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HomeMy WebLinkAbout#13 Job Classification and Compensation Study ReportSTAFF REPORT DATE: January 17, 2017 REGULAR ITEM #: 13 MOTION TO: Mayor and City Council FROM: Kristina Handt, City Administrator AGENDA ITEM: Job Classification and Compensation Study Report BACKGROUND: Last summer Council authorized the issuance of an RFP for a Job Classification and Compensation study. In September, Council selected David Drown Associates to complete the study. ISSUE BEFORE COUNCIL: Receive the report. What are the directions to staff on next steps to proceed? PROPOSAL DETAILS/ANALYSIS: Tessia Melvin from David Drown Associates will be at the meeting to make a presentation to the City Council. The final report is included in your packet. It describes the process we’ve been going through the last few months and offers a number of suggestions regarding position titles and compensation. Staff is still reviewing their updated job descriptions and they will be brought back to Council at a future meeting for formal adoption. FISCAL IMPACT: The fiscal impact could vary from $31,678 to $96,683 depending on the option chosen by Council. Staff is recommending option 2 which has a fiscal impact of $53,102. OPTIONS: Three options are detailed in the report: 1) 100% of the Market 2) Move Employees to the next step 3) Move Employees to Market Average RECOMMENDATION: Staff is not requesting a specific motion at this meeting, but is looking to see if Council has any additional questions. If there are no questions and Council would like to move forward with one of the options staff would suggest the following: “Motion to move employees to the next step in the compensation plan outlined in Appendix II.” David Drown Associates Human Resources, Inc. Tel 612-920-3320 Cell 952-484-1193 3620 Northome Avenue Wayzata, MN 55391 www.daviddrown.com tessia@daviddrown.com LAKE ELMO CLASSIFICATION AND COMPENSATION STUDY FINAL REPORT JANUARY 17, 2017 Table of Contents i | Page Contents LETTER____________________________________________________________1 INTRODUCTION____________________________________________________________2 METHODOLOGY___________________________________________________3-4 FINDINGS AND RECOMMENDATIONS________________________________________5-8 IMPLEMENTATION AND RECOMMENDED SALARY PLAN________________________9-10 Appendix I: Market Study Results _______________________________________________ 11 Appendix II: Compensation Plan ________________________________________________ 12 Appendix III: Position Grade Assignment _________________________________________ 13 MISSION STATEMENT QUALITY ADVICE—WITH A SIMPLE FOCUS ON YOU. 1 | Page January 17, 2017 Kristina Handt City Administrator Lake Elmo, MN RE: Classification and Compensation Final Report Dear Kristina, David Drown Associates is pleased to provide the City of Lake Elmo with the completed Classification and Compensation Study. This Study provides an overview of the City’s current compensation and classification system and our final report, including the methodology used to develop a new evaluation system, market comparability, compensation plan, and options for implementing a new compensation program. The Study represents a thorough and comprehensive review of the City’s classification and compensation system. The recommendations offered in this Study will increase the market competitiveness of the City’s compensation program for its employees within the region marketplace and provide increased internal equity among positions. Implementation of these recommendations will help in recruiting new employees and retaining current employees needed to meet the needs of the City’s service demands. I would like to thank the City of Lake Elmo staff who completed the Position Analysis Questionnaires and the staff for providing information and feedback throughout the process. David Drown Associates appreciates the privilege of serving the City of Lake Elmo and hope that you will contact us in the future for any further needs. Respectfully submitted, Tessia Melvin Management Consultant 2 | Page INTRODUCTION The City of Lake Elmo, Minnesota, retained David Drown Associates to conduct a Classification and Compensation Study of the City’s positions in the winter of 2016. The Study represents a comprehensive review of the components that affect an organization’s compensation program – job descriptions, current compensation structure, the City’s pay philosophy, regional market competitiveness of City salaries, the internal equity of salaries paid to comparatively valued City positions and ongoing maintenance and administration of the compensation system. In today’s marketplace, employees are the greatest asset. A well-designed compensation system aligns with an organization’s goals and is in tune with current standards. An effective compensation system will help organizations attract and retain talented employees. A classification and compensation system provides the framework for determining how employees will be paid. The external market comparison is important because it ensures that the compensation plan is adequate to attract new employees and retain existing employees. If compensation levels fall below those in the regional marketplace: • the organization will experience a difficulty in hiring people • increased employee turnover