QLDC Council 24 July Report for Agenda Item: 11

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1 COU 14/07/11 QLDC Council 24 July 2014 Report for Agenda Item: 11 Department: Human Resources 11. QLDC Remuneration Strategy and Framework Purpose 1 This report provides an overview of the Council s employee remuneration strategy and framework. Recommendation 2 That Council: a. Note the content of the report. Prepared by: Reviewed and Authorised by: Beth Bundy Director, Human Resources 7/07/2014 Chief Executive 9/07/2014 Background 3 This report was requested by the Mayor to provide elected members with an understanding of the approach taken to employee remuneration at QLDC. The strategy and framework used in the organisation has been reviewed following the organisational review to ensure that an appropriate and consistent approach is applied across the organisation. 4 Prior to the organisational review, the previous organisations all used Strategic Pay to inform their remuneration strategy. Therefore the general methodology and approach remains unchanged, however a number of elements have been revised to suit the current environment (market expectations) and address historical anomalies in practice.

2 Comment 5 The remuneration strategy and framework comprises the following elements: a. Job Evaluation b. Grading and Salary Ranges c. Market Selection d. Remuneration Structure Job Evaluation 6 This is the systematic method of rationally assessing the relative sizes of jobs within an organisation by comparing one particular job, a group of jobs, or even a work type with other jobs. The size is determined by comparing jobs on the basis of common criteria known as factors, such as accountability, work complexity, and interpersonal skills. Jobs are analysed to assess the degree to which these factors are present. The end result of a job evaluation is a number of points for every job upon which an equitable pay system can be based. 7 The QLDC Human Resources team and a group of senior managers are trained in the Strategic Pay SP10 job evaluation method, the model of choice within Local Government and the Public Sector in New Zealand. Evaluations are completed via a committee structure; Strategic Pay considers this approach best practice because it ensures: a. Organisation wide accountability for job evaluation. Human Resources remain responsible for the remuneration strategy, decision making and associated administrative processes. b. Each area of the Council is represented (involving the HR portfolio representative in some instances). At least one individual on the committee is familiar with each role being evaluated. c. The range of knowledge of the committee members ensures consideration of consistency in sizing and internal relativities for comparing similar roles in different parts of the organisation. d. The committee approach provides the ability for discussion and consensus of opinion on evaluation. e. The inclusive process provides confidence to employees of a fair process. f. A trained committee reduces the organisations on-going reliance on an external consultant. 8 The terms of reference for this committee have been developed by Human Resources. To ensure no bias, the trained senior managers do not evaluate roles within their own departments. Senior Management Team positions will not be considered by the committee.

3 Grading and Salary Ranges 9 QLDC uses a grading approach for positions at Tier 3 and below, this means that roles are grouped into grades based on a range of total points achieved from the evaluation. Each grade has an associated salary range which is based around a midpoint which is the market value for positions within that grade. The salary range is determined by the organisations choice of market selection (explained later in the paper) and remuneration structure. 10 In all remuneration discussions (including the annual salary review process and negotiations with new employees) QLDC considers that the maximum salary appropriate for employment will be the midpoint. This is the market value for individuals competently performing the role. New appointments should be between 85% and 95% of the midpoint to take into consideration the growth and development of an individual performing the role. The exception being a specialist role that is difficult to recruit. Market selection 11 Strategic Pay collects data for over 128,000 employees across New Zealand which is analysed and presented as market information from a variety of different standpoints including by industry, region, number of employees and company turnover. In the organisational review QLDC selected the nonmetropolitan local government market information. Based on advice from Strategic Pay going forward QLDC has selected the following market lines for determining the market midpoint for each position: 12 Roles evaluated up to and including Grade 12 will be assessed against the Local Government Market. These roles are lower level, non-technical and as such should be roles in which it should be easier for QLDC to recruit. Example positions are provided below: Role Administrator Customer services Manual labour 13 Roles evaluated at or above Grade 13 will be assessed against the General Market. This is because they require further technical competency / qualification or managerial competence and will more than likely require recruiting new employees from outside the district. Example positions are provided below: Role Engineer Planner Manager

