon separation of employment, employees will be paid a proration of their earned but unused sick accrual balance. Comparables report a range of payout options that has no trending pattern. The Consultants have no recommended changes to the City’s sick leave benefit. Paid Time-Off Although the City has sufficient time-off benefits, work/life balance, flexibility, and paid time -off topics are very important to the total compensation package. Having the rules and variations for each of the traditional methods of time-off may be confusing and frustrating for employees and managers, and it is likely a significant administrative burden to the administrative staff who set up and monitor the use of these forms of leave. Many organizations add stringent rules for the use of benefits to help the employees manage their personal situations, but that often makes programs more difficult to manage, so considering an alternative time-off program option may be beneficial to the City. This may also be very advantageous for future recruitment, when candidates are looking for increased flexibility with time-off. Paid Time-Off (PTO) is a single bank of time-off, which is then used for sick, vacation, and even bereavement time, instead of having different banks of time for different purposes. Some organizations include holidays into this program, while others do not. Generally, PTO has a larger overall rate than vacation, but less than vacation and sick time combined as a tradeoff for the increased flexibility provided under a PTO program, and there is an overall payout on the benefit. The benefit has administrative ease, simplification, and new flexibility for employees. Oftentimes the biggest challenge is transitioning accumulated sick and vacation hours into a new program, but this can be done successfully without loss of accumulated time. Organizations that have done this are satisfied with the result once the transition is complete. Although only two (2) comparable organizations identify PTO as a program they offer, the City could consider the concept of PTO to offer more flexibility within their benefits in the future. Typically, when an organization transitions to a PTO program, there is discussion of what to do with the current banks of time. It is customary for vacation to be rolled over into the PTO program so employees start with a balance of time. Available sick time can then be rolled into an Extended Leave Bank, in which employees may utilize this bank for major illness/accident events and FMLA qualifying events. This way, the sick time the employee has already accumulated is still available for significant events in their personal life. For hours that have been earned and are vested, there will need to be a Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 49 payout mechanism built into these banks so there is no loss to the employee as a result of the change in programs, but the banks simply do not need to accumulate new hours, if not desired by the City. Extended Leave Banks could be a grandfathered provision for current employees with sick time, so new employees would not be eligible. Other programs allow employees to move PTO into the Extended Leave Bank annually. A PTO program may be more difficult for Police and Fire positions with the vacation and sick time statutory requirements, so one of the considerations for the City is the administration behind retaining sick and vacation programs for part of the organization, and PTO for general employees. Paid Parental Leave The City of Fayetteville offers up to six weeks of paid parental leave for eligible employees. This leave may be used after the birth, adoption, or foster placement of a child. Fayetteville is proud to lead the region in this benefit, giving employees paid time to welcome and care for a new child. Although Arkansas does not require municipalities to provide paid parental leave, Fayetteville has chosen to invest in this support for its employees and families. The consultants have no recommended changes to the City’s parental leave benefit. Retirement Plan The City currently offers a deferred compensation retirement plan with a 12% City contribution when employees contribute an initial 3%. This is a defined contribution plan. In addition, Civil Service is enrolled in the Arkansas Local Police and Fire Retirement System (LOPFI), which is a defined benefit program. Retirement benefits are a major recruitment and retention tool. The difference between LOPFI and a deferred compensation plan is that one is a defined benefit (DB) plan while the other is a defined contribution (DC) plan. The City is competing with other Arkansas communities that offer DB systems to both its civil service and non-civil services employees. This impacts an applicant’s willingness to take employment with the City if they are already in a DB program. A defined benefit plan sets out the specific benefit that will be paid to a retiree. This