TOTAL REWARDS ANNUAL ACTION ITEM #2

2 AGENDA  Purpose of the Presentation  Our Approach  Total Rewards Philosophy Review  Compensation- Current State/Future State  Building a Compensation Structure  FY’09 Plan

3 PURPOSE OF BRIEF  Update Commission regarding Total Rewards, Annual Action Item #2 : “ Communicate the Total Rewards Philosophy that aligns pay and rewards with performance, identify alternative solutions for implementing the philosophy, and brief the Commissioners by July 31, 2008.”  Where we have been…  Where we are going…

4 OUR APPROACH  Developed a Total Rewards Philosophy  Re-examined current situation  Reviewed recent market studies  Hired compensation consultant  Reviewed internal processes  Job evaluation methodology  Defined our desired future state  Determined what to focus on first

5 PHILOSOPHY GOALS  Reinforce the WSSC’s Mission, Vision, Core Strategies, and Core Values  Increase accountability by offering more rewards to top performers  Attract, hire and keep employees  Better manage dollars provided by rate payers used to reward employees

6 TOTAL REWARDS PHILOSOPHY  Total Rewards include:  Pay or compensation  Benefits  Employee recognition  Career opportunities  Opportunity to work for an organization with an important mission

7 TOTAL REWARDS PHILOSOPHY Compensation piece of the Total Rewards Philosophy states :  Performance based pay system  Compare salaries internally and externally  We target pay at the 75 th %tile of the market

8 WHY DO WE NEED TO DO THIS? To be competitive with the local area especially with jobs that are in high demand and low supply i.e. Engineers Allows us to hire and retain employees who will be replacing our retirees Replacing approx. half of our workforce in the next 5-10 years New generation in the workforce concerned more with the salary than healthcare benefits & retirement plans World Class organizations use a market based system

9 CURRENT STATE FUTURE STATE  Structure is built from point factor  Hiring many new employees close to the max of the range  Does not allow flexibility in hiring “high demand/low supply” jobs  Promotional increases move employees closer to the maximum of the pay grade  Perception employees leave for higher pay  No documentation to support No pay cuts  Structure is built from market data  Retains and attracts employees  Allows flexibility in hiring “high demand/low supply” jobs  Strengthen our competitive position  Provides flexibility in rewarding performance  HR will track exit data COLA will not go away

10 BRIDGING GAPS  Structure alternatives  Built from market data  Our market includes:  Prince George’s and Montgomery Counties as well as federal, state and local governments in general  Water and Wastewater utilities  Private companies in the local area with similar positions  Focus groups  Conducted 15 focus groups- 150 employees  10% of the organization’s population

11 Review and update all of the job descriptions with the departments Market price all of the benchmark jobs Build structure from the benchmark jobs market data Slot the non-benchmark jobs into the structure Internal audit of job slotting Assess employees’ salaries against the new structure Propose new structure and implementation plan BUILDING A COMPENSATION STRUCTURE

12 POTENTIAL IMPACT Alignment with Talent Acquisition, Retention, Performance Management and Succession Management Updated job descriptions Financial impacts Some employees will no longer be maxed out Some employees may be red-circled Market adjustments

13 FY’09 PLAN  Move forward with next steps  Review job descriptions- Target completion date 1/31/09  Market price jobs- Target completion date 4/30/09  Periodic updates