Loading...
HomeMy WebLinkAbout173-06 RESOLUTIONRESOLUTION NO. 173-06 A RESOLUTION ADOPTING THE COMPENSATION COMMITTEE'S RECOMMENDATION TO IMPLEMENT THE 2007 COMPENSATION & CLASSIFICATION PLAN. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby adopts the Compensation Committee's recommendation to implement the 2007 Compensation & Classification Plan. PASSED and APPROVED this 17th day of October, 2006. APPROVE By DAN COODY, Mayo ATTEST: By: as .a. ,,vu SONDRA SMITH, City Clerk `,..`..ERFVTR. 1-aG il .-V%YSG;o ;S. V.•�a • ;.23 F. ;FAYETTEVILLE: yi.ly ,QkANSPc .N: ,, 1, 1G ,QN,1G2.` Michele Bechhold Submitted By City of Fayetteville Staff Review Form City Council Agenda Items or Contracts /07/7/06 /73 apo 76inptns4.4ie n Cis631 C1C4#IOfl sw e66-- NOW /O//1/06 City Council Meeting Date Human Resources Division Action Required: Operations Department Approve a recommendation from Staff and the Compensation Committee to implement the 2007 Pay Plan. Cost of this request Various Account Number Project Number Budgeted Item Category / Project Budget Funds Used to Date Remaining Balance Budget Adjustment Attached Program Category / Project Name Program / Project Category Name Fund Name Department Djfector City Attorney i 1 2 4'cui Vic, Finance and Internal Service Director Mayo 11 1 Date 9-19-0` Date Previous Ordinance or Resolution # Original Contract Date: Original Contract Number: Received in C Received in Mayor's Office 'Comments: a e evi le y Ars KANSAS CITY COUNCIL AGENDA MEMO City Council Meeting October 3, 2006 TO: Mayor Dan Goody and the City Council THRU: Gary Dumas, Operations Direc FROM: Michele Bechhold, Human Resources DATE: September 18, 2006 SUBJECT: 2007 Compensation & Classification Plan Implementation On September 12, 2006, the Compensation Committee and representatives from City Administration made a decision to extend the deadline for the final report from Management Advisory Group from September 15, 2006 until 8:OOam September 19, 2006. This extension allowed employees additional time to review and provide input for the final report as well as provided MAG with the time needed to evaluate the information provided by employees. At this time, the Compensation Committee and Staff are waiting to receive the final report to develop recommendation(s) to be forwarded to Council. Budget staff is working to provide funding information that was requested by the Committee. The Compensation Committee will meet on September 21, 2006. Following that meeting, the recommendation(s) from Staff and the Compensation Committee will be presented to Council at the Agenda Session on September 26, 2006. RESOLUTION NO. A RESOLUTION ADOPTING THE COMPENSATION COMMITTEE'S RECOMMENDATION TO IMPLEMENT THE 2007 COMPENSATION & CLASSIFICATION PLAN. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1. That the City Council of the City of Fayetteville, Arkansas hereby adopts the Compensation Committee's recommendation to implement the 2007 Compensation & Classification Plan. PASSED and APPROVED this 3rd day of October, 2006. Management Advisory Group, Inc. Web -based Classification and Compensation Study Final Report City of Fayetteville September 18, 2006 Management Advisory Group, /nc. (MAG) Prepan'np for Tomorrow... Today. • Classification and Compensation Plan Final Report September 18, 2006 By: MANAGEMENT ADVISORY GROUP, INC. 15532 Yorktown Dr. Montclair, Virginia 22025 (703) 590-7250 Virginia/DC Area Headquarters 1850 Buford Court Tallahassee, Florida (850)386-2711 Tallahassee/Regional Office Virginia September 18, 2006 Florida North Carolina To: The Honorable Bobby Ferrell, Chair Compensation Committee The Honorable Robert Reynolds and Lioneld Jordan Don Marr, Members of Compensation Committee From: Carolyn Long, President and CEO; Alan Johnson, Senior Vice -President Subject: Final Report — Classification and Compensation Phase of Study Management Advisory Group is pleased to provide this Final Report of the Compensation and Classification phase of the overall study. We have prepared a step- by-step guide to reviewing the report, as well as this introduction. Compensation Philosophy The Council has adopted a compensation philosophy which provides the guiding direction for the completion of the classification and compensation portion of this study. The compensation philosophy address all aspects of employee compensation and provides a comprehensive framework for the development and support of an excellent workforce. The City's proposed Compensation Philosophy is as follows: "The City of Fayetteville is committed to recruiting, retaining and motivating an excellent workforce by providing a high quality of work life to City employees through a competitive compensation structure, competitive benefits program, and a challenging and enriched work environment. In order to deliver high quality municipal services, the City's workforce must possess key attributes associated with excellence. Therefore, the following key characteristics for all employees are desired: 1 Compensation Committee Letter September 18, 2006 Page Two • highly skilled; • customer service oriented; • possess personal integrity