5.1. ERMUSR 01-08-2013 Elk River t
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. —General Manager
John Dietz—Chair
Daryl Thompson—Vice Chair
Al Nadeau—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
January 8, 2013 5.1
SUBJECT:
Longevity Pay
BACKGROUND:
The Wage and Benefits Committee considered the idea of longevity pay. The Committee
submitted this idea to the Commission for discussion at the December Utilities Commission
meeting. The Commission directed staff to bring back a longevity pay plan for consideration as
soon as possible.
DISCUSSION:
The lack of comparable information for consideration at the time this topic was discussed by the
Commission did not allow for specific direction. Staff has used best judgment to prepare the
proposed longevity pay benefit that is comparable to other Minnesota municipal utilities yet
meets the specific needs of ERMU.
Staff utilized Minnesota Municipal Utilities Association(MMUA) to conduct a survey of
Minnesota municipal utilities on longevity pay for lineworkers and other employees. This
survey information is available upon request. Of those responding to the survey, 24%offered
longevity pay. With the exception of one, all of the utilities offering longevity pay extend the
benefit to both lineworkers and non-lineworkers. There is also one utility that offers longevity
pay to non-lineworkers, but not the lineworkers.
Some of the utilities surveyed have their longevity pay calculated as a percentage basis and some
have fix dollar amounts. Designing a longevity pay benefit calculated as a percentage allows the
benefit to grow over time with the cost of living adjustments (COLA). By doing this, it is less
likely the benefit would need to be revised in the future and would stand the test of time.
After analyzing the data, 25% of those offering longevity pay begin the benefit at 5 years. The
remaining utilities that provide this benefit start offering the longevity pay later than 5 years of
service. Typically at 5 years of service a lineworker or water operator would have completed
their apprentice program or passed an examination for Class B water operator certification. This
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is also a typical level of applicable experience required for those seeking a job for an industry
competitor. Based on the issues that ERMU is considering addressing with this benefit, starting
the benefit at 5 years of service is the targeted demographic. There are a number of key
positions that will become open through retirements over the next decade. There has been a
depletion of employees with 5 through 15 years of service. It is becoming increasingly critical to
incentivize employees to grow and develop within the company and be positioned to be
promoted and fill positions as they become open. Attached for reference is a graph depicting the
number of ERMU employees compared to years of service. This does not reflect experience
brought into the company when hiring from the outside.
Based on the survey data the average longevity pay benefits are added to the base wage at
approximately 1% at 10 years of service, 2% at 20 years of service, and 3% at 30 years of
service. To modify this to meet our targeted 5 years of service demographics while staying
consistent with the industry standards, smaller increments could be used. This could be
accomplished by starting at 0.5% at 5 years of service and increasing by 0.5%every additional 5
years of service. This is reflected in the attached table. For reference,the table also reflects the
impact to a journeyman lineworker.
As with the Performance Metrics Incentive Compensation Policy adopted by the Utilities
Commission last month, it is recommended that an employee of the Utilities would be eligible
for the longevity pay benefit only if the employee is in good standing with the Utilities. An
employee would not be eligible while on disciplinary probation or a performance improvement
action plan.
FINANCIAL IMPACT:
If approved and implemented January 1, 2013,the financial impact to the Utilities would be
approximately $23,000 in expense for 2014. This is the equivalent of approximately a 1%
COLA evenly applied to all employees.
ACTION REQUESTED:
Staff recommends the Commission adopt the longevity pay benefit for implementation retro-
active to January 1, 2013.
ATTACHMENTS:
• ERMU Employees Years of Service Graph—January 8, 2013
• Proposed ERMU Longevity Pay Table—January 8, 2013
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Elk River Municipal Utilities
1/8/2013
Proposed Longevity Pay
Years of Service 5 10 15 20 25 30
Longevity Pay(%) 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
Lineworker 2013 Base Wage($) $ 36.87 $ 36.87 $ 36.87 $ 36.87 $ 36.87 $ 36.87
Lineworker 2013 Longevity Pay($) $ 0.18 $ 0.37 $ 0.55 $ 0.74 $ 0.92 $ 1.11
Lineworker 2013 Adjusted Wage($) $ 37.05 $ 37.24 $ 37.42 $ 37.61 $ 37.79 $ 37.98
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