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5.5a ERMUSR 06-04-2024
5/29/2024 i Classification and Compensation Study Elk River Municipal UN J Project Methodology Project Results • Internal Equity = Job Evaluation • External Equity = Market Study • Pay Plan Development • Implementation Recommendations Next Steps M e[F otl olc5�y Project Overview Data Collection: project planning meetings to discuss goals for the study and current challenges experienced by existing classification and compensation plan, data collected from the organization. Position Review: SAFE was utilized for job evaluation, to establish internal equity. Existing job descriptions provided by the organization were the basis of this evaluation. Market Assessment: collection of base pay information from peer organizations. Pay Plan Development: pay plan development, grade assignments, and implementation calculations. Project Completion: final report, Commission presentation, project documentation delivery. 120 5/29/2024 Internal Equity Position Review • Baker Tilly owns a point factor job evaluation tool called SAFE® which was developed specifically for measuring local government jobs to determine internal value. • A point factor evaluation, such as SAFE, allows for a consistent, equitable and defensible means of establishing a hierarchy of jobs (internal equity) and is a< 7 •. m. �� compliant with the Federal Equal Pay ,,, •.•ceno�"e."• Act and Minnesota Local Government �,„,••m,,,,,��e, e.e.�e „" Pay Equity Act. zu"„"ece.aa.�mma,a.„.am„w • The result of this process is a total score for each position. 4 External Equity Market Assessment Peer Organizations = peer organizations that are similar in size (revenue, population, or number of employees), services provided, geographic proximity, industry, competition for talent, etc. • Private Sector = three private sector peer organizations and published survey salary data included in the market results. Benchmark Positions = a job that is commonly found in the workforce and is likely to match with analogous positions in other organizations. Data Adjustments = work week and aging data if not in the current fiscal year. Quality Control • Market data is not weighted; no peer's data is given preference over another. • Required three matches per benchmark position to determine market values. • A 75% overlap in duties/responsibilities is considered a "good" match. =x to rnal Equity Market Assessment: Peer Organizations • ERMU identified 10 peer organizations to be included in the study. • Data was collected or compiled from all 10 of those, shown in bold below. ERMU contacted the pmate companies (8-10) and provided the data t Baker Tilly for analysis - Data from 3 published surveys included to represent the "private sector" 1. Anoka Municipal Utilities 11. Comp Analyst 2. Austin Utilities 12. Bureau of Labor Statistics 3. City of Chaska Utilities 13. Economic Research Institute 4. City of North St. Paul Utilities 5. Moorhead Public Services 6. Owatonna Public Utilities 7. Shakopee Public Utilities 8. Connexus Energy 9. Great River Energy 10. Wright -Hennepin Electric Co-op N. 121 2 5/29/2024 0 .- — — m�Mw�l l,ne$MN �resMa a .Mx wbere cast of b�i� is a measaremen< p of goods antl servic¢sin eacM1 area, tl,e 1. - ecbe �nop - mst of labor is a measuremen[of compensation paid rat Cost of lab. can be impacletl by [M1e cost of Irving but¢ ainlyinfluencetl by [besupply antl tlemaeM of labor in eacM1 Assessor toolwM1icM1u 1 g p isM1 y Bureau NLabor Staeseb. rea (rate of unemployment antl numberof qualifietl laborers). External Equlvy Market Assessments: Results • All 35 positions within ERMU were included in the market survey as a benchmark position. • Of the 35 benchmark positions, none had insufficient data (less than 3 matches). • Overall, the study yielded market values for 100% of the organization's positions. • Average minimum, midpoint, and maximum results were prepared for each benchmark vdth sufficient data. Benchmarks had 6 3 matches on average. 