Salary System Guide 301105

LOCAL GOVERNMENT & SHIRES ASSOCIATIONS OF NSW
SALARY SYSTEM GUIDE
Revised Edition - 2004
CONTENTS
Page No
SECTION 1: INTRODUCTION AND OVERVIEW.......................................................................... 2 SECTION 2: REVIEWING AND ENHANCING YOUR SALARY SYSTEM................................ 5 SECTION 3: DEVELOPMENT OF A SALARY SYSTEM .............................................................. 7 3.1 DETERMINING THE RELATIVE VALUE OF POSITIONS ........................................................................ 7 3.2 DECIDING ON AN APPROPRIATE STRUCTURE ................................................................................. 10 3.3 PLACEMENT OF POSITIONS IN A SALARY STRUCTURE .................................................................... 15 3.4 DETERMINING THE METHOD OF PROGRESSION THROUGH THE SALARY STRUCTURE ..................... 22 3.5 IMPLEMENTING THE SALARY SYSTEM .......................................................................................... 25 3.6 SALARY MODELS .......................................................................................................................... 27 3.6.1 Skill Based Model ................................................................................................................ 27 3.6.2 Competency Based Model.................................................................................................... 30 3.6.3 Performance Based Salary Progression Model 3.6.4 Performance Based Pay....................................................................................................... 34 SECTION 4: OPERATING PROCEDURES .................................................................................... 43 SECTION 5: DEVELOPING A TRAINING PLAN......................................................................... 45 SECTION 6: SUPPORTING DOCUMENTATION......................................................................... 50 SECTION 7: APPENDICES ............................................................................................................... 51
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SECTION 1: INTRODUCTION AND OVERVIEW

During the late 1980s, centralised wage fixation moved away from the concept of payment based on cost of living adjustments to focus on the need to improve productivity and efficiency to pay for wage increases. The Structural Efficiency Principle of Wage Fixation (SEP) was introduced to ensure that the new wage system would continue to encourage productivity and efficiency at the industry and enterprise levels. Specifically, the SEP provided for a fundamental review of Awards with a view to implementing measures to improve efficiency of industry and to provide workers with access to more varied, fulfilling and better paid jobs. In response, NSW Local Government embarked on a program of Award restructuring which resulted in the introduction of a single skills based Award structure with a system of minimum entry level rates of pay being assigned to Award bands and levels. The Local Government (State) Award commenced operation on 8 June 1992 and required that each council establish a salary system to complement the Awards skill based structure with entry-level rates of pay. At the time, the Award parties described the objectives of a salary system as follows:

internal equity - to ensure internal relativities between jobs are fair, equitable and defensible; external competitiveness - to set salaries which are competitive enough to attract and retain staff; individual motivation - to provide a remuneration system with sufficient incentive for employees to achieve their job objectives; ease of administration - to be sufficiently simple to communicate and administer.
[Book 4, "The Structure of the New Award", Local Government Award Restructuring Implementation Kit.] The Award parties also issued a booklet "How to Develop a Salary System in Local Government" which was designed to assist councils to meet their Award obligations. The booklet suggested that a salary system should be aligned to a council's corporate objectives, as reward and personnel strategies had an important role to play in the achievement of such objectives. The Award parties agreed that while salary systems would vary from council to council, generally a salary system should be:

