HomeMy WebLinkAbout2006 09 07 Regular 313 Salary Plan for FY 07 Budget
City of Winter Springs
Special Meeting - September 7,2006
Regular_Add _ On _ 313 _Compensation_Alternatives _for ]Y07
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COMMISSION AGENDA
ADD-ON
ITEM 313
Regular
September 7. 2006
Special Meeting
REQUEST: City Manager requesting the City Commission to approve a Salary Plan for the FY
07 Budget.
PURPOSE: This agenda item is needed for the Commission to finalize salary for FY 07.
CONSIDERATIONS:
In the City Manager's Budget Message the City Manager requested the Commission to approve a salary
plan for FY 07 which included the following:
General Other
Fund Funds Total
1. Cody Range Adjustment 97,000 23,000 120,000
2. 4% Merit Increase 230,000 62,000 292,000
3. 1 % Internal Equity 25.000 5.000 30.000
352,000 90,000 442,000
The Commission directed the City Manager to further review the issue of compression and to bring the
issue back to the Commission for further consideration.
Salary Compression
Even though efforts have been made to convince the Commission that compression is a significant
problem in the City's pay plan, an objective and factual review of the city's pay plan demonstrates that
compression is not a factor of concern in the current pay plan as follows:
1. Staff analysis utilizing scatter grams and penetration analysis failed to demonstrate a factual
presence of compression at levels of concern.
2. A review of the staffs data and current plan by Dr. Wendell C. Lawther, Associate Professor of
Public Administration at Central Florida University, who specializes in Human Resources, and
who has performed extensive research on salary compression finds no significant degree of
compression in the City's pay plan.
3. At the request of Commissioner Gilmore, Jack Preach, Director of Human Resources at Siemens
Westinghouse reviewed staffs analysis and the pay plan and concluded that salary compression
was not problematic in the City's pay plan.
4. Nick Pellegrino of Cody and Associates was asked to review the plan again and concluded that
salary compression was not a problematic factor in the City's pay plan, and that the use of
internal equity adjustments in future plan implementation would counteract any compression
building up in the plan.
Proposal
Based upon the recent completion of contract negotiations with the Seminole County Fire Union, which
is the largest employer of fire personnel in Seminole County, Cody is recommending that the entry
grade fire fighter range be increased 5% from range 26 to range 27. This has been incorporated into the
salary plan.
Updated financial information demonstrates that we have approximately $220,000 in additional monies
to work with in the General Fund. I have had extensive communication with the senior management
team regarding the best manner in which to utilize the additional funds.
Based upon their input we have reached a consensus for a two year plan which I am fully prepared to
recommend as follows:
FY07
a) 2% Across the Board Increase in Current Salaries October 1, 2006
b) Placement of all Employees on new Cody Ranges October 1, 2006
c) 1% Internal Equity Adjustment October 1, 2006
d) 4% Merit Anniversary Date
FY08
a) 5% Increase in all Ranges (not pay) October 1, 2007
b) 1 % Internal Equity Adjustment October 1, 2008
c) 4% Merit Anniversary Date
FY09
Re-evaluation
FUNDING: FY 07
a) 2% Across the Board October 1, 2006
b) 4% Merit Anniversary Date
c) Cody Range Adjustment October 1,2006
d) 1% Internal Equity Adjustment October 1, 2006
General
Fund
280,000
240,000
85,000
40.000
645,000
Other
Funds
Total
64,000
60,000
65,000
10.000
199,000
344,000
300,000
150,000
50.000
844,000
RECOMMENDATION: It is recommended that the City Commission adopt the Pay Plan Proposal as
provided herein for the FY 07 Budget.
ATTACHMENTS:
a) Cody and Associates Letter
b) UCF Consultant Letter
c) Kevin Smith Report
COMMISSION ACTION:
ATTACHMENT "A"
Cody and Associates, Inc.
