A-2b. 2017 Budget, Review of Compensation Plan for 2017. ` Y o�
CITY OF CIIANIIASSEN
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q S Chanhassen is a Community for Life-Providing for Today and Planning for Tomorrow
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MEMORANDUM
TO: Mayor and City Council
FROM: Chelsea Petersen, Assistant City Manager
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DATE: November 26, 2016
SUBJ: Review of Compensation Plan for 2017
With the assistance of Keystone Compensation Group, staff conducted a compensation study
over the past spring and summer. This has been done every 2-3 years to ensure that
Chanhassen's pay rates and ranges are competitive with the market. As part of the study,
Chanhassen's current compensation was compared to 30 other metro cities, including all of our
Key Financial Cities.
Chanhassen operates under a Pay for Performance (PFP)program in which pay increases are
determined by a combination of employee performance and their position pay range.
Probationary reviews are done after six months of employment and every employee receives an
annual performance review to aid in determining a potential pay increase. The PFP program is
set up in a way that aims to get new employees to their midpoint(to be competitive with the
market)within 4-6 years after hire, and reward high performers no matter where they fall in their
respective pay range. Traditional step pay programs have set increases for all employees,
regardless of job performance.
[SALARY ADMINISTRATION & PROGRAM DESIGN COMPARISON
P-F-P Programs Step Pay Programs
r1. Open salary ranges 1. Steps to maximum
2. Competitive rate is at midpoint 2. Top step in the range
3. Typically wider ranges 3. Typically narrower ranges
4. Maximum typically set at 10-20% 4. Maximum typically set slightly
above the midpoint above the market rate
5. Increases based on performance 5. Increases based on seniority
6. Increases based on current pay 6. Increases based on current step
level and length of service
7. Preferred by high level 7. Less ability to differentiate,
1 contributors favored by unionized workforce
8. Managers have more flexibility/ 8. Managers generally do not
freedom J influence pay
PH 952.227.1100• www.ci.chanhassen.mn.us• FX 952.227.1110
7700 MARKET BOULEVARD • PO BOX 147 • CHANHASSEN • MINNESOTA 55317
Mayor and City Council
Review of Compensation Plan for 2017
November 28, 2016
Page 2
Each pay grade has a minimum, midpoint, and maximum. The `minimum' is the rate that would
be offered to an employee who meets the minimum qualifications for the job,but is still learning.
As an employee grows into a position they will tend to get higher percentage pay increases so
that they can reach the midpoint and be competitive with both the overall market and their peers.
The `midpoint' is the competitive rate paid to a fully qualified employee who is performing all
aspects of the job, approximately 4-6 years after hire. The `midpoint' in PFP is actually the
equivalent to the highest step in a step pay program, so that would be the maximum pay an
employee could attain. The `maximum' in PFP is generally rarely reached by employees for a
couple reasons: first,because ranges are continually adjusted to keep up with market growth, and
second, because the maximum is designed to reward long-tenured employees that have
continually maintained an outstanding job performance. If an employee were to reach the
maximum they would receive a lump-sum cash payout in lieu of an annual increase.
{-- --- I Base Salary increases cro
Pay for. 10 0 00 1 o o ..semumi,�,
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Performance ( '
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1 y 4, 4, v 1 I Market
Pat for service
steps program • — I Rate Ca:gPeeM11)
CtartirD Step
alaMaximum
COMPENSATION POLICIES — MERIT INCREASE MATRIX
Merit Guide Chart
Pay Level Within Grade Range
Midpoint
Performance Rating Minimum Lower Middle (Competitive Middle Maximum
Market)
Outstanding Performer(5) 6-7% 5-6% 4-5% 3-4% Lump Sum
Exceed Expectations(4) 5-6% 4-5% 3-4% 2-3% Lump Sum
Solid Performer(3) 4-5% 3-4% 2.5-3% 1.5-2% Lump Sum
Need improvement(2) 0-2% 0.0% 0.0% 0.0% 0.0%
Unsatisfactory(1) 0.0% 0.0% 0.0% 0.0% 0 D%
Mayor and City Council
Review of Compensation Plan for 2017
November 28, 2016
Page 3
Chanhassen has not updated pay ranges since the last compensation study, which was completed
in 2013. When the study was completed earlier this year, it was recommended that all ranges be
increased by 7%to account for inflation and market growth during that time. Going forward staff
recommends increasing pay ranges roughly 2% each year to keep in line with the market, and to
hopefully avoid the need for large range increases in the future.
While there is a significant increase to ranges being recommended, Chanhassen actual pay is at
95% of market median. That is slightly below the overall market,but within the competitive
range of 95%-105%. This means that there are only a few employees that need significant
changes to their pay to remain in line with the recommended ranges. Also,there were some
FLSA changes regarding salaried employees that would also need to receive adjustments to
remain in compliance with federal standards. The recommended average of a 4%increase would
include those employees that need adjustments to get back in their modified range or be in
compliant with FLSA standards.
Comparisons of 2016 Chanhassen Actual Pay with 2016 Pay Ranges
$90.00 —
• 2016 Chanhassen Avg Rate
$80.00- • 2016 Minimum .-...
♦ 2016 Maximum
—2016 M1Mmum Line
$70.00
—2016Maaimum line
0
u 560.00 .
•
y 550.00
$10.00 = ..
I •
$30.00- •
$20.00
♦�
$10.00
100 120 147 117) 17 )G110 1
Job Grade
g:\admin\cp\city council\pay comp update.docx