as employees seeks jobs with other organizations that will pay the market rates for their skills and abilities. Turnover is to be expected, but excessive turnover has a serious impact on an organization’s overall effectiveness. Advertising is a measurable component of turnover. Organizations will experience some turnover, but when it because excessive the organization faces serious challenges. Other non-measurable components of turnover include, current employees covering the void left by departing employees, training new employees and slower progress on meeting organizational goals. The City of Lake Elmo has experienced much turnover and has some difficulty in recruiting qualified employees. It is the intent of this study to help retain employees and recruit highly trained and desirable employees. It is also the intent of this study to address compliance with pay equity, which has been an issue in the recent past. 3 | Page METHODOLOGY Our approach to compensation and classification studies is to focus on finding the best solution for our clients. This is accomplished by listening to clients to understand goals and objectives and building a compensation and classification process from those conversations. The following Study documents the comprehensive review and evaluation of the City’s existing Classification and Compensation System. A comprehensive survey was developed and wage and benefit information was collected from comparable regional employers. The result of the job evaluation and the salary market data were used to create a salary structure with pay ranges. Our methodology included: 1. Our consultant met with the City Administrator and City Clerk to establish a working relationship and gain an understanding of the needs and expectations of the City. This also provided an opportunity to discuss the City’s goals in reviewing the pay philosophy, review current policies and practices relating to the City’s existing pay practices, and obtain data on the programs and materials currently used. 2. The City Administrator communicated the purpose of this study and asked employees to complete the Position Analysis Questionnaire (PAQ) with reminders given at staff meetings. All managers and supervisors were provided with information on the purpose of the study along with the process. 3. Information was gathered from the City on current compensation structure, current bargaining unit contracts and existing job descriptions covering the positions included in the study. 4. A comprehensive market analysis was conducted with selected cities within the region. 5. Information was gathered on minimum, maximum and actual wage information for all positions included in this study. 6. All employees received updated job descriptions and were encouraged to participate in the process by submitting any changes to their job descriptions and completing a PAQ. We received completed PAQs for all positions, except the Office Administrative Assistant position, which was vacant during this process. Within the last two weeks a person was hired into this position. Managers and supervisors reviewed and completed the PAQs to ensure completeness and accuracy. 7. Employees were sent new job descriptions and asked to address any concerns or disagreements with the City Administrator. The deadline for all appeals is Thursday, January 19. 8. Using salary and benefit data supplied to the League of Minnesota Cities and additional information provided by cities, we were able to benchmark with comparable government organizations and provide trend lines with market average pay rates, market minimum pay rates and market maximum pay rates. 4 | Page 9. Guidelines for implementation and ongoing administration of the new compensation program were developed. These guidelines provide for annual adjustments to the salary schedule ensuring that the City’s pay scale stays current with changing economic and market conditions. The guidelines also provide for annual salary adjustments based on employee performance that meets or exceeds job expectations. 10. We are presenting our findings to the City Council along with budget impacts. Based on the discussion and direction provided by the City Council, we will continue to work with staff on the implementation of the Classification and Compensation study results. We will work with staff to complete pay equity reports for 2017. 11. Ongoing administration that the City should address is creating a pay philosophy that should be included in the employee handbook. In addition, Council should agree and create a policy on what to do with employees when they reach the max of their pay range. Generally, these employees will continue to receive a cost of living increase, but will not receive other increases unless there is a change in the job. COMMUNICATION WITH STAFF Kick off meeting in October 2016 Employees received current job descriptions and PAQs Managers and Supervisors reviwed and approved changes on PAQs City Administrator received PAQs and Project Team began revising job descriptions Employees received update on the process along with new job descripion and an appeal process 5 | Page FINDINGS AND RECOMMENDATIONS Conducting a comprehensive study involves the analysis of substantial quantities of data collected from comparable employers and the City. We have evaluated the City’s existing compensation program based on our analysis of the study data and the survey results. Using this information, we have developed recommendations for modification to the City of Lake Elmo compensation system. 