fair and equitable; market competitive; simple to administer; provide equal opportunity; affordable; related to the acquisition and use of skills and performance; supported by training; flexible; able to provide security for employees.
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Council may consider the above objectives as a sensible starting point for the process of consultation and review of its current salary system. A more detailed Award provision which better defines the salary system features required to comply with the Award came into operation on 1 November 2001 and defines a salary system as follows:
(i) A salary system determines how employees are paid. An employee shall be paid the salary system rate of pay that recognises the skills the employee is required to apply on the job; The salary system shall have a structure that complements the entry level rates of pay and skill descriptors in the Award by identifying grades. Each grade shall contain a number of salary points/steps for progression that are over and above the entry level rates of pay; Positions shall be assigned a salary grade(s) within the structure. A position may extend across more than one grade in council's salary system or level as prescribed by Clause 5 Skills Descriptors of this Award; Progression through the salary system shall be based upon the acquisition and use of skills. Where skills based progression is not reasonably available within the salary range for the position, employees shall have access to progression based on the achievement of performance objectives relating to the position. Such performance objectives shall be set in consultation with the employee(s); Subject to subclause (iv), skills for progression relevant to the position shall be assigned to each salary point/step within the grade, or set at the annual assessment provided that such criteria shall provide an opportunity to progress through the salary system; Employees shall be assessed for progression through the salary range for their position at least annually or when they are required to use skills that would entitle them to progress in the salary system; At the time of assessment, council shall advise the employee of the skills and/or the performance objectives required for the employee to progress to the next salary point/step and shall review the employee's training needs; The salary system shall include a process by which employees can appeal against their assessment; Employees shall have access to information regarding the grade, salary range and progression steps of the position.
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
The provision identifies those procedures that council should implement to ensure that employees have reasonable and equitable access to progression through a salary
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structure. It also allows performance based salary progression within a positions salary range where skills are not reasonably available. A councils obligation to pay employees is not restricted to implementing a salary system alone. Attention must also be paid to Award provisions relating to:
ordinary pay, which includes disability allowances, tool allowances, on call allowance, first aid allowance and community language and signing work allowances; transitional arrangements relating to climatic and west of the line allowances, shift and penalty rates (where shift and penalty rates applied to certain classifications under former Local Government Awards); former Award allowances; incremental scales which applied to certain employees engaged under former Local Government Awards up to 8 June 1992; the Award parties undertakings with respect to present occupant only arrangements and absorption of Award increases.
Developing and reviewing a salary system can be a time consuming exercise and may require some expertise. In order to comply with the Award provisions, this exercise will also require the involvement of councils consultative committee. The purpose of this guide is to identify and discuss some of the issues that council and its consultative committee should consider when developing or reviewing its salary system to satisfy the Award provisions' intentions and requirements. The guide also discusses those aspects of salary systems that commonly form the basis of industrial disputes. The guide includes resources developed by the Award parties and the Local Government Workplace Reform Project (an initiative of the LGSA and funded by the National Office of Local Government). The examples contained in this guide draw on the experiences of councils who have been developing or enhancing their respective salary systems and therefore, contain options and solutions adopted by other councils in NSW.
Local Government Learning Solutions conducts workshops based on the case studies contained in this guide. For further information Council should contact Ruth Stevenson on Tel: 9242 4180 or www.lgsa.org.au. In addition to the provision of advice and assistance on the application of Award provisions, the Associations' Workplace Solutions Division has established a new Human Resource Consultancy Service. This cost-effective service provides on site assistance to councils, to achieve workplace reforms including the review and enhancement of council salary systems. For further information, Council should contact an Industrial Officer on Tel: 9242 4000 or Fax: 9242 4188.
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SECTION 2: REVIEWING AND ENHANCING YOUR SALARY SYSTEM

The operation of the salary system should be reviewed on a regular basis and should involve council's consultative committee. When council is reviewing its salary system, it is important to adopt a structured approach in identifying those areas requiring enhancement. How to quickly identify any problem areas The following checklist will be useful as a starting point in quickly identifying any problems with the operation of the system: Inappropriate salary grade structure for the size of the council i.e. Too many grades or salary steps; Insufficient salary steps for skills based salary progression i.e. One step, or entry plus one step; Too many salary steps i.e. Higher steps are unachievable or do not represent council with sufficient value; Skills/performance based progression criteria is not clearly defined; No clear linkage between skills based progression requirements and the development of training plans i.e. Training plans are adhoc and largely budget driven; Inadequate supporting documentation, including operating procedures; The system is not administratively simple; Affordable and providing a return to the organisation i.e. through a better skilled or performing workforce. Undertaking a more detailed review If the initial review identified the following problems, a salary system may require more detailed review and subsequent modification:

having an adverse effect on the day to day operation of the system; or being in breach of the Award requirements.
A more detailed review can be undertaken using the Action Plan Worksheet set out in Appendix 1. The worksheet is designed to be copied and distributed with provision to:

briefly record the current method/procedure; identify the outcomes sought (variations and enhancements); the actions required/recommendations.
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Identifying the solutions Once the areas of change have been identified, council may find that the information and examples contained in this guide assist the review process. Some of the solutions adopted by the councils whose systems feature in this guide have included:

developing more appropriate salary grade structures eg a reduction from 21 to 15 salary grades; developing an appropriate number of salary steps and % movements between salary steps within salary grades for skills/performance based progression; drawing on existing documentation (eg position descriptions) in developing and documenting criteria for progression between salary steps; designing simple multi-purpose supporting documentation eg combined position descriptions and assessment record which generates the input into the annual training plan; documenting operating procedures in "plain English" format; developing a simple methodology and documentation for developing training plans.
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SECTION 3: DEVELOPMENT OF A SALARY SYSTEM

