HomeMy WebLinkAbout1997-11-04; City Council; 14425; PERFORMANCE MANAGEMENT AND COMPENSATION SYSTEM FOR MANAGEMENT CLASSIFICATATIONS AND APPROPRIATION$ 9
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0 Is market driven
0 Is a unique system for managers, separate and distinct from the bargaining
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The Council expressed its interest in creating a process that was highly participative and
administering and/or impacted by the redesign of these two key management systems.
Meetings and communications regarding best practices and redesign concepts involved
the City Council Subcommittee, the Leadership Team, Department Heads, a focus group
representing a cross section of management employees, and all management employees.
The Human Resources staff and the consultant team have completed the comprehensive
review. and redesign of both the performance appraisal and compensation systems for
management employees. Staffs recommendations are reflected in the attached staff
report to the City Manager (Attachment 2).
The City Council has indicated that it is the responsibility of the City Manager to
administer this program. The City Council has thoroughly reviewed the key elements
that are being recommended by the City Manager in an effort to ensure that the approach
which will be taken is consistent with the City Council’s philosophy regarding
Carlsbad.
Key Concepts in DesiEn of New System:
Consistent with the direction of the City Council, staff has recommended a new system
which is comprised of two major components:
open to the input of the management employees who would be responsible for
performance appraisal and compensation of management employees in the City of
Performance Management - emphasizing an employee development
approach to performance appraisal through continuous coaching/feedback,
which is comprised of:
3 Alignment of individual contributions with organizational direction,
=. Development and demonstration of competencies in the job, and
=. Measurement of levels of accomplishment of goals
0 Compensation - Based on a market based approach to compensation,
comprised of:
a Market based salary structure
=. A Base Pay program which rewards the development and
3 An Incentive Pay program which rewards the measurable achievement
demonstration of competencies in the job, and
of specific goals
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It is recommended the City Council repeal the existing Management Compensation Plan
new program include the following:
and adopt the new Management Compensation and Benefits Plan. The elements ofthe
1. The addition of new Section 2: Performance Management and Compensation
Overview, which describes the key components of the new plan, including the
Management Salary Structure.
2. The revision of the Schedule of Benefits, now numbered Section 3, to include
a comprehensive listing of management benefits previously approved by the
City Council. There are no new benefits being added to this section. The
difference simply reflects the inclusion of the following management benefits
which were not previously listed in this document: Bereavement Leave,
Leave of Absence Without Pay, Pregnancy Disability Leave, Family and
Medical Leave of Absence (FLMA), Military Leave, Jury Duty, Health
Insurance for Retirees, Accidental Death & Dismemberment, and Drug &
Alcohol Policy.
Effective January 1, 1998, any increase in either base pay andor incentive pay will be
based on performance. The funding for the Base Pay Plan and the Incentive Pay Plan
will be reviewed and established annually by the City Council.
The resolution further provides that the City Council direct the City Manager to
administer the formal Performance Management and Compensation Program, consistent
with the program recommended in the attached staff report. The details of this program
will be described fully by the City Manager in an Administrative Order. This
Administrative Order may be modified periodically. All management employees will be
covered by this Performance Management and Compensation System. Management
employees are those employees in classifications listed in the new Management Salary
Structure (Attachment A of Exhibit 1).
Transition from Calendar Year to Fiscal Year Review Cycle:
In an effort to establish a clear connection between individual employee contributions
and the City’s business goals and results, it is recommended that the performance
appraisal and compensation cycle for management transition from calendar year to a
fiscal year. This transition will ensure that the goals of the City Council clearly cascade
down to the operating departments of the City and ultimately to the goals of individual
management employees, in conjunction with the City’s usual business cycle.
There are three distinct periods involved in this transition fiom the current calendar year
appraisal cycle to the new fiscal year cycle:
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0 Calendar Year 1997
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Fiscal Year 1998/99
Calendar Year 1997
It is recommended that the Council continue its existing policy on Management
Compensation throughout the remainder of Calendar Year 1997, ending
December 3 1, 1997.
There are currently two major components of management compensation under
with Council Policy No. 36, all increases granted to the bargaining units for
Calendar Year 1997 have already been passed through to respective management
employees. Management performance appraisals will be conducted in January
1998 in review of management employee performance for the prior twelve month
CY 1997 period.
It is recommended that the Council authorize the appropriation of funds to grant
merit increases for management employees for this current twelve (12) month
calendar year performance appraisal cycle consistent with existing policy.
Six Month Transition: January through June of 1998
During this abbreviated review period, performance appraisals and base pay
increases will be based on:
0 The development and demonstration of competencies in the job.
Additionally, this six month transition period will incorporate an extensive
training program to ensure that all management employees receive specific skills
training in all aspects of the new Performance Management and Compensation
System.
The City Council will consider the level of funding for base pay increases for this
six month period during its review of the FY 1998/99 Operating Budget.
Fiscal Year 1998/99: First Full Twelve Month Appraisal Cycle
During this first full twelve month appraisal cycle, performance appraisals, base
pay increases, and incentive pay will be based on:
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Six Month Transition - January through June of 1998
Council Policy No, 36: 1) the pass through, and 2) merit adjustments. Consistent
The development and demonstration of competencies in the job, and
Measurement of levels of accomplishment of goals.
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During its review of the FY 1998/99 Operating Budget, the City Council will
consider the level of funding for both base pay increases and incentive pay.
