FINAL REPORT OF THE TOTAL COMPENSATION STUDY

Transcription

1 Final Version 4/13/2016 Presentation to CCWA Board of Directors 4/28/2016 Submittal date: 2/18/16 FINAL REPORT OF THE TOTAL COMPENSATION STUDY Central Coast Water Authority Submitted By: Koff & Associates Georg Krammer CHIEF EXECUTIVE OFFICER th Street Berkeley, CA Tel: Fax:

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3 February 18, 2016 Mr. Ray Stokes, Executive Director Central Coast Water Authority 255 Industrial Way Buellton, CA Dear Mr. Stokes: Koff & Associates is pleased to present the final total compensation report for the study of all positions at Central Coast Water Authority. This report documents the compensation study process, findings, and recommendations. We would like to thank you John Brady and Lisa Watkins for your assistance and cooperation without which this study could not have been brought to its successful completion. The report includes market data that shows how competitive the Authority is to the market. In addition, we created a compensation plan that, when implemented, will bring the Authority s compensation program into an externally and internally equitable status. We will be glad to answer any questions or clarify any points as you are implementing the findings and recommendations. It was a pleasure working with you and we look forward to future opportunities to provide you with professional assistance. Very truly yours, Georg Krammer Chief Executive Officer th Street, Berkeley, California

4 Final Report Total Compensation Study Central Coast Water Authority TABLE OF CONTENTS Executive Summary... 1 Background... 1 Summary of Findings... 1 Study process... 2 Survey Classifications... 2 Comparator Agencies... 3 Benefits Data... 5 Data Collection... 7 Matching Methodology... 8 Data Spreadsheets... 9 Market Compensation Findings Base Salaries Total Compensation Benefits Additional Benefits Internal Salary Relationships Recommendations Pay Philosophy Proposed Salary Structure Proposed Salary Range Placements Benefits Package Options for Implementation Using The Market Data as a Tool Appendix I: Results Summary Appendix II: Market Base Salary, Benefit, and Total Compensation Findings Appendix III: Proposed Salary Structure Appendix IV: Proposed Salary Range Placements Appendix V: Additional Benefits th Street, Berkeley, California

5 Final Report Total Compensation Study Central Coast Water Authority EXECUTIVE SUMMARY Background In October 2015, Central Coast Water Authority (Authority) contracted with Koff & Associates (K&A) to conduct a comprehensive total compensation study for all Authority classifications. All compensation findings, recommendations, and options for implementations are contained in this report. This compensation review process was precipitated by: The concern of management and the employee groups that employees should be recognized for the level and scope of work performed and that they are paid on a fair and competitive basis that allows the Authority to recruit and retain a high quality staff; The desire to have a compensation plan that can meet the needs of the Authority; and The desire to ensure that internal relationships of salaries are based upon objective, nonquantitative evaluation factors, resulting in equity across the Authority. The goal of the total compensation study is to assist the Authority in developing a competitive pay and benefit structure, which is based upon market data to ensure that the plan is fiscally responsible, and that meets the needs of the Authority with regards to recruitment and retention of qualified staff. Summary of Findings This report summarizes the job analysis methodologies, analytical tools, and the total compensation (salary and benefits) survey findings. Salaries are defined by an employee s base pay, i.e., the gross amount they get paid each payroll and that is reflected on their paycheck. Benefits are additional means of compensation that represent a cost to the Authority and therefore a value to the employee because they do not have to pay for those benefits out of pocket (see pages 5 and following for a detailed description of the benefits components surveyed). Total compensation is the employee s entire compensation package, i.e., salaries and benefits added together. The results of the total compensation study showed that on average, classifications are 2.0% below the market median for base salaries, while that figure changes to 2.8% below the market median when we look at total compensation, which is a 0.8% difference. Market base salary results showed that fifteen (15) of the twenty (20) benchmarked classifications were below the market median; ten (10) of which were below the market by less than 5% and five (5) below the market by more than 5%. Market total compensation results showed that seventeen (17) of the benchmarked classifications were below market, thirteen (13) of which were below the market by less than 5% and four (4) were below the market by more than 5%. Further analysis indicates that the Authority s benefits package, in terms of cost, are competitive when compared to the market th Street, Berkeley, California

6 Final Report Total Compensation Study Central Coast Water Authority Because the Authority s benefits are competitive with those of the comparator agencies, we based the salary recommendations on the base salary market median results. Further analysis of the market benefit data reveals the differences between the Authority s benefits versus the comparator agencies are due to retirement benefits. With the passing of the Public Employees Pension Reform Act (PEPRA), the Authority cannot make changes to enhance the retirement benefits offered to current and new employees. The Authority s insurance benefits, including medical, dental, vision, life, EAP, and disability are greater than nine (9) of the twelve (12) comparators. Since the Authority s combined retirement and insurance benefits balance each other out and are competitive with the market, we are not making any recommendations to adjust the Authority s compensation package. STUDY PROCESS Survey Classifications The study included all twenty (20) of the Authority s classifications in order to collect compensation data within the defined labor market. The Authority updated classification descriptions with input from employees. The updated descriptions were sent to K&A as a basis for benchmarking. K&A and Authority management discussed past compensation and recruitment issues prior to surveying the classifications. These survey classifications included: 1. Accounting Technician 2. Administrative Assistant 3. Controller 4. Deputy Director of Finance Classification 5. Deputy Director of Operations and Engineering 6. Distribution Supervisor 7. Distribution Technician 8. Engineering Technician 9. Executive Director 10. IT/Instrumentation and Control Specialist 11. Laboratory Analyst 12. Maintenance/Instrumentation Calibration and Repair Technician 13. Maintenance Foreman 14. Maintenance Superintendent 15. Office Manager th Street, Berkeley, California

