07 Staff Report - Management Compensation Plan for FY 2004-2005
DATE: TO: FROM: COUNCIL AGENDA REPORT NOVEMBER 10, 2004 MAYOR AND TOWN COUNCIL DEBRA 1. FIGONE, TOWN MANAGER MEETING DATE: 11/15/04 ITEM NO. 7· SUBJECT: ADOPT RESOLUTION APPROVING THE
MANAGEMENT COMPENSATION PLAN FOR FISCAL YEAR 2004-2005 RECOMMENDATION: Adopt resolution approving the Management Compensation Plan for Fiscal Year 2004-2005. DISCUSSION: The Town's Management
Compensation Plan is reviewed annually. The Plan applies to at-will executive level managers (Management Group I), at-will middle managers (Management Group II), and Police Sergeants
(Management Group III). Compensation adjustments for executive and middle managers are made to the salary ranges, and actual adjustments are performance based. A summary of the proposed
amendments to the Management Compensation Plan is attached. The key plan amendments include a 3% salaryrange adjustment for executive and middle managers effective August 29,2004 and
a 6% salary adjustment for Police Sergeants effective January 2,2005; changes to the health benefits program including a reduction in the Cash Allocation Plan from FY 2003-04 and the
establishment ofnew Family Medical Insurance Plan; the establishment ofa salary range for the Clerk Administrator position at a level equal to other lower tier middle management staff;
a re-title for the Redevelopment Manager classification to Economic Vitality Manager and movement from executive to mid-management; a reduction in paid Administrative Leave for executive
and middle managers from 80 hours to a maximum of40 hours per year; reinstatement of sick and vacation leave cash-outs; and amendment of the Exceptional Contribution Pay Program from
a fixed dollar amount -$2,000 annually, to up to 1.75% of base pay annually. A detailed summary of the proposed changes is attached, as is a copy of the 2004-2005 Management Compensation
Plan. PREPARED BY: GARY ROGERS Human Resources Director Reviewed by: Town Manager 4)k Town Attorney __Clerk .5(J Finance __Community Development Revised: 11/12/04
8:06 am Reformatted: 5/30102
PAGE 2 MAYOR AND TOWN COUNCIL SUBJECT: ADOPT RESOLUTION APPROVING THE MANAGEMENT COMPENSATION PLAN FOR FISCAL YEAR 2004-2005 NOVEMBER 10, 2004 ENVIRONMENTAL ASSESSMENT: Is not a project
defined under CEQA, and no further action is required. FISCAL IMPACT: Funds to implement the Management Compensation Plan as amended are included in the Adopted 2004-2005 Operating Budget.
Attachments: 1. Summary of Proposed Amendments to Management Compensation Plan for F Y 2004-2005 2. Resolution approving Management Compensation Plan for FY 2004-2005 (Exhibit A: Management
Compensation Plan for Fiscal Year 2004-2005
SUMMARY OF PROPOSED CHANGES IN THE FY 2004-2005 MANAGEMENT COMPENSATION PLAN • Compensation Adjustments FY 2004-2005 A salary range adjustment of 3% will be effective August 29, 2004,
for Group I & II Managers (executive and middle managers). Consideration of actual salary adjustments will be made as part of the management evaluation program, and are subject to the
parameters established by the Town Manager. If salary adjustments are made, they will be performance based. A wage adjustment of 6% will be effective on January 2,2005 for the Police
Sergeants (Group III Managers). • Health Benefits Program The evolution of the Town's health benefits program continues in FY 2004-2005, through the establishment a new Family Medical
Insurance Plan option and a reduction in the Cash Allocation for benefits. It is proposed that a Family Medical Insurance Plan, similar to that provided to other Town employees, be established
for management personnel effective January 1, 2005. The plan would provide a contribution of up to $1,256 per month for the purchase of medical, dental andlor vision insurance. Cash-back
is not permitted under this program. It is proposed that the current Cash Allocation be changed to provide one benefit level to all management personnel. The new Cash Allocation would
not be linked to future increases in medical premiums. Under this model, future increases in Town contributions toward health insurance are anticipated to be limited to increases in
the Family Medical Insurance Plan only. The proposed contribution levels proposed to be effective January 1,2005 are as follows: 2005 Family Medical Option wino cash-back 2005 Cash Allocation
Plan $1,256 per month $ 950 per month This proposed change represents a decrease in Cash Allocation and the establishment of a new Family Medical Insurance Plan option for the Town's
