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12-27-2016 CCM Workshop (Compensation Study)HUTCHINSON CITY COUNCIL SPECIAL WORKSHOP MEETING MINUTES TUESDAY, DECEMBER 27, 2016 AT 4:00 PM CITY CENTER — COUNCIL CHAMBERS 1. Call to Order Mayor Gary Forcier called the meeting to order. Members present were Chad Czmowski, Mary Christensen, Bill Arndt and John Lofdahl. Others present were Matt Jaunich, City Administrator, Kent Exner, City Engineer and Marc Sebora, City Attorney and other city directors. DISCUSSION/REVIEW ITEMS 2. Review of 2016 Compensation Study Matt Jaunich, City Administrator, provided a presentation on the final analysis and results of the 2016 compensation study that was completed by Keystone Compensation Group. The presentation consisted of the following: objectives of the study, job evaluation, Hutchinson's compensation strategy, overview of market analysis and results, important changes to the City's compensation program, 2016 & 2017 salary structures, exhibits for results of compensation analytics and recap/questions. The study objectives consisted of reviewing and revising job descriptions including interview employees; evaluating City jobs and confirm internal equity; conducting a competitive market analysis for City's compensation program; calibrating/revising current salary structure based on market and internal job evaluation; estimating the budget impact for implementing new ranges and the strategic objectives included enabling the City to retain and attract qualified talent and being complaint with the Local Government Pay Equity Act. Mr. Jaunich also reviewed the process used in the study which included job descriptions being reviewed and updated and the consultant conducting job interviews with representative employees for each job to confirm duties; department heads provided feedback about the current compensation program; consultant evaluated all jobs using the Keystone Job Leveling System and assigned job grades; department heads reviewed their departmental grade and the consultant and administration jointly worked on resolving questions about job calibration; consultant used the market peer group government agencies to prepare the market summary statistics; benchmark base pay data was collected from market jurisdictions and reviewed for quality of job matching; consultant used the combination of the job evaluation results and market analysis to create the new salary ranges to establish internal equity while maintaining a competitive market position; assigned salary grades to all jobs and prepared various comparisons and analytics to illustrate the impact of the new salary structure and developed an estimate for the financial impact of the new salary ranges and the consultant reviewed preliminary study results with administration and subsequently met with department heads collectively to review the results. Mr. Jaunich reviewed the job evaluation characteristics and elements of jobs to establish the relative job hierarchy within the City. The purpose of evaluating jobs is to compare different characteristics or elements of jobs in order to establish a job ranking. The Keystone system provides logical and systematic steps to reduce the subjectivity of judging job value. It also provides more consistency in how jobs are assigned to grades. Therefore the process of job evaluation can be characterized as systematic method, evaluating jobs, repeatable process, relative hierarchy, job worth, and within organization. Mr. Jaunich reviewed the five factors each job was weighed against in the study: knowledge, skills & competence, responsibility & accountability, job complexity, contacts & interpersonal skills and working conditions. Mr. Jaunich reviewed the compensation strategies used for the City to compete for talent in the marketplace. These strategies were based on the following: 1. What is the City's market for talent? Who does the City compete with? 2. Where does the City intend to position its pay program relative to the market? 3. What does the City intend to pay for? 4. How does the City administer its pay program and grant pay increases? Mr. Jaunich reviewed the market used for the study which included 29 cities and counties comparable in size, type of services delivered and where the City's talent pool exists. Mr. Jaunich also reviewed the benchmarking used for the City compensation process. 90% of City jobs were benchmarked within the defined market. Benchmark jobs cover 88% of City incumbents. Actual pay for City employees is at 104.3% of the market. Overall, the City's pay program is competitive and requires some internal and external alignment. The City is paying employees competitively with the market. All jobs have been accurately calibrated internally and with the market. The range maximum increased to 20% above the midpoint up from 15% in the old structure. The midpoint is set at 100% of the market median vs. 97.5% of the market in the old structure. The range minimum remains at 80% of the midpoint. More competitive and slightly wider ranges are in place to attract and retain qualified talent. Mr. Jaunich noted that for implementation in 2017, employee pay rates will be placed on the new pay grid based on the 2016 year-end pay rates. No increases in pay will result except for the following: the pay rates for five employees with rates below the new 2017 minimums will be increased to the 2017 minimum rate with a small budget impact estimated at $9000; three employees have current pay rates above the new maximums; 82% of City positions will realize an earnings potential increase with the grade replacement. Mr. Jaunich noted that an updated pay for performance system is being designed. Merit increases are determined by current actual pay within the range and performance level. General discussion was held regarding lump sum payments for those employees that are maxed out on the pay grid. Mr. Jaunich reviewed the current position classification table that has 19 grades. The proposed position classification table has 16 grades. Mr. Jaunich also reviewed the current pay grid structure as well as the proposed pay grid structure which moves 2.5%. Lastly, Mr. Jaunich reviewed the exhibits used in the compensation analytics. Administration will be requesting that the Council accept the results of the study and establish the 2017 proposed classification table and pay grid at a later date. Mr. Jaunich is also suggesting that the wage committee review the study information as well. Motion by Christensen, second by Lofdahl, to adjourn at 5:05 p.m. Motion carried unanimously. ATTEST: Gary T. Forcier Mayor Matthew Jaunich City Administrator