HomeMy WebLinkAbout03/20/2007, C4 - RESOLUTION TO ADOPT A COMPENSATION PHILOSOPHY Ecouncil
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CITY OF SAN LUIS OBISPO
FROM: Monica Irons, Director of Human Resources W��'
SUBJECT: RESOLUTION TO ADOPT A COMPENSATION PHILOSOPHY
CAO RECOMMENDATION
Adopt a resolution establishing a compensation philosophy for the City of San Luis Obispo.
DISCUSSION
This item was continued from the February 6, 2007 consent agenda, to allow staff adequate time
to consider inclusion of local private sector data in the relevant labor market. Staff has
thoroughly discussed and researched this suggestion and the proposed compensation philosophy
has been revised to incorporate this factor.
Summary of the City's Proposed Philosophy
The proposed compensation philosophy establishes an overarching goal for the City's pay and
benefit plans, which is to provide "competitive compensation as part of an overall strategy of
attracting and retaining highly qualified employees who exemplify our organizational values".
The philosophy acknowledges attracting and retaining employees is the result of a
comprehensive strategic approach, and competitive compensation is not the only solution to this
objective. The City continues its commitment to succession planning, training, development, and
organizational effectiveness as part of this overall strategic approach. However, compensation is
also important, and the proposed philosophy targets the City's market pay position as
"competitive".
Background
During the past three years, the City has experienced increasing difficulty in attracting and
retaining qualified employees. Data indicates recruitment and retention issues are broad-based
within the City. Approximately 20% of the regular employees hired in 2004 and 2005 were no
longer employed with the City after one year. The City has experienced vacancies for extended
periods due to an inability to attract qualified candidates.
Additionally, anecdotal information obtained from strong candidates who chose not to accept
positions with the.City, as well as from key employees who left the City, indicate compensation
influenced their decisions. However, more detailed information is needed to understand what, if
any, changes to City compensation and benefit plans are necessary in order to ensure the ability
to attract and retain qualified employees who exemplify our organizational values and high
standards.
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Establishing a Compensation Philosophy Page 2
In August 2006, the City began a comprehensive compensation study for general services,
confidential, management, and department head job classifications. Public safety classifications
are not part of this study. Human Resources staff is leading the study with input from an
employee committee, the Personnel Board (as suggested by the Council liaisons to the Board),
and a consultant, Geoffrey Rothman of Renee Sloan Holtzman and Sakai LLP. Mr. Rothman has
extensive experience in public sector compensation and has provided Human Resources staff and
the committee with an objective process for gathering and reviewing market data. Prior to
considering results from the compensation study, Mr. Rothman suggested the City adopt a
compensation philosophy as an important foundation in guiding the preparation and evaluation of
this analysis.
What Does a Compensation Philosophy Accomplish for the City?
The compensation philosophy identifies the objective of the City's pay and benefit plans. Stated
simply, the City's objective is to provide competitive compensation as part of an overall strategy
to attract and retain highly qualified employees who exemplify the City's organizational values,
and who are able to deliver exceptional services to the community.
The proposed philosophy further establishesa consistent methodology for determining whether
or not the City's plans are competitive. In addition, the philosophy establishes a broad
framework for the Council, citizens, and employees, to guide and understand decisions affecting
pay and benefit plans. It is designed to acknowledge the connection between the quality of
employees the City is able to recruit and retain and the quality of the services the City provides.
It also retains maximum flexibility for elected decision-makers, taking such factors as fiscal
health and community acceptance into consideration. Therefore, unlike some other jurisdictions,
the proposed philosophy assures that our compensation decisions are not on "auto-pilot" or
contractually anchored to formulas or indexes.
Inclusion of Private Sector Data
Staff previously detailed some of the practical and analytical challenges associated with
comparing private and public sector compensation and benefits. These include difficulty in
obtaining compensation data from the private sector because it is typically considered
confidential and difficulty in finding private sector matches for some of the City's key positions.
After the February 6, 2007 Council meeting, staff surveyed California cities to acquire insight
into how this interest was addressed elsewhere.