MANAGEMENT CONSULTANTS
305 Jack Drive, Cocoa Beach, Florida 32931
(321) 783-3720; FAX (321) 783-4353
E-mail: CodyAssociates@aol.com
Mr. Ronald W. McLemore, City Manager
City of Winter Springs
1126 East S.R. 434
Winter Springs, FL 32708
September 5, 2006
Dear Mr. McLemore:
In regard to the possibility of salary compression within the City, we analyzed the
appropriate salary information and found no major compression issues.
Any isolated compression issues there are can be alleviated by internal equity
adjustments (adjusting individuals in their appropriate pay range by number of
years in grade).
If you have any questions please do not hesitate to call.
Sincerely,
N.E. Pellegrino, Principal Partner
ATTACHMENT "B"
University of
Central
Florida
Department of Public Administration
August 28, 2006
Ronald McLemore
City Manager
City of Winter Springs
Winter Springs, Florida 32708
Dear Ron,
Thank you for the opportunity to assist the City of Winter Springs in its assessment of
possible salary compression among its employees. As a resident of the City for the past
eight years, I. welcome the-chance to. help my community.
My relevant credentials include more than 30 years of teaching graduate courses in
Human Resouree-Management-(HRM), the last 23 of which have been at the Public
Administration Department, University of Central Florida; tecluiical assistance provided
to Central Florida-IDeal-govemments on a variety of projeets.t~ughout this time period;
and research efforts that have resulted in several published articles in HRM, including
one article dealing-with salary compression.
The analysis below is based upon as assessment of the draft document entitled "City of
Winter Springs Pay COOlpr-essionAnalysis", dated Augustl~, 2006 and prepared by
Kevin Smith, City of Winter Springs General Services Director; a review of the 2006
Cody and Associates-SalarySurvey-for-theCity;andadditional information provided by
you and Kevin during a face to face meeting and follow-up email.
In summary, there--are-a--limitednumber'ofpossible-cases-o-f~lary compression in job
classes studied by the draft document. Qyerall City compensation policies for the past
four years, including-amma-l-raisesbasedon-meritpay-andinternal salary adjustments du~
to market changes, make it highly unlikely that widespread salary compression exists.
After a brief discussion-efsalary compression;. a review of City data and
recommendations follows. '
Definition. and .Causes--orSalary Compression
Salary compression exists when employees with more years of experience are making
about the same salary with fewer years experience-assuming-the same level of
College of Health and Public Affairs II
Orlando, FL 32816-1395 · 407-823-2604 . FAX: 407-823-5651
An Equal Opportunity and Affirmative Action Institution
productivity for all employees. For example, if a firefighter who has just graduated
the Fire Academy without any work experience is paid the same as an incumbent
firefighter with three years of experience, then compression may exist.
Salary compression is caused when the market rate for new hires in a given job class
rises faster than the annual raises given to incumbent employees. The market
rate is reflected by the minimum and maximum salary for the pay range or grade
assigned to each job class. If a city, for example, as the result of a survey of
surrounding local government salaries, raises its pay range minimums 10% every
two years for a job class, and existing employees receive 3% pay raise for each
of those two years, it may be that these employees' salaries will be compressed to
the salary of the next new hire in that job class.
Salary compression can be easily viewed when incumbent salaries are plotted
along a pay range for a given job class (see examples below). A pay range is
divided into quartiles measuring the annual salary of an employee as a percentage
of the pay range: the first quartile reflects those salaries that are within
0-25% of the pay range. For the City of Winter Springs, the first quartile should
be the focus of any salary compression concerns.
