HomeMy WebLinkAboutItem 01 Classification and Compensation Study
Meeting Date:
Meeting Type:
Department:
Staff Contact:
Staff Phone No:
Estimated Time:
February 19,2008
Work Session
Human Resources [/0.' r
Bill Spiry
X3787
45 Minutes
AGENDA ITEM SUMMARY
SPRINGFIELD
CITY COUNCIL
ITEM TITLE:
CLASSIFICATION & COMPENSATION STUDY
ACTION
REQUESTED:
Staff is requesting Council's approval to proceed with this study at this time for all
non Public Safety employees of the City.
ISSUE
STATEMENT:
Council has authorized funding for consultant services in the 2008 fiscal year to
conduct a compensation & classification study for the City. During the budget
process Council requested that additional information be presented prior to
commencement of the study to ensure that the objectives and focus of this project
will align with City strategic objectives.
This presentation is intended to identify the objectives of the study, to describe the
systems and issues to be addressed through the study, and to describe what the
. study will entail.
ATTACHMENTS: Attachment 1: Council Briefing Memorandum
DISCUSSION/
FINANCIAL
IMP ACT:
The goals of this study are to update and redesign the position classification system,
to redesign the compensation plan to most effectively support the strategic
objectives of the City, and to establish salary ranges that are appropriately
competitive with our comparable and relevant labor markets.
The City has budgeted $100,000 in this fiscal year to cover the projected cost of
contracting with a professional consultant to conduct the phases of the study.
The last evaluation of the City's classification and compensation system was
conducted over 25 years ago. This has resulted in a system that is inflexible,
unresponsive to rapidly changing business need, and increasingly difficult and costly
to administer.
The last comprehensive review of salaries for non-union positions took place in
1995. Review of pay rates for unionized positions has been limited to collective
bargaining and reactive job specific adjustments.
The City has attempted to maintain total compensation rates (base pay plus the
value of city paid fringe benefits) that are approximately equivalent to the average of
comparable governmental agencies in the region.
An adequate position classification system and competitive salary ranges are critical
to attracting and retaining qualified employees. Attracting and retaining qualified
employees is essential to providing quality services to the citizens of Springfield in
the most cost effective manner.
Depending upon the negotiated implementation approach, the possible cost of
implementation beginning in FY 2010 could range from 2% to 4% of annual salary in
addition to COLA based adjustments that may be necessary at the time of
implementation.
MEMORANDUM
City of Springfield
Council
Briefing
Memorandum
To:
From:
Date:
Subject:
Mayor & City Council VV.. . .
Bill Spiry, HR Director
February 19, 2008
Classification & Compensation Study
ISSUE STATEMENT:
Council has authorized funding for consultant services in the 2008 fiscal year to conduct a
compensation & classification study for the City. During the budget process Council
requested that additional information be presented prior to commencement of the study to
ensure that the objectives and focus of this project will align with City strategic objectives.
Staff is requesting Council's approval to proceed with this study at this time for all non
Public Safety employees of the City.
This presentation is intended to identify the objectives of the study, to describe the
systems and issues to be addressed through the study, and to describe what the study will
entail.
The City employs approximately 240 non public safety employees in approximately 115
classifications. In FY 07- 08 budgeted payroll (including wages and fringe benefits) for this
group were approximately $18,720,000 (General Fund approximately $6,713,000.;
approximately $2,797,000 Street fund; other funds approximately $9,210,000)
The last evaluation of the City's classification and compensation system was conducted
over 25 years ago. This has resulted in a system that is inflexible, unresponsive to rapidly
changing business need, and increasingly difficult and costly to administer.
The last comprehensive review of salaries for non-union positions took place in 1995.
Review of pay rates for unionized positions has been limited to collective bargaining and
reactive job specific adjustments.:.
The City has attempted to maintain total compensation rates (base pay plus the value of
city paid fringe benefits) that are approximately equivalent to the average of comparable
governmental agencies in the region.
DISCUSSION
The City of Springfield has been fortunate to attract and retain a dedicated and skilled
workforce. However, the market for applicants in many fields is becoming tighter and
tighter, with fewer qualified candidates entering the workforce relative to market demand.
The impact of a tighter labor market has been felt most dramatically in many key
professional and technical positions that are very difficult and costly to fill, in fields
including Engineering, Transportation Engineering, Accounting & Budget, Building and
Engineering Inspection, Environmental Services, Planning, Human Resources, and Library
Services.