management staff. This proposal reduces the existing Cash Allocation for benefits from a current contribution of $1076 per month for executive managers and $1008 per month for middle
managers and Police Sergeants to $950 per month for all management staff. PerSOllilel hired as new Town employees after November 15, 2004, will be eligible for a cash allocation for
benefits of $400 per month. N:\MGR\AdminWorkFiles\cnclrpts\MGMT PLAN SUMMARY OF PROPOSED CHANGES 2004-05.doc 11/12/2004 1 ATTACHMENT 1
...-Summary of Proposed Changes in the FY 2004-05 Management Compensation Plan Page 2 • Administrative Leave The Town Manager and Department Heads are able to
provide executives and middle managers (Group I and II) paid administrative leave in recognition of extraordinary work hours. In the FY 2003-04 Management Compensation Plan, the maximum
Administrative Leave was increased from 40 to 80 hours annually in recognition of a delay in salary adjustment, and suspension of sick and vacation leave cash-outs. It is proposed that
the Administrative Leave be returned to the FY 2002-03 levels of up to 40 hours annually. • Elimination of Auto Allowance -Conversion to Salary To simplify payroll functions, it is recommended
that the auto allowances provided to management staff be eliminated. It is further proposed that, where necessary to accommodate a similar salary increase, the maximum salary ranges
for affected incumbents be adjusted. This action will result in an additional range adjustment for the Parks and Public Works Director and the Community Development Director. The salary
range of the Assistant Town Manager will also be adjusted as it is internally linked to these positions. • Classification Changes On June 7, 2004, the Town Council established the Management
position of Clerk Administrator. Based on a review of survey data of similar positions in Santa Clara County and on a review of internal position alignment, it is proposed that the salary
range of the Clerk Administrator be equal to other lower-tier middle management staff as reflected in Appendix A. Also included is a proposed re-title and reclassification of the executive
level Redevelopment Manager to middle management position of Economic Vitality Manager. • Re-instate Sick Leave and Vacation Leave Cash-outs Cash-outs of vacation and sick leave were
suspended exclusively for management employees in FY 2003-04 as a cost savings measure. It was a one-time action implemented to provide additional budget savings. It is proposed that
the provision enabling sick and vacation leave cash-outs be reinstated. • Exceptional Contribution Pay Program (ECPP) Currently, the Town Manager is authorized to provide exceptional
contribution pay up to $2,000 annually. The $2,000 level was established more than a decade ago, and as a percentage of salary, has decreased in value over the years. It is proposed
that ECPP be indexed as a percentage of salary. This action would provide the Town Manager the ability to grant exceptional contribution pay up to 1.75% of base salary. Exceptional contribution
pay for FY 2004-05 will only be considered' for those managers who are at the top of their range or in lieu of a salary increase.
RESOLUTION NO. RESOLUTION OF THE TOWN OF LOS GATOS APPROVING THE MANAGEMENT COMPENSATION PLAN FOR FISCAL YEAR 2004-2005 RESOLVED, by the Toyvn Council of the Town of Los Gatos, County
of Santa Clara, State of California, that the Management Compensation Plan for Fiscal year 2004-2005, a copy of which is attached hereto as EXHIBIT A, is hereby approved. PASSED AND
ADOPTED at a regular meeting ofthe Town Council ofthe Town of Los Gatos, California, held on the__day ofNovember, 2004 by the following vote: COUNCIL MEMBERS: AYES: NAYES: ABSENT: ABSTAIN:
SIGNED:MAYOR OF THE TOWN OF LOS GATOS LOS GATOS, CALIFORNIA ATTEST: CLERKADMINISTRATOR OF THE TOWN OF LOS GATOS. LOS GATOS, CALIFORNIA N:\MGR\AdminWorkFiles\cnclrpts\Mgmt comp plan resolution
2004.doc 11/11/2004 ATTACHMENT 2
EXHIBIT A TOWN OF LOS GATOS MANAGEMENT . COMPENSATION PLAN Fiscal Year 2004-2005 Exhibit A
-II 1. ·PURPOSE To establish a program and guidelines for a management compensation plan pursuant to the following goals and objectives: • Establish a system for the payment of management
personnel which results in appropriate salary.:contribution relationships and competitive salary rates. • Recognize the distinct character of management jobs and incumbents as opposed
to grouping them with other employees for salary purposes. • Diminish the possible influence of negotiated salaries for rank-and file employees on salaries set for management classifications.
