POLICY STATEMENT 31

Pay for Performance Policy

Effective: 7/1/2006

Approved by Council: 6/22/2006

Supersedes: 5/26/2005

Prepared by: Valiria Willis, Human Resources Director

 

A.  POLICY PURPOSE

To support the Town's mission by encouraging employees to develop and contribute to the maximum of their potential by compensating those employees based on job performance.

 

B.  COVERAGE

All employees who work under the supervision of the Town Manager except the Assistant Town Manager and Department Directors. (The Assistant Town Manager and Department Director classes are surveyed regularly for labor market competitiveness and are not assigned to salary grades.)

 

C.  GOALS AND ASSUMPTIONS

The Town's Pay for Performance Policy has the following primary goals:

1.   To provide sufficient flexibility in its rewards to recognize varying levels of performance through varying levels of compensation.

2.   To maintain the Town's competitive position in the labor market in order to attract and retain the best employees possible.

3.   To provide incentives for continuous performance improvements and for sustaining performance improvements.

 

      Underlying these goals are the following assumptions:

a.   The plan must be understood and perceived as fair by the majority of Town employees.

b.   Productivity enhancements can best be achieved by improving the relationship between performance and pay.

c.   Unsatisfactory performance or detrimental personal conduct should not be rewarded.

d.   Job expectations should apply equally to employees in the same job class with the same appointment status (trainee, probationary or regular).

e.   Salary levels are the most appropriate indicator of how job performance is valued.

f.    Market adjustments to the pay plan are necessary to be competitive in our labor market.

g.   Market adjustments should not increase employee salaries across the board.

h.   With a market-based average salary attainable and sustainable with standard performance there is no need for cost-of-living increases.

i.    Most employee's job growth follows a curve.

 

D.  DEFINITIONS

Market Rate - The "going rate" or fair market value for a standard performer in a specific job classification.  Called market rate because employees at this rate typically are those that consistently meet standard job expectations.

 

Market Adjustment - A periodic adjustment to the salary schedule (all pay ranges) based on changes in the local labor market and in comparable municipalities. The market adjustment creates a new regular salary schedule (salary structure).

 

Performance Ratings - Terms used to summarize overall performance and conduct during the rating period.

 

Developmental Range Segment - The segment of the range from the minimum of the salary grade up to the minimum market rate.  Called "developmental" because employees in this segment typically are still mastering standard job expectations.

 

Performance Range Segment - The segment from the market rate up to the minimum of the high performance segment.  Called "performance" because employees in this range segment have consistently met all standard job expectations and, exceeded some expectations. 

 

High Performance Range Segment - The segment from the maximum of the performance range to the maximum of the full salary range plus top-of-grade performance increases.  Reserved for top performers who consistently exceed most, if not all expectations.

 

Classification Change - A change in job classification based on significant changes in job duties or responsibilities.

 

Pay Range Revision - A change in salary grade that is based on market changes for a specific type of work.  Only affects the job class describing that type of work.

 

Salary Grade- A numerical designation for a pay range. Also referred to as pay grade.

 

Standard Job Expectations - Performance expectations which are the same for most all employees in a given job class.  Among others, these relate to quality, quantity, timeliness, and work outputs, as well as attendance, customer service, and team work.

 

Pay Range- The minimum and maximum pay rates in a salary grade.

 

Performance Goals - Individual or group goals established for particular rating period.  Individual performance goals are typically used for supervisory, professional, and managerial employees who have completed probation.  Examples:  1) Complete draft of efficiency report by June 30, 1995 .  [An example of surpassing this goal would be to have an acceptable draft completed in May of 1995.]  2) Improve minority representation by 5% in inspections.  (This goal would be surpassed if the representation is increased significantly above 5%.)

 

E.  STRUCTURE

Like many local government pay plans, Cary 's plan contains a number of salary grades that represent pay ranges with minimum and maximum base pay rates.  Classes are assigned to salary grades according to a job evaluation process which considers the internal relationships of classes and pay for similar jobs in Cary 's labor market.  Each pay range has approximately a 55% spread for Non-exempt employees (covered by the overtime provisions of the FAIR LABOR STANDARDS ACT) and approximately a 65% spread for Exempt employees (exempt from FLSA overtime provisions).

 

Each pay range is divided into four segments. The first segment is called "developmental” because employees in this range segment typically are acquiring many basic job skills, knowledge, and abilities and demonstrating to the Town whether or not they have appropriate work habits and behaviors.  With clear communications and with supervisory coaching the employee learns what is expected of him/her.  Most employees in this range segment should make rapid progress in meeting standard job expectations.  The pay plan is designed to move these employees up to market rate. 

 

The market rate is the next segment of the salary range and is intended to reward performance which is consistently standard.  Employees whose performance never exceeds Standard will normally be paid at the market rate.

 

The segment of the salary range above the market rate is designated as the "performance segment range" and is reserved for employees who consistently achieve overall performance ratings of Proficient or higher.  Employees in this range segment who make steady progress in expanding and demonstrating job competencies will move up through the "performance range".  The skills, knowledge, and abilities that employees in this range should acquire and apply to enhance performance are fewer but more complex than those in the developmental and market range segments.

