DMA POLICY: 3-05-01-2013 NAME: PAY PLAN POLICY

DMA POLICY: 3-05-01-2013 NAME: PAY PLAN POLICY EFFECTIVE DATE: September 1.2013 I. PURPOSE The purpose of this document is to summarize the Department program for implementing compensation under the broadband guidelines for Pay Plan 20 for all non-union positions. It will be the guiding document for both the Department of Military Affairs and the administratively attached Veterans Affairs Division. All pay-related issues for positions in a collective bargaining unit are negotiated with the Union per statute, state policy, and the individual Bargaining Agreement. The contents of this document are not intended to serve as a contract between the Department or Veterans Affairs Division and employees. Rather, the document should provide guidance to employees and managers regarding the Broadband Pay Plan referred to as Pay Plan 20 and help managers to be able to recommend or determine pay decisions. Any stated policy or criteria set forth in this publication is subject to revision or modification as determined by the Governor's Office or Department Head. II. PHILOSOPHY The Department of Military Affairs promotes the concept of a compensation system that will ensure employees are compensated fairly and equitably, and offer opportunities for rewards and recognition. The goal of the Broadband Pay Plan is to give agency managers, supervisors, and employees the flexibility needed to assist them in fulfilling this mission. The Department believes that employee competence, combined with an employee's overall contribution to organizational success, should largely determine their compensation and career advancement opportunities. The objectives of the Broadband Pay philosophy are as follows: First, be internally equitable within the Department. That is, provide a salary range for every position that reflects its value compared to all other similar positions in the Department. Additionally, we will support "equal pay for equal work regardless of gender". Second, be externally competitive. That is, provide salary ranges that are competitive in the marketplace and retain equity so that the Department can attract and retain qualified employees vital to organizational success. 1

Third, be motivating. That is, provide the opportunity for future pay based on an employee's individual work performance and development of job related competencies. With these objectives in mind, the Broadband Pay Plan is intended to reward employees for positive behaviors that contribute to the effectiveness of the Department and offer increased opportunities for career advancement and recognition to employees. III. DEFINITIONS Base Pay: (base rate, base salary) The hourly rate paid to an employee for a job performed, not including shift differentials, benefits, overtime, incentive premiums, or longevity. Pay Band: A broad pay range in which positions are placed based on their classification and job functions. Competencies: Sets of measurable and observable behaviors that are essential to success on the job. Complexity Level: Measures the nature and difficulty of tasks, steps, methods, and mental processes necessary to identify what needs to be done and the originality, problem solving, resourcefulness, and conceptualization required to complete assigned tasks. Entry Salary: The lowest salary or entry of a pay band. This does not apply when an employee is on a training assignment. Hiring Range: The salary range usually between 80% of market and 100% of market. Market-based Pay: Pay awarded to employees based on comparisons to how other surveyed employers compensate employees in similar jobs (within DMA) based on the most recently approved Department of Administration market survey. The most current survey can be found at: https://mine.mt.gov/personnel/officers/default.mcpx. Market-based comparisons consider only base pay. Maximum Salary: The highest total salary available in a pay band. Pay Zone: The salary range between 80% of market and 120% of market in the pay band for a position's job code. Performance Management: A managerial process that consists of planning, managing, improving, evaluating, and rewarding performance. In Montana State government both results and competency standards are considered performance standards. Short-term worker: As provided in 2-18-101 (23), MCA a person who: (a) Is hired by an agency for an hourly wage established by the agency; (b) May not work for the agency more than 90 days in a continuous 12 month period. (b) Performs temporary duties or permanent duties on a temporary basis; (c) Is not eligible for permanent status; (d) Is terminated at the end of the employment period; and (e) Is not eligible to become a permanent employee without a competitive process. 2

