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HomeMy WebLinkAbout#07 - Payroll and Compensation Policy Update STAFF REPORT DATE: June 4, 2024 CONSENT TO: Mayor and Council Members FROM: Karissa Goers, Administrative Services Director AGENDA ITEM: Approve Payroll and Compensation policy update BACKGROUND: Staff is seeking approval to make updates to the payroll and compensation policy. We have employed career firefighters for just under a year and continue to learn what procedures and policies may need updating as appropriate. Our career firefighters are the only employees required to work regular shifts on holidays. Public Works employees may work on holidays but only if emergencies arise and require on-call or call back shifts. On Memorial Day we encountered a first, where a firefighter was working a regular shift, but had a few overtime (OT) hours because of some additional training required earlier in the month. Career Firefighters only receive OT hours if they go over 159 hours in their 21-day work cycle. We currently pay employees 1.5 times their regular pay rate for time worked on holidays or OT hours worked. We had not yet established what the rate of pay should be for OT hours worked on a holiday. After consulting with other city fire departments on how they pay for these hours, the Fire Chief, Finance Director, and myself concurred that an additional rate of .50 times the hourly rate for OT hours worked on a holiday is fair compensation. This equates to double (2) times the hourly rate for the employee. ISSUE BEFORE COUNCIL: Should the Council approve the Payroll and Compensation update? PROPOSAL DETAILS/ANALYSIS: A red and green-lined Payroll and Compensation policy has been included in your packet. The green edits are just items that have been moved to a new location in the policy. Red lined items are changes that have been deleted or added to the policy. The following changes have been made: • Update the times for the pay period • Clarify that Expense reimbursement checks for city expenses will be paid to staff through direct deposit. • Add clarifying language to allow individuals to understand the policy more clearly. • Specify the pay rate for overtime hours worked on a holiday for career firefighters. • Update regular pay and reimbursement procedures for jury duty. FISCAL IMPACT: The career firefighters don’t have overtime (OT) above their 159 hours in the 21-day cycle very often. But when this happens it will have a minor impact on the budget as firefighters working overtime (OT) hours on a holiday will receive .50 times extra pay for those OT hours. OPTIONS: 1) Approve the updates to the Payroll and Compensation policy. 2) Do not approve the updates to the Payroll and Compensation policy. RECOMMENDATION: If removed from the consent agenda: “Motion to approve the updates to the Payroll and Compensation policy.” ATTACHMENTS: - Payroll and Compensation Policy PAYROLL & COMPENSATION DEFINITIONS Direct Deposit – As permitted by state law, all city employees are required to participate in direct deposit. FICA (Federal Insurance Contributions Act) – FICA is the federal requirement that a certain amount be automatically withheld from employees’ earnings. Specifically, FICA requires an employee contribution of 6.2 percent for Social Security and 1.45 percent for Medicare. The city contributes a matching 7.65 percent on behalf of each employee. Certain employees are exempt or partially exempt from these withholdings (e.g., firefighters). Pay Period – A fourteen (14) day period beginning at 12:001 a.m. on Saturday through midnight 11:59 p.m. on Friday, fourteen (14) days later. Holiday Pay – Compensation (8 hours) received when City offices are closed for an observed holiday. Firefighter Holiday Leave Bank – In lieu of holiday pay, career firefighters will accrue leave (8 hours) when City offices are closed for an observed holiday. The eight (8) hours of leave will be earned in the pay period in which the observed holiday falls and can be used at a time mutually agreed upon by the employee and the employee’s supervisor. Accrued hours do not carry over from year to year and are not paid out upon separation of employment. Full-time employees of the city will be compensated as determined by the City Council. Unless approved by the Council, employees will not receive any amount from the city in addition to the pay authorized for the positions to which they have been appointed. Expense reimbursement or travel expenses may be authorized in addition to regular pay. Expense reimbursement checks will be paid through direct deposit. Compensation for seasonal and temporary employees will be set by the City Council at the time of hire, or on an annual basis. Under the Minnesota Wage Disclosure Protection Law, employees have the right to tell any person the amount of their own wages. While the Minnesota Government Data Practices Act (Minn. Stat. §13.43), specifically lists an employee’s actual gross salary and salary range as public personnel