Personnel Practices: Pay for Performance Policies

Transcription

1 International Public Management Association for Human Resources HR-CENTER September 2006 Personnel Practices: Pay for Performance Policies International Public Management Association for Human Resources 1617 Duke Street Alexandria, VA (703)

2 PAY FOR PERFORMANCE POLICIES Table of Contents I. Pay for Performance Overview II. Sample Policies A. Town of Cary, NC B. City and County of Denver, CO C. City of Hays, KS 21 D. City of Issaquah, WA

3 Pay for Performance Overview Written by Ryan Lowry Pay for performance, sometimes referred to as incentive programs, can be set up in various ways. One popular pay for performance structure is the merit pay system. In the merit pay system an employee is paid a higher rate within their respective salary range, based on her/his achievements or high level of performance. 1 An appraisal system, normally used as part of an employee s regular performance evaluation, accompanies the merit pay system and serves as the measure of employee performance. 2 Merit Pay System The purpose of a merit pay system is to motivate employees, enhance performance, and retain hardworking employees. 3 For these purposes and outcomes to be realized, the job and employer have to fit the merit pay system. The job must be one that individual performance can be measured. More specifically, the employee has to have full control over their performance with minimal impact for outside factors. 4 The measure for individual performance must be accurate and valid for each job involved in the merit pay system. Lastly, there must be clear communication between the employer and employee. Everyone involved must understand how performance is measured and how pay is distributed. The actual amount that employees receive from the merit pay program will vary among different agencies. The merit pay increases need to be high enough to entice employees but still remain within the budget. The salary range of an employee can effect how much in merit pay is received. Merit pay should not move an employee into the next highest salary range. Increases should be awarded at the same time once a year or up to three times a year. 5 The appraisal system is the backbone of a pay for performance system. The measuring system has to be objective and valid. The system has to be based on measurable criterion and have a very descriptive rating scale. 6 The scale can be in numerical terms or on Likert scale ranging from phrases such as does not meet expectation to exceeds expectations. Once the measuring system is structured properly, employees should fully understand the system and be aware of how to earn pay for performance. 1 Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October

4 When its time to evaluate an employee to determine their pay for performance, the employer should have examples to support their decision. If an employee s absences have contributed to their lack of production, cite days the absences occurred. (But be careful absences taken under the Family and Medical Leave Act cannot be considered a negative on a performance evaluation.) Likewise, if an employee has gone beyond the call of duty, keep records of those acts demonstrating excellence. An open and effective line of communication should be kept between employee and employer at all times in reference to the pay for performance system. Employees should be kept informed of changes in pay, evaluation structures and expectations to earn merit based increases. Pay performance programs, when implemented correctly, can yield great results. Employees are motivated by the idea of receiving extra pay, and extra pay serves as positive reinforcement to meeting expectations. This can lead to other employees working harder to achieve the extra pay that their coworkers earned. HR professionals who support incentive programs and merit pay systems believe the results are worth every penny. If you are really serious about moving into the new economy and winning the talent wars, stop paying people and start buying their results, says the Bruce Tulgan author of the article Pay for Performance, and Nothing Else in Human Resource Management News. 7 The article urges agencies to reward the most valuable employees who contribute directly to the agencies success. 8 Incentive programs begin to go awry when merit pay is given to large number of employees whose contributions may not have merited such compensation. This creates competition and tension between coworkers. Some HR professionals, however, are not avid supporters of merit pay programs or incentive programs. An ineffective merit pay system can create bad employee morale and competition amongst coworkers. If the pay for performance program does not reinforce organizational goals, the program could lead to dangerous results. 9 If employees become overly concerned with working to obtain raises or pay increases, they could lose sight of their purpose in the agency. "I don't think people are motivated by rewards and bonuses. I think they're motivated because they're excited about their jobs or because they're doing something that provides a service to the world," said Mary Roberts CEO of Rejuvenation Inc. 10 Other HR professionals also warn not to reward employees simply to reward them. An over saturation of pay increases diminishes the quality of work over a period of time. If individual competition begins to supersede organizational goals, team based incentives could be a great alternative. The concept of team forces individuals to focus more on overall goals rather than individual agendas. 7 Tulgan, Bruce. Pay for performance. Human Resource Management, March Tulgan, Bruce. Pay for performance. Human Resource Management, March Hays, Scott. Pros and Cons of Pay for Performance. Workforce Online, February Hays, Scott. Pros and Cons of Pay for Performance. Workforce Online, February