7 Final Report Total Compensation Study Central Coast Water Authority 16. Plant Maintenance Technician 17. Regulatory Specialist 18. Senior Chemist 19. Water Treatment Plant Operator 20. Water Treatment Plant Supervisor Comparator Agencies The most critical element in conducting a market compensation study is the determination of appropriate agencies for comparison. In developing the list of potential comparator agencies, we first started with twenty two (22) potential agencies and analyzed them based on the following factors: 1. Organizational type and structure We generally recommend that agencies of a similar size, providing similar services to that of the Authority be used as comparators. When it comes to technical classes, the size of an organization is not as critical as these classes perform fairly similar work. The difference in size of an organization becomes more important when comparing classes at the management level. The scope of work and responsibility for management becomes much larger as an organization grows. Factors such as management of a large staff, consequence of error, the political nature of the job, and its visibility all grow with larger organizations. When it is difficult to find agencies that are similarly sized, it is important to get a good balance of smaller and larger agencies. 2. Similarity of population, staff, and operational budgets These elements provide guidelines in relation to resources required (staff and funding) and available for the provision of services. 3. Scope of services provided For the majority of classifications, it is important to select agencies providing similar services. Organizations providing the same services are ideal for comparators and most comparator agencies surveyed provide similar services to the Authority. Specifically, we focused on water distribution and treatment services. Additionally, we scored comparators based on if they were a wholesale and/or retail purveyor. 4. Labor market and geographic location In the reality that is today s labor market, many agencies are in competition for the same pool of qualified employees. No longer do individuals necessarily live in the communities they serve. The geographic labor market area, where the Authority may be recruiting from or losing employees to, was taken into consideration when selecting comparator organizations. Furthermore, by selecting employers within a geographic proximity to the Authority, the resulting labor market data generally reflects the region s cost of living, housing costs, growth rate, and other demographic characteristics to the same extent as competing employers to the Authority. 5. Compensation Philosophy A factor to take into consideration is compensation philosophy. Does the organization regularly conduct a market survey, and, once completed, how is this information th Street, Berkeley, California

8 Final Report Total Compensation Study Central Coast Water Authority applied? Many agencies pay to the median, some pay to the average, others may pay to a higher percentile. In addition, salary ranges may be set strictly upon market base salary values or may include the total value of salary and benefits when developing a compensation policy. 6. Required Water Treatment and Distribution Certifications An important consideration regarding level of comparability of different water agencies is the level or grade of the systems that technical staff are operating and maintaining. The grade levels of the systems translate to the levels/grades of certifications that are required of distribution and treatment operators to obtain to operate the systems. In identifying appropriate comparator agencies, the requirement for the highest level/grade of certification is an indication of how technical and specialized the work is that each agency s staff is performing. The analysis included four (4) cities and eighteen (18) special districts, all of which are located throughout the State of California, with a strong emphasis on Southern California. For all cities, water services are provided by city employees. For all cities, the FTE data reflects only those FTE allocated to the Water department/subdivision. The analysis included special districts that are both retailers and wholesalers. This aspect is unique about the Authority in that not many districts are both, most are either one or the other. Emphasis was placed on identifying agencies that provide both. The data that was analyzed was collected from agency documentation such as websites, budget documents and CAFR reports, the 2015 E 1 Authority and County Report (issued by the State of California), State Controller s Office Government Compensation Database, and Sperling s Best Places. Each agency was ranked according to each factor that as analyzed. The lower the value of the ranking, the more comparable the agency was to the Authority for that particular factor. The ranking is based on the absolute value difference between the agency and the Authority on each factor regardless of whether the agency is higher or lower for that factor. For example, an agency that has 5 more FTE compared to the Authority will rank lower than an agency with 10 fewer FTE compared to the Authority. The total ranking that was considered represented a summary of the ranking criteria for the following data factors: 1. Geographic Proximity Comparison 2. Full Time Equivalents Comparison 3. Cost of Living Average Comparison 4. Cost of Labor Comparison 5. Retail vs. Wholesale Comparison 6. Treatment Certification Comparison 7. Distribution Certification Comparison th Street, Berkeley, California