data, Minnesota law also requires wage disclosure protection rights and remedies to be included in employer personnel handbooks. To that end, and in accordance with Minn. Stat. §181.172, employers may not: • Require nondisclosure by an employee of his or her wages as a condition of employment. • Require an employee to sign a waiver or other document which purports to deny an employee the right to disclose the employee’s wages. • Take any adverse employment action against an employee for disclosing the employee’s own wages or discussing another employee’s wages which have been disclosed voluntarily. • Retaliate against an employee for asserting rights or remedies under Minn. Stat. §181.172, subd. 3. The city cannot retaliate against an employee for disclosing his/her own wages. An employee’s remedies under the Wage Disclosure Protection Law are to bring a civil action against the city and/or file a complaint with the Minnesota Department of Labor and Industry at (651) 284-5070 or (800) 342-5354. DIRECT DEPOSIT As provided for in Minnesota law, all employees are required to participate in direct deposit. Employees are responsible for notifying the administrative services director of any change in status, including changes in address, phone number, names of beneficiaries, marital status, etc. When paydays fall on a holiday, deposits will be made the day before the holiday. Expense reimbursement checks will be paid through direct deposit. Improper Deduction and Overpayment Policy PAYROLL & COMPENSATION If an employee believes that an improper deduction or overpayment, or another type of error, has been made, they should immediately contact their supervisor. If the city determines it has made an improper deduction from a paycheck, it will reimburse the employee for the improper amount deducted and take good faith measures to prevent improper deductions from being made in the future. In cases of improper overpayments, employees are required to promptly repay the city in the amount of the overpayment. The employee can write a personal check or authorize a reduction in pay to cover the repayment. The city will not reduce an employee’s pay without written authorization by the employee. Once the overpayment has been recovered in full, the employee’s year to date earnings and taxes will be adjusted (so that the year’s Form W-2 is correct) and the paying department will receive the corresponding credit. When an overpayment occurs, the repayment must be made within the same tax year. In the exceptional situation where the overpayment occurs in one tax year and is not discovered until the next year, the overpayment must be repaid in the year it is discovered, but there will be additional steps and paperwork required. Any overpayments not repaid in full within the calendar year of the overpayment are considered “prior year overpayments” and the employee must repay not only for the net amount of the overpayment, but also the federal and state taxes the city has paid on their behalf. The city is able to recover the overpaid Social Security and Medicare taxes. Accordingly, the city will not require the employee to repay those taxes provided the employee provides a written statement that he/she will not request a refund of the taxes. The overpayment amount will remain taxable in the year of the overpayment since the employee had access to the funds. The employee is not entitled to file an amended tax return for the year but may be entitled to a deduction or credit with respect to the repayment in the year of repayment. Employees should contact their tax advisors for additional information. TIME REPORTING Full-time, non-exempt employees are expected to work the number of hours per week as established for their position. They will be paid according to the time reported on their time sheets. To comply with the provisions of the federal and state Fair Labor Standards Act, hours worked, and any leave time used by non-exempt employees are to be recorded daily and submitted to payroll on a bi-weekly basis. This is done electronically through the City’s payroll software. Time sheets should be entered and approved by the employee and approved by the employee’s immediate supervisor. Approving and submitting electronic time sheets acts as a signature. Reporting false information on a time sheet may be cause for immediate termination. OVERTIME / COMPENSATORY TIME The City of Lake Elmo has established this overtime policy to comply with applicable state and federal laws governing accrual and use of overtime. The city administrator (with input from the administrative services director) will determine whether each employee is designated as “exempt” or “non-exempt” from earning overtime. In general, employees in executive and professional job classes are exempt; all others are non-exempt. Non-Exempt (Overtime-Eligible) Employees For most employees the workweek begins at 12:001 a.m. on Saturday and runs until the following Friday night at 11:59 pmmidnight. Supervisors may establish a