FM20060627 Merit Incentive6/27/06 Finance Committee Notes
History of Pay For Performance Plan (Created in 1999)
A. Recruit, retain, and motivate employees by rewarding them based on their
performance
B. To date, the Common Council has always been supportive of having a pay
for performance plan
C. Started with a 5% maximum salary increase (1999), then last year (2065)
that was reduced to 4%, and now it has been proposed to go. to 2% (2006).
This is a 3% reduction in 3 years for above midpoint employees and 2%
for below midpoint employees. For above midpoint employees (83% for
2007), a larger merit percentage has been taken away than what is being
given. We recommended going to 3% for the above midpoint and leaving
the below midpoint at 4%. This still saves the City money when
compared to the old evaluation method.
Committee's 2 objectives (Direction from Common Council)
A. Create and recommend a more user-friendly evaluation tool
B. Create and recommend a performance incentive program that is creative
and moves us away from what we have been doing. The Council desires
this.
C. The committee kept asking if there was a budget number the Council was
looking for and each time there was nothing. We tried to reduce the real
monies spent on employee increases while at the same time preserving the
value of the employee. We feel at the last Finance Committee meeting
cuts were too severe.
III. Examples of how these cuts would affect non -rep employees
A. Average non -rep employee makes $62,400 or $30/hour (above mid -point)
B. Most employees will receive an effective or outstanding rating with this
new evaluation tool
C. Effective rating of .75% would yield $468/year or $18/paycheck and 2
days off
D. Outstanding rating of 1.25% would yield $780/year or $30/paycheck and 3
days off
E. Under our plan: effective rating of 1.5% yielded $936 or $36/paycheck
and 2 days off; outstandingratinof 2.25% yielded $1,404 or
$54/paycheck and 3 days off. FYI -- Remember, COLA is an adjustment
that is based on inflation and set by Council annually. COLA adjusts your
salary range and maintains your percentage of midpoint. The employee's
_ - oyes tirexrrthrn — F. Under the Finance Committee's recommendation, an employee would be
in the salary range ($11,560 - midpoint to maximum salary) for 14-24
years with an effective or outstanding rating. Under our plan, an
employee would be in that salary range for 8-12 years. This is more
realistic. If you include someone starting out below midpoint — this year
duration for each would add years.
IV. Committee's Feelings On Issue —
A. Never wanted to be a negotiating committee. We were asked to satisfy the
2 objectives previously mentioned and we did. We thought this would
meet with your approval since it met the cost conservative approach while
preserving the value of employee performance.
B. If the merit system stays as proposed by the Finance Committee we wish
we would have just been able to work on the employee evaluation tool and
the merit system would have been created and approved solely at the
Council level.
C. We very much feel the value of the employee has to be considered when
making the decision on how to reward the employee for performance. We
hope by us coming here tonight, you see a truer sense of what these
percentages look like. Bottom line is you are saving money by
implementing this new evaluation tool and merit system. The question is
how much do you want to save at the expense of the employee trying to
work thru the salary range and the ability to recruit, retain, and motivate
employees?
Again, thank you for the opportunity to meet with you tonight on this issue. We hope
you found value in our presentation. Do you have any questions for the Committee?