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HomeMy WebLinkAboutFIN 2018-07-05 Item 2C - Policy - Compensation Policy for City EmployeesCity of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance Committee FROM: Stephanie Brown, Human Resources Director CC: Mayor Allan Ekberg DATE: June 27, 2018 SUBJECT: Review of Compensation Policy Resolution No. 1796 Note: Because this topic is building on previous Committee meetings, the original memo has been updated in underline font below. This intent is to continue to preserve the information from one meeting to the next given that each discussion will build upon the previous. ISSUE The City Council and Administration have committed to review and discuss Resolution No. 1796, which sets policy for compensation and benefits for City employees. BACKGROUND Beginning in the 1980's, the City Council adopted various resolutions regarding compensation policy. These resolutions focused on several common themes including: 1) An overarching goal to maintain a competitive position in the market place; 2) The desire to select and to retain a competent and productive work force; 3) The compensation system should reflect average compensation among the various employment markets in which the City competes for qualified labor; 4) Provides that classifications shall be based upon the Decision Band Method (DBM), for the represented and non -represented employees; 5) A comparative analysis for all positions shall be determined based upon internal and external factors; 6) A mix of wages and benefits shall be provided based on the average or above average of the defined market. These resolutions have since been updated and replaced over time, with many of these provisions carrying forward over the years. In 2013, Resolution No, 1796, was adopted which sets core value statements, specifically that the City desires to utilize standardized policies, procedures and processes whenever possible for compensating all employee groups, both non -represented and represented. From the Human Resources perspective, since the adoption of this policy in 2013, it has been effectively used as a guide and serves to establish criteria for use when conducting analysis for salary and benefits. In the Collective Bargaining process, it has been objective; manageable, fair, representative of the market to which you chose to compare; used in good faith under our bargaining statue RCW 41.56; reduces the comparisons to those groups that are represented; sets parameters for pay and benefit considerations; it guides the pre -collective bargaining process as to what the City expects to receive for consideration in preparation for labor negotiations. 31 INFORMATIONAL MEMO Page 2 As it relates to the classification of new positions and the reclassification of existing positions, it provides the external market criteria based upon assessed valuation +/- 50% that we have been able to benchmark our positions to fairly consistently; provides consideration for internal comparability; identifies the data collection resources to use when conducting external market analysis; sets parameters for when a market study will be conducted and when a cost of living adjustment will be considered. The challenges we have experienced have generally been when we have positions that we are not able to find benchmark comparators for based upon the duties of the position (standard for a valid match is 5 positions). In addition, recently when the market for a certain position was highly competitive, we were not able to attract qualified applicants. During these times we look for creative, innovative and strategic ways to attract qualified applicants such as offering hiring bonuses. This has also been an effective recruitment strategy with our Civil Service positions. Given that some areas of Resolution No. 1796 are silent, addressing those silent areas would provide more clarity and an objective methodology to use for anomalies that may occur. Administration proposes consideration of the following for discussion with the Council. This list is not all inclusive as there could be other items the Council wants to consider. L Above and Below Market adjustments - specifically define what compensation standard would be used to set parameters for adjustment of wages when positions are above or below market. 2. Compression — establish a definition within the resolution that defines what it means, and what methodology will be used to address compression when it occurs. 3. Comparability — review the current methodology specifically as it applies to the external market for non -represented positions. 4. Recruitment — review what barriers exist when it is a highly competitive external market, and ways to attract and retain future employees. Follow Up from the March 20, Finance Committee Meeting At the March 20, Finance Committee meeting, Committee members requested the following components be included in the analysis and review • An updated market study; • Input and recommendations from the non -represented employee groups; • Background and evaluation of decision band methodology; • Analysis on gender neutrality, desk audits, and appeal process, performance reviews and Merit pay; • Understanding of compression and when it has been an issue. In addition, the Council committee requested that Administration provide a revised timeline for review and adoption of changes to Resolution No. 1796 by the full City Council: The schedule below meets the Council requests for a compensation workshop for the Council and for a deadline of September. 