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Compensation and Benefits Report March 7, 2011 Page 2 Related to the severance provisions, Staff is suggesting that a new policy be added to the Personnel Manual in this Section to clarify severance provisions. The Personnel Manual used to have such a policy, but was replaced with the Retirement Health Savings Plan language in Section 3.45. There could be instances that a non-union employee may fall outside the provisions of the RHSP provisions in 3.45, thus there should be additional language that serves to clarify how severance is to be paid, if not through the RHSP. The new language as proposed is reflected in Policy 3.47, which reads as follows: Subject to the provisions of Section 3.45, employees who sever employment with the City shall be compensated for any remaining accrued Vacation hours and Compensatory Time hours not already directed into an RHSP. (Flex time and Unused Floating Holidays are not eligible for Severance payout.) Employees with less than two full years of service are not eligible for payout of Sick Leave hours. Employees with two or more years of service are subject to the terms and provisions addressed in Section 3.45 regarding Sick Leave balances upon separation. The non-union employees typically meet on an annual basis to evaluate and update the terms of the RHSP, which can be modified periodically based on the specific needs and situations of the staff members. With the promotion of Sergeant Menard to Deputy Chief, it is likely that revisions will be proposed. It should be noted that any sick-leave hours directed to an employee’s RHSP benefits the City in that hours are deposited at a 50% rate of conversion using present rates of pay versus the higher future rate of pay if paid out at separation. Furthermore, the City as well as the employee benefits from early conversion of the sick leave hours as the amounts are non-taxable, which represents a large cost-savings to the City’s future liabilities. The revision proposed above along with any changes recommended by non-union staff to the RHSP policy will be presented for Council consideration on March 28, 2011. Finally, the Council has expressed some interest in exploring the feasibility, pros and cons of transitioning to a Paid Time Off (PTO) system instead of the present and more traditional vacation and sick leave system. The League of Minnesota Cities indicates the following on their website regarding PTO programs: There is a wide variety of reasons why employees need to be away from work periodically. Traditional paid vacation, sick leave and funeral leave programs are highly structured with many rules applied to their use. Such rules do not always provide the best “fit” for the circumstances of individual employees. In addition, the more kinds of leave a city provides, the more tracking the city must do regarding leave accrual and use. Finally, employees who rarely have a need for sick leave may feel as though employees using their sick leave and vacation leave are receiving a greater benefit. Because of these issues, some cities choose to provide employees with one kind of paid leave to be used for any reason that an employee needs to be away from work. This kind of leave is often called “PTO” or “paid time off.” A city with PTO would typically not offer vacation, sick or funeral leave. As with the other forms of paid leave, the parameters surrounding a PTO benefit should be clearly defined in the city’s personnel policy.