• Promote more commitment by management to goals and objectives of the Town Council and Town Manager. • Establish a system where salary serves as an effective device for promoting better
job performance. • Give recognition to impact of the employee on the job and performance level. • Promote the further identification of management group and understanding of associated
roles, loyalties, and responsibilities. • Strengthen the role of the supervisor in the the compensation program. • Appropriately reward those employees whose extra effort results in
the improvement of Town services. 2. APPLICATION This Policy shall apply to all employees occupying positions designated as Management. 3. POLICY a. Criteria For Establishing Ranges
-Salary ranges shall be designed to ensure satisfaction of the "equal pay for equal work" principle. It has been determined that the maintenance of a strong competitive position in the
labor market has a positive effect on the Town's ability to attract and retain highly qualified personnel.
b. Additionally, there are identifiable differences in work requirements between Los Gatos management and presumptively comparable positions in other agencies. These differences argue
against the setting of rates strictly on the basis of "prevailing wage". To the degree possible, ranges will reflect consideration of the relative value of positions. This consideration
will take into account differences and similarities in positions, within the respective management and employee groupings. The establishment and maintenance of management ranges shall
be guided by the principle that no supervisor should receive less compensation than their highest paid subordinate if a similar amount of time is worked. The establishment and adjustment
of salary ranges shall be effected through resolution of the Town Council. A and B Ranges -All management classes shall have two ranges titled "A" and "B". The ranges will be reviewed
for possible adjustments to be effective the first pay period in September. For Management Group III, the general or cost-of-Iiving adjustments shall be the same as those granted to
the employee association representing sworn positions. Range adjustments also may be made to prevent salary compaction and ensure the objectives of this plan are maintained. Salary range
adjustments shall apply to the ranges only for Group I & II managers. Range adjustments may also be made in the event of materially changed job assignments. 1. A Range -The "A" range
is appropriate for entry level and fully qualified employees. The performance expectations are those which would normally be associated with these levels. The range is to be used to
initially grant a salary based on anticipated performance level and thereafter to recognize changes in such performance. The "A" range will have a spread of 35% from entry to top salary
with no set steps. The lowest salary in the range would be appropriate for a new employee who minimally satisfies job requirements. The top of the range is reserved for employees who
perform at the highest level of expected proficiency. 2. B Range -The "B" range is designed for those employees whose performance and value to the Town clearly exceed normal expectations.
The top salary of any given "B" range shall exceed the top salary of the A "range of the class by 15% (see Appendix A). Placement in the range is contingent upon the satisfaction of
specific requirements and approval of the Town Manager. 2
c. Salary Progressions Within Ranges -Employees, both upon appointment and during the course of their employment, may receive any salary amount not to exceed the maximum of their range.
Employees shall be reviewed for salary increases at such times the Town Manager or department head deems appropriate, provided, however, that at least one review will be conducted annually.
Management Group I and Group II evaluations are scheduled to be completed in September of each year. Management Group I and Group II salary range adjustments in FY 2004-05 will be effective
August 29, 2004. The sole consideration in the granting of within-range salary adjustments shall be performance. Management Group III salary range adjustments are effective January 2,2005.
