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Home My WebLink AboutFIN 2018-09-05 Item 2B - Policy - Compensation Policy for City EmployeesCity of Tukwila Allan Ekberg, Mayor INFOR ATIONAL E ORANDU TO: Finance Committee FROM: Stephanie Brown, Human Resources Director Erika Eddins, Human Resources Analyst David Cline, City Administrator CC: Mayor Allan Ekberg DATE: August 29, 2018 SUBJECT: Review of Compensation Policy Resolution No. 1796 Update from August 21, Finance Committee Meeting Note: This is a new informational memorandum with the intent to capture the compensation policy review and discussion outcomes in preparation for discussion with the full Council. At the July 17, Finance Committee meeting, Administration sought committee direction to finalize the scope of the review of the City Council compensation policy. The committee requested that Administration bring back recommendations on the following proposed policy change considerations of above and below market adjustments, comparable cities, compression, recruitment incentives, and the process for non -represented compensation review. In addition, as directed by the Council, Administration has conducted the external market study using the Association of Washington Cities and County Employee Salary and Benefit Survey for 2018. Once the regressions analysis was applied to the raw data, the results show we are still close to market and are considered very competitive (Exhibit A.1 and A.2). This was also the case when we did the regression analysis for 2017. In future years, to address the potential for above and below market wage adjustments, it is recommended that Council adopt the Market Competitiveness standard provided by our Mr. Lawson, our compensation consultant as it provides an objective guide to address when positions are out of alignment with the market. Option 1 The Market Competitiveness Standard: +/-5% to +/-10% - Competitive with market +/-10% to +/-I 5% - Possibly Misaligned with market +/-15% and above - Significantly Misaligned with market For positions that are possibly and significantly misaligned with the market would require review of the data to ensure the appropriateness of market data and review of job classifications to ensure appropriate placement. 13 INFORMATIONAL MEMO Page 2 Below are three examples of a process Council could adopt using the Market Competitiveness Standard: OPTION A — External Market Study • During External Market Study (for even numbered years) — Positions that are 5% or more below market and up to 10% above are considered competitive with the market and will receive a market adjustment the year the market adjustment is to occur. • Those positions 10% to 15% above the market will not receive an adjustment during the year the market adjustment is to occur and will warrant further evaluation and possible reclassification. If further analysis results in reclassification, any adjustments will be made in alignment with City policy. OPTION B — Internal Equity • Considerations for cost of living adjustment (COLA) for odd numbered years will be based upon internal equity with represented groups to determine if an adjustment is warranted. Administration will inform City Council if an adjustment is warranted prior to implementation. OPTION C — Written Justification for Misaligned Positions The other option would be to update the current language in Resolution No. 1796 Section B.2. to state "If the City's pay schedule for any classification that does not represent the average of comparable salary ranges (+/-10%) written justification must be provided to the City Council." 2. Compression As it relates to defining Compression, Council Resolution No. 1796, states, "The goal of the City is to mitigate or avoid salary compression issues where possible. An example of salary compression would be when a non -represented supervisor earns less or is projected to earn less than those that he/she supervises due to contracted wage increase." During the Council work session Mr. Lawson, our consultant expressed that compression cannot be totally mitigated. Therefore, Administration recommends that Council retain the current definition reflected in the resolution as it is referenced above. It is further recommended to review the salary structure more frequently preferably in the year a market study is done to ensure that wage adjustments that occur over time do not create compression between salary bands. 