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042406 CC WS2 AgP CITY OF SHOREWOOD CITY COUNCIL WORK SESSION MONDAY, APRIL 24, 2006 AGENDA 1. CONVENE CITY COUNCIL WORK SESSION A. Roll Call B. Review Agenda 5755 COUNTRY CLUB ROAD CONFERENCE ROOM 8:00 P.M. or immediately following the Regular City Couucil meetiug Mayor Love _ Lizee Turgeon _ Callies Wellens 2. COMPENSATION STUDY (Att. - Administrator's memoraudum) 3. OTHER 4. ADJOURN CITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD' SHOREWOOD, MINNESOTA 55331-8927' (952) 474-3236 FAX (952) 474-0128. www.ci.shorewood.mn.us. cityhall@ci.shorewood.mn.us Celebrating 50 Years' 1956 - 2006 MEMORANDUM TO: FROM: DATE: SUBJECT: City Council ~ Craig W. Dawson, City Administrator April 20, 2006 Compensation Study (Work Session Item) The City engaged Labor Relations Associates, Inc., to perform a compensation study, The main purposes of the study were to: . Update position descriptions, to provide a uniform base for any changes . Develop information and recommendations for any revisions to the City's levels of pay (external labor market) and pay structure (internal relationships to comply with Minnesota's Pay Equity Act) . Change the City's rigid tenure-based step system for salaries with a more system that is designed to reward performance and provide flexibility for salaries at time of hire. The process has been lengthy. It has had extensive involvement by employees and supervisors. New position descriptions were prepared for purposes of pay equity analysis. Deputy Clerk Jean Panchyshyn has refined each of them to the well-organized format that the City has been using for several years, and will be finishing the component describing the physical demands for each position. The process also involved the response and cooperation of 13 of 15 cities contacted for the external market analysis. Ann Antonsen, who conducted the study, will review the report (attached) with the City Council at the Work Session. It is expected that tonight's discussion will be one of several by the Council before changes are determined and approved. Other components of the overhaul of the human resources system are nearing completion. The Employee Handbook Committee has reviewed the update of the Handbook, and will meet one more time to review answers from the City Attorney's Office to specific questions they have raised. The consultant review of the changes in benefits proposed by the employee Benefits Committee is expected to be completed in the next several weeks. .... f: . PRINTED ON RECYCLED PAPER ... CITY OF SHOREWOOD CLASSIFICATION AND COMPENSATION STUDY April 24, 2006 LABOR RELATIONS ASSOCIATES, INC. 18955 Maple Lane Deephaven, Minnesota 55331 952/401-9007 Ema!l: laborrelationsas@qwest.net April 24, 2006 Mr. Craig Dawson City Administrator City of Shorewood 5755 Country Club Road Shorewood, MN 55331 Dear Mr. Dawson Following this letter is the Compensation Study conducted by Labor Relations Associates, Inc. This presents an overview of the study, including the methodology used to develop new job descriptions, a classification system, a compensation plan and the implementation plan for a new compensation program. Also contained are the job descriptions developed as part of this Study. This Study represents a thorough and comprehensive review of all aspects 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 and provide increased internal equity among City positions. Implementation of these recommendations will help the City attract new employees and assist in retaining current employees needed to meet the City's service demands. Labor Relations Associates, Inc. expresses it's thanks to the City staff who completed Position Description Questionnaires. We also express our gratitude to you and the City's Management team for providing direction and feedback through the closing phases of the Study. Labor Relations Associates, Inc. appreciates the privilege of serving the City of Shore wood and hope that we may be of assistance to you in the future. Respectfully submitted, Ann Antonsen Ann Antonsen Consultant 1. Introduction The City of Shorewood, Minnesota, retained Labor Relations Associates, Inc. to conduct a Compensation Study in late 2004. The City's existing classification and compensation program was established many years ago. As a general rule, most organizations conduct new classification and compensation studies every five to seven years ensuring their ability to hire and retain qualified employees and that internal pay relationships are equitable. The City identified several objectives for this study, which included: . Evaluating the existing classification and compensation