4.1. ERMUSR 02-12-2013 II
Elk River ;
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:
February 12, 2013 4.1
SUBJECT:
Longevity Pay
BACKGROUND:
In 2012, 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 topic was then discussed at the January Utilities Commission
meeting. Direction was given to staff to bring back a longevity pay plan for further discussion in
February with an analysis on implementing longevity pay for lineworkers only. Specifically, the
direction given was to analyze the impact to the pay plan if longevity pay were to be
implemented for the lineworker positions only.
DISCUSSION:
The longevity pay discussion at the January Commission meeting focused on starting the
longevity pay steps at 5 years at 0.5% with a 0.5% increase every five years. For simplicity, this
analysis looked at only 1%, 2%, and 3% longevity steps. This simplified analysis does not
impact the results of the analysis, but rather makes for a cleaner presentation. Also, this analysis
considered "lineworkers" to be those lineworkers whose position includes participation in the on-
call rotation: Lineworker, Lead Lineworker, and Foreman.
The paygrades for these three lineworker positions have enough wage separation that longevity
pay could be implemented without a lower paygrade position with up to 3% longevity pay not
exceeding the base pay for the next higher lineworker position.
There are concerns with this approach. First, all three of these positions are non-exempt and
subject to overtime. Although these three positions have occasional overtime associated with
outages and projects, it is not routine. However, when considering the overtime and on-call
stipend, there becomes an issue when compared to the Electric Superintendent position, which is
an exempt position. With the equivalent of approximately 80 hours of overtime (time and a half)
and 3% longevity pay, a Foreman would be making the same as the Electric Superintendent.
This creates a situation where it is unlikely that an internal candidate would be interested in a
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promotion into the Electric Superintendent position. It would be difficult to fill the Electric
Superintendent position from the outside because of the extensive system knowledge required.
For a pay plan structure to be successful and allow for the development and promotion from
within, there needs to be adequate separation between positions and especially between a
supervisor and direct reports.
Second, the Commission had also discussed in 2012 having staff review the pay plan in 2013.
This review may include: analyzing how cost of living adjustments are applied, separation of
work classes, and benchmarking of positions. Through the analysis of the longevity pay as well
as previous wage analyses, a number if pay plan issues have been identified. It has been
discussed that these pay plan issues may be the result of a static pay plan structure in a dynamic
market. To maintain the integrity of a static pay plan in a dynamic market, the pay plan needs to
be reviewed every few years. This pay plan is going on 4 years and is due to be reviewed.
Typically in midyear Minnesota Municipal Utilities Association conducts an extensive wage
survey of water, wastewater, gas, and electric municipal utilities within Minnesota. American
Public Power Association typically has wage data available around the same time. An analysis
on the pay plan can be conducted after this information is available.
Longevity pay can be an effective way to compensate employees for institutional knowledge and
promote employee retention. Longevity pay essentially works like pay grade steps extending
farther into a career. This type of incentive works better applied across the board. The concerns
that non-lineworker positions would not need longevity pay because there is not currently
employee turnover in those positions is justification to review the pay plan. Fixing the root of
the problem would be better in the long run rather than using longevity pay as a corrective
adjustment for specific positions.
ACTION REQUESTED:
Staff recommends tabling the consideration of longevity pay, giving direction for a review of the
pay plan, and directing staff to bring back the results of the pay plan analysis with longevity pay
information later in 2013.
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