A timeline for implementation is include for the Council's review and infomnation
(Attachment 3).
FISCAL IMPACT:
It is recommended that Council appropriate funds from Contingency in order to grant
merit increases for management employees for the calendar year 1997 performance
appraisal cycle consistent with existing policy. The potential net cost of merit increases
for all management employees for CY 1997, based on performance, is approximately
$244,000.
The funding of the new Performance Management and Compensation System is at the
sole discretion of the City Council and will be reviewed on an annual basis in conjunction
with the review and adoption of the Operating Budget and Capital Improvement Program.
ATTACHMENTS:
1. Resolution No. 9 ?-67b , with its Exhibit 1 : Management Compensation and
Benefits Plan (including its Attachment A, the Management Salary Structure)
2. Staff Report to City Manager
3. Implementation Timeline
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ATTACHMENT 1 0 0
RESOLUTION NO. 97-676
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA REPEALING THE MANAGEMENT
COMPENSATION PLAN AND ADOPTING A NEW
MANAGEMENT COMPENSATION AND BENEFITS PLAN
(INCLUDING A NEW MANAGEMENT SALARY STRUCTURE)
EFFECTIVE JANUARY 1,1998; REPEALING COUNCIL POLICY
NO. 36; AUTHORIZING THE CITY MANAGER TO
ADMINISTER THAT FORMAL PERFORMANCE
MANAGEMENT AND COMPENSATION PLAN FOR
MANAGEMENT EMPLOYEES; AND MAKING AN
APPROPRIATION THEREFOR
WHEREAS, the City Council has concluded that there needs to be a connection
between the individual management employee’s role and the City’s business goals and
results; and
WHEREAS, the City Council has further concluded that there should be a clear
and visible link between management employee performance and rewards; and
WHEREAS, the City Council has directed staff to design and develop a
performance management system for management employees which accomplishes the
following key objectives:
0 Rewards high performance
0 Links pay to performance
0 Is market driven
0 Is a unique system for managers, separate and distinct from the bargaining
units
Gives the City Council control over bottom line costs and flexibility to adjust
to different economic situations
Makes good business sense; and 0
WHEREAS, the City Council has thoroughly reviewed the key elements that are
being recommended to the City Manager; and
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WHEREAS, the City Council has determined that these elements are consistent
with the Council’s philosophy regarding performance appraisal and compensation of
management employees in the City of Carlsbad; and
WHEREAS, the City Council wishes to authorize the City Manager to administer
a Performance Management and Compensation Plan for employees in management
classifications;
NOW THEREFORE BE IT RESOLVED by the City Council of the City of
Carlsbad as follows:
1. That Council Policy No. 36 is hereby repealed, effective December 3 1, 1997.
2. That the current Management Compensation Plan (being Exhibit A to
Resolution No. 93-28 dated February 2, 1993) is hereby repealed, and a new Management
Compensation and Benefits Plan, attached hereto as Exhibit 1, is hereby adopted effective
January 1, 1998, including the Management Salary Structure, Attachment A thereto.
3. That the City Council authorizes the City Manager to administer that
performance management and compensation plan for management employees.
4. That the full scope of this program will be outlined by the City Manager in an
Administrative Order and that this Administrative Order may be periodically modified.
5. That the City Council hereby appropriates $244,000 from the contingency
account of the general fund and other fund balances as appropriate to provide merit
increases for management employees for the CY 1997 appraisal period, in accordance
with Section I11 of the current Management Compensation Plan, notwithstanding its
repeal. In no event shall the I998 police, fire or general City bargaining unit employees’
across-the-board increases be passed through to management employees.
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6. That the City Council hereby approves the transition plan and resolves to
consider the level of funding for base pay increases for a six month period from January
through June of 1998 during its review of the FY 1998/99 Operating Budget.
7. That the City Council hereby further resolves to consider the level of funding
for both base pay and incentive pay for fiscal year 1998/99 during its review of the FY
1998/99 Operating Budget, consistent with the transition plan.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad
City Council, held on this 18th
wit:
day of November , 1997, by the following votes, to
AYES:
NOES: Council Member Lewis
ABSENT: None
Council Members Finnila, Nygaard, Kulchin and Hall
ATTEST;
L- Z, City Clerk ALETHA L. RAUTEN
(SEAL)
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1 e 0 EXHIBIT 1
MANAGEMENT COMPENSATION AND BENEFITS PLAN
SECTION 1: INTRODUCTION
This attachment constitutes the Management Compensation and Benefits Plan, which contains
three parts: 1) an introduction, 2) a brief overview of how management performance will be
benefits.
A. Definitions
evaluated and how compensation levels will be determined, and 3) a schedule of management
1. Management Employees - Management employees are defined as those employees
whose classifications are listed on the Management Salary Schedule.
2. City Council Appointed Employees - The City Manager and City Attorney are hired
by and responsible directly to the City Council. The salaries for these positions shall
be set by the City Council. The City Manager and City Attorney will not be subject
to the provisions of the Performance Management and Compensation program as
outlined in Section 2 of this attachment. The schedule of management benefits (as
outlined in Section 3 of this attachment) will apply to these positions, except as
otherwise provided by the City Council.
SECTION 2: PERFORMANCE MANAGEMENT AND COMPENSATION SYSTEM
OVERVIEW
The City Council has delegated its authority to the City Manager to administer a Performance
Management and Compensation System for management employees under the following general
guidelines.
