AGENDA #2a

 

BUDGET WORKING PAPER

 

TO:                  W. Calvin Horton, Town Manager

 

FROM:            Pam Eastwood, Human Resources Director

 

SUBJECT:       Recommended Salary and Pay Structure Increases for FY 2003-2004

 

Date:                April 30, 2003

 

 

This information summarizes the compensation increases recommended for Town employees for implementation October 1, 2003. The costs of implementing the recommended Town-wide increases on October 1, 2003 for all funds would be $1,040,600 for the fiscal year 2003-2004. The annual costs would be $1,387,500.

 

Costs of Proposed Increases Recommended

 

If implemented on October 1, 2003, the cost of the recommended increases would be $1,040,600 for all funds for fiscal year 2003-2004 and $1,387,500 for the twelve months of fiscal year 2004-2005.

                                                                        Fiscal 2003-04             Fiscal 2004-2005

           

            General Fund: Town-wide increases                  792,300                       1,056,400

            Transportation Fund                                         211,500                          282,000

            Housing Fund                                                     23,000                            30,700

            Parking Fund                                                      13,800                            18,400

                                   

 

Total                                                           $1,040,600                     $1,387,500

 

The funding recommended is a lower amount than the original cost reserve established for this purpose. Initial rough estimates were conservative and proved to be high when survey data was analyzed. Of the total amount recommended for next fiscal year, 2003-2004, $919,700 is for general adjustments and $120,900 for special pay adjustments, all in the General Fund. The special adjustments are needed for specific jobs because of market conditions and the need to maintain appropriate internal pay relationships. If approved as recommended, we believe these changes will establish a competitive pay position for the Town in the coming year which maintains employee pay at the 75th percentile of the market.

 

BACKGROUND

 

Last year, the State withheld funds from municipalities and the Town Council deferred action on salary adjustments until late in the year. On December 1, 2002, all eligible Town employees received a salary increase of 3.78%. Salary ranges were held constant. Taking this action allowed the Town to remain reasonably competitive in the defined labor market, as other municipalities and counties faced similar constraints.

 

In 1999, the Council adopted a resolution stating that “approximately the third quartile of market data shall be used to determine local market comparability for Town positions” (see Section D, Attachment 5 for the full text of this resolution) and we have adhered to that principle in gathering and analyzing market data.

 

SUMMARY OF RECOMMENDATIONS

 

These recommendations are based on a pay survey conducted by Town Human Resources staff in March and April 2003, with information from ten peer organizations defined by the Council in 1999 as the group to be considered in determining market pay.  The recommendations are aligned with the Town Pay Plan and continue the Council policy of competing at the 75th percentile of the market. These recommendations have four parts, each addressing a key pay system goal:

 

(1)   2% salary range adjustments: The hiring rate, probationary step, other steps and maximum rate in each of the salary ranges would be adjusted by 2%. This action would maintain hiring rates and ranges that are competitive in the area labor market for most job classes.

 

(2)   Regularly scheduled step adjustments for employees below the Job Rate of their range: Consistent with the Town Pay Plan, employees whose performance is satisfactory and whose salaries are below the Job Rate (or midpoint) of their range would have their salaries moved to the next step in the range, which is an amount of 3.78%, for a total salary increase for this group of 5.78% (combination of range and step increases). This would meet the goal of providing steady progress of these employees through the pay range, which prevents future salary compression. Moving employees steadily toward the Job Rate (or midpoint) of the range each year also achieves better employee retention by maintaining a competitive market pay position.

 

(3)   Performance increases for employees at or  above the Job Rate ( midpoint) of their range: A performance increase averaging 4.5% would be granted to employees based on their annual rating. This increase would move longer-term employees through the range, although at a slower rate than those in the bottom half of the range. This continued movement is vital to prevent pay compression developing between more junior and senior employees in the same job by maintaining a reasonable difference in salaries between these employee groups.

 

(4)   Special Pay Adjustments for specific job classes: Nine job classes are recommended for special pay adjustments, because of market conditions, recruitment difficulties, or the need to establish or maintain appropriate internal pay relationships. These job classes were identified as significantly behind the labor market and are recommended for range changes to a higher grade. The increases proposed, if approved, would total $120,900 in fiscal year 2003-2004.  These would include a pay increase of up to 10% for employees in these jobs, to bring their pay rates up to an appropriate level in the new range. The majority of these proposed changes would occur in the Fire and Police departments. They are detailed in Section B, Attachment 1: Data Analysis Supporting Range Changes and Special Pay Adjustments.

 

Importance of Salary Increases

 

To accomplish the Town goal of recruiting and retaining high-quality employees and being recognized as an employer of choice, it is important that the Town’s wages be competitive and that employees at all levels of the organization who perform well receive a reasonable increase in their pay. The Council’s action of providing a 3.78% increase for employees in December 2002 helped to maintain the pay position of the organization.  Overall turnover has continued to drop and is currently below 6%. A consistent and steady approach with moderate change each year achieves several important goals:

 

 

 

 

We look forward to presenting our report to the Council and will be pleased to provide additional information as desired.

 

The Attachments are divided into five main sections with contents as shown below:

 

                        Section A  

1.            Report and Recommendations on Employee Compensation (p. 5).

2.            Town Pay Survey 2003-04 (p. 9).

 

                        Section B

1.              Data Analysis of Survey Responses Supporting Grade Changes and Recommendations for Special Pay Adjustments (p. 20).

         a.  Data Analysis of Survey Responses and Recommendations for Special Pay Adjustments

         b. Special Pay Adjustments

2.              Comparison of Pay Practices of Survey Respondents (p. 34).

3.              Explanatory Comments on Pay Adjustments Provided By Local Governments and State Agencies in Fiscal Year 2002-2003 (p. 35).

 

      Section C

1.      Explanation of Survey Format (p. 38).

2.      Template- Survey (p.40).

3.      Template- Job Capsules (p. 41).

4.      Template- Pay Questionnaire (p. 43).

     


 

            Section D

1.      Definitions of Key Compensation Terms (p. 44).

2.      Article on Competitive Pay Policy (p. 45).

3.      History of Town Pay Plan (p. 50).

4.      Example of Cumulative Effects of Increases Over Time (p. 52).

5.      Text of Council Resolution on Maintaining Pay at the 75th Percentile (p. 53).

 

            Section E

1.      Proposed Class List (p. 54).

2.      Proposed Grade and Title Changes (p. 56).

3.      Proposed 2003-2004 Salary Schedule (p. 58).