Attachment_07a_-_Pay_and_Benefits_Study_Report.pdf

Attachment 07a

Pay and Benefits Study Report

THIS DOCUMENT IS PROVIDED FOR INFORMATIONAL PURPOSES

ONLY TO ASSIST OFFERORS WITH THEIR PROPOSALS. IT PERTAINS

TO THE SOLICITATION ONLY AND WILL NOT BE INCORPORATED INTO

THE CONTRACT AT THE TIME OF CONTRACT AWARD

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Table of Contents

1. Pay and Benefits Study Approach

2. Pay and Benefits Study Model Structure

2.1 Pay & Benefits Study Model

2.2 Rates Calculator

2.3 Raw Supporting Data

3. Pay and Benefits Study Key Findings

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1. Pay and Benefits Study Approach

As discussed within the Statement of Work, the baseline for the study labor categories listed in Attachment #1 was the Department of Labor (DoL) wage information provided by the DoL Wage Determinations for Palm Beach County, Florida. The study was then proceed by leveraging data from the Economic Research Institute database to calculate cost-of-living differentials between Palm Beach County, Florida and the Andros Island, Bahamas with the following considerations:

1. Consumables - The percentage of income dedicated to Consumables was calculated for spending pattern after housing and income tax spending has been assigned. Consumable spending was based upon North American disposable income spending patterns at different earnings levels and formed from a market basket of goods and services that a typical management/professional household would purchase and consume. The market basket of goods and services used survey data from items that represent categories of goods and services (i.e., proxy goods). Each item contributes a specific share (weight) to the market basket and the weights are determined by the Bureau of Labor Statistics’ Consumer Expenditure Survey (http://www.bls.gov/cex/). The following categories of goods and services were used in the Consumables price index data: meats, dairy products, produce, bakery products, miscellaneous grocery products, miscellaneous goods and services (e.g. fast food, average casual restaurant, haircut and other personal services, clothing items, entertainment, major appliance repair, etc.).

2. Transportation - The Transportation figure included the yearly total cost of operating automobile(s) and/or equivalent commuter expense for ten miles each way. The cost of operating an automobile defaults to 20 miles round trip daily, maintenance, taxes and licensing fees, insurance, gasoline costs including taxes, etc. Costs vary according to changes to number of vehicles, combined value and combined, annual mileage/kilometers. Sources included IRS allowed reimbursement policies, local gasoline, insurance, licensing, and maintenance/service prices. The Transportation estimates used local data on commuting patterns and city dispersion data combined with fuel cost factors, public transportation, and efficiency patterns of public transportation in relationship to a transportation price level index.

3. Health Services - Health care services are out-of-pocket costs for the employee and carrier zone rates by location, along with hospital costs. They were based primarily upon group medical benefits as tracked by national carriers and other methodologies.

4. Rent/Utilities/Renters Insurance - The study assumed unfurnished rental of an apartment or a condominium. Amenities vary by region and the study assumed amenities that are standard for the region. Utilities were based on costs for common heating/cooling/sources of energy for the Andros Island, Bahamas. Water and sewer cost estimates were also be included.

5. Income and Payroll Taxes - The study calculated the estimated impact of combined employee income taxes, including federal, state/provincial, and local (specific city or county, if existent), along with federal and local payroll taxes (e.g., FICA, FUTA, etc.), flat taxes, surtaxes, employee-paid disability, and employee-paid unemployment rates.

6. Miscellaneous - The study assumed a set percentage of after-tax miscellaneous expenses that may be defined as any number of additional expenditures (e.g., charitable contributions, tuition for dependents or child care, insurance premiums or deferrals, 3 | Page personal savings, investments, credit card debt payments, vacations, etc.) or unique factors such as attrition rate.

Once the cost-of-living differentials were calculated, the factors highlighted within the Statement of Work were then considered within the Pay and Benefits Study Model file to further analyze the impacts:

1. The non-Bahamian contract personnel and their families, are provided basic housing on a no-cost basis within the Government site on Andros Island.

2. The non-Bahamian contract personnel are provided electrical, water, telephone (not long distance), and cable television services, on a no-cost basis within the Government site on Andros Island providing minimum length of stay provisions are met, the non-Bahamian contract personnel do not have to pay federal or state income taxes on the wages they earn while on Andros Island; depending on the hire date for an employee, the minimum length could be up to two years for residency filing.

In regards to the attrition rates provided, the rates are simply too low and statistically insignificant to be considered as a single modeling factor. A basic regression analysis was conducted, but it did not provide any useful insights in adjusting the wage rates. The inclusion as a single modeling factor would introduce unnecessary assumptions and faulty errors. Instead, we assumed that the Miscellaneous line item consideration encapsulates any potential minuscule adjustments from the attrition rates normalization.

2. Pay and Benefits Study Model Structure

The Pay and Benefits Study Model file is organized into three tabs: Pay & Benefits Study Model, Wage Rates Calculator, and Raw Supporting Data.

2.1 Pay & Benefits Study Model

This tab shows each AUTEC Occupation as presented in Attachment #1, along with the Department of Labor (DoL) wage information for Palm Beach County, Florida in Column B.