9 Final Report Total Compensation Study Central Coast Water Authority The analysis also included data for informational purposes only. For example, the Median Home Sales Price and the Median Household Income data was included but this criteria was not part of the overall comparison score, as these factors are components of the overall Cost of Living Average. The analysis utilized the Cost of Living in the overall rank, as an indicator of the local economy for each agency. All of the above elements should be considered in selecting the group of comparator agencies. The Authority agreed on a list of comparator agencies, and the following twelve (12) agencies were approved by the Authority s Board of Directors on October 22, 2015, and used as comparators for the purposes of this market study: Comparator Agencies Antelope Valley East Kern Calleguas Casitas Castaic Lake City of Santa Maria Goleta Kern County San Diego Water Authority San Juan Three Valleys United Water Conservation District Zone 7 Benefits Data The last element requiring discussion prior to beginning a market survey is the specific benefit data that will be collected and analyzed. The following information was collected for each of the benchmarked classifications (the cost of these benefits to each agency was converted into dollar amounts and can be found in Appendix IIb of this report; these amounts were added to base salaries for total compensation purpose and those results can be found in Appendix IIc): 1. Monthly Base Salary: The top of the salary range and/or control point. All figures are presented on a monthly basis. 2. Employee Retirement: This includes several figures: PERS: The amount of the employee s contribution to PERS that is paid by the employer (Employer Paid Member Contribution) th Street, Berkeley, California

10 Final Report Total Compensation Study Central Coast Water Authority Formula: The service retirement formula. Enhanced PERS Formula: The baseline PERS formula is There is typically a cost to the employer for offering a formula with a higher benefit than the baseline formula. For each enhanced formula the cost to the employer is based on a percentage range calculated by PERS. We took the midpoint of the range and multiplied the % by the top monthly salary to calculate the cost of the enhanced formula. The percentage value for each enhanced formula is: 2%@60: midpoint of range = 3.05% 2.5%@55: midpoint of range = 4.95% 2.7%@55: midpoint of range = 8.05% 3%@60: midpoint of range = 9.80%. Final Compensation: The period for determining the average monthly pay rate when calculating retirement benefits. The base period is thirty six (36) highest paid consecutive months. When final compensation is based on a shorter period of time, like twelve (12) months highest paid consecutive months, there is a cost to the employer. Similar to the enhanced formula, the cost to the employer is based on a percentage range calculated by PERS. We took the midpoint of the range (1.35%) and multiplied the % by the top monthly salary to calculate the cost of the final compensation. Social Security: If an employer participates in Social Security, then the employer contribution of 6.2% of base salary up to $ per month was reported. Other: Any other retirement contributions made by the employer. 3. Insurances: The employer paid premiums for an employee with family coverage was reported. The employer paid insurances included: Cafeteria/Flexible Benefit Plan Medical Dental Vision Employee Assistance Program (EAP) Life and Accidental Death and Dismemberment (AD&D) Insurances Long Term Disability Insurance Short Term Disability Insurance Other 4. Leave: Other than sick leave, which is usage based, the number of hours off for which the employer is obligated. All hours have been translated into direct salary costs by using the following calculation: Top Monthly Salary / 2080 hours per year * leave hours offered per year th Street, Berkeley, California

11 Final Report Total Compensation Study Central Coast Water Authority Vacation: The number of vacation hours available to all employees who have completed five years of employment. Holidays: The number of holiday hours (including floating hours) available to employees. Administrative: Administrative leave is normally the number of paid leave hours available to Federal Labor Standards Act (FLSA) Exempt and/or management to reward for extraordinary effort (in lieu of overtime). Personal leave may be available to augment vacation or other time off. 5. Auto Allowance: This category includes either the provision of an auto allowance or the provision of an auto for personal use. If a car is provided to any classification for commuting and other personal use, the average monthly rate is estimated at $450. Mileage reimbursement is not included. 6. Uniform Allowance: This category includes the provision of uniform or shoe/boot allowances. Reimbursements are not included. 7. Deferred Compensation: Deferred compensation contributions provided to all employees of a classification without requiring the employee make a contribution is reported. 8. Other This category includes any additional other benefits not captured above available to all in the class. All of the above benefit elements are negotiated benefits provided to all members of each comparator class. As such, they represent an on going cost for which an agency must budget. Other benefit costs, such as sick leave, tuition reimbursement, and reimbursable mileage are usage based and cannot be quantified on an individual employee basis. We also collected information on the following Additional Benefits (summary of the benefits are reported in Appendix V): Certification Pay Policies Compensation Philosophy and Salary Structure Overtime Pay Policies (including how holiday overtime is treated) Retiree Health Benefits Shift Differential On Call and Call Out Pay Policies Data Collection Data was collected during the months of December 2015 and January 2016, through websites, conversations with human resources, accounting, and/or finance personnel at each comparator agency, th Street, Berkeley, California