and exhibit ethical behavior; • highly productive and focused on quality results; • team players; • seek opportunities to improve services; • understand technology; • value diversity; and, • committed to the City's welfare. The City will achieve this pay philosophy by implementing the following initiatives: Hiring • provide a base compensation structure that is competitive and strives to be above average in market salaries as incorporated into the City's compensation and classification plan; • provide for flexibility in both hiring rates and providing compensation for existing employees that is both flexible and internally equitable; • provide an appropriate set of benchmark positions which establish the foundation for the City's pay line and provide a consistent means for the City to review the market every year and conduct a comprehensive market survey every four years. Retaining • provide for a meaningful way for employees to move through the compensation plan based on both experience and achievement so that employees can anticipate rewards based on contributions, experience and performance; • provide that the annual review of the market and adjustments to the City's overall compensation plan of not less than the cost of living increase become a part of the budgeting process through periodic surveys and the incorporation of the results into the City's proposed budget for personnel costs; • adopt a policy of regularly reviewing the City's benefits and rewards programs to maintain competitiveness with the City's market. 2 Compensation Committee Letter September 18, 2006 Page Three Motivating • provide for a performance and experience recognition program that incorporates the following: o the ability to review and rate performance for all employees and to provide adjustments to employees based on their consistent level of achievement and successful experience on the job; o a bonus program to provide one-time, on -the -spot rewards for meritorious service; and, o a compensation program that recognizes incentives based on job related professional or academic achievements." The approved compensation philosophy will result in consistently positioning the City's pay line above the market average if fiscal resources permit. Additionally, the City has adopted a policy of regularly evaluating its benefits and performance rewards program to ensure that the City's position relative to the market does not erode. Collecting Market Data The survey targets for the market data were initially selected by the Compensation Committee and then adjusted once we began our work. Over 90 positions were selected for inclusion in the survey. The RFP specified that only those jobs that had five (5) or more responses should be included in the final study. Sufficient data was collected on over 80 positions, representing 36% of total city job titles, or slightly more than one (1) out of three (3). While collecting data on such a large number of jobs may be beneficial for this particular study, the number for regular review should probably be reduced to approximately 30 to 35 positions that are true "benchmarks". "Classic" benchmarks represent points along the pay line, represent different occupational families, and are generic jobs where there is a reasonable expectation that they will be fairly and sufficiently represented in the target organization population. Unique positions or those with special requirements, while often of compelling interest, do not make good "benchmarks" since finding adequate matches is often difficult and results in poor or misleading matches. Even under ideal circumstances, a rule of thumb in compensation work is that a job match will be about 70% equivalent. There are any number of variations between and among organizations that suggest that "identical" job matches are few and far between. "A benchmark job is a market job (or external job) to which an actual employee's job (or internal job) is matched for pay comparison. Your job should have similar content, as characterized in the job description, of the 3 Compensation Committee Letter September 18, 2006 Page Four benchmark job. Matching your job at least 70% to the benchmark job is a good rule of thumb when trying to pick a match"- Salary.com Salary com also conducted research on jobs where employees perceived themselves to be underpaid compared to the market. Here are the data and findings of that study: This analysis revealed that only 18.7% of the self-proclaimed underpaid employees looking to leave their job were in reality underpaid. That means nearly 80% of these workers who felt that they were underpaid actually were not. The majority of these workers, 34.2%, were paid fairly relative to the market, while 17.4% were overpaid." Overall market findings for Fayetteville indicated that market data, unadjusted for Geographic Compensation Differentials, resulted in the overall minimum salaries for Fayetteville to lead the market by + 3.23% at the market minimum; at +.18% at the market midpoint; and to lag the market by -2.28% at the market maximum. The overall market has an average range width of approximately 52%, while