The system is comprised of two major components:
0 Performance Management - emphasizing an employee development approach to
performance appraisal, comprised of
a Alignment of individual contributions with organizational direction,
a Development and demonstration of competencies in the job, and
3 Measurement of levels of accomplishment of goals
0 Compensation - based on a market driven approach to compensation, comprised of:
3 Market based salary structure
3 Basepay
3 Incentive Pay
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PERFORMANCE MANAGEMENT
The Performance ManaPement Cycle
The Performance Management Cycle coincides with the fiscal year and includes three separate
phases: Performance Planning, Performance Update, and Performance Review.
Maior ComDonents of Performance Management
The two major components upon which a management employee’s performance is based are:
the accomplishment of goals.
Management Competencies -
All management employees are reviewed and evaluated based on how well they can
develop and demonstrate specific Competencies. Competenci& are the knowledge, skills,
abilities, and behaviors that are essential to the success of each management employee.
Goals -
Goals describe how the individual’s contribution links and aligns with their department’s
goals and objectives and ultimately with those of the City Council. Goals are set at the
beginning of the performance management cycle, and employees are evaluated at the end
of the cycle as to how well they accomplished their assigned tasks for the year.
the development and demonstration of specific competencies, and
Link to Compensation
An employee’s performance, as evaluated against the selected competencies, is rewarded by a
base pay adjustment. Base pay adjustments are ongoing and are added to the employee’s annual
salary. An employee’s performance, as evaluated against the achievement of annual goals, is
rewarded by an incentive award. Incentive payouts are one-time cash payments to an employee
which do not recur automatically fiom year to year. Both the base pay increases and the
incentive payments comprise the cash compensation available to management employees.
COMPENSATION
The Performance Management and Compensation System is based upon a market based
approach to compensation, comprised of:
0 A market based salary structure
A base pay program based on the development and demonstration of
competencies
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0 An incentive pay program based on the measurable achievement of specific
goals
Market Based Salarv Structure - Base Pav Program
The Management Salary Schedule, attached hereto as Attachment A, establishes a salary grade
for each management classification. The City Manager is delegated authoriiy to place new hires
at any salary within the range, as determined by the appointee’s knowledge, skills and abilities.
The area of the salary grade between the minimum and the bottom of the market range is
intended for inexperienced new hires.
The Human Resources Department will conduct an annual survey of a reasonable number of
comparable agencies in San Diego County. Job content, job classification and salary information
on each City of Carlsbad classification will be compared with appropriate classifications in the
comparator group. The City Council delegates to the City Manager the authority to assign job
classifications to a specific salary grade, based on both benchmark sal-ary information and
internal relationships within the organization. Changes to the “minimum” and “market range” of
each salary grade within this structure shall be approved by the City Council.
The City Council determines the budget amount to be spent on management base pay increases
for each fiscal year, and the base pay increase percentages will be determined after all of the
performance ratings have been determined. All base pay increases are prospective. Management
employees whose current salary is above the maximum of the market range for their assigned
salary grade shall continue to be paid at that base rate until their salary falls within the market
range, and until such time shall not be eligible for base pay increases.
INCENTIVE PAY PLAN
The Incentive Pay plan is provided in addition to the Base Pay plan.
All management employees are eligible for incentive pay, regardless of their position in the
salary range. All management employees’ salary above base pay is unfixed and uncertain until
completion of the evaluation and award process annually, in which the incentive portion, if any,
is determined for each management employee.
Employees earn the incentive based on their achievement of goals established during the
performance management process. For each goal, achievement is rated based on one of three
performance levels: Threshold, Target or Optimum.
Unlike base pay increases which are determined at the end of the performance management
cycle, the potential incentive percentages will be made public at the beginning of the
performance review cycle. Incentive awards are expressed as a percentage of base pay. The City
Council will determine the annual amount to be budgeted for management incentive pay, and an
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Incentive Pay matrix will be distributed to all management employees. This matrix will change
from year to year based on the City's economics, market data, and demographics. At the end of
the fiscal year and upon completion of the review process, incentive awards will be granted to
employees based on their level of goal accomplishment during the performance management
cycle. No management employee shall be awarded incentive compensation in an amount greater
than 10% of that employee's base salary.
The City Manager will periodically provide the City Council with progress reports on the
operation of the Performance Management and Compensation System.
SECTION 3: SCHEDULE OF BENEFITS
Life Insurance
All management employees shall receive City paid life insurance in an amount equal to two
times the basic yearly earnings. To determine benefits, the amount of insurance is rounded to the
next higher $1,000 multiple, unless the amount equals a $1,000 multiple. Supplemental Life, at
an amount equal to City paid life insurance, is available at the employke's cost. Dependent life is
also available at the employee's cost.
Former CMWD management employees shall receive Group Term Life Insurance, Accidental
Death and Dismemberment, and Dependent Life Insurance as contained in their Individual
Agreement.
Retirement
All management employees shall participate in the Public Employees' Retirement System. The
specific retirement formula applied will be determined based on whether the position is deemed
safety or miscellaneous. All positions not deemed eligible for safety retirement will be deemed
miscellaneous under the PERS system.
Retirement Contribution
All management employees shall have their portion of the retirement contribution to the Public
Employees' Retirement System paid by the City. The specific retirement formula applied will be
deemed eligible for safety retirement will be deemed miscellaneous under the PERS system.