different workweek based on the needs of the department, subject to the approval of the city administrator. The employee’s supervisor must approve overtime hours in advance. An employee who works overtime without prior approval may be subject to disciplinary action. Overtime-eligible employees will be compensated at the rate of one time-and-one-half (1.5) times their hourly pay rate for all hours worked over 40 in one workweek. Paid holidays do count toward “hours worked.” Career firefighters will be compensated at the rate of onetime-and-one-half (1.5) times their hourly pay rate for all hours worked over 159 in the designated 21-day cycle. Firefighter Holiday Leave hours do not count towards “hours worked.” For any overtime hours worked on a City holiday Career Firefighters shall be paid two (2) times their hourly pay rate. PAYROLL & COMPENSATION Employees may earn compensatory time at the rate of one- and one-half (1.5) times in lieu of overtime pay, upon mutual agreement between the employe and the employer. For most employees the workweek begins at 12:01 a.m. on Saturday and runs until the following Friday night at midnight. Supervisors may establish a different workweek based on the needs of the department, subject to the approval of the city administrator. The employee’s supervisor must approve overtime hours in advance. An employee who works overtime without prior approval may be subject to disciplinary action. Overtime earned will be paid at the rate of time-and-one-half on the next regularly scheduled payroll date, unless the employee indicates on his/her timesheet that the overtime earned is to be recorded as compensatory time in lieu of payment, upon supervisor approval. Compensatory time balances should not exceed fifty (50) hours with a maximum carryover of forty (40) hours per year. Once an employee has accrued a balance of fifty (50) hours of compensatory time no further compensatory time may accrue. All further overtime will be paid. Employees may request and use compensatory time off in the same manner as other leave requests. All compensatory time will be marked as such on official time sheets, both when it is earned and when it is used. The Finance Department will maintain compensatory time records. As of the last pay period in November of each year, all accumulated compensatory time above the maximum carryover amount of forty (40) hours shall be paid to the employee at the hourly pay rate the employee is earning at that time. All compensatory time accrued will be paid when the employee leaves city employment at the hourly pay rate the employee is earning at that time. Exempt (Non-Overtime-Eligible) Employees Exempt employees are expected to work the hours necessary to meet the performance expectations outlined by their supervisors. Generally, to meet these expectations, and for reasons of public accountancy, an exempt employee will need to work 40 or more hours per week. Exempt employees do not receive extra pay for the hours worked over 40 in one workweek. Exempt employees are paid on a salary basis. This means they receive a predetermined amount of pay each pay period and are not paid by the hour. Their pay does not vary based on the quality or quantity of work performed, and they receive their full weekly salary for any week in which any work is performed. The City of Lake Elmo will only make deductions from the weekly salary of an exempt employee in the following situations: • The employee is in a position that does not earn vacation or personal leave and is absent for a day or more for personal reasons other than sickness or accident. • To offset compensation received for military pay. If an employee works part of the week in military service, the city must pay the entire week’s salary to the employee, but the city shall offset the amount of the military pay for the week against the employee’s salary. • The employee is in a position that earns sick leave, receives a short-term disability benefit or workers’ compensation wage loss benefits, and is absent for a full day due to sickness or disability, but he/she is either not yet qualified to use the paid leave or he/she has exhausted all of his/her paid leave. • The employee is absent for a full workweek, and for whatever reason, the absence is not charged to paid leave (for example, a situation where the employee has exhausted all of his/her paid leave or a situation where the employee does not earn paid leave). • The very first workweek or the very last workweek of employment with the city in which the employee does not work a full week. In this case, the city will prorate the employee’s salary based on the time actually worked. • The employee is in a position that earns paid leave and is absent for a partial day due to personal reasons, illness, or injury, but: o Paid leave has not been requested or has been denied. o Paid leave is exhausted. PAYROLL & COMPENSATION o The employee has specifically requested unpaid leave. • The employee is suspended without pay for a full