the average range width of Fayetteville is approximately 41%. These findings do not include the Geographic Compensation Differentials (GCD). Using two independent sources, The Salary Calculator and the results of economic research on wages by the Economic Research Institute, MAG found the cost of labor in the peer and comparable communities used in the market survey to be 4.37% and 4.55% higher, respectively. In order to compare the survey results to the market average, MAG first compared the results to the overall market, unadjusted by the GCD. MAG then adjusted the salary structure generated from the survey to be compatible with 100% of the market average, or a reduction of 4.37% (the lesser of the two cost sources). All of the final responding public sector organizations, (other than published data sources), review and revise their plans on an annual basis. This places the overall pay structure for fire, police and merit positions in alignment with 100% of the market average, adjusted for the Geographic Compensation Differentials. A percentage above the market average can then be determined by the Compensation Committee to be consistent with the Council's desire, as expressed in the adopted compensation philosophy, to pay above the market average. Adjustments for the 2007 Fiscal Year To assist the Compensation Committee in determining an appropriate reference point for adjusting the market point relationship, MAG is including a review of the cost of labor changes for state and local government, not seasonally adjusted. Generally speaking, seasonal adjustments are considered when looking at monthly labor fluctuations and are a statistical means of adjusting for the effects of seasonal differences on a monthly basis. Seasonal adjustments are not needed when looking at annual averages. These data are not seasonally adjusted because we are looking at annual averages. 4 Compensation Committee Letter September 10, 2006 Page Five Data extracted on: Se [ember 8 2006 4:08:02 PM Em lo ment Cost Index Series Id: Not Seasonally Compensation: Sector: Periodicity: Industryocc: CIU3020000000000A Adjusted Wages and salaries State and local government 12 -month percent change All workers Year Qtrl Qtr2 Qtr3Qtr4'Annual 2001 2002 2003 2004 2005 2006 3.5 3.8 3.9 3.8 3.75 3.3 3.2 3.0 3.1 3.15 3.2 3.1 2.4 2.2 2.72 2.1 2.1 2.1 2.1 2.3 2.3 2.6 3.1 2.57 2.1 2.8 3.1 The annual average for the immediate past four quarters is +2.9%. Although past cost of labor is not an exact model for predicting future market variations, the overall cost of labor for the past five years has averaged 2.85%. Consequently, aging the data by a factor of 2.9% is consistent with labor market performance over the past four quarters and the past five years. For purposes of considering the impact of this adjustment on the transition cost to the new proposed plans, MAG has adjusted the pay line to reflect an increase of 2.9% over the differentially adjusted market average. This places the current salary structure at an adjusted 102.9%. Market vs. Internal Relationships In general MAG has tried to achieve a balance between the market data and the internal relationships. For most positions, internal relationships are given slightly more consideration than market data. Market data, while compelling, is not controlling. However carefully the jobs are matched, it is very seldom that one finds a "perfect match" in the external market. Therefore, in addition to the market information, each job is analyzed and placed in relationship to every other position using a careful review of over 150 compensable points of comparison In addition, once MAG had completed a draft Class Comparison report, meetings were held with key staff in a day long workshop meeting to review the results of the draft report for their department and how their jobs "fit" into the overall organizational hierarchy of work. Additional insight, comments and suggestions that were appropriate to the completion of this report were incorporated following these meetings. 5 Compensation Committee Letter September 10, 2006 Page Six. It was important to have this final organizational review of our proposed recommendations to ensure that the spirit of the compensation philosophy of the City is tightly operationalized in the compensation structure designed to support it. While MAG gave great weight to market forces, and full consideration to recommendations from key City staff, the final assignment to proposed job classes reflected MAG's internal analysis of the jobs. At the upper levels of the City's compensation structure, the City has used titles that have created some "titling compression" that may have impacted on making exact comparisons to the external market. Specifically, because of organizational preferences, some positions that are called Directors in other organizations are titled Supervisors, Managers, or Superintendents. This makes cross -comparisons more difficult and has resulted in some organizations possibly reporting on lower level positions. Although the jobs were carefully described in the survey document, it is only human nature to review the title