system . Developing a classification and compensation system that addresses internal equity and external market competitiveness . Developing administrative guidelines for implementation and ongoing maintenance . to provide a pay-for-performance structure to replace the current rigid tenure-based step system . to ensure that any changes in the compensation system would comply with the Minnesota Pay Equity Act This final report represents the culmination of the Compensation Study. It reflects significant City staff involvement, including their participation and attendance at orientation meetings, completion and submission of Position Description Questionnaires, and review of the job descriptions developed by Labor Relations Associates, Inc. by employees, department heads and City administration staff. New job descriptions include a brief description of the position, the essential functions performed, education and experience requirements, language and mathematical abilities, other knowledge, skills, and abilities, required licenses, certificates and registrations, and physical demands and working conditions in compliance with the Americans with Disabilities Act. Upon completion of the updated job descriptions each position was evaluated utilizing the HAY job evaluation system. The HAY system was developed approximately 40 years ago and is a system that is utilized world wide both in the public and private sectors. The HA Y system is also the system used by the State of Minnesota. A comprehensive salary survey was also conducted as part of this Study. All City positions were included in the survey. Survey participants were selected based on geographic location, organizational structure, socio-economic conditions, and other relevant characteristics such as those organizations with which you compete for employees. Fifteen municipalities, listed below, were asked to participate in the survey: . City of Little Canada . City of Arden Hills . City of Mound . City ofWaconia . City of Hugo . City of St. Anthony Village . City of Orono . City of Lake Elmo . City of Spring Lake Park . City of Rogers . City of Victoria . City ofWayzata . City of Deephaven . City of Watertown Only the cities of Rogers and Watertown did not participate in the survey; providing an excellent response rate of thirteen of the fifteen identified communities. Survey respondents were asked to provide information on only those City of Shorewood positions which they considered to be comparable to positions in their organizations. Therefore, survey respondents did not provide data for every position surveyed. During the course of the study, other communities were added for certain positions in order to collect more comprehensive data. For the position of Director of Public Works, the communities of White Bear Lake, Chanhassen, Columbia Heights and Hopkins were added. The cities of Chanhassen and Hopkins were included in the survey for the position of Finance Director. For the position of City Engineer the cities of Hopkins, Prior Lake and Savage were included. 2. Methodology Labor Relations Associates, Inc. used the following methodology to develop a compensation system for the City of Shorewood: 1. Meetings were held with the City Administrator to a establish a working relationship, review of current policies and practices relating to the City's existing pay practices, and obtaining available data on the programs and materials currently in use. These meetings also provided an opportunity to discuss the City's goals in adopting a compensation system for City employees. 2. An employee orientation meeting was conducted explaining the study process and to answer questions from employees. This meeting also provided an opportunity for employees to voice concerns and have input into the study. 3. All employees received Position Description Questionnaires (PDQ's) and instructions. All employees were encouraged to participate in the study by using the PDQ to describe their job duties and responsibilities. Each employee's supervisor reviewed the completed form for accuracy and completeness and provided any additional information they felt was relevant to the position. City employees were requested to complete the entire form ensuring information was available to develop new and updated job descriptions which would also meet the federal requirements under the Americans with Disabilities Act. 4. Each PDQ was reviewed and preliminary job descriptions were prepared. The preliminary job descriptions were submitted to the City for review and comment. Finalized job descriptions were then prepared incorporating any requested changes, additions and deletions. 