Factors that Cause Apparent Salary Compression
The existence of employees with differeing years of experience making the same
salary, however, may be due to reasons other than compression. These factors
include:
a. differences in productivity and resulting differences in annual raises;
b. differences in the amount of new hire experience and resulting starting salaries;
c. a comprehension policy that does not adjust salaries of incumbent employees
as a result of market rate increases; and
d. promotion from within policies.
a. It is possible that a more experiences employee may be less productive than
a less experienced employee. If a city awards different amounts of raises based
on merit pay or productivity, a poorly performed employee will achieve lower
raises and thus potentially fall further behind rising market rats than a more
productive employee. The employee's salary may appear to be compressed, but
it is not, as the similarities in salary with a new hire be due mroe to differences
in productivity.
b. If a new employee is hired by City A with three years work experience from
City B, for example, he may be hired at a rate that is above the City A minimum
salary for a given job class. In this situation, it is likely that the new hire may
receive the same salary as an incumbent employee who has worked only for
City A for the past three years. Salary compression does not exist because the
total years of experience (City A plus City B) are the same for both employees.
c. Salary compression can be caused-or made worse-if government compensation
policy does not allow for rising market rate adjustments-tp be given to incumbent
employees. As a result of a salary survey, pay range minimums and maximums .
may rise to reflect rising market rates. Under this condition, incumbent employees
will find their salary exists closer to the minimum of a pay range after these
market-rate adjustments. Unless these salaries are adjusted,
compression is likely to worsen.
d. The appearance of compression, especially within the second quartile of a pay
range, can be explained by the promotional policies and opportunities that exist
within that job class.If there is a strong promotion from within policy, similar
employee salaries with varying years of experience may be due to the number of
promotional opportunities and not to compression. Also, some employees may be
more productive than others, and thus are promoted faster than others with more
years of experience
Existing Winter Springs Compression Conditions
The draft document entitled "Pay-Compression Analysis--City1Winter Springs", dated
August 16, 2006, reports on:
* All Fire Department Positions
* All Police Department Positions
* Administrative Secretaries
Based upon my analysis of this document, a limited amount of salary compression
may exist for some city employees whose salary falls within the first quartile of the
pay range. In the following three tables, taken from the draft document referenced above,
each "dot" represents the salary and years of experience of a City employee.
Further investigation should be made for the following employees as reflected by the
tables:
One Firefighter whose salary is nearest to the minimum and has the same
salary as another with more experience.
One Firefighter Apparatus Operator whose salsary is lower than one with no
experience;
One Police Officer I - PEC position with one year experience whose salary
is similar to another new hire (no years experience);
Two Police Officer I - PEC positions with two years experience whose salaries
are similar to three positions with one year experience.
FIREFIGHTER
Firefighter (Pay Grade 25)
AmuaI Salary % of Range
The Police Corporal III job class appears to contain compression in the second
quartile. However, because of the City's strong promotion from within policy , it
is unlikely than any of these positions are compressed.
Past City policy regarding increases in pay range minimums indicates a lack
of likely salary compression. The 2004 Cody and Associates salary survey resulted
in no changes for the three job classes mentioned above. The existance of a
merit pay policy, in which all City employees do not receive the same percentage
raise, also supports a lack of salary compression.
Recommendations for Further Action
1. Further investigate the individual cases of the five positions identified above.
A review of hiring salaries should reflect whether anyone was hired above the pay
range minimum. Differences in merit raises and any equity raises may also lead
to the conclusion that there is no salary compression.
2. Continue the current City merit pay policy. Over the last four years, the
estimated annual merit increase of 3.5% to 4.5%, a percentage significantly below
the top possiblc raiscs of4-6%, reflects a well-working policy. If employees
receive differences in the percentage amount of raises---compared to cost of
living raises where everyone receives the same percentage raise - compression
should be less.
3. Continue current policy of providing equity raises to incumbent employees.
The city should be lauded for providing significant equity adjustments - increases
in pay based on time in service- in 2002. Even though no equity adjustments
were provided in 2004 as a result of the Cody Study that year, retaining an internal
equity pay policy reflects a City commitment to resolving any future instances of
salary compression should they occur.
4. Monitor the impact of the adoption of recommended pay grade increases.
The 2006 Cody and Associates salary survey recommends significany pay grade
increases for many positions in the Police and Fire Departments. If these
recommendations are adopted, then future new hires may cause salary
compression for a linked number of incumbent employees.