5 Appraisal Systems As stated earlier a very important element of pay for performance programs is the method that performance is measured. The different types of appraisal methods include but are not limited to the following: Rating Scales, Narrative Appraisals, Management Objectives, and 360 feedback. 11 Of the four different scales listed, the most formal, detailed, and widely used method is Rating Scales. Within a Rating Scale, performance factors of a particular job are outlined thoroughly. For each performance factor, an employee is assigned a position on the scale in relation to that factor. Performance factors are the key duties and responsibilities of a particular position. 12 For example, the performance factor could be ability to meet deadlines and an employee could earn the position of 2 on the rating scale. The scale can be numeric, ranging from one thru five, with one representing well below expectations and five representing well above expectations. The scale can also be in descriptive words or phrases. Again, employers must be sure employees understand what is expected of them and how to earn high marks on the rating scale. When the time comes for the manager or supervisor to actually rate an employee s performance, the employer should do all of the following: Discuss good and bad performance Identify what needs improvement Review ratings given on performance factors Cite examples of good and bad performance Narrative appraisals are written memos by supervisors that discuss an employee s achievements, strengths, weaknesses, and performance. 13 This method provides detailed feedback but is very time consuming for the person doing the evaluating. The Management Objectives and 360 Feedback methods include the employee in the evaluation process. Within the Management Objective system, employees help create the criterion by which they are evaluated. 14 They then coordinate with their supervisors to evaluate their own performance. In the 360 feedback system employees evaluate themselves, then compare their self evaluation to that of their supervisors and discuss the discrepancies. 15 To further understand pay for performance, please see the sample policies below. 11 Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October Bureau of National Affairs, Inc. (BNA, Inc), Human Resources Library, October

6 Town of Cary Valiria Willis Human Resources Department Town Hall, 316 N. Academy St. Cary, NC (919) Effective: 7/1/2006 Approved by Council: 6/22/2006 Supersedes: 5/26/2005 POLICY STATEMENT 31 Pay for Performance Policy 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. 6

7 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. 7

8 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, [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 8

9 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. 9

10 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 sixmonth 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. 10

11 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 11

12 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 Nonexempt to Exempt. 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. 12

13 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. 13

14 Performance Awards Chart RATI NG Below Standa rd DEVELOPM ENTAL RANGE SEGMENT **DEVELOP MENTAL RANGE SEGMENT MARKET RANGE SEGMEN T (six month reviews) (annual reviews) Segment 1 Segment 1 Standard Pay Segment 2 No Increase No Increase No Increase PERFORM ANCE RANGE SEGMENT Exceeds Standard Pay Segment 3 or 33 No Increase HIGH PERFORMANCE RANGE SEGMENT High Performance Pay Segment 4 or 44 No Increase Standa rd-- Meets Basic Requir ements 0-2% Base increase only (unless otherwise approved) 0-4% Base increase only (unless otherwise approved) 0-3% Any combinati on of lump and base except Base cannot exceed Market Rate maximum. 0-3% Lump Sum Only No Increase 14

15 Profici ent 0-3.5% Base increase only (unless otherwise approved) 0-7% Base increase only (unless otherwise approved) 0-6% Any combinati on of lump and base 0-5% Any combination of lump and base except base cannot exceed maximum of Performanc e Range Segment. 0-5% Lump Sum Only Exemp lary 0-5% Base increase only (unless otherwise approved) 0-10% Base increase only (unless otherwise approved) 0-9% Any combinati on of lump and base 0-8% Any combination of lump and base except that base can never exceed maximum of salary grade % 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 Impact of discipline of performance awards during rating period Any Step 3 Final Written Warning Three Warnings (any level) Two Level 2/Written Warnings One Oral Warning and One Step Two Warning One Step 2 Warning Two Oral Warnings One Oral Warning No Award No Award No Award No Award Limited lump sum possible* Limited lump sum possible* Based on departmental practice *Lump sum awards in such situations are the exception and are limited to a maximum of 2% of salary. Requires prior approval from the Human Resources Department. 15