Management Leave
Management employees, except Police Lieutenants, are exempt from overtime requirements
under the Fair Labor Standards Act. Management employees in the City are paid on a salary
basis versus an hourly basis. Pursmnt to FLSA regulation 29 CFR Section 541 Sa, the City can
make deductions from salary or leave accounts for partial day absences for personal reasons or
sickness because the City has a policy and practice of requiring its employees to be accountable
determined based on whether the position is deemed safety or miscellaneous, All positions not
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to the public that they have earned their salaries. A partial day absence is an absence of less than
and (a)(3), the City may make salary or leave reductions based upon full day absences.
Partial day or full day absences shall be first charged against the exempt employee's vacation,
sick, or executive leave account. In the event the exempt employee does not have sufficient time
against the employee's salary in the form of a negative balance.
the employee's regular work day. Pursuant to FLSA regulation 29 CFR Section 54 1.1 18 (a)(2)
in hisher leave account to cover the absence, the time for the partial day absence will be charged
0 Vacation
All management employees shall earn vacation on the following basis:
- Beginning with the first (1 st) working day through the completion of five
(5) full calendar years of continuous service - 80 hourdyear (3.08 hours
biweekly).
- Beginning the sixth (6th) year of employment through the completion of
ten (1 0) full calendar years of continuous service - 120 hours/year (4.62
hours biweekly).
- Beginning the eleventh (1 1 th) year of employment through the completion
of eleven (1 1) full calendar years of continuous service - 128 hourdyear
(4.92 hours biweekly).
- Beginning the twelfth (12th) year of employment through the completion
of twelve (1 2) full calendar years of continuous service - 136 hours/year
(5.23 hours biweekly).
- Beginning the thirteenth (1 3th) year of employment through the
hourslyear (5.54 hours biweekly).
Beginning the fourteenth (14th) year of employment through the
completion of thirteen (1 3) full calendar years of continuous service - 144
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completion of fifteen (1 5) full calendar years of continuous
service - 152 hours/year (5.84 hours biweekly).
- Beginning the sixteenth (1 6th) year of continuous employment, vacation
time shall be accrued, and remain at a rate of 160 hours for every full
calendar year of continuous employment thereafter (6.15 hours biweekly).
Management employees with comparable service in local government agencies
may be granted credit for such service for the purpose of computing vacation at
the discretion of the City Manager. All management employees shall be
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permitted to accumulate up to and including forty (40) days of vacation. The City
Manager shall be responsible for the granting of vacation to all management
personnel, except in the case of the City Attorney’s Office, where the City
Attorney shall be responsible for granting vacation.
Former CMWD management employees shall earn vacation as contained in their
IndividuaZ Agreement. This includes the carryover of unused vacation hours.
0 Executive Leave
All management personnel, except former CMWD management employees and
the position of Police Lieutenant, shall receive 56 hours per fiscal year for
executive leave. Persons employed in the position of Police Lieutenant are not
eligible to receive executive leave because they receive overtime at the rate of
time and one-half for actual hours worked. The 56 hours will be credited at the
beginning of each fiscal year to individual leave balances. This leave must be
used within the same fiscal year.
The City Manager is authorized to provide ten (1 0) additional hours of executive
leave per year to any management employee who is required to work extended
hours due to emergencies such as fires, storms, floods, or other emergencies.
0 Sick Leave
Twelve (1 2) days of sick leave are accrued per year. Accumulation is unlimited
(employees cannot receive payment for unused sick leave).
0 Bereavement Leave
An employee may use up to an equivalent of three work days of paid leave if
required to be absent from duty due to the death of a member of the employee’s
immediate family. Additional time off may be authorized by the Department
Head and charged to accrued vacation or treated as leave without pay.
The “immediate family’’ shall be defined as: Spouse, child, parent,
sibling, grandparents; the aforementioned either natural, step or in-law, or
any person over which the employee acts as legal guardian, or a verifiable
current member of the immediate household.
The employee may be required to submit proof of relative’s death before final
approval of leave with pay is granted.
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Leave of Absence
1. Leave of Absence Without Pay
A. General Policy
Any employee may be granted a leave of absence without
pay pursuant to the recommendation of hisher Department Head
and the approval of the City Manager.
A leave without pay may be granted for any of the following
reasons:
1. Illness or disability.
2. To take a course of study which will increase the
employee’s usefulness on return’to hisher position in the
City service.
For personal reasons acceptable to the City Manager and
Department Head.
3.
B. Authorization Procedure
Requests for leave of absence without pay shall be made upon
forms prescribed by the City Manager and shall state specifically
the reason for the request, the date when the leave is desired to
begin, the probable date of return, and the agreement to reimburse
the City for any benefit premiums paid by the City during the leave
of absence. The request shall normally be initiated by the
employee, but may be initiated by hisher Department Head, and,
upon written recommendation of the Department Head that it be
granted, modified or denied, shall be promptly transmitted to the
City Manager. A copy of any approved request for leave of
absence without pay shall be delivered promptly to the Directors of
Finance and Human Resources.
Length of Leave and Extension
A leave of absence without pay may be made for a period not to
exceed six months, unless otherwise approved by the City
Manager. The procedure for granting extensions shall be the same
as that in granting the original leave provided that the request for
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extension is made no later than fourteen (14) calendar days prior to
the expiration of the original leave.