5. Upon completion of the job descriptions, positions were then evaluated utilizing the HA Y Management Consultants job evaluation system. Factors that Hay utilizes in evaluating positions are: Know How, Problem Solving (Mental Effort) Accountability and Working Conditions. A more comprehensive description is attached as Appendix A. 6. Salary data for each position was collected. Survey recipients were asked to provide the minimum, maximum and actual salaries for each position. Information was also gathered on years to maximum, number of steps if utilized, information regarding longevity, merit or performance pay, FLSA status, and any additional compensation. 7. Using the salary data supplied by comparable government organizations and the results of the HAY job evaluation system, a new wage schedule was created for each non-union position. 8. Guidelines for implementation and ongoing administration of the 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. 3. FINDINGS AND RECOMMENDATIONS Developing a classification system and compensation program involves the analysis of substantial quantities of data collected from employees, supervisors, 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 a compensation program for the City of Shorewood which is described below. a. Evaluation of the Current Compensation Program Discussions with City personnel and a review of current compensation data indicates that employees of the City of Shorewood are under-compensated in relation to other comparable organizations. Other findings indicate a wage problem demonstrated by: . Concerns about the potential for employee turnover because employees choose to leave the City to take higher paying jobs with other employers . City departments experiencing difficulty hiring new personnel . City job classes with comparable responsibilities requiring comparable education and experience that are assigned to different pay ranges b. Pay Philosophy A pay 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 employer's long-range strategic goals. Without a pay philosophy, compensation decisions tend to be viewed from a short-term tactical standpoint apar1 from the organization's overall goals. Market competitiveness and internal equity are among the most important areas addressed in a pay philosophy. An organization's desired market position involves defining the market and identifying where the organization wants to be positioned within that market. Market position should balance what it takes to attract new employees and to retain skilled employees (in other words, eliminating higher pay as the reason employees leave the organization) with the organization's financial resources. Internal equity expresses an organization's desire to provide comparable pay to job classes with comparable duties and responsibilities. In consultation with the City's Management Team, a pay philosophy was developed that establishes a compensation program based on individual employee performance as a key feature of this pay philosophy. Therefore, we have emphasized references to performance in the pay philosophy discussion. As par1 ofthis Study, it is recommended that the City consider these concepts in the adoption of a fonnal pay philosophy: . Providing fair and equitable rates of pay to employees . Defining the City's market area . Developing a system that establishes a "market rate" for each position and states the minimum wage and maximum rates that the City will pay individuals within ajob class . Establishing rates of pay that allow the City to compete successfully for new employees within its market area . develop a system that can reward continuously above-average performance by paying employees above market-rate wages . Establishing a market position that is fiscally responsible with public resources . Ensuring that pay rates for existing employees are based on individual performance that meets or exceeds expectations and reflects changing economic conditions . Developing a pay system that allows employees to progress through the pay range as long as their performance consistently meets expectations . 