To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Discussion/Direction: Employee Compensation, Retention and Recruitment
Body
________________________________________________________________________________
Executive Summary
The economy is impacting the Town’s ability to retain and recruit employees, which is impacting the Town’s ability to maintain its levels of service. Employee separations are increasing, and the number of applications for vacancies has decreased. To position the Town as competitively as possible in the local employment market, Town staff is recommending a market adjustment for all staff positions, full- and part-time. This is consistent with moves being made and considered by other local government employers. Additionally, staff is adding a position focused on recruitment - especially for hard-to-fill, entry-level jobs.
The purpose of this memo is to provide detailed information surrounding this issue and to seek Council’s direction to move forward with the recommended market adjustment.
Discussion
As Council is aware from media reports and previous discussions, the current economy is impacting the Town’s ability to retain and recruit employees and to ensure that our compensation system remains competitive with other area employers - particularly other municipal employers. Whether the cause comes from post-pandemic employment reactions, record inflation, frequent job shifting or low unemployment - the ending impact is the need to review our employee compensation and deploy better efforts to retain and attract employees.
The Town is seeing an increasing number of employee separations. Through April 2022, there have been 33 separations this year. If this trend keeps pace throughout the year, we can expect close to 100 separations, which is over 16% of the Town’s full-time workforce. 2021 was also a high year for separations, with 70.
Separations and other factors, including the need for additional staff, has caused the Town to recruit for 108 job postings during the first four months of 2022 - substantially more than in previous years. Several positions have remained open for months as lack of interest in the postings remained chronic, impacting our ability to maintain appropriate levels of service and requiring the use of existing employees or costlier service contracts to fill the gap. When employees backfill vacancies, workloads increase, potentially delaying projects and increasing burnout rates.
This is not to mention that applications overall were down in 2021. Last year, there were 2,008 total applicants for Town positions, compared to pre-pandemic levels in 2019, when there were 3,605 applicants. This is despite the fact that job postings were up in 2021 over 2019. 77 full-time positions were advertised in 2021, with an average of 26.8 applicants per posting, compared to 51 positions advertised in 2019, with an average of 70.7 applicants per posting. This has impacted all departments at some level, particularly at the entry-level positions. Following are some examples to illustrate this issue:
• The part-time Facility Services (custodial) crew that works at the Recreation Center Fridays through Mondays has not been fully staffed since August 2021; three of the four positions were vacant at the writing of this memo.
• There were five Operator openings in Public Works at this memo’s writing. We continue to look for applicants with a commercial driver’s license, but because we are competing with other public organizations (like CDOT) and private firms for these drivers, the Town will start sponsoring applicants who do not have a CDL through CDL training.
• In Development Services, we continue to struggle in finding Plans Examiners. We are competing with other organizations - who are also growing - for the same type of position. This is not a position that has a pipeline of people who are choosing this profession. We are having to consider “growing our own,” which takes time.
• In Castle Rock Water, we have not had a full staff in Field Services, Meter Services, Plant Maintenance nor Supervisory Control and Data Acquisition (SCADA) for a year and, in some cases, for more than a year. Staffing shortages in our distribution team for Field Services were over 50% of the team for more than six months.
As Council is aware, inflation is impacting the national and local economy. The Consumer Price Index, a key inflation gauge, jumped 8.5% in March 2022 from a year earlier - the fastest 12-month increase since December 1981. Continued inflation erodes the value of compensation, and area employers are having to adjust compensation accordingly. Inflation also motivates employees to seek higher compensation, either within their existing positions or via more attractive positions.
The Town’s employee compensation plan places all Town employee positions in a grade system - each position has a minimum salary, midpoint, and maximum salary. These grades are adjusted annually, as part of the Town budget process, to reflect market requirements. Town Code provides that our employee compensation be based on market rates and that salaries be performance based. The Town does not provide “cost-of-living adjustments” (i.e. COLAs).
In response to market issues for specific positions, we have been adjusting positions’ grades to reflect market necessities. Since October 2021, when we began to see market pressures, we have made market adjustments impacting 246 full-time and 150 part-time employees. Adjustments have ranged from .21% to 24.95%, with the average adjustment being 7.5%. While we’ve always done this historically as an organization, the pace and necessity of this has picked up. Given continuing employment market pressures, staff is now recommending a market adjustment for all positions Townwide.
For 2022, most Town employees are eligible for and receiving merit adjustments averaging 3.5% to 4%, with public safety employees (police and fire) receiving merit adjustments averaging 7.5%.
Because of our recruitment challenges, market conditions and inflationary impacts on Town employees, staff is recommending either a $1-per-hour or a 3% adjustment to all current employees’ pay and to all Town salary ranges - whichever is greater - effective July 9. This adjustment would also be applied to the hiring pay for vacant positions. Additionally, to help offset inflationary pressures, a $250/month stipend would be provided through 2022 to all full-time and 30+ employees earning less than $70,000 annually, seasonal employees working at least 30 hours a week and part-time employees working at least 20 hours a week.
This approach is favored because it would have a greater percentage impact the lower an employee is on the Town’s pay scale, which includes the majority of positions that are proving more difficult to attract and retain. See Attachment A for an illustration of how this change would impact various Town employees.