calculation takes into account factors such as the number of years an employee has worked and their salary, which then dictates the pension that will be paid on retirement. Under this design, the employer and employee are responsible for providing contributions to the employee’s account. The advantage here for the employees is that they are guaranteed a particular income level at retirement. The downside for the employer is that they assume the risk if the account underperforms. If this happens, the employer has to increase the funding. A defined contribution plan (such as deferred compensation) is an accumulation of funds that makes up a person's retirement portfolio. A person contributes a portion of their salary, and these contributions are invested in a fund in order to provide retirement benefits. From the employer’s perspective, the City calculates their contributions percentage each year. From the employee’s perspective, however, there is some uncertainty. They do not know for sure what their retirement Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 50 income will be once they retire, because it will depend on how their investments have performed, and the employee assumes all the risk. Defined Benefit Retirement systems are created to help protect public employees from financial hardship and help attract a qualified public workforce. These systems have the knowledge, expertise, and experience to make sound investment decisions on behalf of hundreds of public sector employers. In an increasingly competitive labor market, it is a staple benefit most public employers offer and is one of the few benefits the public sector can offer its quality workforce that the private sector cannot. This benefit should be a long-term strategic consideration by the City. The City will have to undergo an actuarial review to identify the cost to enroll in the Arkansas Public Employees’ Retirement System (APERS) to understand the financial totality of a transition. Benefits for Future Consideration Organizations should always consider various trends and influences, both public and private sector, to keep competitive with benefits. The current trend in benefits is individualization to help meet the varying needs of a generationally diverse workforce. The following are other opportunities that were considered as part of the City’s comprehensive benefits review but are not recommended at this time. They may be considered in the future. Ancillary Insurance The City has a robust offering of voluntary insurance to select from. Providing these benefit options for employees allows them to hand-pick coverage that will be beneficial to them and/or families on an annual basis. This aligns with the workforce’s desire for individualized benefits based upon their needs. Two (2) additional benefit options should be considered: • Identity Theft and Legal Protection • Pet Insurance These are becoming more standard offerings for employees. Adoption Assistance Adoption assistance programs provide financial assistance or reimburse families for expenses related to the adoption of a child. This is a way to enhance employee recruitment and retention by showing commitment to not only employee health and wellness, but their family life. Including this with the City’s Cafeteria Plan for pre-tax expenses is an additional option, although this was not found among the comparables. Tuition Reimbursement A Tuition Reimbursement program supports employees’ professional development and educational advancement. Through this benefit, employees are typically provided with financial assistance to pursue further education or professional certifications. Tuition Reimbursement programs often contain employee and coursework eligibility requirements, in addition to annual and career maximum limits. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 51 Tuition reimbursement can also be utilized as a substitute for education incentives in the Police and Fire departments. Paid Elder Care Leave Elder Care leave is paid leave for employees who are balancing work with the responsibility of caring for aging parents. These paid benefits are not required in Arkansas; however, some communities are adding this as a benefit and other states are adopting mandatory benefits of this nature, which is gaining support nationwide. Offering a paid leave benefit aligned to Family Medical Leave qualifying events for a duration of between 2-6 weeks should be considered by the City. Volunteering Time Off Volunteer time-off is a paid leave system that allows employees to donate their time to local nonprofit organizations. Volunteer leave policies make an organization appealing to potential and existing employees who have a strong desire to give back to their community. In addition, this type of program allows employers to give back to their communities and nonprofits. Volunteer leave is when workers devote their leave period to charitable or community