31 % of the benchmarks had 8 or mole matches each. • A comparison of current midpoints vs. the market average midpoint was also prepared. Additional market thresholds demonstrating 5 % above and 5% below market were also prepared for consideration. • On average, ERMU is 4.4 % below market at the minimum, 9.5% below market at the midpoint, and 12.8% below market at the maximum. • Based on this information, ERMU proposed to align pay plans at 100 % of market. Pay Plan Pay Plan Development Baker Tilly led discussions with the ERMU's project team with regards to the number of pay plans, type of pay plans, and design of pay plans. Determination for the number of pay plans an organization needs may be influenced by the diversity of jobs, diversity in grading procedures, internal equity versus external competitiveness, and even your organizational culture. The organization currently has four pay structures: Baker Tilly developed a new pay structure: General plan- 35 positions A consolidated pay plan streamlines administration, enhances internal consistency, simplifies communication, and promotes equity by unifying compensation structures, reducing complexity, and ensuring uniformity and fairness across all positions. 122 THE FOLLOWING PAGES OF THE COMPENSATION STUDY WERE PRESENTED AT THE MEETING Elk River Municipal Utilities, MN Current Office Plan Current C6 bakertilly Hourly Pay Plan Annual Pay Plan Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 1 Step 2 Step 3 Step 4 Step 5 01 $ 18.69 $ 20.70 $ 22.71 $ 24.70 $ 26.69 $ 38, 872.70 $ 43, 047.68 $ 47, 244.29 $ 51, 376.00 $ 55, 507.71 02 $ 20.88 $ 23.12 $ 25.36 $ 27.60 $ 29.83 $ 43, 437.06 $ 48, 087.94 $ 52, 738.82 $ 57, 411.33 $ 62, 040.58 03 $ 22.22 $ 24.53 $ 26.85 $ 29.20 $ 31.52 $ 46, 227.58 $ 51, 029.89 $ 55, 853.82 $ 60, 742.66 $ 65, 566.59 04 $ 24.59 $ 27.16 $ 29.81 $ 32.44 $ 35.08 $ 51,138.05 $ 56, 502.78 $ 61, 997.31 $ 67, 470.21 $ 72, 964.74 05 $ 26.90 $ 29.78 $ 32.65 $ 35.53 $ 38.40 $ 55, 961.98 $ 61, 932.42 $ 67, 902.85 $ 73, 894.91 $ 79, 865.34 06 $ 29.42 $ 32.59 $ 35.73 $ 38.88 $ 39.40 $ 61,196.93 $ 67, 794.69 $ 74, 327.55 $ 80, 860.42 $ 81, 952.00 07 $ 32.23 $ 35.68 $ 39.15 $ 42.61 $ 46.07 $ 67, 037.57 $ 74, 219.39 $ 81, 422.85 $ 88, 626.30 $ 95, 829.76 08 $ 35.30 $ 39.08 1 $ 42.84 $ 46.63 $ 50.42 $ 73, 419.01 1 $ 81, 293.06 1 $ 89,102.21 $ 96, 997.89 1 $ 104, 871.94 • Step Plan • 8 Grades • Varied Midpoint Differential Percentages (6.65% on average) • Inconsistent Percentages between steps (9.15% on average) Elk River Municipal Utilities, MN Current Field Plan Current C6 bakertilly Hourly Pay Plan Annual Pay Plan Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 1 Step 2 Step 3 Step 4 Step 5 F 1 $ 18.04 $ 19.97 $ 21.89 $ 23.81 $ 25.76 $ 37, 530.06 $ 41, 530.40 $ 45, 530.74 $ 49, 531.08 $ 53, 574.44 F 2 $ 19.59 $ 21.69 $ 23.78 $ 25.89 $ 27.98 $ 40, 754.69 $ 45,124.35 $ 49, 472.38 $ 53, 842.05 $ 58,190.08 F 3 $ 19.68 $ 21.80 $ 23.89 $ 26.02 $ 28.14 $ 40, 928.20 $ 45, 337.18 $ 49, 681.63 $ 54,112.12 $ 58, 521.09 F4 $ 22.42 $ 24.80 $ 27.21 $ 29.64 $ 32.03 $ 46, 638.59 $ 51, 592.32 $ 56, 589.31 $ 61, 651.20 $ 66, 626.56 F 5 $ 24.59 $ 27.16 $ 29.48 $ 32.44 $ 35.08 $ 51,138.05 $ 56, 502.78 $ 61, 326.72 $ 67, 470.21 $ 72, 964.74 F 6 $ 26.90 $ 29.78 $ 32.65 $ 35.53 $ 38.40 $ 