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 c. Defining and Evaluating Positions City employees completed individual Position Description Questionnaires (PDQ's). Supervisors reviewed the PDQ's and provided information for each position. Employees and supervisors both responded to questions regarding working conditions and the physical requirements of each job in compliance with the Americans with Disabilities Act (ADA). Based on this data, new job descriptions were developed for each position. Job descriptions were distributed to City employees and their supervisors for review and comment. With the completion ofthe job descriptions, we utilized the HA Y Management Consultants job evaluation system, to review and rate each City position. The factors considered in detennining the relative value of classifications are: Know-How . Problem Solving (Mental Effort) . Accountability . Working Conditions A listing of the job evaluation points can be found in Appendix B. d. Developing A Salary Schedule The process of developing a salary schedule draws substantially from market data. This data is obtained by conducting a survey of other comparable employers within the City's defined market. Respondents are asked 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 infonnation on additional compensation if relevant. Survey Results. The salary survey included a series of questions designed to obtain information on a variety of pay practices. All respondents provided information on their pay plans. A salary survey was conducted using data comparable employers in the region. The survey included positions in the City. A general summary of survey results appears in Appendix C. For some positions, we did not receive a sufficient number of responses to use the data in the Study or those received were inconsistent with other information provided. A review of the survey information indicates that the majority of City positions, 13 out of 20 surveyed, are paid significantly below comparable organizations. Desiguiug the Salary Schedule. The recommended pay plan was designed by establishing a compensation schedule with a minimum, a market rate and a maximum salary rate. The minimum wage rate is 76% of the market rate and the maximum is 110% of the market rate. The market rate of each pay grade generally corresponds with the market rate identified by the salary survey. Because the pay plan was developed using 2005 data, the proposed minimum, market and maximum rates were increased by 3 percent consistent with metropolitan area market increases. The recommended 2006 compensation plan for City of Shore wood employees can be found in Appendix D of this report. This recommended compensation plan is in compliance with the Minnesota Local Government Pay Equity Act. Based on knowledge of the City's operations, it is recommended that an open range plan be maintained. Maintaining an open range salary schedule that consists of minimum, market and maximum pay rates provides the City with the flexibility to compensate employees based on their individual performance. This pay plan will also serve as an important tool for aligning individual performance with organizational goals adopted by the City Council. Therefore, an established performance evaluation system is generally considered a prerequisite for successful implementation of an open range pay system. The City of Shorewood currently has in place a comprehensive performance evaluation system. An established performance evaluation includes ongoing training of the system ensuring that supervisors in all departments consistently apply performance standards. When compensation is based on performance, employees look for assurance that managers will honestly evaluate performance and not inflate ratings in order to obtain a higher salary for particular employees. Generally, such systems provide for a review by the City Administrator's Office to provide a mechanism that helps managers apply performance standards consistently for all employees. When pay is based on performance, the evaluation system often provides for reviews at six or 12 month intervals, so employees know how supervisors view their performance and have the opportunity to improve performance and their prospect for a pay increase. Employees who have satisfactory or better performance evaluations should expect annual wage increases above the normal economic of cost of living adjustment. 4. Implementing the Recommended Salary Plan a. Implementation To estimate implementation costs, we used employee salaries which became effective on July I, 2005 supplied by the City for all departments, and making the following assumptions: . Recommended compensation program will be effective for the City's non-union employees January I, 2006. . Implementation will begin to address both internal equity and marketability with other employers. There are several positions which are currently compensated significantly below comparable positions, some by as much as 29%. These positions will require a more substantial wage increase to address their comparability with other employers. b. Ongoing Administration After initial implementation is achieved, the City will need to develop administration procedures that provide for annual