first and then determine the "match". As a result, MAG, based on many years of experience in doing compensation and classification plans for cities all across the country, has deviated in some cases from the suggested market placement for higher level positions. Other divergences from the suggested market placement have occurred because of difficulty in recruitment or retention, or to ensure market equity with other substantially equivalent positions. This is not unusual, but merely confirms that while market data is an important element in determining job placement, it is only one factor. Proposed Structures The internal placements for all positions are set to the market control line, which is based on the regression of the external market data with the internal organizational value for all benchmark positions. As a result, all positions, regardless of assignment to a pay plan, are in substantially equivalent pay plans. The Compensation Committee concluded that one element of the City's compensation design would be overlapping structures. While the Merit plan has fully overlapping structures, care was taken with the Fire and Police structures to create plans that did not overlap on the entry levels, based on promotion to a higher level position at the earliest possible point. Merit Plan The proposed pay structure for the Merit compensation plan is currently set at a range width of approximately 52%. This is consistent with the average for the market, which is approximately 52%. There are 34 pay grades in the proposed plan, down from a total of 65 pay grades in the current merit structure. As a result of the reduction of grades and broader ranges, there is a broader grouping of jobs which provides more flexibility in hiring rates and supports a more comprehensive career performance plan (the next phase of the City's review and revision of its compensation design.) 6 Compensation Committee Letter September 10, 2006 Page Seven Fire and Police Structure The following tables show graphically the Step structures proposed for the Fire and Police positions. These structures incorporate a competitive posture with the external market. Additionally, these structures recognize shorter ranges, truncated at the entry level so that employees who are promoted at the first opportunity in their careers, would not overlap salaries with employees already in the higher range. The structures for Fire and Police each have ten steps, with four steps to the market control point (which is substantially equivalent to the midpoint average of the external market) and an additional six steps to the maximum of the range. The market comparisons for fire and police positions included both longevity and holiday pay. The City should ensure that if this plan is adopted that employees in sworn fire and police positions realize that there is no opportunity for additional compensation once the maximum of the range has been reached beyond that which would be provided when the overall structure is adjusted. Longevity steps are included in this proposed structure. If this structure is adopted, it should be recognized that "topping out" or reaching the top step of the range was the desired goal of fire and police personnel and the driving factor behind creating a 10 year plan. "Topping out" should not, in the future, be viewed as an undesirable situation that requires "fixing" through additional steps, longevity, or other payment beyond the market maximum. Compensation Committee Letter September 10, 2006 Page Eight Fire Structure Table: After 3 years, a Firefighter can be promoted to Driver After 1 year as Driver / Operator and 5 years In Fayetteville, a Driver can be promoted to Captain After 1 year as Captain and 7 in Fayetteville, a Captain can be promoted to Battalion Chief 232 31,037 32,320 2' 235 33,656 a 35,0411 41 36,496 51 38,005 61 39,576' 71 41,212! 42,916 .. 44,690'4_ 10 37,1791 1 40,011 31 41,507 43,059^ 44,669_ 6! 46.339 48,072 49,869 51,734 46,316' 48,050; 4 49,8461 5 51,710 6 53.64' 7 55,649; 5 57,730; 59.889 10 241 Battalion Chief 1 51,686 2, 53,619 3 55,624 4 57,703 5 59,861 6 62,099 7 64,421 8 66,830 9 69.329 10 Firefighter - EMT Certified Fire Driver Fire Captain 8 Compensation Committee Letter September 10, 2006 Page Nine Police Structure Table: After 5 years of service, en officer may be promoted to Police Sergeant No requirement specified for Police Corporal After 2 years as a Sergeant and 7 years with Fayetteville, a Sergeant may be promoted to Police Lieutenant After 3 years as a Lieutenant and 8 years with Fayetteville, a Lieutenant may be promoted to Police Captain 330 Police Officer 33,306 1 34,627 2 36,000 3 37,428 4 38,913 5 40,456 6 42061 7 1 43,729 8 45,46E I 472671 10 332 - j Pollee Corporal 37,4811 1 3351 38,961( 2 40,4991 3 42,097 4 43,759 5 45,486 6 47,282 49,148 8 51,088 9 53,105 10 Police Sergeant 43,389 45,102 2 3 48,733! 4 50657 5 52,656 6 54,735 7 56,895 8 59,141 9 61,478 10 Police Lieutenant 1 49,725 2 337 51.688 58.053 60,345 62,727 65,203 67,777 57 563. 