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HomeMy WebLinkAbout02/29/2000, C9 - MANAGEMENT COMPENSATION council 0229,00 j aGEnaa Pepont "C9 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: C9-1 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. C9-2 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. C9-3 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 1g- 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.) C9-4 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. C9-6 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 C94 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 C9-8 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 C9-9 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 C9-10 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 C9-11