3. Comparability During even numbered years when an external market study is conducted, the Administration uses Council Resolution No. 1796 parameters for comparability which looks at "All Puget Sound jurisdictions with +/-50% of Tukwila's annual assessed valuation, based upon the Department of Revenue data, will be used to create the list of comparable jurisdictions for evaluation of salary information." The issue of comparability has been discussed during the review of this resolution, specifically, do the parameters of +/-50% reflect the market to which we compare, or should the Committee also consider other factors to determine external market comparability. , Mr. Lawson, our compensation consultant shared with the Council at their work session on June 19, that comparability factors could include employee population, assessed valuation double or half the size of Tukwila, geography, and demographics. Whereas, Administration would not recommend considering assessed valuation of double the size of Tukwila, consideration of going above +50% would provide more consistency where jurisdictions come in and out for comparison. For example, in the 2017 Market Study Issaquah and Shoreline were included since they were within +50% of A.V. In the 2018 Market Study, these two cities increased to 54% and 57% of A.V. and therefore were excluded (see table below). 14 INFORMATIONAL MEMO Page 3 Assessed valuation changes annually asreported bythe Department nfRevenue, Taxing District Levy Tob|e3O. City 2027Assassed Value Assessed Value %ofTukwila 2018Assessed Value Assessed Value %ofTukwila Tukwila $5.040 1.00Y6 $5.736 1.00% Shoreline $7_426 1.4796 $8.848 1.540 Issaquah $7.385 1.46% $8.989 1.57Y6 Assessed Value represented in Billions In addition, given that these concerns have been raised bvthe Employees group and in previous discussions, the following are some Suggested options for your consideration that will mitigate the inconsistency the current policy parameters impose. OPTION l "A|| Puget sound jurisdictions with +75/-50% of Tukwila's annual assessed valuationusing the most current data from County Assessors, will beused tocreate the list of cornparablejUrisdictionsfor evaluation ofsalary infbunudoo." As reflected in Exhibit B, the assessed valuation comparison table, this Would serve to eliminate the ioand out annually of comparator jurisdictions. If consideration were given to this option, Administration recon-imends a "second criteria to assessed valuation, to include employee population ofsimilar uizo". 8aExhibit 8also shows, by increasing to+75%ufassessed valuation there would be more similar employee Populations to compare to Tukwila. Make nochange and retain current policy staternent of comparison to"All Puget Sound jurisdictions of +c50%ofTukxdla`aannual assessed valuation". New Recruitment Incentives The FiuunceConouitteerogunstednnun:infbonu1iouonwhatotbcrcidoxdo0orourui and retain employees. Twenty- five (25) Puget Sound Cities were surveyed and responded to OUr request on the attached Exhibit [. The data shows that some cities offer hiring bonuses specifically10law enforcement positions, additional vacation hours, orthe ability touse vacation sooner than the typical six months. Several cities did not offer any recruitment incentives. As has been discussed in previous hton meetings, Tukwila currently offers hiring bonuses to attract applicants to highly competitive positions Such as Building and Construction Inspector, or Law Enforcement positions. Mr. Lawson, OUr Compensation consultant, shared with the Council that a market premium may be appropriate to implement specifically when You want to attract and retain jobs that are competitive in the labor market. /\dnnioisbationo:conomcnds the Committee