16 Dani Brown City and County of Denver Department 412 Denver, Colorado RULE 13 PAY FOR PERFORMANCE (Effective January 1, 2006; Rules Revision Memo 2C) Purpose statement: The purpose of this rule is to explain the Performance Enhancement Program and how individual performance is evaluated, reported and rewarded with merit pay increases for Career Service employees. Section Definitions: A. Performance Improvement Plan ( PIP ): A document which may be used at any time during an employee s evaluation period to supplement the employee s PEP plan that may include, but is not limited to, levels of performance that must be achieved to obtain a successful rating, current performance deficiencies, support that may be provided by the department or agency, actions the employee must take to address the performance deficiencies, and a timeline for completion of the actions. B. Anniversary Date: The effective date of an employment appointment or a reemployment appointment to a full or part-time limited or unlimited position in the Career Service, whichever is later; or the effective date of a re-instatement appointment. C. Interim PEPR: A PEPR prepared prior to an employee s PEP Evaluation End Date whenever an employee permanently changes supervisors, either by promotion, repromotion, transfer, demotion, re-assignment, or other action. D. Merit Increase: Periodic increase to an employee s base rate of pay determined by an employee s PEP rating and current pay step. E. Merit Increase Date: The beginning of the first pay period following the PEP Evaluation End date. F. PEP Evaluation End Date: The date the employee s annual evaluation period concludes. For employees hired prior to January 1, 2006, it is the PEPR date they had as of December 31, For employees hired or re-hired on or after January 1, 2006, the PEP Evaluation End date will be the first of the month following the employee s anniversary date. 16

17 G. PEP Plan: The written plan that is provided to an employee setting forth the performance standards and measures against which an employee s performance is evaluated each year in an employee s PEPR. H. PEPR Due Date: Thirty calendar days after an employee s PEP Evaluation End Date. If the PEPR Due Date falls on a day the Career Service Authority ( CSA ) is not open for business, it shall be construed to be the next working day. I. PEPR Review Date: The date an employee s PEPR is reviewed with an employee. J. Performance Enhancement Program (PEP): The performance evaluation system used by the City and County of Denver for Career Service employees. K. Performance Enhancement Program Report (PEPR): The report of an employee s performance evaluation that is provided to an employee each year by the employee s supervisor. L. Performance Rating: The rating that is included in an employee s PEPR which is either exceptional, successful or needs improvement. Section Performance Enhancement Program The purposes of the Performance Enhancement Program ( PEP ) are to outline job expectations, establish performance standards and measures, encourage and support professional development, provide on-going performance feedback, and evaluate performance. A. Upon appointment to a position, or the assignment of substantially different duties, the employee s supervisor shall complete a PEP plan and review it with the employee. B. The PEP plan may be used as a basis for disciplinary action under Rule 16 DISCIPLINE if an employee s performance fails to comport with the standards set forth in the PEP plan. Section PEP Process A. PEP Reporting Requirement 1. All employees, except those holding on-call positions, shall have their performance formally evaluated and rated once a year. 2. Each employee s performance rating shall be reflected in an official CSA Performance Enhancement Program Report ( PEPR ) form, which shall be reviewed with the employee and submitted to CSA no later than thirty (30) 17

18 calendar days after an employee s PEP Evaluation End Date. 3. Documentation specifically detailing the reason(s) for an employee s performance rating shall be provided to CSA and the employee. Failure to provide such documentation to CSA shall result in the PEPR being returned to the appointing authority. 4. The PEPR and any supporting documentation shall be made a permanent part of the employee s official personnel record. B. Interim PEPRs 1. Whenever an employee permanently changes supervisors, either by promotion, re-promotion, transfer, demotion, re-assignment, or other action, an interim PEPR shall be completed by the employee s former supervisor immediately preceding the change. When the employee s current supervisor terminates employment with the City, the next level manager will be responsible for completing the interim PEPR. This report shall cover the period from the last PEP Evaluation End date to the effective date of the transaction and shall be given to the receiving supervisor. 2. If an employee s supervisor or next level manager fails to complete an interim PEPR and submit to CSA within thirty (30) calendar days after the transaction date, a rating of "Successful" shall be granted for the relevant period. 3. The receiving supervisor shall prepare a PEPR for the period between the effective date of the interim PEPR and the PEP Evaluation End Date. The overall performance rating should take into account the performance rating on the interim PEPR and the employee s current performance in proportion to the time spent in each assignment. Nothing herein shall prevent an employee from receiving an overall annual rating of needs improvement, even if the interim PEPR was successful or exceptional. C. Performance Ratings An employee s overall performance shall be rated in an employee s PEPR as one of the following: Exceptional - Consistently surpassed performance standards. Successful - Consistently achieved performance standards. Needs Improvement - Failed to meet critical performance standards. Section Needs Improvement Rating Procedure A. If an employee s annual performance rating is expected to be "Needs Improvement," the department or agency shall advise the employee of the expected rating a reasonable time in advance, but not less than seven (7) calendar days prior to the PEPR Review 18

