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Attachment 1 CABARRUS COUNTY, NORTH CAROLINA OPEN RANGE VERSUS STEP SYSTEMS—ADVANTAGES AND DISDAVANTAGES Cabarrus County currently uses a formerly common form of a pay range system consisting of a series of steps, which are a specified distance apart. The system has been in place in excess of 30 years and consists of thirty-five (35) grades with ninety(90) steps per grade with each step representing an increase of.005 %until the maximum of the range is reached. Positions assigned to a grade must match the closest designated step for consistency purposes within the system. An explanation of the two systems follows: Step Systems. Cabarrus County currently uses a formerly common form of pay ranges consisting of a series of steps, which are a set specified distance apart. Step ranges may vary considerably in number of steps and the total range the steps covered. Clearly these two variables,in combination,will determine the size of each step. The point is that there are three variables present, and the determination of any two will decide the third. Two basic types of step ranges are common. The first consists of a starting rate and a job rate (assumed to be the market rate), as in the single-rate system. New employees are brought in at the starting rate and then moved up to the job rate in a series of steps. If done properly, this movement corresponds with the learning curve of the job. The market rate is the maximum, since it is assumed that once the person has learned the job,performance differentials are minimal. In this situation,there would be a number of steps, most commonly three, between the starting rate and the job rate. This type of step system is most common in semiskilled blue-collar jobs. The second type of step system places the market rate not at the top of the range but at the mid-point of the range. Other places, such as the one-third point or the two-thirds point, are also possible, but the mid- point is the most common. Employees are hired at the starting rate, as in the step system outlined above, and progress to the midpoint over time, on the basis of learning job proficiency. Thus, a person at the midpoint of the range is assumed to be a satisfactory market rate performer. Movement above the midpoint is assumed to be for performance, or other characteristics beyond the normal or average performance in the job. This type of system is used in a wide variety of office types of nonexempt jobs and lower-level exempt jobs where performance is important but not critical. These two types of rate ranges are not mutually exclusive in an organization. Lower-level pay grades may have the type of range that ends at the midpoint, while higher grades have ranges extending beyond. The rationale for such a system is that the discretion in higher-level jobs in the organization allows for performance differences not permitted in lower-level jobs. Movement within grades will be discussed later, but one point should be made. A person who is moved from one step to the next usually retains the new step even when the overall wage structure is changed. In this way, adjusting the wage structure to meet labor-market changes automatically becomes a general increase for employees in a step system. There is a further consequence of this type of system: all people tend to move to the top of the grade over time. Even if movement is by performance, a person can eventually reach the top of the range and stay there regardless of future performance. This phenomenon in turn has a dramatic effect on the total wage bill. In a period of normal growth and turnover the average wage for the job classification will probably match the market rate as people start to climb the ladder while others leave. But in a low-turnover, no- growth situation the organization may soon be paying above market rate even if it sets the midpoint of the range at the market,because all the employees in the job are in the top steps. Open range system. In order to focus more clearly on performance and to avoid the problems and more rigid nature of step ranges, more and more organizations are using an open-pay range. In this system,the Attachment number 2\n Page 1 F-5 Page 93