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Comprehensive Classification and Compensation StudyCity of Kalispell Post Office Box 1997 - Ka spool. Montana 59903- 997 - Telephone (406)758-7700 Fax (406)75,8-7758 REPORT TO: Mayor Kennedy and City Council Members FROM: Amy Robertson, Finance Director Chris Kukulski, City Manager SUBJECT: Comprehensive Classification and Compensation Study MEETING DATE: June 14, 2004 BACKGROUND: Monday evening at 7pm, Jun Fox of Fox Lawson & Associates will present to the Mayor and City Council the completed pay analysis. Attached to this memo is a short synopsis from Fox outlining the goals and procedures used for completing the pay study. ftwT9414101KHAQUILTIM0 Amy H. Robertson Finance Director Please attend the work session. Report compiled: June 10, 2004 Chris A. Kukulski City Manager INTRODUCTION In November 2003, the City of Kalispell Fox Lawson & Associates LLC to conduct a comprehensive classification and compensation study of all City employee positions. The objectives of the study were to: ❑ Define the purpose, goals and objectives for the classification, UUMPUILbUtiUlt and to identify the strategies to achieve the defined purpose, goals and objectives. ❑ Review the City's job evaluation system to ensure the system was appropriate for the City's needs. Evaluate all proposed classes using the current job evaluation method in order to align job classes internally. ❑ Collect and analyze ma benefits data from public and private employers with whom the City competes for employees in order to assess the competitivenessof the City's current pay rates in the development of program. ❑ Analyze the cost impli structure recommendations. ❑ Provide the City with pay administration guidelines used to facilitate the maintenance of the compensation plan in the future. Fox Lawson & Associates began the study in December 2003. F PHASE I - STUDY INITIATION & ADMINISTRATION PURPOSE: TO DEVELOP AN UNDERSTANDING OF THE CURRENT CLASSIFICATION AND COMPENSATION POLICIES AND PRACTICES WITHIN THE CITYAND TO DEVELOP A FRAMEWORK THAT SERVES AS A GUIDE FOR THE PROJECT The objective of the study initiation and administration phase was to set the ground work for a study which builds upon the organizational characteristics, needs and philosophies of the City with respect to classification and compensation to assure that results enhance organizational goals and objectives. In order to do this Fox Lawson & Associates LLC did the following tasks: 1. Conducted a Study Initiation Session via Conference Call - We discussed the issues, expectations, schedule, and deliverables for the upcoming study. 2. Discussed Potential Salary Survey Participants - We discussed with the City potential salary su from which to collect market salary data. Final survey -participants were mutually decided upon and approved by the City. Phase I was completed in December 2003. PHASE II - JOB ANALYSIS STUDY PURPOSE: TO REVIEW THE CURRENT CLASSIFICATIONS UNDERSTUDY TO GAIN AN UNDERSTANDING OF THEIR CURRENT DUTIES AND RESPONSIBILITIES Job analysis is the process of analyzing information about a position's content and characteristics. The objective of job CLILU!ybib WCL to gather and analyze information that is relevant to the nature and level of work being performed. In conducting our analysis, we performed the following: Reviewed Existing Documentation - We reviewed organizational charts and existing job descriptions. The job desciiptiUIUS had been recently updated by the City. F Conducted Employee Interviews - FLA staff met with City employees individually to conduct on -site interviews. The purpose of these interviews was to gain a better understanding of the required duties and the level of responsibility of each job. Interviews were conducted in February 2004. PHASE III - JOB EVALUATION STUDY PURPOSE: TO REVIEW THE CURRENT SYSTEMAND DETERMINE THE APPROPRIATE INTERNAL RELATIONSHIPS BETWEEN THE CITY'S JOB CLASS117CATIONS UTILIZING THE CITY'S CURRENT JOB EVRLUATIONSYSTEM The object of phase three was to determine the appropriate internal relationship of each job classification within the City's organizational structure. job evaluation is the process of judging the relative importance of a job to the organization. The basic premise is that the more important the job is to the organization, the more valuable it is and, thus, the more it should be compensated. The objective of job evaluation is to evaluate all classifications in a manner that is consistent, fair and free of sex and racial bias. The results help to ensure that salaries paid in the future are based on the importance and value of each classification to the organization. The City had a job evaluation methodology in place and this system was retained for this phase of the project. FLA did, however, review the current system