19 Date, and shall allow representation at the meeting to review the PEPR in accordance with the provisions of Rule 15 CODE OF CONDUCT. B. If an employee s annual performance rating is Needs Improvement, the employee will not be eligible for a merit increase for that evaluation period, unless the PEPR is more than thirty (30) calendar days late under the provisions of Section D Failure to File PEPR. C. The employee shall be provided with a PIP no later than ten (10) calendar days after the PEPR Review Date. Section Grievances and Appeals Relating to PEPRs A. An employee may grieve any performance rating pursuant to Rule 18 DISPUTE RESOLUTION. B. An employee may appeal a grievance of a Needs Improvement rating in accordance with Rule 19 APPEALS. Appeals of grievances of other ratings are not permitted. C. An employee may not grieve or appeal any other aspect of the Performance Enhancement Program. Section Eligibility for Merit Increases A. Eligibility for merit increases is based on employee performance as measured by a PEPR. Employees who hold positions in classifications contained in the Undersheriff pay schedules are not eligible for merit increases under this Rule 13. B. The amount of an employee s merit increase, if any, shall be based on an employee s overall annual performance rating. C. No employee shall receive a merit increase that exceeds the highest rate of pay in the pay grade assigned to the employee s job classification. D. The funding for merit increases is provided in the annual appropriation ordinance. The number of steps reflected in B may be adjusted from year to year. The award of merit increases is contingent upon this annual appropriation being approved by City Council. In case of a conflict between ordinance and these rules, the ordinance will prevail Merit increase date: A. General Provision: If an employee is eligible to receive a merit increase, it will be effective at the beginning of the pay period following the PEP Evaluation End date. 19

20 B. Declared Fiscal Emergencies: In the case of a declared fiscal emergency by the Mayor, and upon the request of the Mayor, there will be no merit increases awarded for increments of at least one year. During the declared fiscal emergency Appointing Authorities, managers and supervisors shall complete PEPRs for employees, but no merit increases will be awarded during this time. C. Late filing of PEPR: If a department or agency prepares an employee s PEPR after the PEP Evaluation End date, any merit increase to be awarded as a result of the performance rating shall be granted retroactively to the merit increase date. D. Failure to file PEPR: 1. If a PEPR is not received in the office of CSA within thirty (30) calendar days after the PEP Evaluation End date, a merit increase, equivalent to the step the employee would have received for a "Successful" rating, shall be granted retroactively to the merit increase date. 2. If the PEPR is received after the thirty (30) calendar days and it shows an "Exceptional" rating, any corresponding increase in merit pay shall be granted retroactively to the merit increase date. 3. If the PEPR is received after the thirty (30) calendar days and it shows a "Needs Improvement" rating, the employee shall continue to receive the merit increase, if any, associated with a Successful rating, but the PEPR evidencing the Needs Improvement rating will become part of the employee s record. 4. Supervisors or managers who are responsible for the submission of PEPRs to CSA and file a PEPR more than thirty (30) calendar days after the PEP Evaluation End date may be subject to discipline for failure to perform assigned duties On-call Employees and Employees in Other Pay Schedules A. On-call employees are not eligible for merit increases. B. Positions in the community rate and short range pay schedules are on-call, accordingly, merit increases are not available. However, employees in these schedules may advance one (1) pay step in the pay range upon the approval of the appointing authority, except during a declared fiscal emergency, after having served: 1. Two consecutive annual terms (an annual term is a minimum of three hundred (300) hours); or 2. One term and completion of a certificate program as approved by the appointing authority. C. The Training pay schedule only has one step; accordingly merit increases cannot be granted. 20