day or more for disciplinary reasons for violations of any written policy that is applied to all employees. • The employee takes unpaid leave under the FMLA. • The City of Lake Elmo may for budgetary reasons implement a voluntary or involuntary unpaid leave program and, under this program, make deductions from the salary of an exempt employee. In this case, the employee will be treated as non-exempt for any workweek in which the budget- related deductions are made. The City of Lake Elmo will not make deductions from pay due to exempt employees being absent for jury duty or attendance as a witness. but will require the eEmployees to pay back to the city any amounts received by the employee as jury fees or witness fees.must provide copies of any compensation received for jury or witness duty, which will be deducted from the employee’s paycheck. Pay for expenses may be kept by the employee. If the city inadvertently makes an improper deduction to the salary of an exempt employee, the city will reimburse the employee and make appropriate changes to comply in the future. If an employee thinks that a wage deduction was made in error, please contact the administrative services director promptly. All employees, in all departments, are required to work overtime as requested by their supervisors as a condition of continued employment. Refusal to work overtime may result in disciplinary action. Supervisors will make reasonable efforts to balance the personal needs of their employees when assigning overtime work. HOLIDAY COMPENSATION All benefit eligible employees who are on active status (not a leave of absence) the day preceding and the day following an observed City holiday are eligible to receive holiday compensation. Any employee on a leave of absence without pay from the city is not eligible for holiday pay. Full-time employees will receive eight (8) hours of Holiday Pay on the observed holiday. Part-time employees will be paid on a prorated basis determined by the number of hours they work per week. Career and POC firefighters, seasonal, and temporary employees will not receive Holiday Pay on observed City holidays. Career firefighters will not receive Holiday Pay on observed City holidays. Career firefighters will receive eight (8) hours of accrued time deposited to their Firefighter Holiday Leave (FFHL) Bank on the paycheck for the pay period in which the observed holiday falls. Firefighter Holiday Leave must be preapproved by a supervisor and be used in eight (8) hour increments. Firefighter Holiday Leave time does not count towards hours worked when determining overtime. Up to thirty-two (32) hours of firefighter holiday leave hours may be carried over into the following year. Firefighter Holiday Leave bank hours will not be paid out upon separation. Pay for Time Worked on a Holiday Non-exempt employees assigned to work on any observed City holiday are paid one-and-one-half times the employee’s regular hourly pay straight time rate for all such hours worked. Career Firefighters required to work on a City holiday shall be paid one and one-half (1.5) times their hourly pay rate for hours worked during the 24-hour period starting at 12:00 a.m. and ending at 11:59 p.m. on the actual City holiday, not the day City offices are closed to observe the holiday. For any overtime hours worked on a City holiday Career Firefighters shall be paid two (2) times their hourly pay rate. Leave Policy for Exempt Employees Exempt employees are required to work the number of hours necessary to fulfill their responsibilities including evening meetings and/or on-call hours. The normal hours of business for exempt staff are Monday through Friday, 8 a.m. to 4:30 p.m., plus evening meetings as necessary. PAYROLL & COMPENSATION Exempt employees are required to use paid leave when on personal business or away from the office for more than fifty (50) percent of their scheduled shift. For example, if they work eight (8) hour days and work 4.25 hours they do not need to take paid leave for the remaining 3.75 hours. If they work four (4) hours, then paid leave should be used for four (4) hours. Absences of less than fifty (50%) percent of a regular shift do not require use of paid leave as it is presumed that the staff member regularly puts in work hours above and beyond the normal 8 a.m. to 4:30 p.m. Monday through Friday requirement. Exempt employees must communicate their absence to the city administrator or his/her designee. If an exempt employee is regularly absent from work under this policy and it is found that there is excessive time away from work that is not justified, the situation will be handled as a performance issue. If it appears that less than forty (40) hours per week is needed to fulfill the position’s responsibilities, the position will be reviewed to determine whether a part-time position will meet the needs of the city. Additional notification and approval requirements may be adopted by the city administrator for specific situations as determined necessary.