59.835 62.19T 64,652 67,204 69,857 72,614 75,481 78,460 3 4 5 6 7 8 9 10 Police Captain 1 2 3 4 5 6 7 8 9 10 Compensation Committee Letter September 10, 2006 Page Ten Implementation Assumptions The Economic Cost Indicator (the labor market cost for state and local government) for the last four quarters is 2.9%. This was the factor used to advance the pay line for the 2007 calendar year. No flat adjustment is included in the calculation for salaries in the coming year. Rather, a general schedule adjustment is recommended along with an implementation formula that ensures that all employees are fairly placed within the new proposed ranges. The overall base market line has been adjusted to 100% of the market midpoint average, adjusted for the Geographic Compensation Differential between Fayetteville and its peer/competitor organizations. If there is no cost calculated for an employee, under any of the proposed implementation options, the target salary for the employee is less than the current salary. If this is the case, no further adjustment is recommended. The market control point becomes the frame of reference for range structure development. The market control point is the trend line or pay line resulting from regressing the average of the ranges of the labor market comparables with the internal value of the benchmarked positions. The ranges are then built around the market control point, or market averages. In the instance of truncated ranges, such as those proposed for Fire and Police personnel, the market control point is a constant, while the range "midpoint" will change when entry level steps are dropped. The market control point is the "true North" in the pay structure and is the control point for movement of employees within the ranges. Detailed summary reports by department or pay plan are included in Section 5 of this • report. Dollar costs are summarized by pay plan in the Review Guide to these reports. Implementation Costs — Fire and Police Implementation costs for the Fire and Police pay plans are based on a ten step/ten year plan which moves each sworn employee to the market control point of the proposed range based on approximately four years (or equivalent) in the range, and moves the employee to the maximum of the range within ten years. The migration from the current structure to the proposed structure is based solely on longevity. Implementation Costs — Merit Employees Because the City currently has an employee appraisal system which accounts for differences in pay, employees who are in the Merit plan are being recommended for placement using a formula based on percentage of range penetration. Each employee is placed in the proposed range at the same percentage of the market control point as they are currently placed in their present range. The benefit of this approach is that it recognizes the differences in current pay progression which employees have earned through meritorious performance. 10 Compensation Committee Letter September 10, 2006 Page Eleven Future Considerations The City needs to consider, in Phase III of this effort, a strong performance based program for merit employee progression within the range, based on the foundation of normal progression for satisfactory performance. If the employee's performance exceeds "satisfactory" (which would be desirable), the employee could progress more rapidly through the ranges. The software system, Classification Manager®, provided by MAG as a part of this study, provides the City with the tools for implementing and maintaining a progressive compensation plan. The compensation structures developed for the City's consideration provide the foundation and framework for a sound performance based program. Policies for Implementing the Proposed Plans The following language is recommended for consideration by the Compensation Committee to the Council with respect to handling changes resulting from the study. Implementation of the Pay Study The pay study conducted by Management Advisory Group, Inc., presents recommendations related to positions and pay ranges, as differentiated from individual employees and their salaries. The specific one-time adjustments for individual employees will vary based on a number of factors including their current placement in the range, current actual salaries, and the specific implementation formula and strategy adopted by the City of Fayetteville. During the implementation of the comprehensive pay study, in which all positions have been evaluated for appropriate pay grade assignment, reclassification requests will not be processed. Implementing changes in pay grade assignments recommended in the proposed report are outside the regular policies of the City. Any changes in employee salary resulting from the implementation of this study will be done by a formula which will be applied equitably and fairly to all employees. Policies related to reclassification and promotion do not apply to the changes resulting from the implementation of the recommended plans. Next Steps Benefits Overview The City provided a broad overview of questions to be considered with respect to benefits provided. It should be noted that this is not an actuarial review of benefits (the City has a benefits consultant who handles that