12 Final Report Total Compensation Study Central Coast Water Authority and careful review of agency documentation of classification descriptions, memoranda of understanding, organization charts, and other documents. Matching Methodology K&A believes that the data collection step is the most critical for maintaining the overall credibility of any study. We rely on the Authority s classification descriptions, as they are the foundation for our comparison. When we research and collect data from the comparator agencies to identify possible matches for each of the benchmarked classifications, there is an assumption that we will not be able to find comparators that are 100% equivalent to the classifications at the Authority. Therefore, we do not match based upon job titles, which can often be misleading, but we analyze class descriptions before we consider it as a comparator. (If an agency does not have classification descriptions available for review, we will follow up with the agency to get a better understanding of the positions.) Our methodology is to analyze each class description and the whole position by evaluating factors such as: Definition and typical job functions; Distinguishing characteristics; Level within a class series (i.e. entry, experienced, journey, specialist, lead, etc.); Reporting relationship structure (for example, manages through lower level staff); Education and experience requirements; Knowledge, abilities, and skills required to perform the work; The scope and complexity of the work; Independence of action/responsibility; The authority delegated to make decisions and take action; The responsibility for the work of others, program administration, and for budget dollars; Problem solving/ingenuity; Contacts with others (both inside and outside of the organization); Consequences of action and decisions; and Working conditions. We require that a position s likeness be at approximately 70% of the matched position to be included. When we do not find an appropriate match with one class, we often use brackets which can be functional or represent a span in scope of responsibility. A functional bracket means that the job of one classification at the Authority is performed by two (2) or more classifications at a comparator agency. A bracket representing a span in scope means that the comparator agency has one class that is bigger in scope and responsibility and one position that is smaller, where the Authority s class falls in the middle. In all, of the twenty (20) benchmarked classifications, we were able to collect sufficient data from the comparator agencies for all twenty (20) of the classifications th Street, Berkeley, California

13 Final Report Total Compensation Study Central Coast Water Authority Data Spreadsheets For each benchmark classification, there are three (3) information pages: Top Monthly Base Salary Data Benefit Detail (Monthly Equivalent Values) Total Compensation Data The mean (average) and median (midpoint) of the comparator agencies, as well as the % above or below the Authority is compared to the average and median, are included on the top monthly salary and total compensation data spreadsheets. The mean is the sum of the comparator agencies salaries/total compensation divided by the number of matches. The median is the midpoint of all data with 50% of data points below and 50% of data points above. In order to calculate the mean and median, K&A requires that there be a minimum of four (4) comparator agencies with matching classifications to the benchmark classification. The reason for requiring at least 4 matches is so that no one (1) classification has undue influence on the calculations. If we were not able to find at least 4 matches then we reported Insufficient Data to do Analysis. When using survey data to make salary range recommendations and adjustments, K&A recommends using the median, rather than the mean because the median is not skewed by extremely high or low salary values (unlike the mean) th Street, Berkeley, California

14 Final Report Total Compensation Study Central Coast Water Authority MARKET COMPENSATION FINDINGS The table below represents a summary of the market top monthly (base) salary and total compensation (base salary plus benefits ([retirement, insurance, leaves, and allowances]) findings. For each benchmark classification, the percent above or below the top monthly salary market median and total compensation market median is listed. The table is sorted by top monthly salary in descending order from the most positive percentile (above market) to the most negative (below market). Classification Top Monthly Salary % Above or Below Total Monthly Compensation % Above or Below Number of Matches Administrative Assistant 2.0% 3.1% 7 Laboratory Analyst 1.7% 1.2% 6 Engineering Technician 1.7% 1.9% 7 Senior Chemist 1.3% 0.1% 7 Accounting Technician 1.0% 1.4% 10 Deputy Director of Operations and % 7.7% Engineering IT/Instrumentation and Control Specialist 0.8% 2.0% 10 Regulatory Specialist 1.0% 1.0% 6 Distribution Supervisor 1.9% 1.4% 8 Executive Director 2.1% 1.2% 11 Maintenance Superintendent 3.5% 3.9% 9 Office Manager 4.2% 4.5% 8 Water Treatment Plant Operator 4.2% 3.4% 10 Deputy Director of Finance 4.7% 7.2% 10 Controller 4.9% 3.1% 7 Maintenance Foreman 5.8% 3.6% 5 Distribution Technician 6.3% 9.8% 7 Plant Maintenance Technician 6.3% 12.1% 5 Water Treatment Plant Supervisor 8.7% 2.9% 9 Maintenance/Instrumentation Calibration and Repair Technician 10.6% 4.6% th Street, Berkeley, California