1. Evaluation of the Current Compensation Program We conducted discussions with City personnel to review current compensation data which indicated that job positions are outdated or non-existent, hiring wages are not consistent and some employees have asked for their positions to be evaluated. Other findings indicate a wage problem demonstrated by: • Concerns about the turnover rate and recruitment issues • Difficulty hiring new personnel • Positions with comparable responsibilities requiring comparable education and experience are paid differently, which is a problem for pay equity compliance Currently the City of Lake Elmo does not have a Pay Philosophy. A philosophy guides the design of a compensation system and answers key questions regarding pay strategy. It generally takes a comprehensive, long-term focus and explains the compensation program’s goals and how the program supports the City’s long-rage strategic goals. Without a pay philosophy, compensation decisions tend to be viewed from a short-term tactical standpoint apart from the organization’s overall goals. A pay philosophy should be developed that establishes a compensation program based on individual employee performance as a key feature of the pay philosophy. As part of this Study, it is recommended that the City consider these concepts in the adoption of a formal pay philosophy that will include: • Providing fair and equitable rates of pay to employees • Defining the City’s market area and desired position compared to market; establishing a market position that is fiscally responsible with public resources. • Maintaining a compensation system that establishes an equitable “market rate” for each position and states the minimum wage and maximum rates that the City will pay individuals within a position • Maintaining a pay system that allows employees to progress through the pay range if their performance consistently meets expectations; ensuring that pay rates for existing employees are based on individual performance that meets or exceeds expectations and reflects changing economic conditions • Developing pay administration policies and procedures that ensure their consistent application between departments • Ensuring that the compensation program is understandable to employees, managers, the City Council and the public 2. Peer Market Review The project team defined a peer market to include in this study. We looked at demographics, population, tax capacity, 6 | Page market rate and general fund. David Drown Associates used the peer market to analyze job titles, pay and wage ranges. 3. Defining and Evaluating Classification The project team determined that management would review the current job descriptions and make any recommendations. We reviewed current jobs to determine if work performed was essentially the same and if so the positions could be consolidated into one job classification, such as Administrative Assistant. Consolidating job titles, if practical, can be beneficial to the organization by helping to promote internal equity. With the completion of the job descriptions, we utilized our Job Evaluation Tool (JET). The factors considered in determining the relative value of classifications are: • Education and Experience • Nature and impact of Decision Process • Nature and impact of Problem Solving • Nature and impact of Relationships • Mental and Physical Effort • Elements of Work Environment Job evaluation results are found on Appendix I. 4. Develop Salary Schedule The process of developing a salary schedule draws substantially from the market data. We used the League of Minnesota Cities to provide most of the data. We also contacted surrounding city officials to provide information about the structure of their pay plans, the minimum, maximum and actual salary rates of positions, years to maximum, number of steps and information on additional compensation if relevant. Our market analysis includes: Albertville Ham Lake Hugo Little Canada Mahtomedi Minnetrista Mound Mounds View Orono Rogers Vadnais Heights Victoria Waconia We were able to collect data from all communities, except the City of Minnetrista. They did not complete the League of MN Cities salary survey and we reached out to their City Administrator and HR staff three times to receive the necessary data. The salary survey included 18 job positions. In addition to the current 18 position, we created a job description and did a market comparison for a Public Works Lead. Four positions were not used in analyzing salary data as there was either inadequate information or inconsistent information provided. The jobs that were not included were Library Director, Library Assistant, Office Assist/Planning and Fire Department Administrative Staff. In order to gain a competitive market analysis for the two library jobs, we searched the League of MN Cities salary data for cities of similar size with libraries and used Chisholm, International Falls, Cloquet, Kasson, Morris, Redwood Falls, Stewartville, Virginia and Windom. These two positions are unique as they report to the Library Board and receive any increases from them; however, they are paid by the City of Lake Elmo and must be