D. Return From Leave
When an employee intends to return fiom an authorized leave of absence without pay either before or upon the expiration of such
leave, he/she shall contact hisher Department Head at least
fourteen (14) calendar days prior to the day he/she plans to return.
The Department Head shall promptly notify the City Manager of
the employee’s intention. The employee shall return at a rate of
pay not less than the rate at the time the leave of absence began.
Effect of Leave Without Pay
An employee shall utilize all hisher vacation, andor sick leave (if
applicable) prior to taking an authorized leave of absence without
Pay-
A prorata reduction of normal annual vacation and sick leave
accruals shall be applicable to an approved absence without pay.
Any absence without pay constitutes a break of continuous service
with the City. The granting of any leave without pay exceeding
two full scheduled pay periods shall cause the employee’s salary
anniversary date and calculation of full-time continuous service to
be extended by the number of calendar days for which such leave
has been granted less the first two full pay periods of such leave.
An employee’s accumulation of sick leave and vacation leave will
cease after the completion of two (2) full scheduled pay periods in
which the employee has not received compensation due to a leave
of absence without pay. Accrual will be reinstituted beginning the
first day of the first full pay period after the employee has returned
to work.
Leave Without Pay - Insurance Payments and Privileges
An employee on leave without pay may continue hisher City
insurance benefits by reimbursing the City for the costs of
insurance on a monthly basis during the period of the leave.
Failure to reimburse the City for such benefits during the term of a
leave of absence will result in the employee’s coverage terminating
on the first day following the month in which the last payment was
received.
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An employee on leave of absence without pay shall not have all of
the privileges granted to regular employees.
0 Pregnancv Disability Leave
An employee disabled by pregnancy shall be allowed to utilize a combination of
accrued sick leave and vacation time and leave without pay to take a leave for a
reasonable period of time, not to exceed four months. An employee shall utilize
all accrued leave prior to taking leave without pay. Reasonable period of time
means that period during which the employee is disabled on account of
pregnancy, childbirth, or related conditions.
An employee who plans to take a leave pursuant to this article shall give the City
reasonable notice of the date the leave shall commence and the estimated duration
of the leave.
Family and Medical Leave of Absence (FMLA)
An employee may be granted a FMLA of up to 12 weeks in a 12 month period for
one or more of the following reasons:
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for the birtldplacement of a child for adoption or foster care,
to care for an immediate family member with a serious health condition, or
to take medical leave when the employee is unable to work because of
a serious condition.
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FMLA may be paid or unpaid and may be granted concurrently and in
conjunction with other leave and benefit provisions. Specific details regarding the
provisions of this leave are available by contacting the Human Resources
Department.
0 Militarv Leave
MXt;u7/ leave shall be authorized in accordance with the provisions of State and
Federal law. The employee must furnish satisfactory proof to hisker Department
Head, as far in advance as possible, that he/she must report to military duty.
0 Jurv Dutv
When called to jury duty, an employee, having provided at least five working
days written notice, shall be entitled to hisher regular compensation. Employees
released early from jury duty shall report to their supervisor for assignment for the
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duration of the shift. Employees shall be entitled to keep mileage reimbursement
paid while on jury duty.
A Depment Head may, at hisher sole discretion, contact the court and request
an exemption and/or postponement of jury service on behalf of an employee.
Employees released early from jury duty shall report to their supervisor for
assignment for the duration of the work day. At the discretion of the supervisor,
an employee may be released from reporting back to work if an unreasonable
amount of the work day remains in light of travel time to the job site after release.
Health Insurance for Retirees
Employees who retire from the City, either service or disability, shall be eligible to continue to
participate in the City’s health insurance program. The cost of such health insurance for the
employee, and eligible dependents, shall be borne solely by the employee. The City shall not
charge the COBRA administrative cost to the retirees.
In order to qualify for this benefit, the retiree must have a minimum of five (5) years of City
service and be a minimum of fifty (50) years of age.
The retiree must make arrangements with the City to prepay hisher monthly premiums and must
keep such payments current to ensure continued coverage.
A retiree who does not choose continued coverage upon retirement, or drops coverage, is not
eligible to return to the City’s health insurance program.
Sick Leave Conversion
Any management employee who has accrued and maintains a minimum of one hundred (1 00)
hours of sick leave shall be permitted to convert up to twelve (1 2) days of sick leave and
uncompensated sick leave to vacation at a ratio of three (3) sick leave days per one (1) day of
vacation. The sick leave conversion option will be provided during the first week of each fiscal
year. Conversion can only be made in increments of full day vacation days. Employees will not
be allowed to convert sick leave to vacation if they are already above the allowed vacation
accrual maximum of 40 days, or if such conversion would put them over the vacation accrual
maximum.
Former CMWD management employees per their IndividuaZ Agreement, have the option to sell
back 100% of accumulated sick leave in excess of 250 hours at their current rate. The City, at its
discretion, may purchase any accumulated sick leave from any of these referenced management
employees at the current rate.
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Separafion ComDensatioa
All management employees involuntarily separated from the City service due to budget
cutbacks, layoffs, contracting out of service or for other reasons not due to misconduct which
actual salary at the time of separation.
Holidays
All management employees, except for the position of Police Lieutenant, shall be paid holidays
in accordance with the schedule of eleven (1 1) holidays and one (1) floating holiday, as
established by the City Council. Martin Luther King’s Birthday (MLK) will be commemorated
by management employees as a floating holiday. If/when local government employers are
required to commemorate MLK on a designated date, this floating holiday will convert to a
scheduled holiday.