defiucinits policy oatutemcoithat reflects its philosophy of providing above average benefits, hiring incentives and competitive pay to attract, and retain a highly skilled, gu«lificdand trained workforce, 15 INFORMATIONAL MEMO Page 4 Non -Represented Compensation Review Process The final item for discussion is should the process for non -represented compensation review change. Currently Resolution No. 1796, provides that non -represented employee compensation be reviewed annually to consider external market or a cost of living adjustment. Unlike represented groups, the non - represented compensation review typically is presented in the fall prior to the year of implementation. This is a more public process. Administration recommends adopting review of non -represented compensation at the time the budget is being adopted so that external market and cola wage adjustments are a more efficient and seamless transition covering a two-year period versus an annual review process. The remainder of schedule for review of the City Council Resolution No. 1796 is as follows September 5— Finalize recommendations for City Council consideration September 10- Bring recommendation to the City Council for review and discussion September 17— Adoption of changes to Resolution No. 1796 for implementation We look forward to discussing these recommendations and options at the Finance Committee meeting, on August 21, 2018. Follow Up from the August 21, Finance Committee Meeting At the August 21, Finance Committee Meeting, Administration reviewed the following recommendations with the Committee members; • Reviewed results of the 2018 External Market Study for Non -Represented Employees; • Recommendations and options for consideration on above and below market adjustments., • Recommendations regarding how to address compression; • Recommendations and options for consideration on comparability; and • Recommendation on new recruitment incentives and the process for review of Non -represented compensation. The Committee reviewed the recommendations, provided input, and asked these recommendations be discussed further at the Sept 5 Finance Committee meeting In addition based upon the results from both the 2017 and 2018 external market studies, the regression shows that we are competitive with the market. It was requested that Administration continue the current policy of conducting the external market study. The Finance Committee asked for Administration to supplement the tables in Exhibits A.1 and A.2 to show the 2018 market study regression results based upon +60 of Assessed Valuation to include the two cities that were excluded from the original study based upon the +/-50% Assessed Valuation criteria. Those cities are Issaquah and Shoreline and the Committee can see the impact of this change now reflected in Exhibits A.1.1 and A.2.1. This analysis shows that the City remains competitive within tie market averages. It was also requested that the table in Exhibit B be updated to include columns showing City populations as a percentage of Tukwila's. Exhibit B.1 includes the population information as well as a column showing the 2018 Assessed Values by County data. The County data provides the most current assessed valuation figures available for cities and is included for comparison to the State Department of Revenue which lags a year behind. 16 INFORMATIONAL MEMO Page 5 The remainder of schedule for review of the City Council Resolution No. 1796 is as follows September 5 — Finalize recommendations for City Council consideration September 10- Bring recommendation to the City Council for review and discussion September 17 — Adoption of changes to Resolution No. 1796 for implementation 17 18 16000 14000 12000 10000 8000 6000 4000 2000 0 0 City of Tukwila, WA Market Data Regression y A 1,1162x + 3376 R2 A- 09851,,,,-22' a • 2000 4000 6000 8000 10000 12000 • Max Avg Max Median - Linear (Max Median) N.) 0 City of Tukwila, WA arket Data Regression - Revised Analysis 18000 16000 y = 1.179x + 3178.3 82 = 0,9836.