Column C presents the wage rates for Andros Islands, Bahamas based on the various adjustment factors. Columns D, E, and F present the Andros Islands, Bahamas wage rates with adjustments made for (D) housing, (E) utilities, or (F) housing and utilities together. Adjustments are based on the Economic Research Institute’s monthly rent and monthly utility cost estimates by income level. Columns G and H respectively present the Andros Islands, Bahamas wage rates with tax normalization included for the non-Bahamian contract personnel that have less than two years of residency and for the non-Bahamian contract personnel that have two or more years of residency.

Non-Bahamian contract personnel that have less than two years of residency are assumed to be responsible for their own taxes; therefore, the rates are not tax-normalized. Non-Bahamian contract personnel that have two or more years of residency are assumed to not be responsible;

therefore, wage rates are lower in order to cover the estimated payroll taxes for that level of income.

The wage rates in Columns G and H are presented based on the values in Cells G1 and H1 respectively. For instance, for tax normalized rates for “Target Rates Minus Utilities Only”, 4 | Page select that value from the drop-down list in both cells. This provides additional flexibility in further modeling and analysis as required.

2.2 Rates Calculator

The Wage Rates Calculator tab does not correspond to any specific AUTEC Occupation unlike those listed within the Pay & Benefits Study Model tab. Instead, the user is allowed to enter any hourly wage rate in Cell B1; this wage rate would be the rate used in Palm Beach County, Florida. The wage rate entered in Cell B1 will be automatically adjusted based on cost differentials to what the equivalent hourly labor rate would be in Andros Islands, Bahamas based on conversion tables in the Raw Supporting Data tab. The converted value is available in Cell C1.

Additional cost of living data is made available on this tab, specifically within different categories of living expenses including: consumables, transportation, health services, rent/utilities/insurance, income and payroll taxes, and miscellaneous (see Rows 4 through 9). The total of these categories produces a total annualized cost of living for each location (Palm Beach County, Florida in Column B and Andros Islands, Bahamas in Column C). The totals lead to the calculation of an aggregate cost of living differential between the two locations.

In Rows 15, 16, and 17, fixed monthly rent, per diem lodging, and per diem food/other are also shown. These values do not vary based on income level, unlike the values in Rows 4 through 9, and are better suited for developing a reimbursement package for employees whose home location is Palm Beach County, Florida but are working on a temporary basis in Andros Islands, Bahamas.

2.3 Raw Supporting Data

The Raw Supporting Data tab is hidden by default. Data from this tab feeds input into the other two tabs. It is organized around various levels of hourly rates in Row 1, which are annualized in Row 4 using a factor of 2,080 hours per year for a full-time employee. Each row is named in Row 3 for organization purposes.

For each pay level in Palm Beach County, Florida, data from the Economic Research Institute’s Relocation Assessor is dropped into the table range B5:M15; corresponding data for Palm Beach County, Florida is dropped into the table range B18:M28.

Table range B30:M40 establishes the percent of total living expenses for each category (e.g.

consumables, transportation) for the purposes of completing calculations in the Pay & Benefits Study Model and Wage Rates Calculator tabs.

Table range B42:M52 calculates the differential between each category (e.g. consumables, transportation) between Palm Beach County, Florida and Andros Islands, Bahamas for the purposes of completing calculations in the Pay & Benefits Study Model and Wage Rates Calculator tab.

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3. Pay and Benefits Study Key Findings

After taking the calculated cost-of-living differentials highlighted in the above section into consideration within the model and the analysis, there was a 29% wage rate increase on average from Palm Beach County, Florida to Andros Island, Bahamas. The average wage rate in Palm Beach County, Florida from the AUTEC Occupations with known wage rates was $20.00 and the average wage rate in Andros Island, Bahamas from the AUTEC Occupations with known wage rates was $25.88.

The factors highlighted within the Statement of Work were then considered within Column F of the Pay & Benefits Study Model tab. First, with housing and utilities factors considered only, there was a 46% decrease from the calculated average wage rate of $25.88 for Andros Island, Bahamas to $14.06. Intuitively, the decrease make sense since housing and utilities together is such a large portion of the aggregated cost-of-living differential. The inclusion as benefits to the non-Bahamian contract personnel and their families should include a similar monetary value decrease adjustment in wage rates.

Furthermore, the factor “the non-Bahamian contract personnel do not have to pay federal or state income taxes on the wages they earn while on Andros Island; depending on the hire date for an employee, the minimum length could be up to two years for residency filing” was then considered in Column H of the Pay & Benefits Study Model tab. The decreases will be dependent on the selections within Cells G1 and H1, but using “Target Wage Rates Minus Both Housing & Utilities” as an example, the average wage rate decreased to $9.07, which is 35% less than the average wage rate highlighted in Column F, which considered housing and utilities factors only. Again, that makes sense given that the non-Bahamian contract personnel do not have to pay federal or state income taxes on the wages, which combined, would add up to about 35% of total income.

Overall, we believe the approach and the factors considered provided an objective and systematic way to determine a fair and reasonable compensation package for the occupations currently being performed by contract personnel at the U.S. Navy’s AUTEC facility on Andros Island, Bahamas. This study will also provide a solid foundation for further pay and benefits analysis and modeling efforts going forward.