Police Lieutenants shall receive holiday pay at the rate of time and one-half in lieu of receiving
holidays off. The Lieutenant in charge of the police investigations di;ision shall receive time
and one-half for all holidays actually worked.
The scheduled paid holidays that will be official City holidays shall be as follows:
would justify involuntary separation shall receive one month’s salary computed at the employee’s
New Year’s Day Columbus Day
Lincoln’s Birthday Veteran’s Day
Washington’s Birthday Thanksgiving Day
Memorial Day Thanksgiving Friday
Independence Day Christmas Day
Labor Day MLK (Floating Holiday)
Health Benefits
Management employees can elect health insurance coverage under ReliaStar, Kaiser Permanente,
or Sharp Health Plan. Health insurance contributions include the cost of medical, dental, and
vision coverage (where applicable). Contribution rates will be determined for each calendar year
and will be communicated to all management employees during the annual open enrollment
period.
Former CMWD management employees shall receive Medical, Dental and Vision, and Retiree
Medical as contained in their IndividuaZ Agreement.
Annual Physical Examination and/or Physical Fitness Testing
All management employees, excluding former CMWD management employees, shall be eligible
for reimbursement of up to the amount of four hundred fifty dollars ($450) during each fiscal
year to pay the cost of an employee’s annual physical examination andor physical fitness testing.
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The annual physical examination may be completed by a physician of the employee's choice.
Each employee claiming reimbursement shall be required to submit original receipts to the
Human Resources Department in lieu of submitting them to the insurance company for payment.
The annual physical examination offered to management employees provides physical fitness
testing and information regarding lifestyle changes that promote optimum health. Program
components include, but are not limited to: Computerized Heart Risk Profile, Complete Blood
Profile, Nutritional Assessment, Diet Program, Body Measurements, Lung Assessment,
Consultations, etc.
Low-Term Disabilitv Insurance nTD)
Long-term disability is available for all management personnel after 30 days of disability. The
LTD premium cost is paid by the City.
Former CMWD management employees shall receive LTD benefits as contained in their
Individual Agreement.
Accidental Death and Dismemberment
This is a voluntary program available to any employee who chooses to participate. Employees
may select among various levels of coverage which cover accidents and death. The City will pay
one-third (1/3) of the cost, the employee pays two-thirds (2/3) and 100% of dependent coverage.
Deferred ComDensation
The City shall provide deferred compensation plan(s) which may be utilized by any management
employee. The City reserves the right to accept or reject any particular plan and to impose
specific conditions upon the use of any plan.
Former CMWD management employees may voluntarily participate in the Deferred
Compensation Plan as contained in their Individual Agreement The City matches former
CMWD employee contributions up to a maximum of 7.5% of the employee's earnings.
Drw and Alcohol Policv
It is the policy of the City of Carlsbad to provide a work environment free from the effects of
drugs and alcohol consistent with the directives of the Drug Free Workplace Act. This policy is
applicable to all employees covered by the Management Compensation and Benefits Plan. A
copy of this policy is available in the Human Resources Department.
As a provision of this policy, the City provides a voluntary Employee Assistance Program (EAP)
to assist employees who seek help for substance abuse or other personal problems affecting work
or family life. This program is available to employees and their family members and offers 24-
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hour access to confidential professional EM assistance for emergency or urgent situations. The
toll free number is 800 999-7222. For more specific information, contact the Human Resources
Department.
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ATTACHMENT A 0 Management Salary Struct~@
(Base Pay)
JOB TITLE GRADE MINIMUM MARKET RANGE
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0 Management Salary Struct~@
(Base Pay)
JOB TITLE GRADE MINIMUM MARKET RANGE
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0 Management Salary Struca
(Base Pay)
JOB TITLE GRADE MINIMUM MARKET RANGE
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ATTACHMENT 2 e 0
October 10, 1997
TO: CITY MANAGER
FROM: Human Resources Director
Human Resources Manager
STAFF REPORT: PERFORMANCE MANAGEMENT AND COMPENSATION
The Human Resources staff has completed its work on the redesign of the performance
management and compensation system for management employees and is prepared to
provided clear direction to staff regarding its objectives in reviewing and redesigning
these major management systems. The City Council has indicated that it is the
responsibility of the City Manager to develop and administer this program; however, the
City Council has thoroughly reviewed the key concepts that are being presented herein to
insure that the approach taken is consistent with the Council’s philosophy regarding the
performance appraisal and compensation of management employees in the City of
Carlsbad.
Background
Over the course of the past several years, the City Council has expressed to staff its
interest in reviewing the performance appraisal and compensation systems for
management employees. In 1997, the City Council identified this project as one of its top
fifteen (1 5) priority projects for the year. Management employees also expressed interest
in revising both the performance appraisal and management compensation programs, As
a result, the City Council established a Council Subcommittee to review the issues and
develop a strategy as to how to proceed.