reported in pay equity reports. A 7 | Page review of the Library Director found a market average of $28.69 and a market minimum of $21.12 and a market maximum of $27.84. A review of the Library Assistant found a market average of $16.03 with a market minimum of $16.01 and a market maximum of $21.23. It should be noted that non-metro data can be lower by a significant amount. In order to gain a competitive market analysis for the Office Assistant/Planning, we looked at jobs of similar duties and found a more comparable job title of Permit Technician. In these communities this position generally reports to the Building Official, Community Development Director or Planning Director. A review of this position found a market average salary of $24.69 with a market minimum of $19.24 and a market maximum of $24.69. We would recommend a title change to Permit Technician, as that is more descriptive of the duties performed. The PT Fire Administration position is unique. In most cases, this work is absorbed by the Administration Department, so we would recommend this job be treated like the Office Assistant with a few more qualifications. The need to respond to emergencies impacts some of the evaluation factors for this position. A review of the salary ranges indicates that the salary ranges for most the City of Lake Elmo positions are above minimum salary ranges of comparable organizations. Only three job positions were below minimum: Finance Director, Planning Director and Fire Chief. The cost to move these positions to the minimum is $18,158. In looking at the part-time positions, the Library Assistants are under the market. The cost to move them to the minimum market rate is $8,590. In looking at the market average for all positions, 52% of the jobs were above market average. The total cost to move all employees to market average is $96,683. In looking at the market average, it is important to review the median salary, which is the rate paid in the middle. This allows the consideration for tenure and experience. To give an example, the lowest percentiles may reflect salaries of those who are entry-level and the highest percentiles may reflect those who have many years of experience. Many of the current employees have been with the City less than four years. In the market, salary maximums are often viewed as the market rate for a fully experienced employee with several years of service. Service time needed to reach maximum varies, but usually by 10 years almost all are at the maximum. A small number of merit pay systems require a longer service time. A summary of the market survey results can be found in Appendix I. Of the 24 employees in comparison to the market data: • 5 employees are below the minimum market range for their position • 5 employees are over their max market range for their position 5. Create Compensation Plan A review of the compensation programs of the survey participants show a wide variety in step system, open range and other. David Drown Associates created both for the Project Team to review. A step system includes annual steps for each position grade. The consultant assigned each positon to the appropriate salary grade in the salary schedule. The grade assignments can be found in Appendix III. Based on our proposed salary ranges, the City would currently have 8 employees that are not at their minimum step rate. Our steps were created by using market data and the Job Evaluation Tool (JET). 8 | Page $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 100 150 200 250 300 350 400 450 500 550 600 650 Draft Min Draft Max Current Pay $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 100 150 200 250 300 350 400 450 500 550 600 650 Draft Min Draft Max Market Average Market Max Draft Range Vs Actual Pay Draft Range Vs Market Pay 9 | Page IMPLEMENTATION AND RECOMMENDED SALARY PLAN A. Implementation Employees can be placed onto the recommended wage schedule in several ways. To estimate implementation costs, we used current employee salaries supplied by the City for all departments. With the various options that are provided, they all include bringing the three positions (Fire Chief, Finance Director, and Planning Director) to the minimum of their salary range. Option 1-100% of the Market In Option 1 individuals whose current wage is below the minimum of the proposed range would be placed on the minimum range of the proposed range for their position. Of the City’s 21 full-time employees, 8 employees are currently compensated below the minimum wage of the proposed wage scale for their position. The annual cost to bring these employees to the minimum of their proposed scale is an estimated $31,678. The actual cost to bring all employees to the market minimum would be $18,158, but this does not take into account the evaluation of the jobs and internal pay equity. Total Estimated Cost: $31,678 Option 2-95% of Market Option 2 creates a wage schedule that is based on a 95% relationships to the market rather than the market average. In this scenario, those employees below the minimum of their proposed range would be placed on the first step of the proposed range for their position. Of the City’s 24 employees 8 would be moved to their first step at an estimated cost of $31,678. Employees whose current wage falls within the proposed range would be placed within the proposed schedule on the step closest