Temporary employee: As provided in 2-18-101 (24), MCA, an employee who: (a) Is designated as temporary by an agency for a definite period of time not to exceed 12 months; (b) Performs temporary duties or permanent duties on a temporary basis; (c) Is not eligible for permanent status; (d) Is terminated at the end of the employment period; and (e) Is not eligible to become a permanent employee without a competitive selection process. Training Assignment: A temporary training work plan when an employee does not meet the full qualifications of a position. An employee may be placed below the pay zone, but within the pay band when a training assignment is implemented. Training assignments may not last more than one year, unless otherwise specified in an agency's collective bargaining agreement. Conditions of a training assignment will be stated in writing and signed by employee and supervisor and placed in employee's personnel file. If the employee does not satisfactorily complete the training assignment the agency may: 1. Return the employee to the position held before the training assignment. 2. Assign the employee to another position for which the employee is qualified. 3. Extend the training assignment up to one additional year. 4. Discharge the employee, in compliance with the disciplines handling policy, ARM 2.21.6505 et seq., or probation policy ARM 2.21.3810 IV. POSITION CLASSIFICATION All positions are classified using the Benchmark Factoring Method (BFM). The BFM uses a single factor, complexity, which is applied to the predominant work performed in a position to place the position in the appropriate job code and pay band. When reclassification of a position is necessary, the Program/Division Administrator will submit a request for a position review by the State Human Resources Office (SHRO), through the chain of command, to the Department Head. Normally reclassifications are not done unless 50% or more of the work duties of the position have changed. Reclassifications will have a target date to be completed within 30 days. The effective date of a reclassification salary adjustment, if any, that results from a change in pay band shall be the first day of a pay period as set by the Program/Division Administrator and Department Head and submitted on an approved Personnel Action Form (PAF) to the SHRO. V. NEW HIRES Typically, new employees are hired at 80% of the market rate for the position which is being filled. However, when determining the employee's base pay, the hiring authority shall consider criteria including but not limited to: 1) The employee's job-related qualifications and competencies, 2) Existing salary relationships within the job class and work unit, 3) Ability to pay, and 4) The competitive labor market. Program/Division Management has the authority to hire above 80% up to 90% of market with written justification provided to the SHRO that will be retained in the employee's official personnel file. Any position hired above 90% of market must have written justification submitted through the SHRO to the Department Head for approval prior to 3

Program/Division Management committing to the pay rate or an applicant being offered the position. Questions to be answered before hiring above the entry rate include: 1) Whether the applicant's education, training and/or prior relevant work experience exceed the minimum qualifications required based on the job profile. 2) Is there a business need to hire an employee with higher than entry-level skills and experience? 3) Are there recruitment problems associated with filling positions in this job class or location? 4) How unique is the position or applicant in terms of training and experience? 5) Are there other special circumstances such as the applicant previously worked for the department but had a break in service? 6) What is the effect on current employees in the department and work unit? Do the differences in qualifications and performance justify a salary difference? VI. PROMOTIONS I DEMOTIONS Promotions; Movement into a higher pay band results from an employee going through the selection process for another position according to department policy. When determining a promoted employee's new base salary, the hiring authority shall consider criteria including, but not limited to: 1) The employee's job-related qualifications and competencies, 2) Existing salary relationships within the Department and work unit, 3) Ability to pay, and 4) The competitive labor market. Any non-statutory pay increase that results in the employee being paid above market must have written justification addressing the questions found in Section V submitted through the Human Resource Office to the Department Head for approval prior to Program/Division Management committing to the new pay rate. Temporary Promotions: An employee may be temporarily promoted for a period not to exceed two years. The employee must be notified in writing at the start of the temporary promotion as to the reason for the promotion and its expected duration. The employee's base pay in the higher level position will be set as provided above. At the end of the temporary promotion, the base pay will revert back to the base salary before the temporary promotion. Temporary promotions must be for three months or longer in order for the employee to be compensated at a higher rate. Demotions: The salary for a person moving from one pay band to a lower pay band will be set no less than the entry rate for the new occupation. When determining a reassigned employee's salary, the agency should consider the employee's job-related qualifications (experience, knowledge, skills and abilities), existing salary relationships within the Department and work unit, and the competitive labor market. Under no circumstances will pay be set above 4