Salary adjustments for employees below the level of Department Head shall be made upon the recommendation of the Department Head and approval of the Town Manager. Salary adjustments
for Department Heads shall be determined and approved by the Town Manager. It is intended that incremental salary adjustments bear a direct relationship to progress of the employee toward
satisfying performance expectations. Upon employment, the employee and his/her supervisor shall develop a progress plan including a definition of performance goals, schedule of performance
reviews, and outline of possible within-range adjustments. Range adjustments average approximately 5%. Adjustments below and above this amount are permitted. While salary adjustments
normally involve increases, reductions may be made in instances of unsatisfactory performance. Prior to being finalized, progress plans shall be reviewed and approved by the concerned
Department Head or Town ·Manager in the case of Department Heads. d.· Labor Market Survey -Survey agencies making up the labor market base shall be used as determined appropriate by
the Santa Clara -County Employee Relations Service and Town Manager. The determination of position comparability shall take into account scope of. responsibility, functions supervised,
staff size, budget, and related factors. Consideration will not be given to factors relating to incumbents, such as performance, length of service, and competency; Supplemental benefits
shall be considered part of compensation paid. In order to determine the position of the Town's benefit package in relation to the labor market, benefit information shall also be included
in the survey of other municipalities. N:\MGR\AdminWorkFiles\cnclrpts\Management Comp Plan 2004-2005.doc 11/10/2004 3
e. Exceptional Contribution Pay -The basic salary ranges "A" and "B" are designed to ensure that employees have .the potential of a salary which is internally justified, competitive
with salaries paid in other agencies, and/or should provide compensation appropriate to productivity at the standards established by the Town. It is recognized, however, that some employees
may make an infrequent or "one time" significant contribution to the Town which exceeds expectations or job requirements. The Exceptional Contribution Pay Program (ECPP) is designed
to recognize and encourage this type of contribution. The contribution cannot be within job expectations and must result in an identifiable and clearly recognized positive impact on
the Town. Ordinarily such impact must be definable in terms of dollar cost reductions and/or increased productivity without additional costs. Examples of indicators of such a contribution
include the following: • Within the employee's area of responsibility there has been a consistent, consistent, exceptionally high level of productivity with repeated successful implementations
of progressive and up-to-date operational and managerial systems. • Employee initiates a series of innovative approaches to providing Town services which result in significant cost savings
with no reduction in service level. • Employee develops programs or makes suggestions which result in operational improvements outside his/her normal area of responsibility. • Employee
devel.ops a program, system, or procedure on his/her own initiative which results in a measurable significant improvement in Town services or governmental efficiency. ECPP may be granted
at any time by the Town Manager upon recommendation by the employee's Department Head in an amount not to exceed 1.75% of salary (Maximum B-Range compensation). Amounts greater than
1.75% of base salary may be granted by the Town Council upon recommendation of the Town Manager. Payment shall be made in a lump sum. 4
4. GENERAL ADMINISTRATION AND PLAN REVIEW The Town Manager shall be responsible for the annual review and proposed changes to the Management Compensation Plan. 5. SUPPLEMENTAL BENEFITS
a. Eligibility -Management employees will be eligible for benefits on the first day of the month following their hire date. b. With the exception of the Cash Allocation Program, no unexpended
dollar amounts associated with selected benefits may be disbursed to a terminating employee. c. All benefit selections are subject to State and Federal rules, regulations, and laws regarding
employee benefits and tax status. No guarantee is made regarding the tax-exempt status of any and all benefits presented or selected except those allowed by law. d. Benefit selections
must be made during open enrollment. No change may be made after that time unless such changes are a result of a qualifying event or are permitted by the benefit plan. e.. Public Employees
Retirement System -The Town shall continue to contract with PERS to provide the 2% at 55 retirement program for nonsafety management personnel and the 3% at 50 retirement program for
...J safety management personnel. f. Vacation Management I -Accrual Schedule o-60 mos. 15 days per year (4.62 hrs. per pay period) 61 -120 mos. 20 days per year (6.15 hrs. per pay period)
121 mos. & over 25 days per year(7.70 hrs. per pay period) Management II -Accrual Schedule o-60 mos. 15 days per year (4.62 hrs. per pay period) 61 -120 mos. 20 days per year (6.15 hrs.
per pay period) ·121 -180 mos. 23 days per year (7.08 hrs. per pay period) 181 mos. &over 25 days per year (7.70 hrs. per pay period) N:\MGR\AdminWorkFiles\cnclrpts\Management Comp Plan
2004-2005.doc 11/10/2004 5
Management III -Accrual Schedule o-36 mos. 10 days per year (3.08 hrs. per pay period) 37 to 60 mos. 15 days per year (4.62 hrs. per pay period) 61 to 120 mos. 20 days per year (6.16
hrs. per pay period) 121 to 180 mos. 23 days per year (7.08 hrs. per pay period) 181 mos. &over 25 days per year (7.70 hrs per pay period) The maximum vacation leave accrual shall "be
500 hours for Management I and II. The maximum vacation leave accrual shall be 344 hours for Management III. Accrual of vacation leave shall cease when the maximum accrual level is reached.
