HomeMy WebLinkAbout11-05-2013 b2 approach to conducting a compensation study
FROM: Monica Irons, Director of Human Resources
SUBJECT: APPROACH TO CONDUCTING A COMPENSATION STUDY
RECOMMENDATION
Discuss and provide input on the proposed approach to be used to conduct a compensation study in
accordance with the Council adopted Compensation Philosophy (Attachment 1) as provided in the
work program supporting the major city goal Sustain Essential Services, Infrastructure, and Fiscal
Health.
DISCUSSION
Background
The major city goal Sustain Essential Services, Infrastructure, and Fiscal Health adopted as part of
the 2013-15 Financial Plan includes the following goal statement:
Sustain essential services, infrastructure, and fiscal health: preserve public health and safety and
provide essential services in line with residents’ priorities and sustain the City’s short and long
term fiscal health by planning future revenues (including renewal of Measure Y or an alternative
measure), while implementing contingency planning, efficiency measures, and cost containment
strategies including implementation of the Compensation Philosophy and monitoring further
pension and benefit issues.
The supporting work program for this major city goal includes the following action items
supporting implementation of the Compensation Philosophy:
1. Assist in the development and coordination of the HRACC compensation
and benefits survey to ensure appropriate local private sector data is
available for use in future analysis. Participate in the survey.
7/13 – 12/13
2. Conduct a market compensation comparison of benchmark classifications
in SLOCEA and management.
1/14 – 6/14
3. Develop a labor relations strategy to guide upcoming negotiations. 1/14 – 12/14
4. Conduct labor negotiations consistent with Council’s labor relations
strategy with represented employee groups; initiating negotiations prior to
expiration of current agreements
9/14 – 6/15
The first item in the chart above, participate in the local Human Resources Association of the
Central Coast (HRACC) compensation and benefits survey, is completed and staff is awaiting the
Meeting Date
Item Number November 5, 2013
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Compensation Study Plan Page 2
results that are expected by year end 2013. Staff is now preparing to conduct the market
compensation comparison that will help inform Council’s development of labor relations objectives.
2014 Compensation Study Purpose
The primary purpose of the 2014 Benchmark Compensation Study is to present to Council objective
and verifiable market compensation data as described in the Compensation Philosophy adopted by
Council in 2011. Current Memorandums of Agreement (MOA) with employee groups, which
achieved Council’s 2011-12 labor relations objectives, vary in length and are set to expire on
December 31, 2014 (SLOCEA), June 30, 2015 (Police Staff Officers), and December 31, 2015 (Fire
and Police). It is prudent to start gathering data that will help inform Council’s development of
labor relations objectives that will guide upcoming negotiations with these employee groups. The
2014 Compensation Study will allow Council to assess the City’s market position as provided in the
Compensation Philosophy and provide an objective basis in the preparation for negotiations with
employee groups in 2014 and 2015. Conducting the study will also fulfill a commitment to the San
Luis Obispo City Employees Association (SLOCEA) which requires that the City conduct a
benchmark compensation study that examines comparison data from local and regional cities by
June 30, 2014.
In addition to the results from the 2014 Benchmark Compensation Study, several factors will help
inform Council’s development of labor relations objectives including the following:
1. Actions expected to be taken by the CalPERS Board at the end of calendar year 2013,
including potential adjustments to mortality rates and the rate of return on CalPERS
investments (February 2014).
2. A staff presentation to Council on the advantages and disadvantages of paying down the
City’s unfunded liability with CalPERS (April 2014).
3. The Supplement to the 2013-15 Financial Plan (June 2014).
4. Development of the 2015-17 Financial Plan (December 2014 – June 2015).
Attachment 2 (2014 Compensation Study Role in Labor Negotiations) provides an overview of the
timing and relationship of these items to Council’s development of labor relations objectives that
guide upcoming negotiations.
In contrast to the 2007 Benchmark Compensation Study that was driven primarily out of difficulty
attracting and retaining qualified employees, the 2014 study will help inform Council’s
development of labor relations objectives. Recently, the City has not had difficulty recruiting and
hiring employees to fill vacancies, with only two exceptions where the skill set was difficult to find
or the salary range not commensurate with the level of responsibility. The current recruitment and
retention environment is very different than the environment in 2006 and 2007 when the City
experienced problems attracting qualified applicants and hiring and retaining employees, especially
in Public Works and Utilities. Recruitments were not resulting in eligibility lists, offers were being
declined, and employees were leaving City employment, citing other positions that compensated
more competitively.