The Council Subcommittee consisted of Council Member Julie Nygaard and Council
Member Matt Hall. Following an initial study of the issues by the Council
Subcommittee, the Council concluded that there needed to be a comprehensive review of
both the performance appraisal system and the Compensation system for management
employees. The Council also concluded that there needed to be a clear link between
these two systems so that the compensation of management employees would be based
directly on employee performance. As a result, the City Council approved a contract
between the City and Watson Wyatt & Company, a consulting firm with specific
expertise in developing and implementing a performance-based compensation plan.
present recommendations to the City Council. As you are aware, the Council has
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Key Obiectives
The City Council expressed an interest in developing a performance management and
compensation system that:
Rewards high performance
Links pay to performance
Is market driven
Is a unique system for managers, separate and distinct fiom the bargaining
units
Gives the City Council control over bottom line costs and flexibility to adjust
to different economic situations
0 Makes good business sense
Process
The approach taken involves two phases: 1) the Design Phase, which extends from
February through October of 1997, and 2) the Training and Implementation Phase, which
will extend from November of 1997 through the end of Fiscal Year 1998/99.
The City Council expressed its interest in creating a process that was highly participative
and open to the input of the management employees who would be responsible for
administering and impacted by the redesign of these two key management systems. As a
result, meetings and communications involved the City Council Subcommittee, the
Leadership Team, Department Heads, a focus group, and all management employees.
A key element of this project was the involvement of the management focus group
comprised of twelve managers fiom a variety of levels of responsibility and functional
areas in the organization. The role of the focus group was to review best practices,
discuss alternative approaches, review the consultant recommendations, and assist in
informing management employees about the redesign process. Additionally, the Council
Subcommittee, Council Members, Leadership Team, and the Department Head group
have reviewed the redesign recommendations, and briefings have been held with the
management group.
As a result of the input received and the comprehensive review which has been
conducted, both the performance management and the compensation systems have been
completely redesigned.
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Design Overview
The design of the new system is comprised of two major components:
Performance Management - emphasizing an employee development
approach to performance appraisal, comprised of:
j Alignment of individual contributions with organizational direction,
s Development and demonstration of competencies in the job, and
3 Measurement of levels of accomplishment of goals
Compensation - based on a market driven approach to compensation,
comprised of:
3 Market based salary structure
a Base pay
a Incentive Pay
PEWORMANCE MANAGEMENT
The Performance Management Cycle
It is recommended that the Performance Management Cycle begin in conjunction with the
fiscal year. This will insure that the goals of the City Council cascade into the
organization through Operating Budget and Department Goals, and ultimately to
individual contributions of management employees.
The Performance Management program is based on the concept of continuous
coaching/feedback between the reviewer and the employee. In addition to the on-going
dialogue, each performance management cycle includes three inter-related and ongoing
phases during which the reviewer and the employee engage in a specific set of
interactions:
Performance Planning -
During this phase, reviewers and employees determine competencies that need to
be demonstrated during the review period, and establish specific goals for the
employee that link to and are aligned with the organizations direction as
determined by the City Council and Department goals.
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Performance Update -
This phase provides reviewers and employees with the opportunity for a midyear
66 checkpoint” for assessing an employee’s progress and the status of specific
goals.
Performance Review -
The evaluation of individual performance assesses to what degree an employees
has successfully developed and demonstrated competency in the job skills
required of the position. It also provides the opportunity to measure to what
degree specific goals have been achieved. This formal evaluation provides direct
input into the compensation process, and is the basis for determining both base
pay and incentive pay.
Performance Update
Development Planning
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Major Components of Performance ManaEement
The two major components upon which a management employee’s performance is based
are:
the development and demonstration of specific competencies, and
the accomplishment of goals.
Management Competencies -
All management employees are reviewed and evaluated based on how well they
can develop and demonstrate specific competencies. Competencies are the
knowledge, skills, abilities and behaviors that are essential to the success of each
management employee. Within the proposed system, reviewing managers can
select fiom a list of 16 separate competencies against which employee
performance might be evaluated, and employees are given one of three
Expectations or Exceeds Expectations.
Goals -
Goals describe how the individual’s contribution links and aligns with their
department’s goals and objectives and ultimately with those of the City Council.
Goals are set at the beginning of the performance management cycle, and
employees are evaluated at the end of the cycle as to how well they accomplished
their assigned tasks for the year. Within the proposed system, goal achievement is
rated at three separate levels of achievement: Threshold, Target or Optimum.
performance ratings for each competency: Needs Improvement, Meets
Link to Compensation
Management competencies and goals link directly to the compensation system for
management employees, as illustrated by the following chart:
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Cash Compensation 1 Competencies piizGGq v v
v v
- <=3 +<-> Incentive Pay -
p-q pzq
Cash Payment
An employee’s performance, as evaluated against the selected competencies, is rewarded
by a base pay adjustment. Base pay adjustments are ongoing and are added to the
employee’s annual salary. An employee’s performance, as evaluated against the
achievement of annual goals, is rewarded by an incentive award. Incentive payouts are
one-time cash payments to an employee which do not recur automatically from year to
year. Both the base pay increases and the incentive payments comprise the cash
compensation available to management employees.
COMPENSATION
Consistent with the direction of the City Council, staff has developed and is
recommending a market based approach to compensation, comprised of:
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A market based salary structure
A Base Pay program based on the development and demonstration of
competencies
An Incentive Pay program based on the measurable achievement of
specific goals
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Market Based Salarv Structure - Base Pav Program
In keeping with the City Council’s philosophy of surveying agencies of comparable size
in San Diego County, the consultant identified a group of 11 public entities in the San
Diego market to be used as the salary comparator group when surveying management
positions. The agencies currently recommended as comparators are:
City of Chula Vista
City of El Cajon
City of Encinitas
City of Escondido
Helix Water District
City of La Mesa
City of National City
City of Oceanside
City of Poway
City of Santee
City of Vista
NOTE: Comparator agencies may be modified periodically.