 

The "high performance range segment" is reserved for top performers who consistently receive an Exemplary rating, overall.  It includes top-of-grade awards.

 

To ensure the competitiveness of the pay plan in the local market, the Town annually reviews the market competitiveness of the salary schedule.  The results of this effort will serve as the basis for the market adjustment, if any, recommended as part of the budget process.

 

F.   MARKET ADJUSTMENTS - IMPACT ON EMPLOYEE PAY

Market adjustments do not increase pay but do increase an employee's potential for additional pay.  Upon implementation of a market adjustment all segments of the pay range are adjusted upward.  Employee pay remains the same although position in the range, and sometimes, the range segment, will adjust downward in the range.  Exception:  any employee other than trainees who are below the minimum of the pay range after a market adjustment will be adjusted to the new minimum.

 

G.   IN RANGE ADJUSTMENTS - PERFORMANCE INCREASES

Advancement through a pay range is based entirely on job performance as evaluated by an employee's supervisor.  Employees may advance to and remain at Market Rate with Standard ratings.  Movement beyond Market Rate is reserved for employees who receive ratings of Proficient or Exemplary.

 

The amount of any increase is variable based on the employee's position in the salary range and level of performance.  Generally, the higher in the range an employee is, the smaller the percentage of increase for a specific level of performance.  This change reflects the realities of the normal job growth curve.

 

Additionally, since each range segment has a maximum base salary, an employee who is already receiving pay commensurate with his performance may only receive base pay adjustments up to that maximum.  The balance of any performance award will be paid in a lump sum.

 

Evaluations and merit eligibility for employees hired in the developmental segment occur every six months. Employees hired or advanced to market or above receive evaluations and are eligible for merit awards on an annual basis. (Employees who fall back to the developmental segment should refer to the Awards Chart for guidance on annual or six-month evaluations.

 

H.   CLASSIFICATION AND PAY STUDY CHANGES - IMPACT ON PAY

The Classification portion of the annual classification and pay study involves the review of a percentage of the Town's job classes to update job descriptions and job specifications, and to determine if the current class assignment is valid.  This job evaluation focuses on changes in job duties, if any, and the relationship of the job to other jobs in the same or similar classes.

 

The pay portion of the annual classification and pay study involves the market survey of pay rates for the specific classes included in the classification portion of the study.  The survey may also include any classes where the Town is experiencing significant problems in the recruitment and retention of staff which may be attributable to pay.  Changes in pay grades due to the pay portion of the study are referred to as a range revision. 

 

In position upgrades, an employee’s current salary would be placed within the new salary range. Salary increases are granted to those who fall below the new minimum rate, and those that have a substantial change in pay grade or pay segment. Current performance ratings are also considered.

 

Situations where an increase may not be appropriate include, but are not limited to the following:

 

1)   an employee who has been recently demoted without a reduction in salary.

 

2)   an employee whose position was reclassified to a lower salary grade in the most recent classification and pay study of that position and whose salary was not reduced as a result.

 

An increase to the minimum of the new pay range may not be appropriate where the employee is already below the minimum of the current salary range for training or disciplinary reasons.

 

If the employee’s salary is above the maximum of the new salary range, the base salary of that employee shall be maintained at the current salary at least until such time as the employee’s salary range is increased above the employee’s current base salary and the employee is eligible for an increase.  While above the maximum of the range the employer may be eligible to receive lump sum performance awards.

 

I.    STARTING SALARIES

All persons employed in positions contained in the position classification plan shall be employed at the minimum salary for the classification in which they are employed.  However, on the recommendation of the department director and with the approval of the Human Resources Director, exceptionally well-qualified applicants may be employed above the minimum, not to exceed the Market Rate.  An applicant may be employed above the Market rate if approved by the Town Manager.

 

J.   TRAINEE STATUS

An applicant who is hired, or an employee who is promoted, who is not fully qualified to meet all the established requirements of the position, may be appointed at a trainee salary.  A trainee salary is normally at least five (5) percent below the minimum rate of the assigned salary range and shall be designated a "T".  For example, a trainee placed five (5) percent below the minimum rate shall be designated by "T1" and a trainee placed ten (10) percent below the minimum rate shall be designated by "T2".

 

K.   PROMOTION:  SALARY

When an employee who meets all established requirements is promoted to a higher salary grade, the employee's salary shall normally be increased to the minimum level for the new pay range, or the level which would provide at least the equivalent of a five (5) percent increase.  Situations where an increase may not be appropriate include, but are not limited to the following:

 

1)   an employee who has been recently demoted without a reduction in salary;

 

2)   an employee whose position was reclassified to a lower salary grade in the most recent classification and pay study of that position and whose salary was not reduced as a result.

 

Employees receiving interim appointments or special assignments to positions in a higher salary grade may be granted a salary increase.  The salary increase will not affect anniversary dates and will be rescinded upon the expiration of the interim appointment or special assignments.