115% of the market salary for the new occupation. Salaries may be pay protected up to six months at the agency's discretion. VII. PAY COMPONENTS A. Market-Based Pay: The Department will endeavor to have all employees' pay is at least 80% of the market rate for their position. Employees whose pay rate is below 80% of market should get first consideration when making market pay adjustments. Pay adjustments to move toward the market rate may be done annually after the completion of a satisfactory performance review. The maximum move to market any employee may receive is 5% per year including any statutory raises approved by the legislature. Positions currently at or above market do not qualify for a market-based pay adjustment and will stay at current base rate unless a higher rate is approved by the Department Head. A decrease in a market rate during a market survey analysis will not result in a decrease in pay for any position.. Market pay adjustments must be given as an increase to base pay and can only be made if the program/division has adequate funding available in the existing budget. B. Strategic Pay: This pay component is intended to attract or retain employees with the competencies critical or vital to the achievement of the Department mission or strategic goals. Consideration shall be given to the competitive labor market and existing pay relationships within the same job class within the Department. Strategic Pay may be considered when: 1) The hiring authority has a highly competent person in a job in order to achieve an identified strategic goal; or 2) Competency-based adjustments are not enough to attract a candidate with the desired competencies and level of competence; or 3) Persons with the desired competencies or combination of competencies are rare in the marketplace and very difficult to recruit; or 4) The retention of an existing key employee becomes an issue. 5) The adjusted salary still costs much less than obtaining services through other means such as contracting. Program/Division Management has the authority to make Strategic Pay adjustments between 80 and 90% of market with written justification provided to the SHRO that will be retained in the employee's official personnel file. Any adjustments moving an employee above 90% of market must have written justification submitted through the SHRO to the Department Head for approval prior to Program/Division Management committing to the pay rate or an applicant being offered the position. 5

C. Situational Pay: For consideration under this pay component a job situation should be one that causes difficulty in recruitment or retention because of job requirements such as unusual hours of work, environmental hazards, unusual physical demands, or extensive travel. When determining pay, consideration shall be given to documented past recruitment or retention problems, the competitive labor market, and existing pay relationships within the same job class within the department. Pay may be given up to 100% of the market rate within the classified pay band of the position. All Situational Pay adjustments must be approved by the Department Head prior to Program/Division Management committing to the pay rate or the applicant being offered the position. D. Results-Based Pay: Results-based pay may be awarded to employees or teams of employees based on accomplishments. This pay is not intended to increase base pay, but rather is used as a one-time, lump-sum bonus. Accomplishments may be outcomes and/or outputs achieved which are observed and documented through performance management. 1) Results-based pay is meant to provide recognition to employees for outstanding contributions and accomplishments that go "Above and Beyond" their traditional role in the agency. It should encourage employees to take the initiative to reach beyond their job requirements and act as models, motivators, leaders and innovators. Criteria that should be considered for awarding results based pay are things such as savings to the Department, work output, customer satisfaction, Department results, and innovation. Employees must have a current above satisfactory performance appraisal to qualify for results based pay. 2) Program/Division Administrators must submit a letter to the SHRO requesting the award. The awards will not exceed a gross payment of $1,000.00 per person, per year. The letter must address the above criteria explaining why the employee or team deserves the award and certify that payment of the award is within the existing program budget. The SHRO will collect the letters and present them quarterly to a review board that is appointed by the Department Head. The board will review requests to make sure they meet the criteria and intent of this policy. The requests will then be forwarded to the Department Head for final approval of the award. 3) All results-based awards will be paid through payroll and are subject to payroll deductions. 4) Awards of paid time off as compensation for results based pay are not authorized unless all of the provisions of MCA 2-18-1106 are met. 6

E. Supervisory Adjustment: Employees may be eligible for a pay adjustment when performing supervisory duties. When an employee who is performing supervisory duties is classified in the same job code and pay band as their subordinates, an agency may recognize these additional duties with a 10% pay adjustment. When determining this additional pay the agency will consider levels of supervisory duties performed, internal equity, and the pay plan rules. F. Lead Worker Adjustment: Employees may be eligible for additional pay when performing lead worker duties. When employees who are performing lead worker duties are classified in the same job code and band as their subordinates, a program/division may recognize these additional duties with a 5% pay adjustment. When determining this additional pay, a program/division should consider levels of duties performed and internal equity. G. Statutory Pay Increases: Pay increases authorized by the Legislature will be executed following legislative intent. H. Longevity Pay Increases: Each employee who has completed 5 years of uninterrupted state service must receive 1.5% of the employee's base salary multiplied by the number of completed, contiguous 5-year periods of uninterrupted state service. In addition, each employee who has completed 10, 15 or 20 years of uninterrupted state service must receive an additional 0.5% of the employee's base salary for each of those additional 5 years of uninterrupted service. Longevity Pay increases are given every five years and added to the hourly base salary. VIII. IX. INTERNAL APPEALS PROCESS Employees can appeal pay decisions using the existing rules outlined in the Administrative Rules of Montana, 24.26.501. COLLECTIVE BARGAINING AGREEMENTS Provisions of this policy shall be followed, unless they conflict with negotiated collective bargaining agreements, which will take precedence to the extent applicable. 7