DATE: November 8, 2016
SUBJECT:
Title
PRESENTATION OF THE 2016 COMPENSATION AND BENEFITS STUDY FOR UNREPRESENTED CLASSIFICATIONS AND DIRECTION TO STAFF
Body
EXECUTIVE SUMMARY:
The Board of Port Commissioners (Board) will be presented with a review of a compensation and benefits study conducted for unrepresented classifications (those classifications not represented by a union or association). The study reviews the current compensation and benefits package of the District and makes recommendations that will be used to develop a compensation and benefits package that supports the District’s broader goals and objectives.
RECOMMENDATION:
Recommendation
Presentation of the 2016 Compensation and Benefits Study for Unrepresented Classifications and Direction to Staff.
Body
FISCAL IMPACT:
This item has no fiscal impact.
Compass Strategic Goals:
This agenda item supports the following Strategic Goal(s).
• A Port with an innovative and motivated workforce.
DISCUSSION:
Over the past year the District has commenced new initiatives to address challenges experienced in recruiting and retaining key talent. These challenges have become more significant as the District pursues new lines of business. As part of these initiatives, Human Resources’ work plan for Fiscal Year (FY) 15/16 included a compensation and benefits study for unrepresented employees ( those employees who are not represented by a union or association).
The District’s compensation program contains provisions for paying employees of the District, based on policy set by the Board of Port Commissioners (Board) with authority delegated to the Board appointees and managed by the Executive Leadership Group (ELG). The compensation program components are documented each year in the Salary Ordinance which is approved by the Board.
The last compensation study conducted and brought to the Board for its consideration was almost a decade ago. The purpose of the study was to review the current compensation and benefits package of the District, make recommendations on the current compensation structure, and determine how the District’s compensation and benefit programs compare to relevant market. The information obtained would then be used to develop a compensation and benefits package that supports the District’s broader goals and objectives. On June 10, 2015 the District issued a Request for Qualifications (RFQ) for a Compensation and Benefits Study. FutureSense was selected to analyze the District’s current pay and benefits for competitiveness within the market and to provide recommendations. The full study is attached (Attachment A).
FutureSense reviewed 168 individual, unrepresented positions or job descriptions, of which 159 have appropriate benchmarking data in the marketplace. Positions represented by a union or association were not included in this analysis; compensation benchmarks for these positions are reviewed prior to the negotiations process. This study was a moment in time and positions created as a result of the 2016 District reorganization were added at a later date. Additionally, although benefits were addressed in the study, Human Resources brings recommendations to the ELG on benefits each year as part of the annual renewal process and as such the benefits component of the study will not be addressed in this presentation.
Salary structure is an important component of an effective compensation program and ensures that pay levels for groups of jobs are competitive externally and equitable internally. A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary costs by providing a cap on the range paid for particular jobs.
A salary range is the span between the minimum and maximum base salary an organization will pay for a specific job or group of jobs. A salary range structure is a hierarchal group of jobs and salary ranges within an organization. Salary structures often are expressed as pay grades or job grades that reflect the value of a job in the external market and/or the internal value to an organization. The District’s current salary structure is comprised of 31 ranges that are approximately 35% from the maximum of one range to the minimum of the next. The 35% is referred to as the range spread. For reference, a copy of the current range structure is attached (Attachment B).
The District’s compensation philosophy includes maintaining a total compensation program, which includes direct compensation/salary, benefits, and non-financial rewards directed towards attracting, retaining, and rewarding a qualified and diverse workforce. Within the boundaries of financial feasibility, employee compensation should be externally competitive and internally equitable, and should be based upon the employee’s performance.
Part of an organization’s decision around compensation strategy has to do with where it wants to target salaries relative to the market. Hitting the market at the 50th percentile means that the organization is “meeting” the market. Targeting higher than the 50th percentile is referred to as either “exceeding” or “leading” the market, and targeting lower is referred to as “lagging” the market. A percentile is a location marker along a range of values. The 50th percentile is the median or middle number in the range of values. For example, assuming 100 data points, at the 60th percentile, 59 data points would be below the 60th percentile, 40 data points would be above. Historically, the District’s compensation philosophy has been to target the 50th percentile.