Please do not hesitate to contact me ifl can be of any further assistance.
Sincerely,
Wendell C. Lawther
Associate Professor
City of Winter Springs
Pay Compression Analysis
August 16, 2006
Prepared by: Kevin Smith
General Services Director
Attachment "C"
Pay Compression Analysis
What is Compression?
Pay differentials too small to be considered equitable. The term may apply to
differences between:
The pay of experienced and newly hired incumbents of the same job.
The pay supervisors and subordinates.
Pay range midpoints in successive job grades.
Source: The Society for Human Resource Management (SHRM)
Pay Compression Analysis
What causes Compression?
In one case, compression occurs as a result of employers being forced to
increase entry level salaries to attract qualified new employees.
Pay Compression Analysis
What causes Compression (cont.)?
This can lead to situations were the pay rates of new
employees are similar to that of more experienced employees.
In other words, the pay employees in this job class is "compressed,"
(normally) at or near the entry pay level of that particular job.
Pay Compression Analysis
Does Compression exist at the City of Winter Springs?
This question may be best answered graphically. In a
graphical representation, Compression would appear as follows:
Pay Compression Analysis
Hypothetical Pay Compression Example:
Five employees in same job classification.
One hired each year at minimum of grade.
Each employee received 3% annual merit.
Ranges adjusted 10% every other year. Those under minimum were
adjusted up to minimum.
Pay Compression Analysis
Does Compression exist at the City of Winter Springs?
The following job classifications were analyzed:
All Fire Department Positions
All Police Department Positions
Administrative Secretaries
Pay Compression Analysis
Fire Battalion Chief
Pay Compression Analysis
Fire EMS Division Chief, Training Division Chief, Fire Marshal
Pay Compression Analysis
Fire Lieutenant
Pay Compression Analysis
Firefighter Apparatus Operator
Pay Compression Analysis
Firefighter
Pay Compression Analysis
Deputy Fire Chief
Pay Compression Analysis
Fire Chief
Pay Compression Analysis
Police Captain
Pay Compression Analysis
Police Lieutenant
Pay Compression Analysis
Police Officer I- PEC
Pay Compression Analysis
Police Officer II - Lance Corporal
Pay Compression Analysis
Police Officer III-Corporal
Pay Compression Analysis
Police Officer I, II, III (combined)
Pay Compression Analysis
Police Communication Operator II
Pay Compression Analysis
Police Chief
Pay Compression Analysis
Administrative Secretary
Date: September 7, 2006
The attached documents were referenced by the
City Commission during the September 7, 2006
City Commission Special Meeting during
(ADD-ON) Regular Agenda Item "313".
CITY OF WINTER SPRINGS, FLORIDA
1126 East State Road 434
Winter Springs, Florida 32708
Telephone: 407-327-5957-Facsimile: 407-327-6686
Ronald W. McLemore
City Manager
MEMORANDUM
TO:
Mayor and Commission
Ronald W. McLemore, City Manager
FROM:
DATE:
September 7,2006
SUBJ:
Pension Workshop Agenda Item
In review of this item you may want to consider the wisdom of moving the proposed
workshop date from September 27,2006 to a later date in October, or even November for the
following reason.
1. The Commission and staff are going to be intensely involved with budget issues until
September 25, 2006. This will leave virtually no time for the city staff to prepare for
the workshop.
2. The Commission and the Pension Board is going to be very involved with other
pension issues that will consume September, and quite possibly a large part of
October, including the selection of new investment managers and the update of the
plan document. It is likely that one or both of these issues will require workshops in
September and October in and of themselves.
3. Staff is going to be working on the joint training model with Seminole County and
other Seminole Cities.
4. You may want to consider the merits of these discussions being held with the new
Commission. Although, the new Commission will not be seated until December, the
workshop could be scheduled in mid or late November.
/jp
U:\Docs\Word\Pension Plan\06 Pension Plan\Pension Workshop Date.doc
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