service activities. Some employers give their employees the freedom to choose where they want to spend their volunteer leave time, while others limit it to pre-approved locations. Volunteer time-off is typically up to one (1) day per year. Childcare Assistance Childcare is one of the most expensive household expenses, and often is a barrier to employment for that reason. Offering a childcare discount can increase employee satisfaction and engagement and can be a major recruitment tool. The City could consider a percentage, flat rate, or scholarship program to subsidize this expense. Although this was not a benefit found in the comparable market, this is a benefit some employers are considering on a national level as a means to reduce this potential ‘barrier’ for employees. This is often a solution in lieu of employers exploring the development of their own day care centers. Long Term Care Insurance Long-term care (LTC) is different from traditional medical care. Long-term care goes beyond medical treatment and nursing care to helping people cope in the face of a chronic illness or disability. Long- term care provides support in performing everyday tasks. People need long-term care for a number of reasons, but often it is simply for the process of getting older. Long-term care services are typically needed by individuals unable to perform activities of daily living or who become cognitively impaired. As the City’s workforce matures, there is a greater need for long-term care services which can be a significant financial burden without proper insurance coverage. Because this is a critical component to retirement planning, more employers nationally are offering LTC insurance programs and education. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 52 529 College Savings Plan A 529 plan is a tax-advantaged savings plan designed to help families save for college and a range of other qualified education expenses which is outlined in Section 529 of the Internal Revenue Code. This is a voluntary benefit option for the City to include in its benefits portfolio, while the preferred vendor works directly with the employee for enrollment and fund management. Lifestyle Saving Account A Lifestyle Savings Account (LSA) offers employers an opportunity to help fund health and wellness costs that a traditional group health plan won’t cover. The employer determines what expenses are eligible for reimbursement through an LSA. Here are a few examples of common spending opportunities through LSAs: • Gym memberships • Nutritional supplements • Fitness equipment • Groceries • Daycare • Athletic clothes • Life coaching • Continuing education courses • Sports Equipment This is considered a taxable income benefit. Wellness Program Enhancements Wellness initiatives can be positive influences toward the work culture and health of the organization. Although the City has a program, there was feedback this program could be enhanced. A review of the program identifies education, private coaching, participation challenges, nutritional counseling, lunch and learns, etc., and the City’s private gym. The City may wish to consider a partnership with other gyms in the community for discounted membership, and expanding services to other holistic opportunities such as yoga, massage, or even acupuncture. Other Wellbeing Strategies Wellness programs do not always offer what the employees need and want. These programs need to be intentional, to include topics that are important to employees, such as financial wellness and familial wellness, which are two (2) very key stressors to many employees. The City should engage the employees to understand what support looks like for the employee, otherwise the programs in place may not be effective for employees and have low participation. After engaging employees, the City can then consider the following examples of services and programs as new opportunities: • Financial advisor/Wealth management services • Income tax services • Family care/respite care services Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 53 • Caregiver support programs • Estate Management services • Final Life Assistance services • Concierge health services • Nontraditional wholistic healing programs Although the City offers personalized solutions through Bree Health, understanding the needs of the employees will help steer additional opportunities. Longevity Program Longevity is a traditional and tenured benefit intermittently found in the public sector that has never been proven to be effective toward promoting efficient and effective services, nor is it typically considered a retention tool simply because the amount is not intended to augment wages, nor is it base building. Longevity is instead considered a recognition benefit. Sometimes, organizations find they need the financial resources to be reallocated to support competitive market wages to all employees instead, which is a necessary