Compensation Philosophy
Council adopted a Compensation Philosophy in March 2007 and revised it in March 2011. The
Compensation Philosophy states that the City strives to provide excellent service to the community
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Compensation Study Plan Page 3
at all times and recognizes that many critical community services are delivered by qualified
employees. Therefore, the philosophy further recognizes that attracting qualified employees
depends upon many factors including competitive compensation. According to the Philosophy,
competitive compensation will be evaluated based on a variety of considerations including:
financial sustainability, community acceptability, the relevant labor market, internal relationships,
and other relevant factors such as unforeseen economic changes, natural disasters, states of
emergency, changes in City services, and changes in regulatory or legal requirements.
Modifications to the Compensation Philosophy in 2011 moved consideration of “relative labor
markets” to “relevant labor markets”. Practically speaking this means labor markets may differ
among classifications and are primarily defined on geographic region (local, state-wide, or national)
and key markets (municipal, other government agencies, or private sector) where labor talent is
found, recruited from, and/or lost. As staff prepares to conduct the 2014 Benchmark Compensation
Study, the relevant labor markets will be defined and documented.
Methodology
Staff recommends using a comprehensive and transparent methodology that addresses changes in
the labor market including the implementation of second and third tier retirement benefit formulas
with lower employer costs and the 2011 modification to the Compensation Philosophy with
emphasis on relevant labor markets. The general approach to conducting the compensation study
is outlined below.
1. An experienced consultant guides the methodology. Geoffrey Rothman of Renne Sloan
Holtzman Sakai LLP advised the City on the methodology used in the 2007 Compensation
Study and has extensive experience conducting compensation and benefit surveys in the
public sector including surveys used pursuant to AB646, recent legislation encompassing
fact-finding. Mr. Rothman also has extensive labor relations and negotiations experience
and can advise Council on how the results of the study may be used to help develop labor
relations objectives for future negotiations.
2. Convene an employee committee to weigh in on methodology and assist with the
survey. About fifteen employees from a cross-section of all employee groups within the
City will be asked to participate. The employee committee will be trained by the consultant
on how to conduct a benchmark compensation study and will work with Human Resources
staff and the consultant in proposing the benchmark positions, data points, and relevant labor
markets to the City Manager. Committee members will help ensure job descriptions of the
benchmark classifications are up to date and provide input to staff regarding matches with
other organizations.
3. The Personnel Board provides input and reviews results. The Personnel Board, a citizen
advisory body to Council, provided input regarding methodology and reviewed the results of
the 2007 Benchmark Compensation Study prior to the report being presented to Council.
The same process and role is recommended again. Additionally, the former chair of the
Personnel Board, Rebecca Ellis, is willing to work closely with staff and the current
Personnel Board on this matter. She has been instrumental in coordinating the local
compensation and benefits survey through the Human Resources Association of the Central
Coast (HRACC) that will be a source of local private sector compensation and benefit data.
4. Survey total compensation of a sampling of classifications across all employee groups.
Use a benchmark approach, meaning classifications that tend to be consistently defined
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Compensation Study Plan Page 4
among organizations will be selected. This study will include benchmark classifications
from all employee groups (SLOCEA, Fire, Police, Police Management, unrepresented
management/department head, and confidential). Pursuant to the Compensation Philosophy
total compensation includes salary, health, retirement, and time off benefits.
5. Define relevant labor markets. Pursuant to the Compensation Philosophy, relevant labor
markets (local, state, or national) will be identified for each benchmark classification. Local
private and public sector data will be gathered when the relevant labor market it defined as
local. Comparison agency data will be gathered when the relevant labor market is defined
as state-wide or national. The Police and Fire MOAs include survey agencies that will also
be considered during this process.
Upon Council approval of this report, staff will immediately start working with the consultant,
committee, and Personnel Board with the objective of conducting the survey in 2014 and returning
to Council by July 2014 with the results of the 2014 Benchmark Compensation Study.
FISCAL IMPACT
The Human Resources Administration budget has funds available under consultant services. A
preliminary proposal from Geoff Rothman of Renne Sloan Holtzman Sakai LLP estimates costs not
to exceed $20,000.
No adjustments to compensation or benefits will directly result from this study.