Adjusting employees’ pay follows up on compensation concerns expressed in the Town’s employee survey conducted earlier this year. A move would also keep Town employee salary ranges more competitive with other employers, as other area municipalities are increasing salary ranges and giving market adjustments for employees. Some examples:
• Denver’s firefighters recently renewed their contract with the city to provide for a 12% salary increase over the next three years, increasing their maximum firefighter/EMT pay to $106,000 annually; the Town’s maximum firefighter/EMT pay for 2022 is $89,232.
• Douglas County has implemented a 4% adjustment for all of its employees effective July 31 and is providing a $200/month stipend through 2022 for employees earning less than $80,000 annually.
• Erie provided employees percentage increases based on their place in the town’s pay scale, which equated to $2,400 to $2,900 increases to annual pay.
• Lone Tree recently completed a salary study that resulted in adjustments for all but sworn Police positions; City Council in June approved the adjustments, which will be implemented in three steps: July 2022, January 2023 and June 2023.
• Lakewood staff is considering recommending a 3% salary adjustment for its employees.
• Parker Water & Sanitation recently granted an across-the-board $3-per-hour pay raise to its employees.
• The Town of Parker recently made a 2% salary adjustment for all employees not in a step pay plan.
Looking more globally, a June 2022 cost of living adjustment survey by Employers Council - which assists employers in our geographic area - showed that 41% of respondents said they were adjusting their pay increase budgets to add an additional cost of living increase of anywhere from 1% to 5% to assist with rising inflation.
While the recommended market adjustment is viewed as an important step to retain and attract the best staff for the Castle Rock community, that move alone will not necessarily bring more quality applicants to the Town. That’s why staff is also adding a new position in our Human Resources Division to focus on employee recruitment - particularly focused on hard-to-attract, entry-level positions. This position will be available to all Town departments to enhance our efforts to continue to seek applicants for positions. Other municipalities have added or dedicated resources to the recruitment function, asking recruiters to get creative and think “outside of the box” in where to find qualified labor in this current market (contacts in high schools, colleges, job fairs, etc.).
Staff has also examined our benefits package (health care, retirement, etc.) to ensure we are market competitive. Currently, our medical plan is a highly competitive plan based on premium and deductible rates. Our dental and vision plans are also competitive. HR is not planning on making any changes to our benefit plans.
Conclusion
Town employees are essential to providing Town services. They are the key to the community we serve and enjoy. Remaining market competitive in salaries is essential to attracting and retaining high-quality employees. A market adjustment of $1 per hour or 3% - in combination with the already-budgeted market adjustments for this year - will help in remaining market competitive for all Town employees. The supplemental stipend of $250/month for the remainder of 2022 for qualified employees will further help address these needs. Additionally, retaining a new Human Resources position focused on recruitment for our 1,000+ Town positions (full-time and part-time) will assist in our abilities to attract potential applicants.
Budget Impact
If Council approves the recommended market adjustment, each Town fund with positions budgeted in it would require increased expenditures that could necessitate a budget amendment later in 2022. Some of the cost for the adjustment could be absorbed in salary savings from vacant positions. In other cases, continued strong sales tax performance - or strong sales of services in enterprise funds - could allow for this adjustment.
The budget impact of the adjustment would be the greatest within the General Fund - estimated for the half-year in 2022 to be about $800,000. The estimated Townwide impact of a half-year adjustment in 2022 is about $1.6 million.
Looking ahead to a full year in 2023, the adjustment would add roughly $2.4 million to the Townwide budget. This would compound in years moving forward, as salaries do. Projected revenue increases are likely to cover this additional expenditure each year, such that levels of service are not anticipated to be negatively impacted.
The department heads have discussed the cost of the recommended adjustment and appreciate that it would impact their ability to add positions to their teams in future years. That said, they believe the adjustment is an appropriate and necessary step to attract and retain a high-quality Town workforce. The following table shows by fund the estimated 2022 and 2023 budget impacts of the recommended adjustment.
|
Fund |
2022 Impact |
2023 Impact |
|
General Fund |
$787,855 |
$1,275,466 |
|
Transportation Fund |
$99,628 |
$130,932 |
|
Conservation Trust Fund |
$2,213 |
$4,604 |
|
Philip S. Miller Fund |
$4,995 |
$10,390 |
|
Lodging Tax Fund |
$1,210 |
$2,516 |
|
Water Funds |
$246,550 |
$326,708 |
|
Golf Fund |
$110,840 |
$165,818 |
|
Development Services Fund |
$133,870 |
$158,475 |
|
Community Center Fund |
$204,132 |
$323,464 |
|
Employee Benefits Fund |
$1,007 |
$2,094 |
|
Fleet Fund |
$21,059 |
$21,837 |
|
TOTAL |
$1,613,359 |
$2,422,304 |
Potential Motion
“I move to direct staff to implement the recommended market adjustment to the Town employee compensation system and the addition to the 2022 Budget of an additional Human Resources position.”
Attachment
Attachment A: Adjusting Pay For Employee Retention and Recruitment