 

L.   DEMOTION:  SALARY

When an employee is transferred to a position in a lower salary grade for which the employee is qualified, the salary shall be set at the level in the lower pay range which provides the smallest or no decrease in pay, provided the action is taken for reasons other than discipline.  If the action is for disciplinary purposes, the salary shall be set in an appropriate level in the lower pay range that is less than the existing salary.

 

M.  TRANSFER

An employee who is transferred from a position in one class to a position in another class where the new position is assigned to the same salary grade as the old position, shall continue to receive the same salary unless there is a change in FLSA status from Non-exempt to Exempt.

 

Attachment 1

PERFORMANCE RATINGS

(Regular Employees, and Probationary Employees Hired At or Above Market Rate)

 

Below Standard: Does not meet standard job expectations. May not provide an acceptable level of customer service. Performance is inconsistent; additional training may be needed. May have received one or more warnings during the review period.

 

Standard:  Consistently meets minimum job expectations. Is competent in all essential job functions and routinely provides customer services which are entirely acceptable.  Meets most performance goals within his/her control.  The employee does what is necessary and is a valued employee.  Employees consistently rated Standard are most appropriately paid at Market Rate.

 

Proficient - Exceeds Standard:  Fully meets all standard job expectations and routinely exceeds some standard job expectations; routinely demonstrates initiative, accuracy and reliability; routinely provides customer service at a high level.  Meets most performance goals and surpasses others within his/her control.  Employees consistently rated Proficient are most appropriately paid in the Performance Range segment.

 

Exemplary:  Consistently exceeds most standard job expectations, including all major expectations.  Provides exemplary customer service.  Surpasses most performance goals within his/her control.  Actively supports department and Town mission.  Employees consistently rated Exemplary are most appropriately paid in the High Performance Range segment.

 

PERFORMANCE RATINGS

(Trainees and initial Probationary Employees Hired Below Market Rate)

 

NOTE:  Employees on initial probation who are below Market Rate are expected to make steady progress towards meeting standard performance expectations by the end of probation.  The rate of progress shall be such that the supervisor can reasonably anticipate that the probationary employee is capable of meeting standard performance expectations within a reasonable time.

 

Below Standard – failing to meet standard job expectations.

 

Standard - making steady progress towards meeting all standard job expectations.  Projected to meet standard job expectations within a reasonable time.

 

Proficient - progress towards meeting all standard job expectations exceeds that expected of most new employees.  Most standard job expectations already met.

 

Exemplary - Fully meets or exceeds all standard job expectations.

 

SPECIAL PERFORMANCE AWARDS

 

Lump sum special performance awards of any dollar amount up to and including 10% of base salary may be awarded with the prior approval of the Town Manager.  These awards may be made to individuals or groups/team members where the individual or group is primarily responsible for a singular achievement or accomplishment which brings special recognition to the Town, generates substantial savings, or creates significant organizational improvements.  Lump sum special performance awards may be given any time during the year provided the employee received at least a Standard rating on his/her last evaluation and has not received a Step 2 or Step 3 Warning in the past twelve months.  Special performance awards must be funded from the department’s performance awards budget.

 

NOTE:  Cumulative awards exceeding 5% of base salary shall be reported to the Council by the Manager.

 

Performance Awards Chart

 

	DEVELOPMENTAL RANGE SEGMENT (six month reviews)	**DEVELOPMENTAL RANGE SEGMENT (annual reviews)	MARKET RANGE SEGMENT	PERFORMANCE RANGE SEGMENT	HIGH PERFORMANCE RANGE SEGMENT
RATING	Segment 1	Segment 1	Standard Pay Segment 2	Exceeds Standard Pay Segment 3 or 33	High Performance Pay Segment 4 or 44
Below Standard	No Increase	No Increase	No Increase	No Increase	No Increase
Standard-- Meets Basic Requirements	0 - 2% Base increase only (unless otherwise approved)	0 - 4% Base increase only (unless otherwise approved)	0 - 3% Any combination of lump and base except Base cannot exceed Market Rate maximum.	0 - 3% Lump Sum Only	No Increase
Proficient	0 -3.5% Base increase only (unless otherwise approved)	0 -7% Base increase only (unless otherwise approved)	0- 6% Any combination of lump and base	0 - 5% Any combination of lump and base except base cannot exceed maximum of Performance Range Segment.	0 -5% Lump Sum Only
Exemplary	0 - 5% Base increase only (unless otherwise approved)	0 - 10% Base increase only (unless otherwise approved)	0 - 9% Any combination of lump and base	0 - 8% Any combination of lump and base except that base can never exceed maximum of salary grade.	0 - 7.0% Any combination of lump and base except that base can never exceed maximum of salary grade.

Where “any combination” is referenced there is always the option to make an award, if any, which is totally lump sum or totally base unless there is a cap on the base increase.  The percents are maximum awards.  Departments, in their discretion, may choose not to make an award.

**Follow this column ONLY when an employee moves from one segment back to the development segment (i.e., due to market adjustments, classification and pay study increases) AND their review data falls between July 1and December 31. This does not apply to promotions.