15 Final Report Total Compensation Study Central Coast Water Authority Base Salaries Market base salary results show that of the twenty (20) benchmarked classifications, five (5) classifications are paid above the market median. Five (5) classifications are paid above the market median by less than 5%. Fifteen (15) benchmarked classifications are paid below the market median. Ten (10) classifications are paid below the market median by less than 5%, four (4) classification are paid below the market median by more than 5% and less than 10%, and one (1) class is paid below the market by more than 10% and less than 15%. Generally, we consider a classification falling within 5% of the median to be competitive in the labor market for salary survey purposes because of the differences in compensation policy and actual scope of work and position requirements. However, the Authority can adopt a different standard. Total Compensation Total compensation results show that of the twenty (20) benchmarked classification, three (3) are paid above the market median. All four (4) classifications are paid above the market median by less than 5%. Seventeen (17) benchmarked classifications are paid below the market median. Thirteen (13) classifications are paid below the market median by less than 5%, three (3) classifications are paid below the market median by more than 5% and less than 10%, and one (1) classification is paid below the market median by more than 10% and less than 15%. Overall, these differences between market base salaries and total compensation indicate that generally the Authority s benefits package, in terms of cost, is competitive with the market. Further analysis indicates that, on average, classifications are 2.0% below the market median for base salaries, while that figure changes to 2.8% below the market median when we look at total compensation, which is a 0.8% difference (i.e., the Authority loses 0.8% competitive advantage). This percentage is fairly small and does not indicate a significant impact that benefits have on total compensation. Benefits Further analysis of the market benefit data reveals the differences between the Authority s benefits versus the comparator agencies are due to retirement and insurance benefits th Street, Berkeley, California

16 Final Report Total Compensation Study Central Coast Water Authority Retirement Comparator Agencies Retirement Formula Employer Paid Member Contribution Final Compensation Central Coast Water Authority 7% SHY Antelope Valley East Kern N/A 10% (401 k) N/A Calleguas 7% 36 Month Average Casitas 7% 36 Month Average Castaic Lake 7% SHY City of Santa Maria 0% 36 Month Average Goleta 4% SHY Kern County 0% SHY San Diego County Water Authority 7% SHY San Juan 0% 36 Month Average Three Valleys 0% SHY United Water Conservation District 0% SHY Zone %@65 0% 36 Month Average Seven (7) of the twelve (12) participating comparator agencies pay all or a portion of the employee contribution to PERS (or similar retirement plan), similar to the Authority. Three (3) of the twelve (12) participating comparator agencies offer a greater retirement formula compared to the Authority. Six (6) of the twelve (12) participating comparator agencies base final compensation on 12 months of salary, similar to the Authority. Retiree Health Ten (10) of the agencies offer current employees retiree health benefits. One (1) agency pays the minimum employer contribution. Nine (9) of the agencies offer retiree health benefits contingent on years of service ranging from 5 to 20 years. Five (5) agencies pay a percent of the medical premium depending on years of service. Four (4) agencies pay a flat amount if the employee has the required years of service. Because the Authority has high retention of employees, it is likely that the majority of Authority employees would reach the five to 10 years of service requirement for retiree health benefits at the comparator agencies. Of the nine (9) comparators that offer retiree health benefits contingent on years of service, the smallest benefit amount would be $200 for an employee with five years of service receiving single coverage at San Diego Water Authority. This amount would still be greater than the Authority s th Street, Berkeley, California

17 Final Report Total Compensation Study Central Coast Water Authority current contribution of the PEMHCA minimum. It would be fair to conclude that (9) of the twelve (12) comparators offer greater retiree health benefits than the Authority, though actual dollar amounts will vary depending on years of service and current health insurance rates. Additional information regarding retiree health benefits can be found in Appendix V. Insurances Three (3) of the twelve (12) participating comparator agencies contribute a higher dollar amount toward a cafeteria plan and/or medical, dental, and vision insurances. On average, all of the comparator agencies contribute $1,774 per month whereas the Authority contributes $2,046 per month. This is approximately a 15% difference. Leave Eight (8) of the twelve (12) comparator agencies offer the equivalent of vacation leave as the Authority, at five years of service. Two (2) of the comparators offer more vacation leave and two (2) of the comparators offer less vacation leave. Two (2) of the twelve (12) comparator agencies offer equivalent holiday leave. Seven (7) of the comparators offer more holiday leave and three (3) of the comparators offer less holiday leave. For management positions, nine (9) of the comparators offer no administrative leave (excluding Executive Director). Two (2) comparators offer the same amount of administrative leave as the Authority and one (1) comparator offers more administrative leave than the Authority. Recommendations Since the Authority s benefits are fairly competitive with those of the comparator agencies, we base our recommendations on the base salary market survey results. Additional Benefits Appendix V contains information on the additional benefits offered at the comparator agencies. Data was collected on retiree health benefits, longevity benefits, and standby and call back pay policies: Certification Pay: Six (6) of the agencies offer pay for certain certifications. Compensation Philosophy/Salary Structure: Six (6) of the agencies had a compensation philosophy to align salaries with the market median. One (1) agency had a compensation philosophy to align salaries with the market plus 10%. Eight (8) of the agencies did not have a formal compensation philosophy or the philosophy was subject to labor negotiations. Five (5) agencies had salary schedules that consisted of steps, four (4) agencies had ranges consisting of a minimum and maximum, and three (3) agencies had a combination of the two. Overtime Pay Policies (including how holiday overtime is treated): Ten (10) of the agencies count hours worked on a holiday towards overtime calculation. Overtime compensation varies by agency. Shift Differential: All of the comparator agencies offer shift differential. One (1) agency only offers differential for shifts outside the incumbents normally scheduled shift th Street, Berkeley, California

