Henderson officials are introducing a new paid time-off system for nonunion employees to reduce the city’s post employment payout liability by millions of dollars.
The city has $36.1 million in accrued sick leave and vacation pay liability among its nearly 1,850 full-time employees. However, the new plan scheduled to start July 1 for nonunion workers will reduce the city’s financial exposure throughout an employee’s career.
“New hires will have a very fair program but we’re no longer willing to expose ourselves to those large payouts at retirement,” said Fred Horvath, assistant city manager in charge of human resources. Nonunion employees account for 508 of the city’s nearly 1,850 full-time workers. The remainder are covered by union contracts and not affected by the change.
The change comes as Henderson is trying to bridge a $5 million operation budget shortfall and a $17 million infrastructure annual deficit.
Nonunion employees hired after July 1 will have time-off payout at the end of their careers capped at 250 hours, down from the maximum of 1,418 hours many current employees could claim. Horvath said the change will protect the city from as much as $21.7 million in future liability.
Current employees will not lose sick and vacation time already accrued, which is capped at 900 hours for sick leave and 518 hours for vacation time for most of the employees. However, current employees will not be able to bank additional hours if they are under the current cap.
“Annually, this change will mean we are no longer handing out $1.6 million in sick leave,” Horvath said. The freeze will eliminate another $10 million in potential payouts if current workers stay with the city to their 30-year benchmark.
Henderson is pulling back on its vacation time payout to 500 hours, which will save another $437,000, Horvath said. Current employees can have as much as 988 hours of time off on the books, but will only be paid for 500 upon departure.
The city is also reducing the annual paid time off allocation by 25 percent, according to Horvath. As an example, a nonunion employee who has worked at the city 13 years will receive 30 days of paid time off annually. Previously, they would receive 40 days total: 20 days vacation, 12 days sick, personal days and bonus days for attendance.
The reduced paid time off will increase productivity in the city by an estimated $2.3 million by having people at work those extra days, Horvath said.
The city will introduce a buy-back program that will allow nonunion employees to cash out one work week a year. Henderson did not previously allow nonunion employees a buy back option.
Beyond changes to the personal time-off structure, Henderson will be rolling out a new wage schedule and compensation plan in the upcoming weeks to its non-represented employees. The new structure is the result of a compensation and classification study Henderson undertook in 2012.
Horvath, who worked for General Motors Corp. and Nevada Power Co. before joining the city in 2005, said the city will move back to a market-based wage scale, doing away with the Henderson’s 25-year-old philosophy of paying above market salaries to lure the “best and brightest” to the city starting July 1.
“We will pay what our other jurisdictions pay,” Horvath said. “We are changing our entire structure which will very much look like the private sector compensation system.” Henderson solicited information from Clark County, Las Vegas, the Regional Transportation Commission of Southern Nevada, and the Southern Nevada Water Authority, as well as the cities of Colorado Springs, Colo.; Irving and Plano, Texas; and Scottsdale, Ariz. The city also looked at a dozen private sector salary surveys through the consulting firm Towers Watson Co.
The study, which city officials are finishing reviewing, will show that some employees are making higher than what the current market demands. However, there does not seem to be any plan to roll back those higher salaries, only to control pay scales moving forward..
“We’re going to have people as a result of the class and comp study that will never see another wage increase maybe as long as they are employed with the city,” Horvath said. “They’ll still be eligible for compensation on an annual basis based on their performance, but it would be in a lump sum.”
Henderson said it has reduced pay by 6 to 11 percent since 2009 for all employees except police and fire. This includes the elimination of matching contributions to a city government retirement plan smilar to a 401k, saving $2.6 million per year, elimination of car allowances for nearly 80 employees, and certain holiday pay. The city eliminated cost-of-living increases in 2010.
How the new paid time-off structure and the comp and class study will influence union contracts will not take long to see. The city is negotiating with each of its six unions because current bargaining agreements expire June 30.
Contact reporter Arnold M. Knightly at firstname.lastname@example.org or 702-477-3882. Find him on Twitter: @KnightlyGrind.