„..,' 14000 12000 10000 8000 6000 4000 2000 0 > 2 0 2000 4000 6000 8000 10000 12000 /24 ---2 Max Median Tukwilia ------ Linear (Max Median) EXHIBIT A.2 Structure Comparison: Max Comparisons Market Median Market Median Hrly Current Max Max Based on Regression Results % Diff B21 N/A N/A $33.65 $30.21 -10% B22 N/A N/A $35.83 $32.36 -10% B23 $5,975 $34.47 $38.00 $3450 -9% C41 N/A N/A $46.26 $43.09 -7% C42 $7,276 $41.97 $48.89 $45.24 -7% C43 N/A N/A $51.06 $47.38 -7% C51 N/A N/A $53,79 $50.07 -7% C52 N/A N/A $57.06 $53,28 -7% D61 $10,071 $58.10 $58.04 $55.97 -4% D62 N/A N/A $59.07 $58.11 -2% D63 $10,639 $61.38 $61.15 $60.26 -1% D71 N/A N/A $63.77 $62.94 -1% D72 $11,453 $66.08 $66.88 $66.16 -1% E81 N/A N/A $69.48 $68.85 -1% E82 $12,416 $71.63 $71.58 $70.99 -1% E83 $12,932 $74.61 $73,66 $73.14 -1% E91 $13,302 $76.74 $76.23 $75.82 -1% E92 N/A N/A $79.40 $79.04 0% F101 N/A N/A $82.56 $82.26 0% F102 $14,163 $81.71 $83.65 $85.48 2% Negative % = leading market Positive % = lagging market Average % Difference -4.8% Observations: Current maximums for DBM ranges Al].- C52 currently lead the market Beginning with D61, the ranges are aligned with market in a highly competitive manner 21 ExhibitA.Z.l Structure Comparison: MaxCompahson-Revised Market Median Mr| y Current Max Max Based on Regression Resu|ts- Or|Q1Mo| Y6Diff B21 N/A $33.65 $29.68 '12% 822 N/A $35.83 $31.94 '21% B23 $36.61 $38.00 $34.21 '10Y6 C41 0/A $45.26 $43`28 -G% [42 $43.19 $48.89 $45.54 '7% [43 N/A $5I.06 $47.81 -696 [51 N/A $53.79 $60.65 '6% C52 N/A $57.06 $54.05 '596 D6I $57.89 $58.04 $56.88 '2V6 D62 N/A $59`07 $59.15 O% D63 $60.26 $61.15 $61.41 096 D72 N/A $63.77 $64.25 1% D72 $66.77 $66.88 $67.65 1V6 EOI N/A $69.48 $70.49 1% E82 $74.26 $71.58 $72,75 2% E83 $76.31 $73.66 $75.02 l% E91 $77.08 $76.23 $77,85 2Y6 E92 N/A $79.40 $81.25 296 F101 N/A $82.56 $84.66 396 F102 $84.25 $83.65 $88.06 5% Average 96Difference -3.996 Negative 96=leading market Positive 96lagging market Observations: Pay structure better aligned with market with inclusion of Issaquah and Shoreline Assessed Valuation Comparisons Puget Sound City Comparisons within King, — Snohomish King Shoreline Snohomish Issaquah King Federal Way Kjng rn King/Pierce EXHIBIT B Des Moines Maple Valley Lake Stevens King King Snohomish MuNlteo Snohomish Puyallup pierce SeaTac King Lakevvood Pierce � 8uhen Lynnwood Tukwila 3,194,299,789 ' Assessed CitV 0.55 132 3,268616,351 0.56 46 3,324,196,683 4,354,213,237 _ 5148O32�91 �c�' 5,4OS,58 �,�' 5,41O/414,843 ` 5,608,165,807 0.75 0.89 269 0.94 112 O.84 209 0.97 78 1.00 Marysville Snohomish 6/425,149,097 112 1.20 122 1/Cl 23U BothellKing/Snohomish1.52 328 � 8,848,561,852 1.54 176 $ Ei736,568,228 666 0.98 350 321 277 Edmonds Snohomish 8,177,283,180 � ' 291 1.64 323 1.66 437- Assessed Valuation Comparisons EXHIBIT B.1 2017"AV 2018'4V, Citles'or Market Survey 017 State 0O Assessed Value state DOR essed Value Popluatioi Population . "' Vatue % County 2038 County Assessed Assessed Values Value X X X X X x X X X X X x X X X x X X X X x X Maple Valley Lake Stevens Des Moines Mukilteo Puyallup Lakewood SeaTac Tukwila Lynnwood Burien Marysville Bainbridge Island Edmonds Bothell Issaquah Shoreline Federal Way Auburn King Snohomish King Snohomish Pierce Pierce King King Snohomish King Snohomish Kitsap Snohomish King/Snohomish King King King King/Pierce 3,268,616,351 3,324,196,683 3,194,299,789 56% 57% 55% 4,354,213,237 5,148,032,791 75% 89% 5,410,414,843 94% 5,405,585,665 94% 5,736,568,228 100% 5,654,422,666 98% 5,608,165,807 97% 6,425,149,097 112% $ 6,898,602,203 120% $ 8,177,283,180 143% $ 8,760,887,474 153% $ 8,989,557,112 157% $ 8,848,561,852 154% $ 9,420,224,291 164% $ 9,555,039,113 167% 46 93 132 14% 29% 41% 124 39% 269 84% 209 65% 112 35% 321 100% 350 109% 78 24% 24,900 127% 31,740 161% 30,860 157% $ 3,680,189,655 60% $ 3,784,529,975 61% $ 3,823,309,451 62% 21,240 108% 40,500 206% 59,280 302% 28,850 147% 277 86% 122 38% 220 328 248 176 323 437 69% 102% 77% 55% 101% 136% 19,660 100% 36,950 188% 50,680 65,900 23,950 41,260 44,370 258% 335% 122% 210% 226% $ 4,745,542,557 $ 5,666,549,214 $ 6,002,783,089 $ 6,165,328,557 $ 6,184,943,263 6,272,081,312 $ 6,385,711,481 $ 7,144,089,843 $ 