HomeMy WebLinkAbout02/29/2000, C9 - MANAGEMENT COMPENSATION council 0229,00
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CITY OF SAN LU I S OBISPO
FROM: Ann Slate, Director of Human Resources
SUBJECT: MANAGEMENT COMPENSATION
CAO RECOMMENDATION
Adopt a resolution revising the Management Pay for Performance System
DISCUSSION
In 1998,the City Council approved a two year management pay for performance program. It is now
time for the Council to reconsider the pay for performance program. Staff is recommending that(1)
the management pay for performance system be renewed for another two year term with a rating
system providing performance pay of 1-6% and increasing the lump sum payments for top of range
pabratance,(2)the Police Chief salary range be placed in the same range as Public Works Director,
(3) management employees, department heads and appointed officials receive a cost of living
adjustment of 3.5% in year one and 3.75% in year two, (4) management employees receive 1% of
salary in year one to be placed in a deferred compensation plan; (5) deparhnent heads be granted an
additional floating holiday, and(6)department heads and management employees discontinue paying
the City's cost for the Employee Paid Member Contribution(EPMC). The Council,in closed session
on February 1,2000 reviewed and endorsed this recommendation.
Background
The City Council directed staff in 1995 "to develop a longer range comprehensive management
compensation plan" to be used in establishing managerial compensation in the future for the
appointed officials and the department heads. Soon thereafter, the City entered into negotiations
with the Mid-Management Employees' Association and both parties agreed to explore the
possibility of merging all management employees (excluding public safety managers) into one
dented group and developing a pay for performance plan that would govern salary
adjustments. . In August of 1996, the City Council approved the merger and a comprehensive
program for management compensation.
In 1998, the program was revised. By (1) changing the rating system to include %z% salary
increases rather than simply whole number percentage increases, (2) shortening the length of the
ranges to be approximately 25% from minimum to maximum, (3) linking the lowest available
performance pay increase to the amount of the range movement, the system was redesigned to
enable the strong performer to move through the salary range in a reasonable period of time.
Additionally, the management salary ranges were adjusted to more appropriately reflect internal
equity and labor market adjustments.
Since its initial development in 1996 and its modification in 1998,the program continues to provide
a number of benefits to the City organization. The program:
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Council Agenda Report—Management Compensation
Page 2
1. Provides for salary increases that are based on merit and performance and consistent with
other City compensation programs;
2. Ensures that Council goals are fully integrated into managers' objectives from the CAO
through Department Heads to key management staff
3. Enables management employees' performance to be measured similarly and consistently
throughout the City organization;
4. Encourages and rewards extraordinary performance;.
5. Strengthens the recruitment and retention of well-qualified and effective management
employees.
Renewal of the Pay for Performance System
Staff is recommending that the Management Pay for Performance System be approved for another
two year period. After four years of experience with the pay for performance system, it should be
noted that cost projections and assumptions have proven correct. Originally estimated to provide
approximately 3.7% movement through the salary range, the system in actuality provided 3.3% in
year one and 3.9% in year two, 4.2% year three and 4.7% year four. It was expected.that the
system would yield higher salary increases over time since one of the objectives of this or any other
pay for performance program is to motivate employees to strive for top performance. The costs
associated with the pay for performance system are still below those of the traditional salary step
system that all other city employees participate in.
Separating Cost of Living/Across the Board Adjustments from Performance Pay
Staff is recommending de-linking the cost of living adjustment from the pay for performance
system. As it stands now, while management salary ranges are adjusted for cost of living,
management employees only receive a salaryy,increase based upon performance on a scale of 1-7%.
(See: Table 1) Over the past year the average salary increase was 4.7%. Since the ranges moved
List year by 5.25% for managers and 3% for department heads, managers on the average lost
ground and moved back a %z % in their salary range while department heads gained only 1.7% in
forward movement in their ranges. This is significantly less than the 5% all other employees who
are moving through their salary ranges receive in the traditional step system.
There is no mechanism for advancing employees through their range to maintain comparability
between new and veteran employees. Only 18%of the managers and 25%of the department heads
are at the top of their ranges,whereas 75% of all other employees are at the top of their ranges by
virtue of the step system where employees can reach the top in no more than 5 years. In actuality,
many non-management employees are starting out mid-range so they reach the top in less than five
years. (Firefighters have nine steps in their salary ranges so it takes them nine years to advance to
the top step, at increments of 5% per year.) Step increases of 5% are on top of whatever an
employee's bargaining group receives in across the board increases.