ALTERNATIVES
1. Do not conduct the study. This alternative is not recommended because the study is in
accordance with the major city goal work program and contractual obligation with
SLOCEA.
2. Change the scope of the study. Staff would need Council input on specific areas they would
like changed or input on objectives they are trying to accomplish so that staff could suggest
a more appropriate scope.
ATTACHMENTS
1. Compensation Philosophy
2. 2014 Compensation Study Role in Labor Negotiations
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RESOLUTION NO . 10248 (2011 Series )
A RESOLUTION OF THE CITY OF SAN LUIS OBISPO MODIFYING IT S
COMPENSATION PHILOSOPHY SUPERSEDING PREVIOU S
RESOLUTIONS IN CONFLIC T
WHEREAS,the City of San Luis Obispo strives to provide excellent service to th e
community at all times, and supports this standard by promoting organizational values includin g
customer service, productivity, accountability, innovation, initiative, stewardship, and ethics ; an d
WHEREAS,to achieve our service standards, the City must attract and retain wel l
qualified employees who exemplify our organizational values ; an d
WHEREAS,fostering an environment attractive to such employees depends upon man y
factors, including a competitive compensation program .
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Lui s
Obispo that the City's compensation philosophy is adopted as follows :
SECTION 1 .The City is committed to providing competitive compensation as part o f
an overall strategy of attracting and retaining well qualified employees who exemplify ou r
organizational values .
SECTION 2 . The City will consider total compensation, including but not limited to ,
salary, health, retirement, and time off benefits .
SECTION 3 .In evaluating competitive compensation, the City considers :
A.Financial sustainability including the City's financial condition as reflecte d
throughout the financial forecast, competing service priorities, maintenance needs, capita l
improvement and other asset requirements, fund reserve levels, and revenue projections prior t o
implementing changes in compensation .
B.Community acceptability since taxpayers and ratepayers ultimately fund al l
employee compensation .
C.The "relevant labor market"that may vary depending upon classification and i s
primarily defined by the geographic region (local, state-wide, or national) and key market s
(municipal, other government agencies, private sector) where labor talent is found, recruite d
from, and/or lost.
When the relevant labor market is defined as "local"; local private sector compensation data wil l
be considered along with local public sector compensation (municipal and other governmen t
agencies . When the relevant labor market is statewide or national, the City will conside r
compensation date for public sector agencies (municipal and other government) with severa l
R 10248B2 - 5
Resolution No. 10248 (2011 Series )
Page 2
comparable demographic data points including but not limited to population, median home price ,
median household income, median age, median education level, services provided, an d
unemployment rate . Quality of life should also be considered when selecting comparable
municipal and other government agencies .
D."Internal relationships"referring to the relative value of classifications to on e
another as determined by the City . Classifications performing comparable duties, wit h
comparable responsibilities, requiring a similar level of skill, knowledge, ability, and judgment ,
will be valued similarly in the City's compensation structures .
E.Other relevant factors may include unforeseen economic changes, natura l
disasters, states of emergency, changes in City services, and changes in regulatory or lega l
requirements .
SECTION 4 .At least every five years, the City will evaluate its compensation structure ,
programs, and policies to assess market competitiveness, effectiveness, and compliance with Stat e
Law . Adjustments to the compensation structure may be made as a result of this periodi c
evaluation and will be done through the collective bargaining process, if applicable, or othe r
appropriate Council-management processes .
Upon motion of Council Member Carter, seconded by Council Member Carpenter, and o n
the following vote :
AYES :
Council Members Carpenter, Carter and Smith, and Mayor Mar x
NOES :
Vice Mayor Ashbaug h
ABSENT : Non e
The foregoing resolution was adopted on March 15, 2011 .
ATTEST :
Elaina Cano
City Clerk
APPROVED AS TO FORM :
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Attachment 1
CalPERS Board Actions
February 2014
CalPERS Liability Analysis
April 2014
2013-15 Financial Plan
Supplement
June 2014
Compensation Study
Report
July 2014
2015-17 Financial Plan
Development
December 2014 - June 2015
Input Council Direction Action
Informs Guides
Informs Guides
Council develops labor
relations objectives
August - September 2014
Council refines labor
relations objectives
August - September 2015
2014 Labor Negotiations
October - December 2014
2015 Labor Negotiations
October - December 2015
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