7,542,154,879 $ 9,900,884,044 9,107,284,679 77% 92% 97% 100% 100% 101% 103% 116% 122% 147% 160% 36,030 55,060 96,350 78,960 183% 280% 490% 402% 10,152,241,433 164% $ 10,228,874,349 165% $ 10,301,293,691 167% $ 10,600,014,202 171% Mercer Island Renton Kent Redmond King King King King 12,083,477,559 15,035,333,726 16,335,686,545 18,631,080,894 211% 262% 285% 325% 205 540 691 642 64% 168% 215% 200% 24,210 123% 102,700 522% 127,100 646% 62,110 316% $ 13,326,314,672 215% $ 16,909,050,051 273% $ 18,597,339,729 301% $ 20,770,064,850 336% * WA State Department of Revenue (DOR) data was used for the 2018 Market Survey. The most recent DOR data available at the time of survey is 2017 figures (data lags by one year.) FTE = Full Time Equivalent Employees County Assessed Values from County Assessor Data current 2018 values Sorted by 2018 County Assessed Values Comparison on Recruiting Incentives EXHIBIT C Surveyed 25 Puget Sound Cities below are the responses received_ Puget Sound Cities Recruiting incentives Offered Auburn None Bainbridge island None Bremerton Hiring Incentives Policy for difficult to fill positions. Bonus up to $5k Burien At times offer a bank of vacation hours (management positions) Edmonds None Federal Way Hiring bonus offered to lateral police officers; Director level positions receive 40 hours vac upon hire; have paid up to $5k in relocation expenses when applicable Issaquah None Kent Can offer vacation immediately upon hire; signing bonuses for PD; may advance to next salary step after 6 months instead of one year. Have paid for travel to and from for final interviews Kirkland Hiring bonus for police officer Lake Stevens May provide more vacation to non -reps at hire Lakewood Management level non -reps may receive initial leave upon hire, and an on occasion a higher vacation accrual rate Lynnwood None Maple Valley Managers Directors may negotiate for additional vacation Mt. Lake Terrace Can offer higher vacation accruals and/or ability to use accrued vacation before 6 months Mukilteo On occasion have offered higher management positions vacation (2-3 weeks) upfront Renton Hiring bonus to lateral police officers; on occasion have given lump sum vacation or accelerated vacation accrual rate. SeaTac None 26 290 Washington Resolution No. 1 1 9k A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, ESTABLISHING A COMPENSATION POLICY FOR CITY OF TUKWILA EMPLOYEES AND REPEALING RESOLUTION NO. 1387. WHEREAS, the City believes that the purpose of a compensation program is to facilitate recruiting, retention, development and productivity of employees; and WHEREAS, the City desires to utilize standardized policies, procedures and processes, wherever possible, for compensating all employee groups, both represented and non -represented; and WHEREAS, the City recognizes that current economic conditions and forecasts, long-range City budget forecasts, position rates for comparable jurisdictions, as well as internal equity considerations should assist in guiding in the compensation of employees; and WHEREAS, the City has made a determination to, when economic conditions allow, review and adjust non -represented employee salaries via a market analysis to that of the average of comparable jurisdictions in even -numbered years, and to provide a cost -of -living (COLA) allowance in odd -numbered years; and WHEREAS, the City has made a determination to, when economic conditions and negotiations allow, provide represented employees with salaries that reflect the average of comparable jurisdictions; and WHEREAS, the City has made a determination to, when economic conditions allow, provide benefits to represented and non -represented employees that are slightly above the average of comparable jurisdictions; and WHEREAS, the City Council will participate in setting negotiation expectations and reviewing and approving represented employee group contracts; W:\Word Processing\Resolutions\Compensation policy for City employees 5-29-13 final SB:bjs Page 1 of 3 27 NOVV, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA, VVASHINGTON, HEREBY RESOLVES AS FOLLOWS: Section 1. The following statements and processes are adopted for the purpose of guiding compensation programs for employees of the City of Tukwila. A. Information to be provided to the City Council. 