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Coancil Agenda Report—Management Compensation
Page 3
Two years ago the Council discussed rectifying this inequity,and modified the Pay for Performance
Plan in an attempt to provide for more timely movement through the ranges. At that time, staff
advised the Council if, at the end of the two year cycle, there still remained significant disparity
between new and veteran managers and between management and other employees, staff would
have suggestions for the Council to consider to address the movement through the range issue.
By granting management employees a salary increase that represents a cost of living adjustment
(consistent with what other employee groups have received) and then providing a performance pay
on a rating scale of 1-6%, employees will be able to move through their ranges. In addition, the
City is still able to administer a. performance pay system that recognizes documented and
exceptional performance as a basis for management compensation. It creates a sort of hybrid
system that facilitates movement through the range while using performance as the way to proceed
through the range.
Table I:Rating System
overall;Qver-alt
:..:Salary ,; Proposed ;°
Score 'Perfor Hance Increase NervRattng
Rating Avatlatile Sysfem
0 to 80 Unacceptable None
81 to 160 Needs None
Improvement
161 to 185 3% 1%
186 to 210 Meets Expectations 1.5%
211 to 235 3.5% 2%
236 to 260 2.5%
261 to 280 4% 3%
281 to 300 Exceeds 4.5% .3.5%
301 to 320 Expectations 5% . 4%
321 to 340 5.5% 4.5%
341 to 360 6% 5%
361 to 380 Outstanding 6.5% 5.5%
381 to 400 1 1 7% 1 6%
Lamp Sum Payment in lien of Salary Increase
Currently, the pay for performance system provides for a lump sum payment in lieu of salary
increases for those at the top of the range. An employee at the top of the salary range who receives
an overall rating of"exceeds expectations"or"outstanding" shall receive a lump sum payment not
to exceed$1,500.
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Council Agenda Report—Management Compensation
Page 4
We can anticipate that the new system will result in more employees reaching the top of the range.
Since this amount has not been increased since the system was originally developed in 1996,staff is
recommending that the cap increase to $1,750 in year one and $2,000 in year two. This is a one
time payment that is designed to recognize and reward performance for those employees who have
reached the top of the range and are unable to receive the full amount of the performance pay
available to them through the rating system
Across the Board Adjustments
Staff is recommending that management employees receive across the board salary increases of 3.5%
in year one and 3.75%in year two.This recommendation relies on a number of factors and is:
• Consistent with what the Council has been granting other employee groups in across the board
salary increases over the last few years.
• Consistent with local data presented at the UCSB Economic Forecast that showed San Luis
Obispo County wage compensation rising 42% in 1998 and 4.1% in 1999. The local
economy is doing better than regional CPI,which has been at 2.7%.
• Consistent with what other public sector organizations throughout the state have been
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Survey data indicated that San Luis Obispo salaries are within 1.5% of the mean; therefore, no
additional adjustments to salary ranges are being recommended at this time for market comparability.
However,the Police Chief position is significantly lower relative to the labor market(93%lower than
the mean)than the other department head positions. Moving it to the same range as the Public Works
Director will place it more appropriately within the department head salary structure. This, in tum,
will be helpful when it becomes time to recruit for this position in the future.
Deferred Compensation Contribution For Managers
Staff is recommending that beginning July 1 of this year,the City begin contributing 1%of salary for
the management employees.Enhancements to retirement continue to be of intense interest to this(and
other) employee groups. A combination of societal factors and the ages of most management
employees are behind this interest. In addition,when the Mid-management group became part of the
larger unrepresented department head group, a commitment was made that over time benefits would
be aligned while maintaining the appropriate distinctions between department heads and managers.
Department heads currently receive a 2%contribution from the City to deferred compensation.
Additional Holiday For Department Heads
Several years ago the City began recognizing Martin Luther King's birthday as a city holiday, a
federal mandate. At that time managers were granted the holiday in addition to the 12 holidays they
were already receiving (ten fixed and two floating holidays) for a new total of 13 holidays.
Department heads were required to convert one of their floating holidays into the fixed Martin Luther
King holiday and retained 12 holidays total. Staff is recommending that department heads receive an
additional floating holiday to bring them into parity with managers as well as the general and fire
employees. (Police employees receive 12 holidays.)