Attachment 1, Pg. 1 of 8
It is anticipated that the labor market for many positions in city government will continue to
constrict while at the same time, a large number of government employees will be retiring.
Due to this dynamic the City must determine how to most effectively position itself to
compete for and retain employees in many critical positions throughout the organization.
Evaluation of the organizations classification system and compensation plan is an
essential to this outcome.
Demographic information compiled by the Federal General Accounting Office indicates
that we are on the cusp of a very significant change in the Federal, State and Local labor
force due to the aging "Baby Boomer" generation. Nationwide nearly 50% of all current
government workers will be eligible to retire within the next five years. Within the City of
Springfield 42% of our general service employees are currently eligible for full or early
retirement, and this percentage is growing each year. In addition, the remaining labor
force has become increasingly mobile, demonstrating greater willingness to move from job
to job for career advancement when such opportunities are not available with their current
employer.
It is clear from these dynamics that the City will soon be faced with an unprecedented
number of vacancies to fill in every City department due to retirements and the mobility of
today's workforce. It is also clear that other public and private sector employers facing the
same demographic challenges will be redoubling their efforts to fill their own recruitment
needs, including cherry-picking from the diminishing portion of our work force that are not
retirement eligible.
A well qualified and productive workforce is undoubtedly the single most important City
resource required to meet the ongoing and changing needs of the Springfield community.
Whether we are providing library services to a diverse community, inspecting new
construction, providing top notch emergency services, or helping Council achieve their
goals for Springfield's future through quality administration, none of it could be achieved
without capable employees who are engaged and committed to the service of this
community.
Developing and maintaining a qualified and committed workforce does not come easily
and requires effective systems to support its cultivation. The classification and
compensation systems are the most critical of these systems as they represent the
foundation upon which most other key HR programs and processes are anchored. The
integrity and effectiveness of these systems are integral to most critical HR programs
including recruitment, performance management, training and development, HR
information systems, workers compensation administration, and labor relations.
The City's current approaches to classification and compensation administration have
been in place for over two decades. While these processes did serve adequately for many
of those years, they have become inflexible, unresponsive to rapidly changing business
need, and increasingly difficult and costly to administer.
The goals of this study are to update and redesign the position classification system, to
redesign the compensation plan to most effectively support the strategic objectives of the
Attachment 1, Pg. 2 of 8
City, and to establish salary ranges that are appropriately competitive with our comparable
and relevant labor markets.
Classification system:
The classification system represents the fundamental identity of the workforce and what
they do through descriptions of job functions, essential qualifications, and performance
expectations. The system also provides the methodology used to establish the
relationships between different jobs in the organization and to determine their comparative
value to one ano'ther.
The City's classification system has become increasingly ineffective over time for a
number of reasons. Many of the City's Job classification descriptions have not been
updated in a number of years, and as a result often inadequately describe the jobs. The
total number of City classifications for general services has grown disproportionately to the
number of employees and work types in the City, and as a result it has become very
difficult to differentiate between many classifications when attempting to determine their
relative value in the system. Excluding Public Safety job families, the City currently
employs approximately 240 employees in approximately 115 classifications, a ratio of
approximately two employees per classification. As classifications have grown in number,
and the differences between job descriptions have become increasingly blurred, a
"leapfrogging" effect has resulted. This is what occurs when numerous closely ranked
classifications cycle through a series of reclassifications over time based on internal
comparisons. This "leap frogging" has the inevitable effect of steadily inflating and
compressing the assigned pay grades upward over time, leaving many lower rated
classifications in the system virtually unused. The effects of such a compression of job
classifications for an organization of the city's size include system inflexibility, deterioration
of the relationship between job identity and organization objectives, artificial concentration
of employees in the highest pay ranges of the system, and the loss of organizational and
employee understanding of how the classification system works.
An analysis and redesign of the classification system should result in a system with:
. Fewer and more broadly defined classifications;
. Clearer functional differentiations between job classifications;
. Classification descriptions reflecting contemporary standards for competencies,
technology and minimum qualifications;
. Higher quality and more accurate classification descriptions for improved
recruitment and selection, performance management, and legal defensibility;
. Easier administration for greater efficiency, consistency, understandability, and cost
containment.