21 Susie Billinger, HR Director City of Hays P.O. Box 490 Hays, KS (785) E-4 Performance Appraisal (a) The performance appraisal process provides the basis for determining employment status and performance-based salary increases. Appraisals are considered in determining promotions, used as a factor in determining the order of layoffs, and as a means of identifying employees who should be transferred, rehired, or who, because of their poor performance, should be demoted or dismissed, and for any other purpose related to job performance. (b) Supervisors are required to complete monthly performance appraisals on all probationary employees. Probationary monthly appraisals are due in the Human Resources Department every 30-days throughout the probationary period. Thereafter, performance appraisals shall be submitted to the Director of Human Resources as follows: (1) at the end of an employee s probationary period; (2) annually, corresponding with the employee s anniversary date in his current position; or (3) after 3 months if an employee has received a poor performance rating. (c) (d) (e) Prior to the time frame set out in (b), (1), (2), and (3), employees will be required to complete a self-performance appraisal, to be reviewed with their supervisor. This requirement is not meant to provide a means of compromise or negotiation between the employee and the supervisor, but to open the doors of communication on measurements of performance. Direct supervisors are responsible for completing employee performance appraisals. The performance appraisal shall be reviewed by additional departmental/divisional supervisors, if appropriate, based upon the size of the department/division. The Department Head must approve all performance appraisals and recommended salary increases prior to submitting them to the Human Resources Director for processing. The City Manager must approve all pay changes prior to communicating pay actions to the affected employee. Performance appraisal forms will include a variety of general measurements (example: productivity, quality of work, etc.), with a number of sub-topics for each measurement, that employees will be judged upon. Each sub-topic should be evaluated with a numerical rating of 1-5 with 5 being the best. After completing the sub-topics within each general measurement, the numerical ratings should be 21

22 added and averaged by the number of existing sub-topics on that page. This process should be followed throughout the appraisal form with averaged totals for each general measurement carried to the final page where a grand tally and average should be calculated. The final rating scale will reflect the following: 1 = unsatisfactory performance 2 = marginal performance 3 = satisfactory performance 4 = commendable performance 5 = outstanding performance Employees receiving an average rating from 3 through 3.5 will receive a 1% pay increase. Employees receiving a rating from 3.6 through 4.4 will receive a 2% pay increase. Employees receiving a rating from 4.5 through 5 will receive a 3% pay increase. (f) (g) (h) (i) (j) (k) All pay increases become effective on the first day of the pay period immediately preceding or following the employee s anniversary date, dependent on when the anniversary date falls within the pay period. Retroactive pay increases require approval from the City Manager. Performance appraisals shall be conducted on forms and in a manner approved by the City Manager. Supervisors shall meet with their employees to discuss their performance appraisal, and employees will be required to sign the document prior to submitting it to the Director of Human Resources. An employee who receives a performance appraisal with a rating below 3 will be placed on a 90-day probationary status after which time the employee will be subject to termination if his performance has not improved. If the employee s performance does improve, any pay increase forthcoming will not be paid retroactively. If disciplinary action requiring suspension without pay has been taken against an employee during the employment period for which the employee is being evaluated, an employee will be limited to receiving no higher than a 1% pay increase for that time period. If an employee s performance appraisal becomes due during a time period that the employee has been placed on a probationary status, his evaluation will be postponed until the probationary status has expired. If an employee believes that his performance appraisal is unfounded or inadequately justified, the employee may informally request a meeting with the next level of supervision, or he may file a grievance in accordance with Article I of this document. 22

23 Ruben Nieto City of Issaquah P.O. Box E. Sunset Way Issaquah, WA PURPOSE: To recognize and reward the outstanding performance of employees whose salaries are within 5% or at the top of their salary range GROUPS AFFECTED: All employees REFERENCES: Collective Bargaining Agreements POLICY: A) All those employees who have been unconditionally approved within 5% of the top, or at the top of their salary ranges, are eligible for MEP merit pay. An employee's base pay increase, plus the percentage of MEP merit pay the employee receives shall not exceed 5% (or the maximum percentage as provided by a Collective Bargaining Agreement) in a calendar year. B) Employees advanced to within 5% of the top, or at the top of their salary ranges during the calendar year are eligible for the MEP for the remainder of the year up to the maximum percentage for the MEP merit pay. See (D) below, and (A)(2). C) Eligibility for MEP Merit Pay is based on sustained, outstanding performance of work that is attainable during the established work schedule, i.e., OT is not required for MEP eligibility, and an employee's efforts to achieve established objectives should not place a burden on other employees. D) The amount of merit pay for which an employee is eligible is in direct proportion (1) to how well the employee's performance meets the MEP requirements, (2) to the amount of time the employee is eligible for MEP merit pay, and (3) to any base pay increase received during the calendar year, as described in (A)(2). E) Eligibility for MEP merit pay must be supported by documentation of the employee's performance. Supervisors must assure that each employee in the MEP receives a thorough performance review and feedback based on the City-wide performance standards contained in the City's current performance review form, 23