to ensure that its characteristics were appropriate. Overall, the system was found to be meeting the needs of the City. However, recommendations were made to revise the system. Specifically, point spreads for the various grade levels were adjusted. See the job analysis report for more detailed recommendations. Fox Lawson & Associates LLC also evaluated each job classification using the system. jobs were ranked in comparison to every other classification within the classification structure. The job evaluation process focused solely on job content, not individual employees within a class. The City reviewed the results of the job evaluation process. Based on the comments received, appropriate changes were made. F PHASE IV— COMPENSATION STUDY PURPOSE: TO UTILIZE MARKET DATA TO DETERNMINE THE APPROPRIATE COMPENSATION LEVELS FOR ALL JOBS AND TO DEVELOP A SALARYSTRUCT URE THAT REFLECTS THE GOALS STATED IN THE FOCUS FRAMEWORK The purpose of phase four was to develop appropriate compensation levels for all job classifications covered under the study through the collection and analysis of market salary data. This was completed by collecting and analyzing market compensation and benefits data from employers with whom the City competes for employees in order to assess the competitiveness of the City's current pay rates, and to assist in the development of a new compensation program. Fox Lawson did the following: 1. Developed the Salary Survey - We worked with the City in identifying benchmark classifications to survey, selecting survey participants, and reviewing survey methodology. A copy of the Data Collection Form can be found in the final Salary Survey report. 2. Collected and analyzed market data - We collected, compiled and analyzed market data for each of the benchmark classifications from employers that the City competes with for qualified personnel. - 23 out of 31 organizations responded for a 74% participation rate; - The City was found to be 24.3% below the market for actual salaries, overall; - Salary range minimums and maximums were found to be 18.4% and 13.5% below the market, respectively; - The final Salary Survey Report is available for review upon request. 3. Compared the City's salaries to those in the market - We compared City of Kalispell pay to market pay. Regression analysis was utilized to compare the organization's internal pay to pay in the labor market. Regression analysis produces "lines of best fit" through internal pay and market pay. Regression analysis calculates average pay for each benchmark classification considering pay levels throughout the benchmark group, not merely for an individual benchmark job. The pay lines were calculated using average pay levels from the F benchmark jobs within the organization and in the labor market. Use of regression analysis to compare the trend of pay within the organization to the trend of pay in the labor market groups is a proven compensation measurement technique. This process smoothes out any variation in internal or market pay levels to discover the average compensation for the benchmark jobs identified. - A graphical representation of the regression analysis of Kalispell average pay vs. market average pay is presented below: City of Kalispell, Mbntana Internal Average Salary vs. Market Median (50th Percentile) Trend Analysis Salary 90,000 80,000 70,000 60,000 50,000 40,000 30,000 Internal 20,000 `- 100 Market Internal 105 110 115 120 Grade Int. Trend Mkt. Trend F 4. Developed a New Salary Structure - We integrated the job evaluation results with the labor market survey data and developed a new salary structure. While the salary ranges for job classes will change under the new structure, individual compensation levels are based on an employee's current compensation level and where they will fit into the recommended salary range for the classification for their position. The salary range target rate is linked to the pay line value derived from the labor pay trend comparison. The new salary structure has salary range spreads of 35 - 40% from minimum to maximum; The recommended salary structure can be found in the Final Salary Survey Report. 5. Analyzed Implementation and Costing* - The final task in developing a new compensation structure involved determining how each individual employee's compensation would be affected. Currently, implementation options are being evaluated by the City. However, we recommend than any implementation have the following characteristics: • no employee would be paid less than the minimum of the new salary range for their job classification • any employee whose current salary exceeded the maximum of the new salary range for their job classification would not receive any salary increase Due to budgetary concerns, any implementation can be phased in over a period of two to three years.