COMPENSATION PLAN:
It is well established that organizational success is closely linked to how effectively an
organization uses its compensation plan as a strategic tool to attract, retain, motivate, and
reward employees. The compensation plan provides both the pay structure for the jobs
within the organization as well as the methodology for how employees are managed within
Attachment 1, Pg. 3 of 8
that pay structure. It provides the mechanics of how employees are compensated,
including hire and promotional pay placement, movements between or within pay ranges
based on specified criteria and rules, and incentives for performance. A well designed
system also includes mechanisms to more effectively maintain compensation plan integrity
and competitiveness over time.
An effective compensation plan must be designed and maintained to support the strategic
objectives of the organization. This requires a periodic evaluation of the compensation
system, including its design and the mechanics of how it is used by the organization.
Typically a system evaluation would be advisable as frequently as every seven to ten
years. Assessment of the relevant labor market through compensation surveys of
benchmark and targeted classifications is advisable on a more frequent cycle, typically at
least every five years, due to changing labor markets and economic influences.
The last compensation study by the City was conducted for non union classifications in
1995, and was limited to a review of pay rates within the current compensation plan
without an assessment of the design and function of the plan itself. The 1995 study
involved an update of approximately 45 non union classifications, and a pay survey of 12
public and 14 private sector employers to update the existing compensation plan. This
study did not include an assessment of compensation or classification specifications for
the approximately 100 union classifications at the time. Through collective bargaining
and/or reclassification requests, many of these union classifications have been surveyed
and updated as well since that time. However, the design and function of the
compensation plan and classification system has not been substantially evaluated for over
25 years.
Redesign ofthe City's compensation plan, in tandem with a purposeful evaluation of
comparabie compensation in the City's relevant private and public sector labor markets will
help the City:
. More effectively attract and retain high quality employees in an increasingly
competitive labor market;
. More effectively respond to changes in specific job markets;
. More effectively motivate and reward quality employee performance;
. Maintain a clear and defensible compensation system related to bona fide City
objectives;
Phases of Project
The phases of the project are as follows:
Phase One - Strategic Planning and Analysis
This phase is singularly the most important to the overall success of this project as it is
where the City will establish the purpose and goals for the compensation plan. The
consultant will work with us to analyze the City's current classification and compensation
systems to determine strengths and weaknesses identify why the systems are not meeting
organizational objectives, and to develop strategies to meet those objectives. Through this
process the City will identify the prioritized outcomes to be achieved through this project,
Attachment 1, Pg. 4 of 8
and we will decide what compensation system design and job evaluatioh methodology will
most effectively meet these objectives. The consultant will also help the City develop a
recommended implementation plan during this phase. In this phase we will also develop
communication strategies to inform and educate stakeholders regarding the classification
and compensation systems during the project.
Phase Two - Job Analysis and Job Evaluation
The second phase of the project will involve job analysis. This involves the gathering and
analysis of job data for all of the positions considered in the study, the development of a
model classification structure, and the preparation of new classification descriptions
consistent with current functions, legal requirements and design objectives.
This phase will also include the job evaluation of the newly established job classifications.
Job evaluation is the methodology of determining the internal relationship of job
classifications relative to other job classes either within a specific occupational group or
across the organization. It is how the City will determine the relative value of each job class
within the organization, to ensure internal compensation equity and relative organizational
relationships. There are a number of methodologies to job evaluation, each involving
different rules, criteria, and targeted outcomes. Ultimately the methodology that will be
selected needs to be appropriate to the objectives and the classification design established
by the City in Phase One of the project. This job evaluation methodology will be a critical
component to the long term administration and maintenance of the City's classification
system once the project is complete. It will be used to evaluate new and modified jobs as
they are introduced to meet changing organizational needs, and determine placement of
those jobs within the established compensation structure.
Phase Three - Compensation Study
The third phase of the project is the compensation study and plan design. In the first
phases of the project the City will have established the strategic objectives to be achieved
through our compensation system, and will have determined what type of
compensation/pay structure and design will be best suited to meet those objectives. In this
third phase the consultant will conduct pay surveys of targeted private and public sector
employers to be used in determining the value of established City classifications. Thiswill
involve selection of the appropriate labor markets and employers to be surveyed and the
identification of benchmark classifications to be surveyed. The consultant will collect,
compile, and analyze the data, and construct recommended compensation/pay structures.
"Pay ranges" are assigned to each of the newly established job classifications within these
recommended compensation/pay structures during this phase.