32 Z:ICouncil Agenda Items Human Resources IFinanceCommitteecompreviewmemo 3-14-18 -Update 6-27-18 sb.docx INFORMATIONAL MEMO Page 3 May 22 - June (TBD) July 3 July 17 - August 7 - August 21 - September 4 - September 10 - September 17 - Review the revised timeline with the Committee and address any additional considerations to Resolution 1796; Conduct a compensation workshop for the City Council Committee discussion: review Compensation workshop and next steps review non -represented employee input Review and discuss 2017 data of the external market study Finalize scope of policy review of Resolution1796 Review and discuss updated 2018 data for the external market study (Note AWC 2018 Data results are published end of July) Review and discuss committee considerations Review and discuss committee considerations (if necessary) Finalize recommendations for City Council consideration Bring recommendations to the City Council for review and discussion; Adoption of changes to Resolution No. 1796 for implementation NEW: Update from Compensation Work Session- 6/19/18 A work session was held with the City Council on June 19. Mr. Bruce Lawson, Compensation Consultant from Gallagher Benefit Services, Inc provided a presentation on Methods of Job Evaluation Alternatives, How to Determine Salaries. The purpose of this work session was to provide background on compensation philosophies to new Council members and to receive feedback from the full Council to inform the Finance Committee's ongoing review of the City's compensation policy as established by Resolution No. 1796. The presentation covered the follow objectives: • The history of job evaluation • The role of job evaluation • Selecting a job evaluation tool • Alternative job evaluation approaches o Whole Job Ranking o Market Pricing o Point Factor o Factor Comparison o Decision Band • Market Premiums • Pay Compression • Market Competitiveness The consultant reviewed with the City Council the process used to evaluate iobs under whole job ranking, market pricing, point factor, factor comparison, and the Decision Band Method the current system used by the City. Job Evaluation under the Decision Band Method is based upon six broad band decisions. Mr. Lawson explained that the advantage of this type of evaluation method is to determine job content, and to create a hierarchy of jobs for internal equity, and of skill, effort, responsibility and working conditions. Z: Council Agenda Items\Human Resources\FinanceCommitteecompreviewmemo 3-14-18 -Update 6-27-18 sb.docx 33 INFORMATIONAL MEMO Page 4 In addition, Mr. Lawson addressed the issue of pay compression, when it occurs, and that compression cannot be totally mitigated. He added that pay compression can be managed by the ratio percentage allocated in the pay structure. He concluded the presentation with discussion on when a market premium is appropriate to implement, specifically when you want to attract and retain jobs that are competitive in the labor market. Given the current construction climate occurring in this region and that it is hard to attract positions such as Building and Construction Inspectors, he suggested it may be a good option. Mr. Lawson reviewed with the Council the definitions of market competitiveness and that is occurs when your external market data reflects when your pay is highly competitive, possibly misaligned; or significantly misaligned reauiring review to determine if the job evaluation is appropriate. Councilmember Quinn lead the discussion of the review and discussion of Resolution No. 1796 requesting input from the City Council. Council members have reauested that the Finance Committee consider and discuss COLA and market adiustments: compression; positions above and below market, and new incentives. At the Finance Committee meeting on July 5. the committee will review non -represented employee input. the external market study data for 2017, and next steps for further review of Resolution No. y1796. 34 Z:1Council Agenda Items Human Resources\FinanceCommitteecompreviewmemo 3-14-18 -Update 6-27-18 sb.docx Tukwila Job Title DBM Band/Grade City P&R Administrator PW Director Police Chief Director F102 E91 E91 E83 A/V Cities 2017 Monthly Wage Top Step Burien 13750 12971 12971 Des Moines 14280 11162 12556 11610 Edmonds 13267 13843 12556 Issaquah 16070 14574 14574 13882 Lake Stevens 13046 11296 12336 Lynnwood 14636 14842 14636 Marysville 16052 13878 13878 13364 Maple Valley 13149 11722 11722 Puyallup 13411 12150 13411 11007 SeaTac 14044 12731 12731 Shoreline 15819 13095 13095 Tukwila 2017 Monthly Wage Average of Top Wage Step (excudes Tukwla) Dollar Difference Percentage Difference 12866 14402 12862 13634 12757 -283 4 -768 -326 -1.97% 0.03% -5.63% -2.56% In determining the level of competiveness against the market: +/-5% is Highly Competitive +/-10% is competitive +/-15% is a Possible Misalignment with the Market =/-20% is a Significant Misalignment with the Market Blank cell = no match in position with that City or no data available Cities chosen based on +/-50% of Tukwila's Assessed Valuation utilizing 2017 Washington State Department of RevE 35 2017 Deputy Public Works Human Deputy Director/City Deputy Finance Building Resources Deputy City Administrative Police Chief Engineer Director Official Analyst Clerk Assistant E82 D72 D63 D61 C42 B23 B23 12081 11288 12308 11440 10241 9614 7134 6180 5487 -227 -152 80 182 1117 234 560 -1.85% -1.33% 0.78% 1.89% 15.66% 3.78% 10.20% ?nue data Table 30 36 10911 9409 5203 12075 10650 9105 6204 5517 11958 10330 9838 6991 5462 5806 10878 7728 7075 5238 11075 8330 5894 5174 13208 13187 11880 10800 6708 5361 12150 10495 9067 7269 5980 6595 5825 12150 11564 9491 9034 6394 6086 5513 11252 9010 9945 7964 6699 5777 9737 7421 6399 5797 12081 11288 12308 11440 10241 9614 7134 6180 5487 -227 -152 80 182 1117 234 560 -1.85% -1.33% 0.78% 1.89% 15.66% 3.78% 10.20% ?nue data Table 30 36 Regression Results: All Data Included City mfTukwiYya 2017 Market Data Regression Results $16,000 $14,000 —~^w, � m^ ,,~~ .��~��' $12.000 � '$1U.0O0 To .,.^`' un ~' 7-0 $8,000 ^,' �G~~ ~~,~~..� O00 | it... ''' ' / ww Gallagher y = 1.1555x + 2977.2 R2 = 0.9859 $4,000 $2,000 B23 C42 D61 D63 D72 E82 E83 E91 F10 DBMO Rating 37 Summary of Findings Gallagher Insurance I Risk Management I C.ortsu@krg Overall regression results, regardless of what data was excluded or included based on the previous slides, resulted in an R2 > 0.98 — The results indicate that the data variability is low and therefore utilizing the resulting formula to create the pay structure would result in a valid and reliable structure that is aligned with the market. Once the proposed structure is developed utilizing the resulting formula, any variance of +/-15% from the market data would warrant further review to determine if a market premium is appropriate - The variance may be acceptable for a variety of reasons: Internal value of the position versus the value the market places on the job Variance in responsibilities between the City's role and the typical role in the market (jobs matched from other organizations are rarely a 100% and therefore variance may occur What is the variance in data in the market? If there is wide disparity that would indicate that there may be issues with the market data Has there been difficulty in retaining or recruiting for the job? If so, a market premium may be warranted 38