The FutureSense data reveals that, on average, District positions are being paid at 95% of the 50th percentile. This means that a number of positions are being paid below market. For comparison, if the District was using the 75th percentile its positions would be at 82% of comparable positions in the marketplace. Given that the District is behind the market in this area, and no adjustments have been made to the ranges since 2007, adjustment is warranted at this time.
Structure Options
In response to the District’s request, FutureSense developed three potential structures to address the marketplace deficit. These structures were all reviewed in terms of their advantages and disadvantages, their ability to address competitiveness in the market, the financial impact to the District, and the ability to support the overall business strategies.
Structure A
• Structure A would maintain the current structure, but adjust it so that the midpoints would align with current market data. If the District were to maintain its current structure system, FutureSense would recommend that the ranges be adjusted by 6% to ensure that the midpoints would correlate to the 50th percentile of the market. This means that both the minimums and maximums would move up by an additional 6%.
Structure B
• Structure B would reduce the number of ranges from 31 to 20. The resulting ranges would have an equal spread of 50%, compared to the current range system which has a spread of 35%. Positions would be assigned to a range based on the proximity of the midpoint closest to the 50th percentile of the market.
Structure C
• Structure C is similar to Structure B in that the number of ranges would be reduced from 31 to 20. One key difference is that the range spread would vary from 35% to 60%, providing more flexibility in the higher ranges. Positions would be assigned to a range based on the proximity of the midpoint closest to the 50th percentile of the market.
Staff is recommending Structure C. This structure provides the most flexibility in hiring, especially for positions that may be challenging to recruit for. It also better aligns with current market pay practices.
Additionally, staff is recommending that the Board approve including an automatic increase of 1 -2% to the range structure each year. This increase would ensure that the range structure would automatically remain competitive in the marketplace. Of note is that employees’ wages are not automatically adjusted when the wage structure is adjusted; this is handled through the budget process.
If the Board directs staff to move forward with the recommended changes, staff will amend the Salary Ordinance as appropriate and bring it back to the Board for approval at a future meeting.
General Counsel’s Comments:
The Office of the General Counsel has reviewed the agenda sheet as presented to it for form and legality.
Environmental Review:
This item would receive a presentation of the 2016 Compensation and Benefits Study for the unrepresented classifications and direction to staff. This presentation to the Board does not constitute an “approval” or a “project” under the definitions set forth in California Environmental Quality Act (CEQA) Guidelines Sections 15352 and 15378 because no direct or indirect changes to the physical environment would occur. CEQA requires that the District adequately assess the environmental impacts of its projects. Further, while the Board may request certain project components be included, alternatives studied or other direction, such direction to staff will not bind the District to a definite course of action prior to CEQA review. Full CEQA analysis will be completed prior to the approval of any entitlements, concept approval, or agreements necessary for the projects. Moreover, the Board reserves its discretion to adopt any and all feasible mitigation measures, alternatives to the projects, including a no project alternative, a statement of overriding consideration, if applicable, and approve or disapprove the projects and any permits or entitlements necessary for the same. Those decisions may be exercised in the sole and absolute discretion of the Board. Based on the totality of the circumstances and the entire record, the Board’s direction does not commit the District to a definite course of action prior to CEQA review being conducted. Therefore, no further CEQA review is required.
In addition, this presentation allows for the District to implement its obligations under the Port Act and/or other laws. The Port Act was enacted by the California Legislature and is consistent with the Public Trust Doctrine. Consequently, this presentation is consistent with the Public Trust Doctrine.
This presentation to the Board does not allow for “development,” as defined in Section 30106 of the California Coastal Act, or “new development,” pursuant to Section 1.a. of the District’s Coastal Development Permit (CDP) Regulations because it will not result in, without limitation, a physical change, change in use or increase the intensity of uses. Therefore, issuance of a CDP or exclusion is not required. However, the District’s projects require processing under the District’s CDP Regulations. If a project is formulated as a result of the 2016 Compensation and Benefits Review for the unrepresented classifications, the Board will consider approval of the project and any improvements associated after the appropriate documentation under District’s CDP Regulations has been completed and authorized by the Board, if necessary. The Board’s direction in no way limits the exercise of the District’s discretion under the District’s CDP Regulations.
Equal Opportunity Program:
Not applicable.
PREPARED BY:
Michelle Corbin
Director, Human Resources
Attachment(s):
Attachment A: Market Data Tables
Attachment B: Annual Salary Ranges for Principal Administrators and Assistants, and Professional, Technical and General/Clerical