and more impactful tool for retention. Recommendations on longevity programs are based on the financial means to continue the program, and the internal perceptions of the value of the program. Longevity should remain separate and not affiliated with base wages. Currently, longevity is provided to Police and Fire, but not general employees, and the longevity amount between Police and Fire is inconsistent. A closer look at the City’s longevity payments shows inconsistent annual values because the longevity amount is banded over several years. The City should establish a set and consistent annual value for longevity, starting at five (5) years. The City should consider between $50-$60 per year and keep the value consistent and equitable. This can be payable as the City is currently paying, on a pay period basis, to ensure its calculation into the overtime rates. Longevity should be consistent across the entire City for all positions. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 54 Appendix A: Compensation Policy Guidelines The following are general guidelines to maintain the compensation schedule. The City can use this to integrate into current compensation practices as appropriate. The City also needs to utilize any established practices designed by Arkansas Code and/or contractual obligations. Thus, this only serves as a guide for human resources. New Hires Employees start at the minimum rate of pay grade if the employee has the minimum skills and abilities required in the job description. The hiring supervisor, with the approval of the Human Resources Director, can start experienced individuals up to the market rate/position point. Any requests for placement above the market rate may occur only with the approval of the Chief of Staff and CFO. Cost-of-Living Adjustment On January 1st of each year (or a date designated by the City), employees will receive an annual cost- of-living adjustment equivalent to the percentage adjustment of the salary schedule. This includes the step and range schedules. Annual Increases On July 1st of each year (or a date designated by the City), employees may receive an incremental annual merit increase based on the pay-for-performance guidelines established by the City. For the uniformed salary schedules, the employee may receive the step increase. In-Range Adjustment The non-uniformed salary schedule is divided into quartiles, with the market range identified. Annually, Human Resources should evaluate whether employees, with acceptable performance, have moved beyond the hiring range based on their years of service in the position. An in-range adjustment may be needed to ensure that employees, with acceptable performance, are within the market range within an acceptable time. This is not available for the step salary schedules. Promotions An individual who moves to a position of a higher pay grade, will be placed at the minimum rate of the new salary range, OR the rate closest that provides a 5% increase. There may be situations in which a 5% increase is insufficient, and compression may still be a problem. In those rare situations, Human Resources may grant up to a 10% increase to alleviate a compression situation. The 10% guideline is intended to provide Human Resources with reasonable administrative flexibility and is not intended to limit or supersede the authority of the Mayor or other authorized City officials to approve a salary adjustment. Any adjustment exceeding 10% should receive City Administration approval and be supported by a recommendation from Human Resources. The recommendation Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 55 should consider the internal impact on longer-tenured employees in comparable positions, internal equity, and relevant external market data to ensure the adjustment is appropriate and does not create additional compression or inequities within the organization. The employees on the step schedule will be placed on the step closest to the 5% increase. Human Resources may grant to up 10% to alleviate compression issues. Demotions There are several situations that can occur, resulting in an employee’s pay being lowered which may result in the pay not being within the established salary range or step range. It will be the responsibility of the Human Resources Director to determine the pay implications due to employee demotions. The following are guidelines suggested: A. For demotions that occur because of position changes and/or position consolidations (not based on the performance of the employee), the salary can be “red circled” and frozen at that level until the salary range of the new pay grade catches up to the employee’s salary. B. For demotions that occur because the employee voluntarily applied for and accepted a position in a lower pay grade, the salary will be determined based on the employee’s experience and internal equity within the new salary range. C. For demotions that occur because