salary adjustments based on market and economic conditions and adjustments that recognize individual performance. Employee Adjustments. Employees will move through the wage schedule based on performance factors. An employee hired at the minimum wage rate who maintains satisfactory performance will move from the minimum to the market wage rate in approximately 5 years. Those with above satisfactory performance will move through the wage schedule in a shorter time frame. Employees who maintain above satisfactory perfonnance will move beyond the market rate in the wage schedule. Base adjustments. In 2007 and subsequent years it will be necessary for the City to adjust the salary schedules and grades based on cost of living and other factors such as recruitment. The City can establish a guideline for determining armual base adjustments. For example, the City could base it's adjustment on the Consumer Price Index (CPI). The City could also 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 also ensure that the City maintains marketability among comparable regional organizations. If the CPI for example, is 2.5, a 2.5 percent increase would be applied to the wage rates of each pay grade. In addition, all employees with perfonnance that meets or exceeds job expectations would receive the 2.5 percent increase applied to their base salary. By making this base adjustment to all employee salaries, the City ensures that employees will not fall behind the market. Performance adjustments. All non-union employee's progression through the pay grade is based on individual performance. Supervisors can recognize an employee's contribution to department and organizational goals through performance adjustments. With the ability to recommend performance adjustments, supervisors will have an important role in linking pay and performance. Performance adjustments will be determined based on the employee's annual peiformance review. The increase will be applied to the employee's base salary effective on the anniversary of his or appointment date to the current position. Appendix A COMPONENTS OF JOB EVALUATION In measuring the "size" of jobs, job evaluation assumes fully acceptable performance by jobholders. Job content information, as documented in job descriptions is evaluated in terms of four factors. These factors are: Know-How: The sum total of every kind of skill, however acquired, necessary for acceptable job performance. This includes: . The depth and breadth of work procedures and vocational/technical/professional knowledge and skills required of the job. . The managerial breadth of skills that are required for integrating and harmonizing different organizational units or functions. . The human relations skills required to directly interact on a person-ta-person basis with others in order to produce the desired results. Problem Solving: The original "self-starting" thinking required by the job for analyzing, evaluating, creating, reasoning, arriving at and making conclusions. This includes: . The organizational and procedural parameters that guide or circumscribe the focus of thinking and freedom to think on the job. . The variety, uniqueness, and complexity of problems faced by the job. Accountabilitv: The responsibility for action and for the consequences thereof; the measured effect of the job on end results. This includes: . The autonomy or discretion that a job has in taking action and the personal or procedural controls that a job follows. . The magnitude or impact that the job has on the organization; what the job works with (or on) and its overall cost/benefits to the organization. . The role the job has on impacting end results; whether the job has primary or shared responsibility for committing the organization to action or a contributory or ancillary role in supporting such action. Workin!! Conditions: The conditions under which work must be done. This includes: . Physical Effort: Work requiring physical exertion. . Environment: Exposure to objectionable or noxious conditions. . Hazards: Exposure to factors involving risks of accident, personal injury, or personal health. The following are not considered in evaluation jobs: . The quality of your job perfonnance . Your length of service . Your formal education or degree (unless ajob requirement) . How the job was evaluated in the past . The current rate of pay for the job . Marketability with other employers Appendix B CITY OF SHOREWOOD HAY JOB EVALUATION POINTS Job Classification City Administrator Director of Public Works Finance Director Planning Director City Engineer Director of Liquor Operations Deputy Clerk/Administrative Assistant Building Official Engineering