18 Final Report Total Compensation Study Central Coast Water Authority Standby and Call Back Pay Policies: Eight (8) of the participating comparator agencies have established standby and call back pay policies. The pay associated with standby and call back varies. For example, some agencies compensate employees on standby with a set number of hours at their hourly rate while others pay a set dollar amount per standby period or day. For call back pay, employees are typically compensated at time and one half (1.5) of their hourly rate, however the minimum number of hours that employees are compensated for varies th Street, Berkeley, California

19 Final Report Total Compensation Study Central Coast Water Authority INTERNAL SALARY RELATIONSHIPS Building from the salary levels established for identified benchmark classes, internal salary relationships would be developed and applied in order to ensure internal equity. In the future, the Authority may need to utilize internal alignment practices if staff grows and additional classifications are added. While analyzing internal relationships, the same factors were considered that we used when comparing the Authority s current classifications to the labor market during the compensation study. Below are standard human resources practices that are commonly applied, when making salary recommendations based upon internal relationships, as follows: A salary within 5% of the market average or median is considered to be competitive in the labor market for salary survey purposes because of the differences in compensation policy and actual scope of the position and its requirements. However, a closer standard can be adopted by the Authority. Certain internal percentages are often applied. Those that are the most common are: The differential between a trainee and experienced class in a series (I/II or Trainee/Experienced) is generally 10% to 15%; A lead or advanced journey level (III or Senior level) position is generally placed 10% to 15% above the journey level; and A full supervisory position is normally placed at least 10% to 25% above the highest level supervised, depending upon the breadth and scope of supervision. When a market or internal equity adjustment is granted to one class in a series, the other classes in the series are also adjusted accordingly to maintain internal equity. Internal equity between certain levels of classification is a fundamental factor to be considered when making salary decisions. When conducting a market compensation survey, results can often show that certain classifications that are aligned with each other are not the same in the outside labor market. However, as an organization, careful consideration needs to be given to these alignments because they represent internal value of classifications within job families, as well as across the organization. For the purposes of this study, we were able to utilize market data to develop the salary recommendations for all of the benchmarked classifications. The Authority s current internal relationships are in line with the standard human resources practices outlined above. It is important for Authority management to carefully review internal relationships and determine if they are appropriate given the current market data th Street, Berkeley, California

20 Final Report Total Compensation Study Central Coast Water Authority It is important to analyze market data and internal relationships within class series as well as across the organization, and make adjustments to salary range placements as necessary based on the needs of the organization. The Authority may want to make internal equity adjustments or alignments, as it implements the compensation strategy. This market survey is only a tool to be used by the Authority to determine market indexing and salary determination th Street, Berkeley, California

21 Final Report Total Compensation Study Central Coast Water Authority RECOMMENDATIONS Pay Philosophy The Authority has many options regarding what type of compensation plan it wants to implement. This decision will be based on what the Authority s pay philosophy is, at which level it desires to pay its employees compared to the market, whether it is going to consider additional alternative compensation programs, and how great the competition is with other agencies over recruitment of a highly qualified workforce. Proposed Salary Structure Currently the Authority has a salary schedule with a set number of ranges. Classifications are assigned a salary range with a minimum and maximum set approximately 22% apart and ranges approximately 4.5% apart from each other. Incumbent salaries are dependent on individual qualifications and performance. Salary adjustments may be made based on merit and/or cost of living adjustments. To meet the Authority s needs, we developed a salary schedule with 60 ranges, each with a minimum and maximum set 22% apart, similar to the Authority s current schedule, except that we inserted in between ranges in order to reduce the differential between ranges from the approximate 4.5% to approximately 2.2%. The proposed salary schedule utilizes formulas to establish relationships between ranges as well as generate the minimums and maximums. It is important to note that the range numbers of the Authority s current salary schedule do not correspond exactly to the proposed salary schedule because of the additional ranges. Appendix III contains the proposed salary range structure. Proposed Salary Range Placements Appendix IV illustrates the proposed salary range placement for each classification based on the market data and an internal relationship analysis. We used the market base salary median findings for each surveyed classification and aligned the classification s salary range maximum with the market median. Benefits Package The Authority appears to be competitive with the market in total compensation with retirement plan and insurance program balancing each other out. Since the Authority s insurance benefits are competitive with the market, we are not recommending any adjustments to the Authority s benefits package th Street, Berkeley, California