1. For Represented Employees. A written presentation of current internal and local external public agency salary and benefit trends, including a salary and benefits market survey of comparable jurisdictions, as defined herein, will be provided to the City Council. This presentation must be made to the Council prior to the commencement of negotiations with the bargaining units regarding salary and benefits. The City Council and Administration will discuss represented employee group negotiation expectations, negotiating points, salary and benefit change floors and/or ceilings prior to the beginning and at appropriate points during negotiation sessions. 2. For Non -Represented Employees. A written presentation of current internal and local external public agency salary and benefit trends, including a salary and benefits market survey of comparable jurisdictions, as defined herein, will be provided to the City Council every year that a non -represented salary increase is due. Relevant Association of Washington Cities (AWC) data from the previous year's Washington City and County Employee Salary and Benefit Survey, for the comparable jurisdictions, will be used in the salary market survey. B. Compensation Policy. 1. All Puget Sound jurisdictions with +/-50% of Tukwila's annual assessed valuation, based upon the Department of Revenue data, will be used to create the list of comparable jurisdictions for evaluation of salary information. It is desirable to use the same comparable jurisdictions for both represented and non -represented employee groups. 2. For non -represented employees, the City desires to pay the average salary for the particular pay scale, as derived from the comparable jurisdiction data described in Section B.1. If the City's pay scale for any classification does not represent the average of comparable salary ranges (+/-5%), written justification must be provided to the City Council. For represented employees, the City desires to pay salaries that are competitive to the City's comparable jurisdictions. 3. The cost -of -living adjustment (COLA) in odd -numbered years for non - represented employees shall be based upon 90% of the Seattle -Tacoma -Bremerton Consumer Price Index (CPI-W) Average (June to June). It is desirable to calculate represented cost -of -living adjustments the same way, unless a different method is authorized by the Council, WAWord Processing\Resolutions1Compensation policy for City employees 5-29-13 strike-thru SB:bjs Page 2 of 3 28 4. The goal of the City is to establish parity between represented and non - represented employees' benefits. The City desires to provide employee benefits that are competitive to the comparable cities described herein. The City will endeavor to keep increases to annual health care costs under market averages. If costs exceed market averages, adjustments will be made to reduce benefit costs. 5. The goal of the City is to mitigate or avoid salary compression issues where possible. An example of salary compression would be when a non -represented supervisor earns less, or is projected to earn less than those that he/she supervises due to contracted wage increases. 6. If the Administration determines that a deviation from the above process (in its entirety or for individual positions) is necessary, it will provide justification to the City Council for review and approval prior to the adoption of any process change. Section 2. Resolution No. 1387 is hereby repealed. PASSED BY THE CITY COUNCIL �F THE CITY OF TUKWILA, WASHINGTON, at a Regular Meeting thereof this day of T3tj 2013, ATTEST/AUTHENTICATED: 7-7% s/j7 Christy O'Flah MMC, City Cler APPROVED AS TO FORM BY: She ersla rney Kathy HoLigerd ol I Presi Filed with the City Clerk: 6- ---61 Passed by the City Council: Resolution Number: 1 j1 cfb W:\Word Processing\Resolutions \Compensation policy for City employees 5-29-13 final SB:bjs Page 3 of 3 29