4 Remuneration Structure 14 Following the evaluation of a role and the determination of relevant market information, an organisation determines the appropriate structure of compensation packages for its employees. Following the organisational review QLDC has been using the total remuneration approach and there is no requirement for QLDC to revisit this position at this time, it is in line with other councils across New Zealand. 15 Due to historical circumstances some employees are currently paid in excess of the midpoint, however moving forward the approach QLDC will take is to appoint new employees at 85-90% of the midpoint, and no higher than 100%. This will provide flexibility to allow progression in salary resulting from the outcomes of performance agreements. Current Remuneration Analysis 16 Since November 2013 the job evaluation committee has reviewed over 50 roles across the organisation. Together with the evaluations undertaken through the organisational and salary reviews last year, the organisation has 18 priority positions left to evaluate. However, there is trend data available from Strategic Pay which enables us to benchmark positions against similar positions nationally without completion of the evaluation by the committee. These roles will be evaluated by the committee over the coming quarter. 17 The tables below provide a summary of how current remuneration compares with the midpoint data for each sized position. The majority of QLDC employees are paid within the acceptable range of 85% to 110%. Those paid below 85% of the midpoint will have their remuneration adjusted through the 2014 salary review process. Those paid over 110% of the midpoint will not be considered for a salary increase in The reasons for individuals receiving over 110% of the midpoint are mainly a result of historical decisions and job evaluation results. There are a number of instances where the requirement to pay over the acceptable range is driven by market forces. Employee population measure against salary review mid-point (Excluding Hourly paid/casual roles) Mid-Point Statistics Excluding Hourly/Paid casual roles QLDC Employee Number (%) Above the mid-point >110% 15.38% Above the mid-point 100%-110% 24.10% Below the mid-point 85%-100% 35.38% Below the mid-point <85% 12.31% To be sized 12.82% Total %

5 Mid-Point Statistics Excluding Hourly/Paid casual roles QLDC Employee Number (count) Above the mid-point >110% 30 Above the mid-point 100%-110% 47 Below the mid-point 85%-100% 69 Below the mid-point <85% 24 To be sized 25 Total Currently QLDC has a total Full Time Equivalent employee population of with 28 employees earning over $100K. The reason for a higher salary bracket can be attributed to a variety of factors including the district s peculiar requirements connected to continued growth, the complexity of the QLDC infrastructure requirements, the particular mix of models of service delivery such as CCO s and other outsourced services and the level of expertise and experience required to carry out the position. Other considerations 19 There are a number of remuneration products and systems that provide salary data, and methods for job evaluation. Some that were considered are listed below including the reasons why they were not chosen. SP5 20 SP5 is Strategic Pay s simplified version of job evaluation and is currently in use by a number of Council s nationwide. Due to the complexity and variables between roles at the Council this was considered but was found to be too basic. Single Evaluator / HR Only Evaluators 21 By involving senior managers and the Human Resources Team the committee approach facilitates an inclusive approach to job evaluation. Historically, the Human Resources Manager was the only employee who would evaluate roles within the QLDC. There were negative internal perceptions surrounding this approach. Grading / Banding Options 22 Once roles are evaluated there are several approaches to using the points awarded from the evaluation information. Positions can be placed within a grade (a range of points), or within a band (encompassing several grades) or be considered purely based on the points allocated to individual positions. Grading allows comparisons of small groups of positions of a similar size, without making these comparisons too widely.

6 Other policy line approaches 23 The non-metropolitan Council line was considered for roles evaluated below grade 13; however no other councils use this line. It is accepted that the cost of living for QLDC s employees is significantly higher than for those working for other New Zealand non-metropolitan Councils. Using the local government and the general market lines enables us to be more competitive in our market place. Career Pathways 24 Strategic Pay has an additional tool, JobWise, which provides a career structure for how positions progress through the grading structure up through the organisation. This tool is designed to assist employees to have clarity about career progression expectations within job families. This requires further analysis and adaptation to be appropriately implemented within QLDC. Financial Implications 25 The remuneration strategy and framework operates within the current salary budget. Local Government Act 2002 Purpose Provisions 26 This report supports the LGA purpose provisions (ss10, 11, 11A), in that QLDC requires a remuneration strategy and framework that enables it to recruit and retain employees with the necessary skills to deliver the services required of it. An effective strategy will allow QLDC to attract individuals whose qualifications, skills and experience contribute to the development of short, medium and long term plans and delivery of high quality operations for all areas of council services. An appropriate remuneration framework will retain talent within the organisation through an offering which meets but does not exceed the market expectations, and enables the organisation to recognise high performing individuals. Council Policies 27 There are no relevant Council Policies, but the paper summarises the internal (i.e. staff) remuneration policy. Consultation 28 QLDC developed this framework in consultation with leading remuneration consultants, Strategic Pay, whose methodology and remuneration advice is used widely across New Zealand local government, the public and private sectors.