55, 961.98 $ 61, 932.42 $ 67, 902.85 $ 73, 894.91 $ 79, 865.34 F 7 $ 29.42 $ 32.59 $ 35.73 $ 38.88 $ 42.06 $ 61,196.93 $ 67, 794.69 $ 74, 327.55 $ 80, 860.42 $ 87, 479.81 F 8 $ 32.23 $ 35.68 $ 39.15 $ 42.61 $ 46.07 $ 67, 037.57 $ 74, 219.39 $ 81, 422.85 $ 88, 626.30 $ 95, 829.76 F 9 $ 35.30 $ 39.08 $ 42.84 $ 46.63 $ 50.42 $ 73, 419.01 $ 81, 293.06 $ 89,102.21 $ 96, 997.89 $ 104, 871.94 F 10 $ 39.05 $ 43.15 $ 47.39 $ 51.58 $ 55.74 $ 81, 228.16 $ 89, 751.17 $ 98, 577.02 $ 107, 294.72 $ 115, 947.52 • Step Plan • 10 Grades • Varied Midpoint Differential Percentages (5.07% on average) • Inconsistent Percentages between steps (9.33% on average) Elk River Municipal Utilities, MN Current Lineworker Plan Current C6 bakertilly Hourly Pay Plan Annual Pay Plan Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 1 Step 2 Step 3 Step 4 Step 5 L1 $ 38.34 $ 42.45 $ 46.57 $ 50.66 $ 54.78 $ 79, 757.18 $ 88, 301.82 $ 96, 868.10 $ 105, 369.47 $ 113, 935.74 L2 $ 40.63 $ 44.98 $ 49.35 $ 53.72 $ 58.07 $ 84, 516.22 $ 93, 558.40 $ 102, 643.84 $ 111, 729.28 $ 120, 793.09 L3 $ 51.34 $ 53.62 $ 55.88 $ 58.16 $ 60.41 $ 106, 797.18 $ 111, 534.59 $ 116, 228.74 $ 120, 966.14 $ 125, 660.29 • Step Plan • 3 Grades • Varied Midpoint Differential Percentages (5.96% between L1 and L2, 13.23% between L2 and 1-3) • Inconsistent Percentages between steps (7.61 % on average) Elk River Municipal Utilities, MN Current Management Plan Current C6 bakertilly Hourly Pay Plan Annual Pay Plan Grade Step 1 Step 2 Step 3 Step 4 Step 5 Step 1 Step 2 Step 3 Step 4 Step 5 M1 $ 26.90 $ 29.78 $ 32.65 $ 35.53 $ 38.40 $ 55, 961.98 $ 61, 932.42 $ 67, 902.85 $ 73, 894.91 $ 79, 865.34 M2 $ 29.42 $ 32.59 $ 35.73 $ 38.88 $ 42.06 $ 61,196.93 $ 67, 794.69 $ 74, 327.55 $ 80, 860.42 $ 87, 479.81 M3 $ 32.23 $ 35.68 $ 39.15 $ 42.61 $ 46.07 $ 67, 037.57 $ 74, 219.39 $ 81, 422.85 $ 88, 626.30 $ 95, 829.76 M4 $ 35.30 $ 39.08 $ 42.84 $ 46.63 $ 50.42 $ 73, 419.01 $ 81, 293.06 $ 89,102.21 $ 96, 997.89 $ 104, 871.94 M5 $ 37.24 $ 41.22 $ 45.20 $ 49.20 $ 53.19 $ 77, 464.19 $ 85, 727.62 $ 94, 012.67 $ 102, 340.99 $ 110, 626.05 M6 $ 38.36 $ 42.46 $ 46.56 $ 50.67 $ 54.79 $ 79, 778.82 $ 88, 323.46 $ 96, 846.46 $ 105, 391.10 $ 113, 957.38 M7 $ 49.12 $ 51.29 $ 53.49 $ 55.63 $ 57.82 $ 102,167.94 $ 106, 689.02 $ 111, 253.38 $ 115, 709.57 $ 120, 273.92 M8 $ 50.61 $ 52.83 $ 55.08 $ 57.29 $ 59.55 $ 105, 261.31 $ 109, 890.56 $ 114, 563.07 $ 119,170.69 $ 123, 864.83 M9 $ 52.11 $ 54.43 $ 56.73 $ 59.04 $ 61.33 $ 108, 397.95 $ 113, 221.89 $ 118, 002.56 $ 122, 804.86 $ 127, 563.90 M 10 $ 55.94 $ 58.41 $ 60.86 $ 63.35 $ 65.80 $ 116, 358.53 $ 121, 485.31 $ 126, 590.46 $ 131, 760.51 $ 136, 865.66 M 11 $ 61.55 $ 64.23 $ 66.97 $ 69.67 $ 72.38 $ 128, 018.18 $ 133, 599.23 $ 139, 288.45 $ 144, 912.77 $ 150, 558.72 N/A $ 80.35 $ 83.88 $ 87.44 $ 90.98 $ 94.54 $ 167,128.83 $ 174, 462.08 $ 181, 881.86 $ 189, 236.74 $ 196, 634.88 • Step Plan • 12 Grades • Varied Midpoint Differential Percentages (7.05% on average) • Inconsistent Percentages between steps (9.3% on average for Grades M 1-M5, 4.15% on average for Grades M6-M 11) Pay Plan Design Proposed General Pay Grades $250,000 233,622 $200,000 188,397 177,733 167,673 184,416 156,526 158,182 $150,000 143,604 131,746 148,722 140,304 122,112 132,362 112,029 1 106,249 24,870 5100,000 93,694 98,379 110,159 89,233 101,063 81,715 84,983 75,549 78,571 92,718 fi8,660 84,289 64,479 , , 70,598 77,330 550,000 0 156,468 59,291 62,256 65,369 50,199 52,207 54,296 44,080 45,635 $o 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 )0 Elk River Municipal Utilities, MN Regression Analysis: Proposed General Pay Plan S250,000 $200,000 $150,000 $100,000 $50,000 y = 204.71x+39601 R' = 0.9661 ........................ Maximum Regression Midpoint ........................ Minimum $0 0 100 200 300 400 Soo 600 700 Soo 900 Each dot represents a benchmark position where the total SAFE score and market average midpoint intersects. The dark blue line is the "line of best fit" through all of the dots. The remaining lines represent the proposed pay plan. This does not reflect grade assignments. 15 Elk River Municipal Utilities, MN Proposed General Pay Plan Proposed Grade Step 1 Step 2 Step 3 Step 4 1 $44,080 $46,725 $49,528 $52,500 Step 5 $55,650 Step 6 $57,737 Step 7 $59,902 Step 8 $62,148 Midpoint Step 9 Differential $64,479 2 $45,635 $48,601 $51,761 $55,125 $58,708 $61,056 $63,499 $66,039 $68,680 5.00% 3 $50,199 $53,462 $56,937 $60,638 $64,579 $67,163 $69,849 $72,643 $75,549 10.00% 4 $52,207 $55,601 $59,215 $63,064 $67,163 $69,850 $72,644 $75,549 $78,571 4.00% 5 $54,296 $57,825 $61,584 $65,587 $69,850 $72,644 $75,550 $78,572 $81,715 4.00% 6 $56,468 $60,138 $64,047 $68,210 $72,644 $75,549 $78,571 $81,714 $84,983 4.00% 7 $59,291 $63,145 $67,250 $71,621 $76,276 $79,327 $82,501 $85,801 $89,233 5.00% 8 $62,256 $66,303 $70,612 $75,202 $80,090 $83,294 $86,625 $90,091 $93,694 5.00% 9 $65,369 $69,618 $74,143 $78,962 $84,095 $87,458 $90,957 $94,595 $98,379 5.00% 10 $70,598 $75,187 $80,074 $85,279 $90,822 $94,455 $98,233 $102,163 $106,249 8.00% 11 $77,330 $81,970 $86,888 $92,101 $97,627 $101,044 $104,581 $108,241 $112,029 8.00% 12 $84,289 $89,347 $94,708 $100,390 $106,413 $110,138 $113,993 $117,982 $122,112 9.00% 13 $92,718 $98,281 $104,178 $110,429 $117,055 $120,566 $124,183 $127,909 $131,746 10.00% 14 $101,063 $107,127 $113,555 $120,368 $127,590 $131,418 $135,360 $139,421 $143,604 9.00% 15 $110,159 $116,768 $123,775 $131,201 $139,073 $143,245 $147,543 $151,969 $156,528 9.00% 16 $124,870 $128,616 $132,475 $136,449 $140,542 $144,759 $149,102 $153,575 $158,182 4.00% 17 $132,362 $136,333 $140,423 $144,636 $148,975 $153,444 $158,048 $162,789 $167,673 6.00% 18 $140,304 $144,513 $148,849 $153,314 $157,913 $162,651 $167,530 $172,556 $177,733 6.00% 19 $148722 $153,184 $157,780 $162,513 $167,388 $172,410 $177,582 $182,910 $188,397 6.00% 20 $184:416 $189,948 $195,647 $201,516 $207,561 $213,788 $220,202 $226,808 $233,612 24.00% • Step Plan (9 steps, up from 5) • 20 Grades (all positions included) • Aligned to 100% Market at Step 4. • Tailored Midpoint Differential Percentages (4%-24%, 7.83% on average) • Consistent and predictable percentages between steps • Up to Midpoint "Market" starting at 6.5% for Grades 2-9, then to 6%, and 3% for Grades 16-20 • After Midpoint 3.75-4% for Grades 1-10, then 3.5%, and 3% for Grades 16-20 CG bakertilly Min-Step5 Step5-Max EIRI .� 6.00% 1 5% 46% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.50% 4.00% 50% 6.00% 3.50% 45% 6.00% 3.50% 45% 6.00% 3.00% 42% 6.00% 3.00% 42% 6.00% 3.00% 42% 3.00% 3.00% 27% 3.00% 3.00% 27% 3.00% 3.00% 27% 3.00% 3.00% 27% 3.00% 3.00% 27% 16 13 Plan Grady Positions were assigned based on internal equity (job evaluation). ■ In accordance with Minnesota Local Government Pay Equity Act (LGPEA) The following information was NOT considered: ■ The person in the position ■ Performance ■ Length of service ■ Existing individual employee salary • Preliminary grade assignments were reviewed with ERMU's project team to ensure positions were assigned to the correct grade and address any outliers. 