HomeMy WebLinkAbout4. Voluntary Separation Incentive City of .Shakopee
Memorandum
TO: Mayor and City Council
Mark McNeill, City Administrator
FROM: Kris Wilson, Assistant City Administrator
SUBJECT:. Voluntary Separation Incentive
DATE: May 27, 2008
Introduction
The Council is asked to authorize the offering of a voluntary separation incentive to certain City
employees.
Background
At a City Council workshop earlier this year, the Council directed staff to explore the possibility
of offering. an early retirement incentive to City employees as a means of making some of the
.staff reductions that are expected to be necessary in order to balance the 2009 budget. In
response to this direction, staff has reviewed the City's personnel policies, information about
what other metro-area cities have offered in recent years, and what the City is legally. able to
offer.
After conducting this research and reviewing. the demographics ofthe City's workforce, staff is
recommending that the Council consider amore general Voluntary Separation Incentive, rather .
than an Early Retirement Incentive. A Voluntary Separation Incentive would be offered to
employees regardless of their age or proximity to retirement, thereby increasing the number of
eligible employees and the likelihood that. the necessary staff reductions can be made through
voluntary action rather than lay-offs.
Incentive Package
The City's current personnel policies contain two provisions for payouts to departing employees.
An employee who resigns his or her job, either to take another job elsewhere or to retire, receives
a payout of any accrued vacation and comp time. If they have worked for the City for five years
or more, they also receive a portion of their accrued sick leave. An employee who experiences
an involuntary separation (i.e. is laid-off or has their position eliminated in a reorganization) is
eligible for involuntary separation pay above and beyond what someone who leaves voluntary
would get. This involuntary separation pay is for employees with at least five years of service
and consists of a week of severance pay, at their current rate,. for-every year of service,: up to a
maximum of twelve weeks of pay. It also includes outplacement assistance up to $2,000,
conditioned on the employee signing a separation agreement. This outplacement assistance can
be used for education and training or job search services.
In order to make a Voluntary Separation Incentive attractive to employees, it will need to be
more generous than the above payouts .which an employee would receive regardless of whether
they leave voluntarily. After researching what other metro-area cities have offered in recent
years, staff is recommending that a Voluntary Separation Incentive take the form of one week of
severance pay for every. year of service to the City, up to twelve weeks,. plus funding for 12
.months of continued medical and dental insurance, up to a maximum. of$7,500. More details
about the proposed Separation Incentive are outlined on the attached page.
There are several benefits to the City of offering a Voluntary Separation Incentive. From a
financial standpoint, .any. severance pay we provide to a departing employee. will reduce the
City's costs for unemployment insurance for that individual. From an employee relations
standpoint, a Voluntary Separation Incentive is intended to make the process of balancing the
budget less painful. In some job classifications it also offers the potential to avoid the "last one
in, first one out" approach to mandatory Layoffs, which is not always in the City's :interest when
it comes to thelong-term composition of our workforce.
Budget Impact .
.Funding for the up to twelve weeks of pay at the employee's current wage would come from
agreed upon separation dates of no later than September 30, 2008. This will allow for the-wage
component and a portion of the insurance component to be funded out of the impacted
Department's 2008 operating budget. Funding for the remaining insurance costs would have to
be identified.
Requested Action: If the Council concurs, it should authorize the City Administrator: to offer
qualifying employees the opportunity to apply-for the Voluntary Separation Incentive outlined on
the attached pages. Authorization to actually pay the incentive to individual employees will be
brought back to the Council at a later date.
.Potential Voluntary Separation Incentive
Eligibility: All non-probationary, full-time and benefits-eligible part-time employees would be
eligible to apply.
Annlication Process: Interested employees would submit a simple written application form to
their Department Head by a certain deadline. Applications will be reviewed by the Department
Head in conjunction with the Finance Director; City Administrator and Assistant City
.Administrator. The City would reserve-the right to reject an application based on the workload
of the department, specials skills and abilities of the- employee and the potential cost savings. If
an employee's application is rejected, that employee would be guaranteed not to be subject to an
- involuntary lay-off related to the 2009 budget.
*The following would be offered above and beyond the normal payout of vacation, comp and
sick time.
Cash Pay-Out
One week of pay at the employee's current. rate of pay for each full-year year of service to the
City of Shakopee, up to 12 weeks maximum.
Funding for Continued Insurance Coverage
An amount equal to 12 months of the City's current contribution toward the employee's medical
and dental insurance, up to a maximum of $7,500, deposited into the employee's Post
Employment Health Care Savings Plan, maintained by the Minnesota State Retirement System.
This can be used to pay COBRA premiums and continue on the City's insurance plan or it can be
used to purchase coverage through another source, pay out-of-pocket medical expenses or saved
for future medical costs.
Other Terms
Employees must enter into a separation agreement.
Proposed Time Table
May 29 Authorized by Council
-June 6 -Presented to Employees
June 27 -Deadline for Interested Employees to Apply
July -Review and Consideration of Applications
August 1 -Notification of Acceptance. or Rejection to Applicants
September 30 -final day of work for employees accepting voluntary separation agreements