of employee performance, the employee’s salary is decreased to a placement within the salary range or step of the new pay grade, as recommended by the department director and approved by Human Resources. Demotions of this nature are rare circumstances. Top of the Range When an employee reaches the maximum rate of their pay grade, they will be eligible for the cost-of- living salary schedule adjustments. The City may also provide a lump-sum payment equivalent to the annual increase, but it will not be added to base salary. This method of payment still provides additional compensation to an employee but does not compromise the schedule. Red Circle In placing employees on the recommended schedule, there were no employees that exceeded the maximum rate of the pay grade. If that occurs in the future, the employee will not be eligible for any base building adjustments. The City may provide the employee with an equivalent lump-sum payment. Position Pay Grade Changes A manager may request a pay grade evaluation for any position in their department via procedures identified by Human Resources. The request should be in writing, including the job duty changes, an updated position questionnaire or other circumstances that have precipitated the evaluation. This Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 56 should include the old job description along with either a new job description or a document that illustrates the changes. Human Resources will meet with the parties and discuss the changes. It should be noted that significant changes to a position’s responsibility that could prompt reclassification should be reviewed carefully to avoid unapproved position creep. Pay grade changes require approval by the Human Resources Director. If it is determined that after a pay grade evaluation an employee’s current salary is below the minimum rate of the new pay grade, the employee should be placed at the minimum rate of the new pay grade. If the current salary is within the new salary range, it will be at the discretion of the department to recommend any further adjustment, with confirmation by Human Resources. Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 57 Appendix B: Non-Uniformed Staff Pay Plan Proposed Effective Date: 10/26/2026 MinRate Q2 Position Point Q3 MaxRate Min Salary Max Salary M199 17.0000$ 18.7000$ 20.4000$ 22.9500$ 25.5000$ 35,360.00$ 53,040.00$ M200 18.2500$ 20.0750$ 21.9000$ 24.6375$ 27.3750$ 37,960.00$ 56,940.00$ M205 20.0750$ 22.0825$ 24.0900$ 27.1013$ 30.1125$ 41,756.00$ 62,634.00$ M210 21.6810$ 23.8491$ 26.0172$ 29.2694$ 32.5215$ 45,096.48$ 67,644.72$ M215 23.8491$ 26.2340$ 28.6189$ 32.1963$ 35.7737$ 49,606.13$ 74,409.30$ M220 26.2340$ 28.8574$ 31.4808$ 35.4159$ 39.3510$ 54,566.72$ 81,850.08$ M225 28.3327$ 31.1660$ 33.9992$ 38.2492$ 42.4991$ 58,932.02$ 88,398.13$ M230 31.1660$ 34.2826$ 37.3992$ 42.0741$ 46.7490$ 64,825.28$ 97,237.92$ M235 33.6593$ 37.0253$ 40.3912$ 45.4401$ 50.4890$ 70,011.34$ 105,017.12$ M240 36.3520$ 39.9872$ 43.6224$ 49.0752$ 54.5280$ 75,612.16$ 113,418.24$ M245 39.2602$ 43.1862$ 47.1122$ 53.0013$ 58.8903$ 81,661.22$ 122,491.82$ M250 42.4010$ 46.6411$ 50.8812$ 57.2414$ 63.6015$ 88,194.08$ 132,291.12$ M255 45.7931$ 50.3724$ 54.9517$ 61.8207$ 68.6897$ 95,249.65$ 142,874.58$ M260 49.4565$ 54.4022$ 59.3478$ 66.7663$ 74.1848$ 102,869.52$ 154,304.38$ M265 53.4130$ 58.7543$ 64.0956$ 72.1076$ 80.1195$ 111,099.04$ 166,648.56$ M270 57.6860$ 63.4546$ 69.2232$ 77.8761$ 86.5290$ 119,986.88$ 179,980.32$ M275 62.3009$ 68.5310$ 74.7611$ 84.1063$ 93.4514$ 129,585.87$ 194,378.91$ M280 67.2850$ 74.0135$ 80.7420$ 90.8348$ 100.9275$ 139,952.80$ 209,929.20$ M285 70.6493$ 77.7143$ 84.7792$ 95.3766$ 105.9740$ 146,950.54$ 220,425.92$ M290 74.1818$ 81.6000$ 89.0182$ 100.1455$ 111.2727$ 154,298.14$ 231,447.22$ M300 81.6000$ 89.7600$ 97.9200$ 110.1600$ 122.4000$ 169,728.00$ 254,592.00$ HOURLY RATE ANNUALIZED JOB GRADE Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 58 Appendix C: Uniformed Police Step Plan TOTAL PAY: TOTAL PAY INCLUDES BASE PAY AND HOLIDAY PAY FOR THE 13 HOLIDAYS RECOGNIZED BY THE CITY (104 HOURS) PREMIUM HOLIDAY PAY: FOR THE RANKS OF OFFICER, CORPORAL, SERGEANT AD LIEUTENANT 104 HOURS OF PREMIUM HOLIDAY PAY IS PRORATED OVER EACH OF THE PAYPERIODS AND LISTED SEPARATELY ON THE PAYSTUB. PREMIUM HOLIDAY PAY ASSISTS IN ALIGNING HOLIDAY PAY PRACTICES WITH OTHER POLICE DEPARTMENTS. NOTE: The Pay Plan steps are built on the base hourly rate. Total Hourly Pay is calculated by dividing Total Pay by scheduled hours 2080. Proposed Effective Date: 10/26/2026 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 59 Appendix D: Uniformed Fire Shift Step Pay Plan Proposed Effective Date: 10/26/2026 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849 McGrath Human Resources Group – City of Fayetteville, Arkansas 60 Appendix E: Uniformed Fire Day Step Pay Plan Proposed Effective Date: 10/26/2026 Docusign Envelope ID: 939FABA1-7EE7-867A-811B-3E8008FD2849