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 =ems=— Positions by Grade 1 2 4 5 6 7 9 10 11 12 13 14 15 17 18 19 20 Vr- �now Baker Tilly prepared 4 scenarios for ERMU to consider in its adoption of the new classification and compensation plan. • No employee will receive a pay decrease as a result of the study. • Implementation cost reflects base pay in US dollars. Benefits and pay differentials are not included. Implementation Scenarios for Pay Plan: 1. Employees move to the closest step without a decrease. This is to get all employees onto the pay plan. 1 b. Employees move to step based on current relation to midpoint or "market". For example, if any employee is on Step 3 in the current pay plan (the current midpoint), they would move to the new midpoint of the proposed pay plan (Step 4). If any employee's current salary is greater than that, they would instead be placed on the closest step without a decrease (Option 1). 2. Employees move to the step based on years in position (capped at 9 years). For example: if an employee has been in their position with Elk River Municipal Utilities for 4 years, they would be placed on Step 4. If that step placement is less than their current salary, they would move to the closest step without a decrease (Option 1). 3. Employees move to the midpoint of their new range if they have been in their current role with ERMU for at least 4 years. For example: if an employee has been in their position for more than 4 years but has not yet achieved the midpoint of their grade in the current pay plan, the employee would move to the midpoint of the purposed pay plan (step 4) without a decrease (Option 1). . h�I 12 a 2 0 Vr- Distribution of Employees by Years in Position I 0 1 2 3 4 5 6 7 S 9 10 20 1 - Closest Step, without Decrease # of Staff Current Salary Proposed Salary Difference % Increase Totals 45 $4,447,526.18 $4,554,354.62 $106,828.44 2.4% Employees Below Minimum 4 $402,563.20 $416,247.22 $13,684.02 3.4% Employees Within Range 41 $4,044,962.98 $4,138,107.40 $93,144.42 2.3% Emplovees Above Maximum 0 $0.00 $0.00 $0.00 #DIV/0! Option 1 b: Steps based on current relation to midpoint # of Staff Current Salary Proposed Salary Difference % Increase Totals 45 $4,447,526.18 $4,733,883.63 $286,357.45 6.4% Employees Below Minimum 4 $402,563.20 1 $459,250.39 1 $56,687.191 14.1% Employees Within Range 41 $4,044,962.98 $4,274,633.24 1 $229,670.26 5.7% Employees Above Maximum 0 $0.00 $0.00 $0.00 #DIV/0! 2: Steps based on Years in Position # of Staff Current Salary Proposed Salary Difference % Increase Totals 45 $4,447,526.18 $4,681,333.41 $233,807.23 5.3% Employees Below Minimum 4 $402,563.20 $432,859.87 $30,296.67 7.5% Employees Within Range 411 $4,044,962.98 $4,248,473.54 1 $203,510.561 5.0% Employees Above Maximum 0 $0.00 $0.00 $0.00 #DIV/0! 3: Move to Midpoint if YIP>4 # of Staff Current Salary Proposed Salary Difference % Increase Totals 45 $4,447,526.18 $4,584,382.50 $136,856.32 3.1% Employees Below Minimum 4 $402,563.20 $428,520.79 $25,957.59 6.4% (Employees Within Range 41 $4,044,962.98 $4,155,861.71 1 $110,898.731 2.7% Employees Above Maximum 0 $0.00 11 $0.00 1 $0.00 r #DIV/0! Recommendations We urge Elk River Municipal Utilities, MN to: — Approve the pay plan and position grade assignments. — Work with Administration to select an implementation scenario that addresses the ERMU's compensation philosophy, business goals, and that is fiscally sustainable. — Continue efforts to maintain the classification and compensation system: o Routinely review positions, job descriptions, and market conditions. o Adjust the pay structure and salaries, annually, to keep pace with the market. o Adopt general increases, annually, to reward employees and ensure advancement through assigned pay ranges. Baker Tilly US, LLP, trading as Baker Tilly, is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2022 Baker Tilly US, LLP.