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Council Agenda Report—Management Compensation
Page 5
EPMC
In August of 1999,the City began reporting the city's retirement contribution of 7%for management
employees to the Public Employees'Retirement System(PERS)as compensation. This has the effect
of enhancing employees' salary for the purposes of calculating retirement benefits without actually
increasing the salary. Since the City is paying retirement on this inflated base, it does carry with it a
cost of approximately%z%of salary. Other employees in the City who have this benefit or one very
similar to it were able to negotiate the City absorbing the cost of EPMC for them. Staff is
recommending that management employees likewise be able to receive this benefit at no cost to the
employee. In other words,the deduction from salary of that approximate%2%will be discontinued.
Snmmary
Staff is recommending that Council approve the management pay for performance system for another
two years. To assist in enabling management employees to move through their salary ranges, across
the board cost of living adjustments of 35% (effective the first full pay period following April 1,
2000) and 3.75% (January 1, 2001) should be granted separately from the performance pay which
provides for 1-6%increases as illustrated in Table 1. The Police Chief salary should be placed in the
same range as the Public Works Director, which is approximately 4% higher, for recruitment and
market comparability purposes. Effective July 1,2000,managers shall receive a contribution of 1%
of salary to be placed into a deferred compensation plan. Department heads shall receive an additional
day of holiday. Effective the fust full pay period following April 1, 2000, department heads and
management employees shall discontinue paying the City's cost of EPMC.
These recommendations are in line with what Council has authorized for other employee groups,
consistent with what is happening locally and statewide to public sector salaries and in keeping with
the City's employee relations policies. It has been four years since the Mid Management Employees
Association disbanded to become part of a larger unrepresented management group. The
management pay for performance program that was instrumental in gaining the association's buy-in to
abandon the traditional model of negotiating for wages, hours and conditions of employment has
achieved the goals it set out to accomplish.
The Management Pay for Performance Program has been a significant step in building ng a more
cohesive and professional management structure which staff believes has led to a more effective and
productive organization. With the modifications as outlined above,this approach to management pay
will continue to serve the organization well by motivating management employees to achieve the
City's objectives with professional excellence.
FISCAL EMPACT
Total compensation for the management group is $5,000,000. The cost of the program as outlined
above is approximately$172,000 in year one and$191,000 in year two. This translates to $46,0002
in FY 99-2000; $230,000 in FY 2000-2001; $120,000 in FY 2001-2002. Funds are available in the
unappropriated fimd balances.
ATTACHMENTS: Resolution
C9-5
RESOLUTION NO. (2000 Series)
A RESOLUTION OF THE CITY COUNCIL OF SAN LUIS OBISPO REVISING
THE MANAGEMENT PAY FOR PERFORMANCE SYSTEM FOR APPOINTED
OFFICIALS,DEPARTMENT HEADS AND OTHER MANAGEMENT PERSONNEL AND
SUPERSEDING PREVIOUS RESOLUTIONS IN CONFLICT
WHEREAS, the City Council is committed to a comprehensive policy that strengthens the
recruitment and retention of well qualified and effective appointed officials and management
personnel;and
WHEREAS, in 1996 the City Council established the Management Pay for Performance
System for a two year period,revised it in 1998 for another two year period;and
WHEREAS, that system provides that the City Council biannually reviews the system;
and
WHEREAS, the Council is committed to a compensation plan which reflects the
differences between duties,responsibilities and job requirements;and
WHEREAS, the Council determines that merit and performance shall be the basis for
Appointed Official and Management compensation;
.NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of San Luis
Obispo hereby revises the Management Pay for Performance System as follows:
SECTION 1. The Management Pay for Performance System will be renewed for another
two year term and revised to provide for cost of living adjustments in addition to performance pay.
SECTION 2. The cost of living adjustments will be applied across the board and will be
. 3.5%of salary effective the first full pay period in April,2000 and 3.75%effective the first full pay
period in January,2001 as shown in Exhibit"A" and Exhibit"B".
SECTION 3. The Appointed Officials and Management Salary Schedule shall be amended
to reflect the movement of the Police Chief classification to Salary Group 13L
SECTION 4. The Appointing Authority, or City Administrative Officer shall detemrine
compensation.within the designated range, after evaluating performance in accordance with the
Management Pay for Performance System on a scale of 1-6%.
SECTION 5. The cost of providing the Employee Paid Member Contribution (EPMC)
shall be borne by the City effective the first full pay period of April,2000.
SECTION 6. The City shall continue to provide employees in those classifications listed
in Exhibit "A" certain fringe benefits as set forth in Resolution No. 8412 (1995 Series) and
Resolution No. 8476(1996 Series) .
