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Ji <br />Elk River amft . <br />Municipal Utilities UTILITIES COMMISSION MEETING <br />TO: <br />FROM: <br />ERMU Commission <br />Mark Hanson —General Manager <br />MEETING DATE: <br />AGENDA ITEM NUMBER: <br />August 13, 2024 <br />5.1 <br />SUBJECT: <br />2024 Compensation Study Update <br />ACTION REQUESTED: <br />Approve Pay Plan, Implementation Scenario, and Implementation Date <br />BACKGROUND: <br />At the July 2024 commission meeting, the Commission received and discussed Baker Tilly's <br />proposed options for a market leading base pay plan and a market lagging base pay plan. The <br />respective plans (attached) are approximately 2% above/below the average market maximum. <br />Staff sought commission direction in three areas: which base pay plan (leading or lagging), <br />which implementation scenario (closest step, current step, or years in position) and a preferred <br />implementation date. The Commission expressed a desire to be market leading in pay but <br />deferred selection of a pay plan until the influence of performance -based compensation (PBC) <br />programs on total compensation could be better understood. Commission members also <br />expressed a preference to implement a new pay plan via the current step scenario and <br />recommended an August 27, 2024, implementation date if a new pay plan is approved. <br />A thorough discussion occurred whether PBC programs should be considered when defining <br />what it means to be market leading. In other words, if you are market leading in base pay, but <br />your talent competition is market leading and offers a PBC program, you are not market leading <br />in total compensation. To better understand this issue, the Commission directed staff to <br />provide additional information regarding the PBC programs of ERMU's comparable peers in the <br />compensation study. <br />For reference, our current Utilities Performance Metrics and Incentive Compensation (UPMIC) <br />policy was adopted December 2012 with the following description: <br />This is a company performance -based program designed to incentivize employee <br />commitment towards the company's success. Divided into categories representing core <br />values of the company and again into sub -categories that are quantifiable, this program is <br />designed to track goals that require companywide support of the employees to continually <br />achieve. When the employees work together as a team to achieve these goals, the company <br />recognizes a corresponding increase in value to our customers. <br />Page 1 of 2 <br />56 <br />