The Town Manager has the authority to establish vacation accrual rates for new managers at the time of hire, based upon experience and years of service. Vacation Cash-out -Vacation leave
cash-out for Management Group I and II is permitted twice a year in December and June. The amount to be cashed out is limited to the amount accrued. Group III Managers are eligible to
cash out up to 40 hours of vacation based on accruals as of November 30th . Cash-out will be paid during the month of December. g. Personal Leave -Management Group I and II employees
are eligible for a maximum of forty-eight (48) hours personal leave each calendar year. For Group I and Group II empioyees personal leave has no cash value, may not be carried over from
year to year, nor may it be cashed-out. Management Group III employees are eligible for a maximum of twenty (20) hours of personal leave. Management Group III may cash out their personal
leave at base pay if it is not used by the end of November. Management Group III may use personal leave during the month of December; however, employees desiring to receive compensation
for those hours shall do so in conjunction with the annual cash-out in November. h. Sick Leave -Sick leave accrues at the rate of 8 hours per month (3.70 hours per pay period) with a
1100 hour accrual limit for Group I and Group II Managers, and an 1180 hour accrual limit for Group III Managers. i. Sick Leave Cash-out -Management employees who terminate employment
with the the Town, may cash out their accrued sick leave as· follows: 1 -59 months of service at 25% of value 60 -119 months of service at 37.5% of value 120 or more months of service
at 50% of value 6
Management Group III employees may cash-out up to 40 hours of accumulated sick leave at 50% of their current salary in December of each year. Management Group I and II may cash out their
accrued sick leave twice a year in December or June, pursuant to the schedule above. In order to be eligible for the sick leave cash-out program, Group 1& II Managers must maintain a
sick leave balance of at least 150 hours after the annual cash-out. Group I & II Managers who terminate with a sick leave balance of at least ·150 hours may cash-out their entire balance
pursuant to the schedule above. Group III Managers who terminate with a sick leave balance of at least 200 hours may cash-out their entire balance pursuant to the schedule above. . j.
Sick-leave Conversion at Retirement -Employees hired into any regular, full-time Town position prior to November 15, 2004, who retire from the Town, may convert 100% of the value of
the accrued sick leave to a dollar equivalent at their hourly rate of pay at the time of retirement. This amount shall be held in an account under the control of the Town. The account
will not accrue interest and will not be paid in cash to the retiree or any beneficiaries. The employee's portion of their medical payment shall be withheld from their monthly retirement
payment by PERS. From the account established, the Town will pay the retiree, quarterly in advance, the retiree's portion of medical payments until all monies are depleted from the account
or the retiree dies, whichever occurs first. The . retiree will be responsible for 100% of their share of future medical insurance payments once the account is exhausted. k. Administrative
Leave -Upon approval of his/her Department Head (or by the Town Manager in the case of Department Heads), Group I and II management employees are eligible for up to 40 hours administrative
leave with pay per calendar year. Administrative leave does not accumulate from year to year, and may not be cashed-out. Administrative leave may be granted in recognition of extraordinary
work hours by management personnel. Specific examples include unanticipated emergency situations, extraordinary Councilor Commission meetings, and extensive weekend or evening work.
