SR 07-24-2018 8E
City Council
Report
City Council Meeting: July 24, 2018
Agenda Item: 8.E
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To: Mayor and City Council
From: Donna Peter, Director, Human Resources Department
Subject: Adoption of a Compensation Philosophy
Recommended Action
Staff recommends that the City Council approve the proposed Compensation
Philosophy, a statement that documents the City’s approach to establishing staff
compensation.
Executive Summary
Few governance issues generate as much public scrutiny as the topics of public
employee compensation and staffing. In response to media and community discussion
in 2017, the City Council initiated an independent, comprehensive Compensation and
Staffing Review by the accounting firm Moss Adams LLP. The report, the most in -depth
performed by any city in Southern California in recent years, provided extensive data
and analysis of Santa Monica’s compensation and staffing practices in relationship to a
range of the Southern California cities that are most comparable in size, services and
demographics. The scoping and oversight of the Compensation and Staffing Review
was provided by the City Council Audit Subcommittee with the participation of a panel of
citizens acting as an advisory committee.
The study’s final report noted that while the City has consistently undertaken pay
comparisons with other municipal employers, Santa Monica does not have a formal
“Compensation Philosophy” adopted by the City Council that explicitly spells out the
goals and factors to be weighed in establishing, administering and modifying the
compensation system for City staff. In the interest of transparency, clarity and
alignment, Moss Adams included in their report a recommendation that the City develop
such a Compensation Philosophy for official adoption of the City Council to guide future
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policies and practices. The City Council adopted all of the report’s recommendations
and this draft was prepared at Council’s direction.
A Compensation Philosophy is not a specific policy so it is intentionally broad and is
designed to capture the philosophy of the City as an “employer of choice” in the 21 st
Century who also has a responsibility to its citizens to be fiscally responsible and
transparent. Compensation philosophies are designed to align total compensation with
the organization’s overall mission and goals and is part of an overall strategy to attra ct
and retain highly qualified staff as well as provide a broad framework for the Council,
citizens and staff to help guide and understand decisions affecting pay and benefits. A
philosophy also typically clarifies what factors may be considered. In the proposed City
Compensation Philosophy, factors such as financial sustainability and “internal
relationships” as well as other factors will be considered when implementing the
philosophy. If adopted, the Compensation Philosophy would provide the basis for f uture
compensation policies and decisions that the Council will enact, taking into
consideration the overall goals and factors enumerated in the document.
Discussion
Council’s adoption of this Philosophy will signify a unified acceptance and
understanding of the City’s approach to staff compensation. The Compensation
Philosophy in its draft form was circulated among City executives and labor union
representatives. All comments and feedback received were considered and applied
appropriately. The draft was not submitted to the Audit Subcommittee as it was decided
it was more of a City wide philosophy that would guide both Council and staff so was
therefore more appropriately taken to the City Council for adoption. This Philosophy is
being presented to members of the Council with an understanding that it is a “living”
document. The Compensation Philosophy in its current form will establish a consistent
methodology for determining if the City’s processes to recruit and retain highly qualified
staff continue to be in line with the City’s overarching goal of being an “employer of
choice” while continuing to be fiscally responsible with a goal of this being completed
every five years.
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Financial Impacts and Budget Actions
While staff compensation is the largest single factor in the City’s budget, there are no
direct financial impacts or budget actions needed for the adoption of a Compensation
Philosophy for the City. It is designed to ensure both an effective basis for maintaining
the City’s goal of being “an employer of choice” within the context of maintaining the
City’s long-term fiscal sustainability.
Prepared By: Tatiana Morrison, Executive Administrative Assistant
Approved
Forwarded to Council
Attachments:
A. Compensation Philosophy Draft 7.17.2018
B. Powerpoint Presentation
The City of Santa Monica strives to provide exemplary service to the community by being a model for
21st Century government. Recognizing the centrality of our workforce of dedicated and talented
professional staff, we are committed to promoting organizational and community values that include:
exceptional customer service to the public; consistent and excellent performance; innovation; good
fiscal, social, and environmental stewardship; and ethical behavior.
To achieve and maintain our high standards of service and performance, the City must continue to
attract and retain well-qualified staff who exemplify the organization’s values. A public service
environment that is attractive to such individuals depends upon many factors, including pride,
teamwork, a competitive compensation program, and non-monetary benefits such as recognition in the
workplace for accomplishments and a positive work environment. The City is committed to being an
“employer of choice” as part of an overall strategy of attracting and retaining talent that will uphold the
City’s organizational values.
In order to provide competitive, sustainable, and responsible compensation, the City will take into
account the following:
• Total compensation which consists of but is not limited to: direct compensation, e.g. salary; and
indirect compensation such as health insurance, retirement, and time-off benefits.
• In evaluating competitive compensation, the City will take into account:
A. Financial sustainability as reflected by the City’s financial forecasts and revenue
projections, competing service priorities, long-term liabilities, capital improvement
and other asset requirements, and fund reserve levels.
B. The “relevant labor market” which may vary depending upon classification but is
primarily defined by geographic region (predominately local and/or state-wide) and
key markets (municipal and other government agencies) and if applicable, private
sector when readily available and effectively comparable.
C. “Internal Relationships” referring to the relative value of classifications to one
another as determined by the City. The City will compare responsibilities, skill level,
knowledge, ability and judgement to determine similarity.
D. Other relevant factors may include unforeseen economic, regulatory or service
changes.
E. Transparency with the community, recognizing that taxpayers and ratepayers
ultimately fund all employee compensation and deserve commensurate value from
all those who work for the City. This includes not only disclosure of the
components of workforce compensation, but adequate advance notice of material
policy changes in order to participate effectively in decision-making that affects the
City’s finances.
Ideally, every five years, the City will evaluate its compensation structure, programs and policies to
assess market competitiveness, effectiveness and compliance with applicable State and federal law. This
is with the understanding that more frequent adjustments to the compensation structure may be
needed as a result of intermittent evaluations or other factors already cited. This will be accomplished
by working with all City staff and their representatives to fairly apportion compensation and benefits,
utilizing the collective bargaining process when applicable, or other appropriate Council-management
processes.
Compensation Philosophy
Background
•2017 Council initiates an audit of Compensation and Staffing through
the firm of Moss-Adams
•Audit finds the City has consistently undertaken pay comparisons
with other municipal employers but Santa Monica does not have a
formal “Compensation Philosophy”
•Moss Adams included in their report a recommendation that the City
develop a Compensation Philosophy for official adoption by the City
Council to guide future policies and practices
Compensation Philosophy
Background Cont.
•Council adopts Audit findings and recommendations and directs staff
to draft and bring to Council a Compensation Philosophy
•Staff drafts philosophy based on recommended best practices
•Draft philosophy is circulated among City executives and labor union
representatives. Comments and feedback received were considered
and applied appropriately
Compensation Philosophy Cont.
Future Use
•It is a “living ” document
•Establishes a consistent methodology for determining if City
processes to recruit and retain highly qualified staff continue to be in
line with the City ’s overarching goal of being an “employer of choice”
and continuing to be fiscally responsible
•Reviewed every five years