to their current range. No employee would receive a decrease in pay. This ensures all employees would at a minimum receive a 2.2% increase. The average percent increase for all employees would be 4.4%. The total cost to move all employees to the next step or steps would cost an estimated $21,424. The total cost of this option would be about $53,102. This move would be the best option as it provides an above average annual increase and puts all employees into their next step. Total Estimated Cost: $53,102 Option 3- Move Employees to Market Average Option 3 would allow all employees to be at or above market average. The cost of this would be $96,683, and would not include an increase for all employees, so an additional COLA would have to be included. Total Estimated Cost: more than $96,683 B. Current Title Changes and New Positions It is recommended to change the title of Office Admin Assistant to Deputy City Clerk. This provides a better job description of the job, allows another minute taker and is similar to many communities. In addition, it is recommended to add the PW Lead, as this allows growth within Public Works, promotes supervision of employees and provides more assistance to the Public Works Director. Finally, it is recommended to change the job title of Office Admin Assistant/Planning to Permit Technician, as this truly aligns with the function of the job. 10 | Page B. Ongoing Administration After initial implementation is achieved, the City will need to develop administrative procedures that provide for annual salary adjustments based on market and economic conditions and adjustments that recognize individual performance. Employees will move through the wage schedule based on years of service and performance factors. An employee hired at the minimum wage rate who maintains satisfactory performance will move from the minimum to the maximum in 9 years. In 2018 and subsequent years, it will be necessary for the City to adjust the salary schedule based on the cost of living and other factors such as recruitment and retention issues. The City can establish a guideline for determining annual base adjustments. The City could contact comparable jurisdictions to find out what percentage adjustment they are making to their pay scales as a second level of verification of the pay range adjustment. This would ensure that the City maintains marketability among comparable regional cities. Other additional administration includes the creation of a pay philosophy and review of the Employee Handbook to reflect these changes. While salary is part of the total compensation, it is recommended that the City take time to review their fringe benefits. Some items to consider include: • Holiday leave and floating holidays • Vacation and sick leave • Medical insurance • Life insurance • Short-term and long-term disability insurance • Deferred compensation • Post-Retirement Health Care Savings Plan C. Employee Adjustments Employees will move through the wage schedule based on years of service and performance factors. An employee hired at the minimum rate who maintains satisfactory performance will move to the maximum within 9 years. 11 | Page Appendix I: Market Study Results Title Current Pay Market Average Market Min Market Max Library Assistant $ 13.50 $16.03 $16.01 $ 21.23 Library Assistant $ 10.30 $16.03 $16.01 $ 21.23 Office Admin Asst. $20.00 $22.97 $19.40 $ 23.78 PW Operator III $ 20.00 $ 20.40 $ 18.54 $ 23.19 PW Operator III $ 20.00 $ 20.40 $ 18.54 $ 23.19 PW Operator III $ 20.00 $ 20.40 $ 18.54 $ 23.19 Office Admin Asst/Planning $ 21.63 $ 24.69 $ 19.24 24.69 PW Operator II $ 24.83 $ 24.83 $ 22.17 $ 26.55 PW Operator I $ 26.00 $ 26.95 $ 22.82 $ 26.97 PW Operator I $ 27.00 $ 26.95 $ 22.82 $ 26.97 Accountant $ 25.00 $ 26.38 $ 22.94 $ 27.94 Building Inspector Building Inspector $ 31.20 $ 32.00 $ 29.76 $29.76 $ 24.99 24.99 $ 31.81 $ 31.81 City Clerk $ 30.00 $ 31.65 $ 27.73 $ 34.06 PW Operator I $ 29.00 $ 26.95 $ 22.82 $ 26.97 City Planner $ 27.10 $ 27.53 $ 23.83 $ 29.74 Library Director $ 23.80 $ 28.69 $ 21.12 $ 27.84 Building Official $ 40.87 $ 37.50 $ 30.58 $ 38.16 Planning Director $ 34.62 $ 41.76 $ 37.09 $ 45.76 Fire Chief $ 35.08 $ 45.74 $ 39.32 $ 47.56 Finance Director $ 38.18 $ 47.47 $ 40.20 $ 49.35 City Administrator $ 54.09 $ 59.51 $ 48.36 $ 58.40 Public Works Lead*** $ 32.34 $27.07 $ 32.37 12 | Page Appendix II: Compensation Plan This is a Compensation Plan that includes steps. This provides a Range percent spread of 30%, and a Grade spread of 6.75% for Grades 1-16 and 6.5% for Grades 17-20. 13 | Page Appendix III: Position Grade Assignment TITLE Current Pay New Grade Accountant $25 9 City Planner $27.10 11 Finance Director $38.18 16 Building Official $40.87 13 PW Operator II $24.83 8 PW Operator III $20 7 Library Director $23.80 12 PW Operator I $29 11 PW Operator III $20 7 PW Operator II $26 8 City Administrator $54.09 20 City Clerk $30 11 Building Inspector Building Inspector $31.20 $32.00 11 11 Fire Chief $35.08 16 PW Operator III $20 7 PW Operator II $27 8 Office Admin Assistant $20 7 Library Assistant $13.50 1 Library Assistant $10.30 1 Public Works Director $40.87 17 Planning Director $34.62 16 Fire Dept. Admin. Asst. $19.79 8 Office Admin Asst/Planning $21.63 7 ***PW Lead 13 ***The Public Works Lead is a newly created position that will need Council approval and can be used in the future.