detailed type of review), but a broad review to simply verify that the City's overall benefits package is substantially comparable to essentially the same labor market included in the labor market survey. The questions that are included in the benefits review were approved in advance by the City. 11 Compensation Committee Letter September 10, 2006 Page Twelve MAG will complete the benefits review shortly and forward that to the Compensation Committee for review and consideration. This will allow the Compensation Committee to determine if there are any adjustments in benefits that are needed to ensure that the City is offering an overall compensation package that is consistent with the adopted compensation philosophy of striving to provide an "above average" compensation package to City employees. Early results of the benefits survey indicate that the City is fully competitive with the market. If any recommendation results from the finalization of this part of the study, it is anticipated that it would only result in minor "tweaking" to the benefits package. Employee Review Employees who feel their job was not given full consideration in the classification process will have an opportunity for review beginning in October and concluding in late November or early December. The review process will include a simple one page review questionnaire completed by the employee. This will be reviewed by the immediate supervisor and the department head with appropriate comment. The review will consider the following three items: 1. Job Placement: the employee feels the position should be placed at a different pay grade level. 2. Job Title: the employee feels the job title is inappropriate and recommends a different title. 3. Employee Placement: the employee feels he or she belongs in a different job title. Dissatisfaction with the amount of pay or salary adjustment resulting from the City's implementation of MAG's recommendations is not grounds for review. Dissatisfaction with the results of the labor market survey is not grounds for review. (Employees have had an opportunity for input into the external market survey at numerous points along the way. MAG has welcomed the input and included appropriate changes in this final report). Pay Ordinance for Elected Officials MAG was asked to specifically review the compensation levels for elected officials (Mayor, City Attorney and City Clerk) and make appropriate recommendations. The Mayor, City Attorney, District (Municipal) Judge and the City Clerk were included in the market survey and the City Attorney and City Clerk were recommended for placement within the proposed compensation plan. Insufficient data was received for the Mayor's and Judge's position to make a definitive recommendation in the proposed plan based on external market comparisons. MAG will make a recommendation on the pay ordinance for the Mayor along with the provision of the benefits review. The City Clerk and City Attorney are included in the proposed classification plan. 12 Compensation Committee Letter September 10, 2006 Page Thirteen After discussion with the District Judge, it was determined that this position should not be included in the proposed compensation plan at this time. Review of Compensation Policies Following adoption of a compensation and classification plan, MAG will review the policies regarding structure adjustment; pay rates; new hire offers; step increases; merit increases; promotional increases; position reclassifications and the concept of intemal pay compression for alignment with both the structure of the adopted compensation and classification plan and the Council's Compensation Philosophy. It should be noted that some of the items listed above are included in Phase III — Performance Evaluation Review - of the City's overall review and would be more appropriately included in that part of the study process. Administration and Maintenance of the New Plan MAG is providing our Classification Managete software along with appropriate training for the City staff. MAG provides two levels of service permitting the City to select a fully maintained in-house system, if staffing permits. As an option, MAG provides for out- sourcing key elements of system maintenance to provide on-going hands-on support to the City for the implementation and maintenance of the system for a modest monthly fee. Recommendations for the on-going administration of the plan will also include frequency review of other elements of the program such as job classification review and update of descriptions. On Going Employee Communications MAG will prepare a concise PowerPoint presentation that will permit the City to effectively communicate to employees the results of the Council's decision to implement the proposed classification and compensation portion of the plan. This presentation will also provide the employees with steps to request additional review of their positions if appropriate. Council Meeting October 3, 2006 MAG will provide a senior representative at the October 3rd Council Meeting to present the proposed report and to answer any questions concerning implementation options. 13