24 available from Human Resources staff, and that the completed performance review documents are submitted to Human Resources no later than the due dates identified in , Subsections (A)(1) and (B)(1)(a). F) Documentation regarding community service completed on the employee's own time may be included in an individual's MEP DEFINITIONS: A) Criteria for Sustained, Outstanding Performance (See Exhibit A) PROCEDURE: A) Employees advanced to within 5% of the top of their salary range: 1) The employee's review date remains the same until the employee is at the top of the salary range. (Thereafter the employee's review date is based on the calendar year.) 2) When an employee receives a base pay increase to the top of the range and that increase is less than 5%, the employee will be eligible for MEP merit pay for the difference between the maximum percentage of MEP merit pay (e.g., 5%) and the percentage of the base pay increase received. 3) The employee's supervisor is responsible for documenting the employee's performance for both the base pay increase and the MEP merit pay. See (E) above. 4) At the next pay period following the employee's review that places the employee at the top of the range, the employee will receive a lump sum payment for the previous twelve-month period in the amount of the difference between the base pay increase and 5%. B) Employees at the top of their salary range: 1) After an eligible employee's salary is at the top of the salary range, the employee must elect in writing one of the following options for each calendar year. In January of each year, or when an employee becomes eligible during the year, Human Resources staff provides a memo to each eligible employee on which the employee's option is indicated (see Exhibit B). The approval of the employee's supervisor must be indicated on the memo, which is returned to Human Resources for the employee's file. 24

25 a) Development of a written action plan for approval by the employee's supervisor and the Mayor. Action plans are submitted to Human Resources for the Mayor's approval by January 31st of each calendar year, or within a month after an employee first becomes eligible. An action plan must contain specific objectives (see form provided in Exhibit C) developed jointly by the employee and supervisor, with the employee taking the initiative to propose possible objectives for discussion. Objectives may be revised during the year to meet changing priorities. Objectives must be specific (define expected result), measurable (describe quantity and quality of output expected), attainable (within the regular work schedule and with available resources including staff time), relevant (to assigned job and goals of the City), and trackable (observable and measurable). b) Identification at the beginning of the eligibility period, and supervisor approval for, the level of performance expectation on which an employee's merit pay will be based. This may be accomplished by documenting throughout the year various accomplishments which support each of the "Criteria for Sustained, Outstanding Performance" (see Exhibit A). c) A combination of objectives and performance expectations (Items (a) and (b) above). d) Not participating in the ME P. 2) MEP participants assume responsibility for "tracking" their performance and unusual accomplishments, e.g., action plan progress if applicable, additional duties assigned, unanticipated and time-consuming events that are or are not job-related. 3) Periodic and brief (15-30 minutes) reviews will be held by the supervisor and employee to discuss progress to date, and to confirm that time and effort is being expended by the employee as expected by the supervisor. It is the employee's responsibility to request meetings with the supervisor for periodic progress reviews, as needed. 4) MEP participants will assume responsibility for communicating with supervisors when problems occur, timelines cannot be met due to other priorities or unavailable resources. 25

26 5) Performance reviews for MEP participants will occur at the end of each calendar year, and will be documented by the employee. a) For employees who have developed an action plan, option (a) above, the recap must indicate the amount of progress achieved toward each objective. b) For employees who elect option (b) above, specific examples of accomplishments must be provided in support of the level of performance achieved. This may be accomplished by providing one or more examples of accomplishments which support each of the "Criteria for Sustained, Outstanding Performance" (see Exhibit A). 6) By the fifth regular working day of the following January, the performance review, with the supervisor's signature and recommendation for the percentage of merit pay to be awarded to the employee, must be submitted to Human Resources. (A separate memo from the supervisor is not needed - just the supervisor's signature and recommendation on the performance review documents to indicate the percentage of merit pay.) The supervisor's recommendation must be related to the level of performance accomplished. The following formula is provided as a guideline for determining an appropriate percentage: Performance Area Level of Achievement or Objective 20% 40% 60% 80% 100% A X B X C D X Totals 40% 60% 80% 100% X Grand Total = 280% divided by 4 projects = 70% average Merit Pay = 70% of the maximum amount (5% of annual salary) 7) Human Resources staff will prepare by mid-january for the Mayor's review and approval, a recap of data regarding all employees eligible for MEP pay for the previous calendar year. The recap, with the Mayor's approval will be forwarded to payroll staff for processing. 26