The consultant conducted an extensive review of each individual job classification and
compared job content, job classification and salary information on each City of Carlsbad
classification with appropriate classifications in the comparator group. Those
classifications that were considered benchmarks are those in which there was a 70% to
80% match between the competencies and duties required for jobs at the City of Carlsbad
and those for the comparator group.
The consultant was able to obtain relevant benchmark data on over 75% of the
management classifications. Using this information, a base pay salary structure was
developed, and each City of Carlsbad job classification was assigned to a specific salary
grade. The nonbenchmark positions were assigned to the salary structure based on
internal relationships. It is anticipated that the benchmark salary data will need to be
surveyed annually, and that the benchmark comparisons will need to be modified
periodically as classifications change within the organization.
The City Council’s philosophy has been to set management salaries within the top three
paying agencies in the survey market, and the proposed compensation program is in
keeping with this philosophy. Each salary grade was designed to establish a market range
which incorporates the 75’ percentile of the comparator group.
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Highest Comparator Rate
Market Range 75th percentile =
Average + 12 %
Average
Lowest Comparator Rate
How Base Pay Works
The key element of the employee base pay program is the base pay structure. Covering
all management jobs, the base pay structure reflects competitive pay levels for jobs
assigned to each pay grade and provides the basis for equitable pay decisions.
The base pay structure works as follows:
8 The structure includes eight pay grades, from grade I to grade 8.
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There is a 10% to 20% difference between the market range of each grade.
There is a 38% - 45% difference between the minimum and the maximum of the
range, which allows managers and supervisors to recognize competency development
and different levels of competency and contribution within a given range.
The ranges are broader at the higher grades to reflect the broader range of
competencies represented in those grades.
A pay range is associated with each salary grade. Each range has a minimum and a
market range. The market range represents the range of competitive base pay rates
for classifications assigned to the grade. Fully proficient employees with acceptable
performance are paid in the market range. Employees who are inexperienced or
newly hired are paid below the market range.
Pay Grade
Range Maximum
Market range Fully proficient: 75th
1111111111 Percentile Acceptable performance
Inexperienced, new hire BeIow market
Range Minimum
The salary structure, including the eight pay grades and the job titles assigned to each
grade, is attached as Exhibit
Linking Pay and Performance
The Compensation Program links directly to the Performance Management Program.
Competencies and goals have a direct effect on base pay and incentive awards. As
mentioned previously, employees have the opportunity to earn:
1. increases to base pay for demonstrating competencies, and
2. incentive awards, one-time cash payments, for achieving established goals.
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How the New System Works
Goal Achievement Overall Competency
Rating d/l.II + r = BASEPAY
Threshold Achieves Expectations
Goal Achievement Overall Competency ri Target or higher + 71 = INCENTIVEPAY
Achieves Expectations
BASE PAY PLAN
Obiective
The purpose of base pay increases is to reward demonstrated competency. Employees
who demonstrate competency and whose salary is below or within market range receive
an increase that is added to base pay. Those paid above the overall range maximum are
not eligible for a base pay increase.
EliPibilitv
Employees are eligible for a base pay increase if they:
Receive an average rating of “Achieves Expectations” or better on their performance
review, AND
Achieve a performance rating of at least “Threshold” on all goals.
Base Pav Increase Matrix
Base pay increases are determined based on the employee’s individual performance rating
and where the employee is being compensated in the salary range. The goal is to move
employee gay levels to the market range (the competitive pay level for jobs in the grade)
over time. The position of an employee’s base pay in the range makes a difference
because those paid below the market range are not yet being paid the market pay level for
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3Y
Performance Rating
Exceeds Expectations
Achieves Expectations
Needs Improvement
Position in Range
Below Market Within Market Above Market
Range Range Range
A B 0%
C D 0%
0% 0% 0%
0 e
Recognize and reward teamwork toward achieving the City’s and the departmental
goals and initiatives
Recognize and reward individual high performance.
The Incentive Pay plan is offered in addition to the Base Pay plan.
Eligibility
All management employees are eligible for the Incentive Plan if they:
Receive an “Achieves Expectations” rating of 2.0 or higher on their performance
review AND
Achieve an average rating on goals of “Target” or higher
All management employees are eligible for incentive pay, regardless of their position in
the salary range.
Performance Measures
Employees earn the incentive based on their achievement of goals established during the
performance management process. For each goal, achievement is rated based on one of
three performance levels:
0 Threshold - the minimum performance level that must be achieved
Target - the desired performance level needed to support attainment of organizational
goals
Optimum - defines performance levels that exceed Target and require significant
effort to attain
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Incentive Pav Matrix
Unlike base pay increases which are determined at the end of the performance
management cycle, the incentive opportunity percentages will be made public at the
beginning of the performance review cycle. The City Council will determine the annual
amount to be budgeted for management incentive pay, and an Incentive Pay matrix will
be distributed to all management employees. NOTE: This matrix will also change from
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36
Performance Against Individual
Measures
Threshold and below
Target
Optimum
Payout
(as a % of Base Salary)
0%
2.5%
5.0%
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