SECTION 6. The Director of Finance shall adjust the appropriate accounts to reflect the
.compensation changes.
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Resolution No. (2000 Series)
Upon -motion of _ ____ _ -_ _ _ seconded by
and on the following roll call vote:
AYES`.
NOES:
ABSENT.
the foregoing resolution was adopted this ___ .day of, ,
2000. - - - --- - — -
.ATTEST:
City Clerk Lee Price,CMC Mayor Allen Settle:
APPROVED AS TO FORM:
ocre
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APPOINTED OFFICIALS AND MANAGEMENT SALARY SCHEDULE EXHIBIT A
Effective April 13,2000
SALARY RANGE
SALARY GROUP CLASSIFICATIONS Bottom Top
I City.Administrative Officer 8,908 11,137
II City Attorney 8,137 10,173
III Police Chief 6,885 8,605
Public Works Director
IV Assistant City Administrative Officer 6,564 8,204
Community Development Director
Finance Director
Fire Chief
Utilities Director
V Director of Human Resources 6,216 7,771
Parks and Recreation Director
VI City Engineer 6,063 7,578
VII City Clerk 5,442 6,802
Deputy Public Works Director
VIII Assistant City Attorney 4,874 6,093
Development Review Manager
Economic Development Manager
Long Range Planning Manager
Natural Resources Manager
Public Works Manager
Wastewater Division Manager
Water Division Manager
IX Accounting Manager 4,669 5,835
Chief Budding Official
Fire Marshall
Information Systems Manager
Revenue Manager
Supervising Civil Engineer
.x Assistant to the CAO 4,370 5,462
Parking Manager
Principal Transportation Planner
Recreation Manager II
Risk Manager
Transit Manager
Wastewater Treatment Plant Supervisor
Water Treatment Plant Supervisor
Utilities Engineer
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XI Administrative Analyst 4,121 5,151
Communication Manager
Fire Protection Specialist
GIS Manager
Human Resources Analyst
Industrial Waste Coordinator
Neighborhood Services Manager
Public Safety Information Systems Coordinator
Recreation Manager I
Utilities Conservation Coordinator
Wastewater Collection Supervisor
Water Distribution Supervisor
Water Supply Supervisor
XII Accounting Supervisor 3,803 4,754
Arborist
Building Maintenance Supervisor
Customer Services Supervisor
Golf Course Supervisor
Parks Supervisor
Police Records Supervisor
Recreation Supervisor
Streets Supervisor
Supervising Mechanic.
S:A08Management Salary Schedule
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APPOINTED OFFICIALS AND MANAGEMENT SALARY SCHEDUI F EXHIBIT B
Effective January 4,2001
SALARY RANGE
SALARY GROUP CLASSIFICATIONS Bottom Top
I City Administrative Officer 9,242 11,555
II City Attorney 8,442 10,554
III Police Chief 7,143 8,928
Public Works Director
IV Assistant City Administrative Officer 6,810 8,512
Community Development Director
Finance Director
Fire Chief
Utilities Director
V Director of Human Resources 6,449 8,062
Parks and Recreation Director
VI City Engineer 6,290 7,862
VII City Clerk 5,646 7,057
Deputy Public Works Director
VIII Assistant City Attorney 5,057 6,321
Development Review Manager
Economic Development Manager
Long Range Planning Manager
Natural Resources Manager
Public Works Manager
Wastewater Division Manager
Water Division Manager
IX Accounting Manager 4,844 6,054
Chief Building Official
Fire Marshall
Information Systems Manager
Revenue Manager
Supervising Civil Engineer
X Assistant to the CAO 4,534 5,667
Parking Manager
Principal Transportation Planner
Recreation Manager II
Risk Manager
Transit Manager
Wastewater Treatment Plant Supervisor.
Water Treatment Plant Supervisor
Utilities Engineer
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XI Administrative Analyst 4,276 5,344
Communication Manager
Fire Protection Specialist
GIS Manager
Human Resources Analyst
Industrial Waste Coordinator
Neighborhood Services Manager
Public Safety Information Systems Coordinator
Recreation Manager I .
Utilities Conservation Coordinator
Wastewater Collection Supervisor
Water Distribution Supervisor
Water Supply Supervisor
XII Accounting Supervisor 31946 4,932
Arborist
Building Maintenance Supervisor
Customer Services Supervisor
Goff Course Supervisor
Parks Supervisor
Police Records Supervisor
Recreation Supervisor
Streets Supervisor
Supervising Mechanic
SA08Menagemerd Salary Schedule
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