I. Salary Adjustments For Management Employees On Extended Leave -A management employee who is on extended leave from his/her position due to sickness, disability, or employee-initiated
leave without pay status shall receive no salary adjustment until returning to full-time work. N:\MGR\AdminWorkFiles\cnclrpts\Management Comp Plan 2004-2005.doc 11/10/2004 7
Vacation or sick leave may be used to assure continuation of payroll status in order to retain insurance benefits under the cash allocation benefits program. Employees who are absent
from work due to a workrelated disability shall not be sUbject to the provision above and will be considered for a salary adjustment on the regular schedule. m. Leave Accruals -Management
employees shall not accrue vacation or sick leave during any period of unauthorized leave, suspension without pay, or leave without pay. n. Continuation Of Benefits -Management employees
shall continue to receive fringe benefits so long as those employees remain on the Town payroll. . o. Disability Insurance -The Town will provide for a Short Term Disability policy effective
the 8th calendar day; coverage of 60% of weekly earnings up to a maximum of $1,300/week for 12 weeks. Long Term Disability benefits begin on the 91st day of disability; coverage of 60%
of monthly earnings up to a maximum of $6,000/mo. p. Life Insurance -Management employees shall receive Town paid life insurance coverage providing cover of $50,000 life and $50,000
accidental death benefit or equal to annual salary, whichever is higher. Additional life insurance may be purchased in accordance with the Town's current life insurance carrier and relevant
I.R.S. regulations. q. Vision Plan -Management employees shall be enrolled in the Town's vision-care health plan (VSP Plan B -with a $20 co-pay). The Town shall pay for the employee-only
coverage. At their own cost, employees may enroll eligible dependents upon hire and at plan inception. r. Employee Assistance Program-Management employees are eligible to participate
in the Town's employee assistance program. The premium shall be paid by the Town. 8
s. Cash Allocation &Family Medical Insurance Plan Effective January 1,2004 through December 31,2004: • Group I managers shall receive a cash allocation of $1 ,076 per month; • Group
II & Group III managers shall receive a cash allocation of $1,008 per month; • Management employees hired prior to July 1, 2003, may choose to receive up to $913 per month of their cash
allocation in cash. • Management employees hired on July 1, 2003 or later may use the cash allocation for the purchase of benefits only. Effective January 1, 2005 managers will have
the option of participating. in a Cash Allocation Plan or a Family Medical Insurance Plan as 'follows: Cash Allocation Plan • All managers hired on or after November 15, 2004 shall receive
a cash allocation for benefits of $400 per month; • All managers hired before November 15, 2004 shall receive a cash allocation for benefits of $950 per month; • Managers participating
in this plan may receive the benefit as cash. Benefits which can be purchased through the cash allocation plan include medical, dental and vision insurance. These benefits are available
on a pre-tax basis. If the premium cost of the health plan exceeds the Town contribution, the employee shall pay through payroll deduction the difference between the monthly premium
and the amount contributed by the Town. Any amount received in cash is taxable. Employees electing to receive cash have the option of receiving payment in the first two paychecks of
each month (twenty-four times a year) or twice a year in December and June. Family Medical Insurance Plan • Managers shall receive a $1,256 per month contribution toward monthly health
insurance premiums. If the premium costs exceed the Town contribution, the manager shall pay through payroll deduction the difference between the monthly premium and the amount contributed
by the Town. The employee shall forfeit any balance should the Town contribution exceed the cost of the premiums. N:\MGR\AdminWorkFiles\cnclrpts\Management Comp Plan 2004-2005.doc 11/10/2004
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t. Deferred Compensation -The Town will offer a program of deferred compensation to all managers. 10
APPENDIX A MANAGEMENT COMPENSATION PLAN BI-WEEKLY SALARY SCHEDULE B-RANGE MAXIMUM FY 2004-05 EFFECTIVE 8-29-2004 GROUP I MANAGERS Police Chief $ 6,209.30 Assistant Town Manager $ 5,755.99
Community Development Director $ 5,755.99 Director of Parks &Public Works $ 5,755.99 Finance Director $ 5,409.71 Police Captain $ 5,385.35 Community Services Director $ 5,163.87 Human
Resources Director $ 5,163.87 Library Director $ 5,163.87 GROUP II MANAGERS Assistant Community Development Director $ 4,791.59 Management Information Systems Manager $ 4,791..59 Superintendent
$ 4,791.59 Town Engineer $ 4,791.59 Accounting Manager $ 4,057.64 Assistant Library Director $ 4,057.64 Clerk Administrator $ 4,057.64 Economic Vitality Manager $ 4,057.64 Parking Coordinator
$ 4,057.64 Parks and Public Works Supervisor $ 4,057.64 Records &Communication Manager $ 4,057.64 GROUP III MANAGERS Police Sergeant: Effective January 4, 2004 $ 4,137.24 Police Sergeant:
Effective January 2, 2005 $ 4,385.47 N:\MGR\AdminWorkFiles\cnclrpts\Management Comp Plan 2004-2005.doc 11/10/2004 11