At the end of Phase Three the following will be completed:
· Classification specifications Gob descriptions) for all jobs in this study
· Job analysis system for determining classification of new and modified jobs
· Job evaluation system for determining relative value of new and modified job
classifications
Attachment 1, Pg. 5 of 8
. Pay structures with pay ranges assigned to each classification (may be referred to
as "pay plan")
. Rules and procedures for pay plan administration.
. Plan for periodic update of pay structures to maintain relevant labor market
comparability.
Phase Four - Reporting and Implementation
The fourth and final phase of this project will be report and implementation. In this phase
the consultant will prepare a report for the City describing the study methodology used,
major findings of the study, and recommendations. The consultant will present
implementation costs of implementation strategies based upon the plan discussed in
phase one and the recommended compensation structure established in Phase Three.
This report, including recommended implementation options and cost implications, will be
presented to City Council for consideration and approval before the City proceeds into
negotiations of implementation with the impacted unions.
Specifically, implementation is the process of placing incumbent employees into the new
pay plans (Le. into which specific pay rate of an assigned pay range an employee is
placed, and how the employee will progress through that pay range). Typically when
making a substantive change to a pay system, a phase in placement approached is used
to control the cost of implementation. Variables applied might include actual step
placement, lagged COLA's, red circles or reductions, etc to permit phasing in both for
those that are below and those that are ahead of the new pay rates for assigned job
classes.
Based upon City Council approval and bargaining authority, the City will negotiate plan
implementation with the impacted unions.
SCOPE AND PROJECTED EXPENSE:
This project will have two categories of expense to the City, the cost of conducting the
study itself and finally the cost associated with implementation of recommendations.
Classification & Compensation Study - The City has budgeted $100,000 in this fiscal year
to cover the projected cost of contracting with a professional consultant to conduct the
phases of the study discussed above.
Implementation - The cost of implementation of such a study includes the cost of
transitioning employees from existing classifications and compensation plans into the new
classification structure and adjusted compensation plan. While it is not possible to project
the specific market adjustments this study will indicate for the City of Springfield, it is
feasible to suggest a potential range of implementation costs based on the experiences of
other organizations of similar size and circumstance. Depending upon the negotiated
implementation approach, the possible cost of implementation could range from 2% to 4%
of annual salary in addition to COLA based adjustments that may be necessary at the time
of implementation. This could of course be higher or lower. The following is a summary of
approximate costs by fund based on this suggested range estimate.
Attachment 1, Pg. 6 of 8
Estimated Total General fund Street fund Other funds
implementation
20/0 $322K $116K $47K $158K
40/0 $644K $233K $95K $316K
Since implementation would occur beginning in July of 2009, in conjunction with collective
bargaining agreement renewals for SEIU/OPEU and AFSCME, implementation expense
would not begin to be incurred until FY 2010. Typically these implem~ntation costs are
spread over more than one fiscal year through phased implementation in multi year labor
agreements.
Options
Option 1 - Proceed with the classification and compensation study as
recommended and budgeted
The classification and compensation systems would be redesigned to more
effectively support City objectives. Allows the City Council to establish a pay policy
based on the most current and relevant market information. Problems with the
current classification and compensation systems would be corrected. Consulting
services $100K.
Option 2 - Proceed with the classification study only, without evaluation of
Compensation plan
A recommended classification system could be designed, however could not be
implemented without conducting the compensation plan project component.
Decisions regarding salaries would continue to be determined primarily through
labor negotiations. Problems with the current classification and compensation
system would not be corrected. Consultant services would be required.
Option 3 - Conduct project to update job classification descriptions and
market pay survey, with no evaluation or redesign of classification or
compensation systems
Selected classification descriptions would be updated and Market comparability of
selected classifications would be improved based on current market information.
Problems with the current classification and compensation system would not be
corrected. Consultant services would be required.
Option 4 - Conduct market pay survey with no evaluation or redesign of
classification or compensation systems.
Market comparability of selected classifications would be improved based on
current market information. Job descriptions would not be updated. Problems with
the current classification and compensation system would not be corrected.
Consultant services would be required.
Attachment 1, Pg. 7 of 8
Option 5 - Do nothing.
Decisions regarding salaries would continue to be determined primarily through
labor negotiations. Problems with the current classification and compensation
systems would not be corrected. No consultant fees.
Attachment 1, Pg. 8 of 8