Staff found few cities that include such comparisons. Two cities responded they acquired private
sector compensation data from survey groups and considered it only for those limited positions
with valid position matches. The information was considered as an additional data point with
public sector market information. Staff recommends using a similar approach and has modified
the proposed compensation philosophy accordingly(see attached Resolution, Section 20). Staff
has already pursued data sources such as the California Employment Development Department
(EDD), the Private Industry Council, local employment agencies, and other local professional
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Establishing a Compensation Philosophy Page 3
groups conducting wage and benefit surveys. Thus far, EDD data appears to be the most
promising source.
Next Steps
If adopted by the Council, the compensation philosophy will be broadly communicated to
employees and ultimately used to guide decisions around compensation and benefits.
Specifically, when results of the current compensation study are prepared, recommendations will
be considered in light of this philosophy. Going forward, the methodology set forth in this
philosophy will guide future compensation studies. The compensation philosophy will be
periodically reviewed to assess how it supports the City's long-term goals, strategies, and
whether the philosophy is realistic and achievable.
FISCAL IMPACT
There is no fiscal impact of adopting a compensation philosophy.
ALTERNATIVES
1. Do Not Adopt a Compensation Philosophy. The Council may choose not to adopt a
compensation philosophy and thus not create written guidelines for future decision-making
around compensation and benefit plans. This alternative is not recommended as the
guidelines offered in the compensation philosophy will provide consistency in making future
decisions, and will document our purpose and methodology.
2. Modify the Proposed Compensation Philosophy. The Council may elect to modify the
proposed compensation philosophy. If Council chooses this alternative, staff requests that
Council provide direction as appropriate.
ATTACHMENT
Resolution
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• 0tachment 1
RESOLUTION NO. (2007 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING ITS COMPENSATION PHILOSOPHY
WHEREAS, the City of San Luis Obispo strives to provide excellent service to the
community at all times, and.supports this standard by promoting organizational values including
customer service, productivity, accountability, innovation,initiative, stewardship, and ethics; and
WHEREAS,to achieve our service standards,the City must attract and retain highly
qualified employees who exemplify our organizational values; and
WHEREAS, fostering an environment attractive to such employees depends upon many
factors, including a competitive compensation program.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo that the City's compensation philosophy is adopted as follows:
SECTION 1. The City is committed to providing competitive compensation as part of
an overall strategy of attracting and retaining highly qualified employees who exemplify our
organizational values.
SECTION 2. The City's compensation philosophy is based on both internal and
external considerations, including internal relationships, the relative labor market, fiscal health,
and other relevant factors as follows;
A. "Internal relationships"refer to the relative value of classifications to one
another as determined by the City. Classifications performing comparable duties, with
comparable responsibilities,requiring a similar level of skill,knowledge, ability, and judgment,
will be valued similarly in the City's compensation structures.
B. In determining the"relative labor market,"the City will consider public
sector agencies with several comparable demographic data points including but not limited to
population,median home price; median household income, median age,median education level,
services provided, and unemployment rate. In evaluating market competitiveness with the
relevant labor market, the City will consider total compensation, including but not limited to
salary,health, retirement, and time off benefits.
C. The City's fiscal health will guide all compensation practices; thus,the
City's financial condition, competing service priorities, fund reserve levels, and revenue
projections will be considered prior to implementing changes in compensation.
D. Other relevant factors may include unforeseen economic changes,natural
disasters, states of emergency, changes in City services, changes in regulatory or legal
requirements, reliable local private sector compensation data as available, and community
acceptability.
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Resolution No. (2007 Series)
Page 2
SECTION 3. At least every five years, the City will evaluate its compensation structure,
programs, and policies to assess market competitiveness, effectiveness, and compliance with
State Law. Adjustments to the compensation structure may be made as a result of this periodic
evaluation and will be done through the collective bargaining process, if applicable, or other
appropriate Council-management processes.
Upon motion of , seconded by ,
and on the following vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted on March 20, 2007.
Mayor David F. Romero
ATTEST:
Audrey Hooper, City Clerk
APPROVED AS TO FORM:
Jon han well, City Attorney
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