22 Final Report Total Compensation Study Central Coast Water Authority Options for Implementation Regarding implementation, it is helpful to point out that adjusting salary ranges per classification, and adjusting actual employee pay, are two separate actions. Our report contains recommendations that adjust salary ranges per classification based on the market compensation study that was conducted. This is the first step in implementing the study. The second step is to determine what the new/adjusted salary ranges mean for the Authority s workforce and their actual pay. For those classifications that are below market, we recommend adjusting salary ranges based on market results and implementing the increased salaries depending on how quickly the Authority can afford to do so based on its fiscal situation. For example, if the market shows that a classification is 10% below market, we recommend adjusting the salary range upwards by 10%. This is the first step of implementation and does not mean that each incumbent within the classification automatically receives a 10% salary increase. Incumbents may merely be moved over to the newly recommended range. In fact, those incumbents whose current pay falls within the newly recommended range may not receive any adjustment but would simply be moved over to the new range. Of course, they then have more opportunity for growth in the future because their new range maximum is greater than what it was before. Only those incumbents whose current pay falls below the minimum of the new range would receive an adjustment up to the minimum of the new range. Of course, the Authority may decide that it prefers a different approach. When classifications are over market, we typically recommend Y rating employees whose current salary is above the top of the recommended range until the market numbers catch up with their current salary. Typically, Y rating an employee means to keep the employee s salary frozen and to provide no salary increases until the employee s current salary is within the recommended salary range. This will result in no immediate loss of income, but will delay any future increases until the incumbent s salary is within the salary range. However, the employee would still be eligible for merit based lump sum bonuses, which is a current practice (see below for more information). It is important to note that though the incumbent s salary may be frozen, the salary range of that classification would receive Cost of Living Adjustments (COLAs); this is how the classification s range would catch up to the incumbent s salary at one point. The Authority s current merit pay program states that when an employee is at the top of their salary range, they may receive a lump sum award in lieu of a merit increase. In the case of a Y rated employee, we would recommend providing a lump sum award when warranted in lieu of a merit increase unit the salary range catches up with the incumbent salary. To reiterate our two step implementation process from above: the first step is to adjust the salary range for the classification downwards based on the market survey. The second step is to determine how this affects incumbents. For example, if the market shows that a classification is 2% above market, we recommend adjusting the salary range downwards by 2%. This is the first step of implementation and does not mean that each incumbent within the classification receives a 2% salary reduction. In fact, those incumbents whose current pay falls within the newly recommended range would not have any negative impact but would simply be moved over to the new range. In the future, they would have less opportunity for growth because their new range maximum is less than what it is now. Only those incumbents whose th Street, Berkeley, California

23 Final Report Total Compensation Study Central Coast Water Authority current pay falls above the maximum of the new range would be Y rated, i.e., their salary would be frozen in place until the salary range catches up by applying COLAs. In these cases, the only opportunity to earn additional pay is through lump sum merit bonuses. For classifications that were not benchmarked, internal alignments with other classifications will need to be considered, either in the same class series or those classifications that have similar scope of work, level of responsibility, and worth to the Authority. Where it is difficult to ascertain internal relationships due to unique qualifications and responsibilities, reliance can be placed on past internal relationships. One (1) classification, the Finance Director, was not benchmarked in the compensation study. We used standard human resources differentials to internally align the classification 20% above the Controller classification; a full supervisory position is normally placed at least 10% to 25% above the highest level supervised, depending upon the breadth and scope of supervision. It is important for Authority management to carefully review these internal relationships and determine if they are still appropriate given the current market data. Cost of Living Adjustments vs. Merit Increases One of this report s recommendations is to review the Authority s policy regarding salary adjustments. Currently, the Authority conducts compensation surveys every other year. In addition, the Authority Board approves a salary pool/budget every year that management can use for merit, as well as cost of living increases. The portion of the pool that is designated for cost of living adjustments (COLAs) is derived from the regional CPI index each year. Both the merit and CPI components of the pool are afforded to employees based on performance and no automatic increases are given. What is somewhat unusual is that no COLAs are applied to the Authority salary ranges which are only adjusted every other year based on the biannual salary survey. We find that best practice is to conduct compensation surveys less frequently and we recommend that the Authority move to a survey model of every five (5) years. Salary surveys are very time consuming and costly (whether conducted by Authority staff or a consultant) and we believe that a biannual survey is not necessary. In those years when no salary survey is conducted, the typical best practice is to apply COLAs to the salary structure. This means that the Authority would increase all salary ranges (the entire salary range matrix we developed) by a certain percentage (typically based on the local/regional CPI) but employees would not receive the COLA automatically, they would still need to earn it based on performance. As a side note, this is something that would not be possible for agencies that have step systems, which we are not recommending th Street, Berkeley, California

24 Final Report Total Compensation Study Central Coast Water Authority USING THE MARKET DATA AS A TOOL We wish to reiterate that this report and our findings are meant to be a tool for the Authority to create and implement an equitable compensation plan. Compensation strategies are designed to attract and retain excellent staff. However, financial realities and the Authority s expectations may also come into play when determining appropriate compensation philosophies and strategies. The collected data represents a market survey that will give the Authority an instrument to make future compensation decisions. It has been a pleasure working with Central Coast Water Authority on this critical project. Please do not hesitate to contact us if we can provide any additional information or clarification regarding this report. Respectfully Submitted, Koff & Associates Georg Krammer Chief Executive Officer th Street, Berkeley, California

