Municipality may establish a merit system; provisions

constitute part of an employment contract. A. Any municipality may establish by ordinance a merit system for the hiring, promotion, discharge and general regulation of municipal employees. The ordinance may contain reasonable restrictions or prohibitions on political activities which are deemed detrimental to the merit system thereby established. The ordinance may provide for a personnel board or personnel officer to: (1) administer the ordinance; and (2) establish rules and regulations pursuant to the ordinance, which may include: (a) rules governing classification of employees; (b) service rating of employees; (c) establishment of pay scales and ranges; (d) establishment of the number of hours of work per week; and (e) methods of employment, promotion, demotion, suspension and discharge of the municipal employees. B. If a personnel board is created, the method of appointment, the number of members and terms of office shall be set forth in the ordinance. The board shall serve without compensation for its service. C. Following the adoption of a merit system, the contract of employment between the municipality and an employee in a position covered by the merit system shall be subject to the provisions of the ordinance and rules and regulations issued pursuant to the ordinance. D. Within ten days following the adoption of a merit system, an employee in a position covered by the merit system may file with the clerk a declaration stating that the employee does not desire to have his employment subject to the ordinance together with the rules and regulations issued pursuant to the ordinance. The contract of employment of all other employees employed at the time of the adoption of the merit system, and in positions covered by the merit system, shall be subject to the provisions of the ordinance and all rules and regulations issued pursuant to the ordinance.