Technician Assistant Planner Light Equipment Operator-Utilities-Lead Senior Accountant Assistant Liquor Store Manager Light Equipment Operator-Shop Technician Administrative Assistant Receptionist/Park Secretary Light Equipment Operator - Utilities Light Equipment Operator Communication Tech Accounting Clerk Web Developer Office Assistant Liquor Store Clerk Liquor Store Clerk - Part time Points 1040 732 677 542 511 437 375 362 323 314 245 238 233 208 194 194 192 183 183 177 177 144 141 120 Appendix C SHOREWOOD COMPENSATION STUDY SUMMARY SHEET Maximum Maximum Survey Difference Difference Monthly Wage Average from Including Wage Including Maximum Market Stability Position 7/1/05 Stabilitv Pav Monthlv Waae Averaae Pav Citv Administrator $6,891.00 $7.205.00 $7,430.00 -$539.00 -$225.00 Director of Public Works $6.698.00 $7,004.00 $7,17700 -$479.00 -$173.00 Finance Director $6.656.00 $6,960.00 $6.502.00 $154.00 $458.00 PlanninQ Director $6.237.00 $6,237.00 $6.306.00 -$69.00 -$69.00 Dir. Of Liquor Operations $4,919.00 $5,143.00 $6,114.00 -$1,195.00 -$971.00 Deputv Clerk/Admin. Ass!. $4.814.00 $5,034.00 $4,815.00 -$1.00 $219.00 Buildina Official $4,887.00 $5,111.00 $5.210.00 -$323.00 -$99.00 Enaineer Technician $4,849.00 $5,070.00 $4,775.00 $74.00 $295.00 Assistant Planner $4.312.00 $4,509.00 $4,433.00 -$121.00 $76.00 LEO-Utilities-Lead $4,252.00 $4,189.00 $4,37700 -$125.00 -$188.00 Sr. Accountant $3.862.00 $4,038.00 $3,963.00 -$101.00 $75.00 Ass!. Liquor Store ManaQer $3,267.00 $3,416.00 $3,797.00 -$530.00 -$381.00 LEO-Shoo Technician $3,952.00 $3,896.00 $3,727.00 $225.00 $169.00 Administrative Assistant $3,401.00 $3,557.00 $3.453.00 -$52.00 $104.00 ReceotionistlPark Secretarv $3,140.00 $3,283.00 $3,207.00 -$67.00 $76.00 LEO-Utilities $3,952.00 $3,896.00 $3,670.00 $282.00 $226.00 Liaht Equipment Ooerator $3,779.00 $3,723.00 $3,664.00 $115.00 $59.00 Communications Tech. $3.267.00 $3,417.00 AccountinQ Clerk $2,949.00 $3.084.00 $3,356.00 -$407.00 -$272.00 Liquor Store Clerk $2.307.00 $2,413.00 $2,685.00 -$378.00 -$272.00 Liquor Store Clerk-PT $1,950.00 $2,039.00 $1.902.00 $48.00 $137.00 Appendix D SHOREWOOD WAGE SCHEDULE 2006 WAGES Full-Time Employees JOB CLASSIFICATION MINIMUM MARKET MAXIMUM Citv Administrator $5.814.00 $7,650.00 $8,415.00 Director of Public Works $5.616.40 $7,390.00 $8,129.00 Finance Director $5,210.56 $6,856.00 $7,541.60 Plannin~ Director $4,997.00 $6,575.00 $7,232.50 Citv Enaineer $4,959.00 $6,525.00 $7,177.50 Director of Liauor Operations $4,784.20 $6,295.00 $6,924.50 Deputv Clerk/Admin. Ass!. $4,377.60 $5,760.00 $6,336.00 Buildina Official $4,104.00 $5,400.00 $5,940.00 En~ineer Technician $3,79620 $4,995.00 $5,494.50 Assistant Planner $3,724.00 $4,900.00 $5,390.00 Senior Accountant $3,344.00 $4,400.00 $4.840.00 Ass!. Liauor Store Mana~er $3,230.00 $4,250.00 $4.675.00 Administrative Ass!. $3,055.20 $4.020.00 $4,422.00 Receptionist/Park Secretary $3,05520 $4,020.00 $4,422.00 Communications Tech $2,888.00 $3.800.00 $4,180.00 Accountina Clerk $2,842.40 $3,740.00 $4,114.00 Office Assistant $2,660.00 $3,500.00 $3,850.00 Liauor Clerk $2,101.40 $2,765.00 $3.041.50 Part-Time Employees I Liquor Clerk $1,527.60 I $2,010.00 I $2.211.00 I CITY OF SHOREWOOD 2006 MONTHLY WAGE RECOMMENDATIONS FULL-TIME EMPLOYEES CURRENT MONTHLY MONTHLY PERCENTAGE JOB CLASSIFICATION WAGE 1/1/2006 COST 7/1/2006 COST INCREASE City Administrator $6,891.00 $7.028.82 $137.82 $7.169.40 $140.58 4.04 Director of Public Works $6,698.00 $6.831.96 $133.96 $6.968.60 $136.64 4.04 Finance Director $6.656.00 $6,789.12 $133.12 $6,924.90 $135.78 4.04 PlanninQ Director $6,237.00 $6.361.74 $124.74 $6,488.97 $127.23 4.04 City Enaineer Vacant Dir. of liquor Operations $4,919.00 $5.017.38 $98.38 $5,117.73 $100.35 4.04 Deputv Clerk/Admin. Ass!. $4,814.00 $4,910.28 $96.28 $5.008.49 $98.21 4.04 Buildina Official $4,887.00 $4.984.74 $97.74 $5,084.43 $99.69 4.04 EnQineer Technician $4.708.00 $4.802.16 $94.16 $4,898.20 $96.04 4.04 Assistant Planner $4,312.00 $4,398.24 $86.24 $4,486.20 $87.96 4.04 Assistant Planner $4,312.00 $4,398.24 $86.24 $4,486.20 $87.96 4.04 Senior Accountant $3.315.00 $3.381.30 $66.30 $3,448.93 $67.63 4.04 Ass!' Liauor Store ManaQer $3,169.00 $3,232.38 $63.38 $3,297.03 $64.65 4.04 Administrative Ass!' $3,169.00 $3,23238 $63.38 $3,297.03 $64.65 4.04 Receptionist/Park Secretary $3,401.00 $3,469.02 $68.02 $3.538.40 $69.38 4.04 Communications Tech $3,410.00 $3,478.20 $68.20 $3,547.76 $69.56 4.04 AccountinQ Clerk $3,267.00 $3,332.34 $65.34 $3,398.99 $66.65 4.04 Liauor Clerk $2,345.00 $2,391.90 $46.90 $2,439.74 $47.84 4.04 MONTHLY COST $1,530.20 $1,560.80 MONTHLY PAYROLL $76,510.00 $79,601.00 AVERAGE PERCENTAGE INCREASE 4.04 TOTAL ANNUAL COST $37,092.00