25 Final Report Total Compensation Study Central Coast Water Authority Appendix I Results Summary

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27 Central Coast Water Authority Appendix I Results Summary January 2016 Top Monthly Salary Data Benefit Cost Total Monthly Compensation Data Classification Top Monthly Salary Average % above or below Median % above or below Benefit Cost Average % above or below Median % above or below Total Monthly Comp Average % above or below Median % above or below Accounting Technician $5,717 $5, % $5, % $3,160 $3, % $3, % $8,877 $8, % $8, % Administrative Assistant $5,717 $5, % $5, % $3,160 $2, % $3, % $8,877 $8, % $8, % Controller $10,631 $11, % $11, % $4,087 $4, % $4, % $14,718 $15, % $15, % Deputy Director of Finance $13,697 $14, % $14, % $4,929 $5, % $5, % $18,626 $19, % $19, % Deputy Director of Operations and Engineering $13,697 $14, % $13, % $4,929 $5, % $5, % $18,626 $19, % $20, % Distribution Supervisor $8,179 $8, % $8, % $3,624 $3, % $3, % $11,803 $12, % $11, % Distribution Technician $6,289 $6, % $6, % $3,295 $3, % $3, % $9,584 $10, % $10, % Engineering Technician $6,987 $6, % $6, % $3,399 $3, % $3, % $10,386 $10, % $10, % Executive Director $19,581 $19, % $19, % $6,902 $7, % $7, % $26,484 $26, % $26, % IT/Instrumentation and Control Specialist $7,761 $7, % $7, % $3,545 $3, % $3, % $11,306 $11, % $11, % Laboratory Analyst $5,968 $5, % $5, % $3,207 $3, % $3, % $9,175 $9, % $9, % Maintenance Foreman $7,364 $8, % $7, % $3,497 $3, % $3, % $10,861 $11, % $11, % Maintenance Superintendent $9,083 $9, % $9, % $3,795 $4, % $3, % $12,878 $13, % $13, % Maintenance/Instrumentation Calibration and Repair Technician $6,987 $7, % $7, % $3,426 $3, % $3, % $10,413 $11, % $10, % Office Manager $8,179 $8, % $8, % $3,624 $3, % $3, % $11,803 $12, % $12, % Plant Maintenance Technician $6,289 $6, % $6, % $3,295 $3, % $3, % $9,584 $10, % $10, % Regulatory Specialist $8,179 $8, % $8, % $3,624 $3, % $3, % $11,803 $11, % $11, % Senior Chemist $8,179 $8, % $8, % $3,624 $3, % $3, % $11,803 $11, % $11, % Water Treatment Plant Operator $6,629 $7, % $6, % $3,359 $3, % $3, % $9,988 $10, % $10, % Water Treatment Plant Supervisor $9,083 $9, % $9, % $3,822 $4, % $3, % $12,905 $14, % $13, % Page 1 of 1 Alpha -General Employees; CCWA Appendix I Results Summary xlsx

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29 Final Report Total Compensation Study Central Coast Water Authority Appendix II Market Base, Benefits, and Total Compensation Findings

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31 Central Coast Water Authority Appendix II a Top Monthly Salary Data January 2016 Accounting Technician Top Next Next Monthly Effective Salary Percentage Rank Comparator Class Title Salary Date Increase Increase 1 Zone 7 Account Clerk $6,550 6/21/2015 Unknown Unknown 2 San Diego County Water Authority Accounting Technician 2 $6,150 07/01/15 7/1/ % 3 Three Valleys Accounting Technician $6,006 07/01/15 7/1/2016 Unknown 4 San Juan Accounting Technician II / Accounting Technician III 3 $5,722 07/11/15 Unknown Unknown 5 Central Coast Water Authority Accounting Technician $5,717 07/01/15 7/1/2016 Unknown 6 Calleguas a Accounting Technician II / Senior Accounting Technician 3 $5,671 01/01/16 Unknown Unknown 7 Castaic Lake Accounting Technician II / Senior Accounting Technician 3 $5,651 10/03/15 Unknown Unknown 8 City of Santa Maria b Accounting Technician II 1 $5,066 12/26/15 Unknown Unknown 9 Casitas Accounting Technician $4,870 07/01/14 Unknown Unknown 10 United Water Conservation District Accounting Technician II $4,852 7/1/2015 Unknown Unknown 11 Antelope Valley East Kern Accounting Technician II $4,720 07/01/15 Unknown Unknown Goleta c N/C Kern County N/C Average of Comparators $5,526 % CCWA Above/Below 3.3% Median of Comparators $5,661 % CCWA Above/Below 1.0% Number of Matches 10 NOTE: All calculations exclude CCWA N/C - Non Comparator N/R - Non Responsive a - Salaries reflect a 1.6% salary increase as of 1/1/16. b - Salaries reflect a 2% salary increase as of 12/26/15. c - Salaries reflect a 2% salary increase as of 1/1/ Requires completion of 30 college units with an emphasis on accounting. 2 - Requires completion of college or vocational school accounting courses equivalent to those required for an Associate of Arts degree. 3- This match is a span of scope bracket to represent the level of responsibility of the CCWA class. The salary displayed is the average of the matches. Page 1a of 20 CCWA Appendix II a Top Monthly Salary xlsx 22