Effective wage and salary administration is important to the overall performance of an organisation. It is affected by a number of other organisational factors and policies, and plays a significant role in employee motivation and job satisfaction. Broadly speaking, a salary system:

describes how employees are rewarded for the work they do; provides the basis for setting pay levels for a job; details pay ranges over and above Award minimums; describes how an employee should be placed within a pay range ; details how future salary increases should be determined.
Figure 1 gives a broad overview of the main stages involved in salary system development and can be useful for reviewing salary systems as well. Section 3 has been developed following the structure of the diagram below:
Figure 1 - Salary system development process Step 1 Determine relative position value Step 2 Decide on an appropriate structure Step 3 Placement of positions within structure Step 4 Determine the method of progression Step 5 Implementation of salary system
3.1 Determining the relative value of positions

Linking to the Award bands and levels Regardless of how council developed its salary system, it must ensure that all positions were initially placed within the bands and levels of the Award structure. If this has not been done, council will be in breach of the Award provisions. The Award structure consists of four, overlapping bands, each containing a number of levels within which jobs should be classified. The relative value of each position needs to be determined. To complete this process it is crucial that council has an accurate understanding of the functions and requirements of each position within its organisation. It is important to note, that during this process the focus should be on the requirements of the position and not the skill or performance of the incumbent of that position.
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The Local Government (State) Award 2004 specifies that positions will be placed in a band and level according to six skill descriptors listed below:

authority and accountability; judgement and problem solving; specialist knowledge and skills; management skills; interpersonal skills; qualifications and experience.
When the Local Government (State) Award 1992 was established, the Award parties issued the Local Government Award Restructuring Implementation Kit. The purpose of this Kit was to assist councils in the Award transfer. The Kits Book 4, The Structure of the New Award includes a skills matrix and work characteristics of each band and level which, in addition to the six skill descriptors, may be of use to council when placing positions within the bands and levels. Once positions have been evaluated, they can be placed in the Award bands and levels according to their work value. The Award specifies a minimum entry salary for each band and level. Should a position be evaluated at a band and level with an entry rate higher than the current salary rate for that position, the salary rate for the incumbent must be adjusted to reflect at least the entry rate for the band and level. However, council may not reduce the employees rate of pay, where this rate is in excess of the entry rate for the Award band and level at which their position has been evaluated. Job evaluation The Award requires that council develop " ... a salary system, which complements the entry-level rates of pay and skill descriptors in the Award by identifying salary points that are over and above the entry level rates of pay". To link positions to salary points and ranges, council will need to provide greater definition than the original transfer to the Award structure does by allocating the relative value of positions within each band and level. There are a number of ways this can be achieved however; one of the most common methods is the use of a formalised job evaluation system. Job evaluation provides a structured and systematic way of arriving at the relative value of positions. As with the application of the Award bands and levels, job evaluation examines the relative worth of the position and not the incumbent of that position. Job evaluation will:

provide a way to rank all jobs within council; provide a way to compare jobs on a fair basis; provide a way to classify new or changed jobs; provide a platform for a future reward system.
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Salary System Guide
Job evaluation wont:

reward individuals for increased performance; reward individuals for the application of skills; recognise the market value of positions.
Where job evaluation is used for the placement of positions in the Award structure, clearly, it is important that the criteria or factors in the job evaluation system adopted by council reflects the Award skill descriptors. A number of Councils continue to use the former Local Government Job Evaluation System, which was developed by Watson Wyatt in conjunction with the Award parties. A revised questionnaire and an upgrade of the software (REWARD software) were rolled out to councils on 14 June 2000. Watson Wyatt ceased its service to councils in NSW on 30 June 2000. The revised questionnaires new factors include: external influence; personal and professional liability; revenue/asset management; business acumen and internal customer service; as well as covering new knowledge areas relating to nursing and the electrical trades. The job evaluation factors, which complement the Award provisions, are listed in Appendix 2. At the time of the release, participating councils were encouraged by the Award parties1 to use the revised questionnaire when evaluating new positions or existing positions that had undergone significant change, but were advised that the questionnaire should not be applied to vacant positions which had been previously evaluated and had not undergone significant change ie they were not required to reevaluate all positions where they chose to implement the revised questionnaire. When implementing job evaluation, care must be taken to ensure consistent application of the system's definitions throughout the organisation. Adequate quality control measures are necessary to ensure that internal relativities are maintained. Computerised job evaluation systems will normally have built in quality control features to assist in this process. Having employees complete job evaluation documentation in facilitated sessions, providing management/supervisors with adequate training and the use of job evaluation committees, are also recommended as a means of improving system quality. Consultation is crucial to the successful implementation of job evaluation eg once the incumbent completes the questionnaire, it needs to be validated by the supervisor. The Award parties are of the view that it is good practice to gain the agreement of the incumbent to the position evaluation when their position is being evaluated. Council may also find it useful to establish an appeal mechanism for reviewing the evaluation of a position where the incumbent and supervisor are unable to agree.
1 The revised questionnaire has not been endorsed by the United Services Union (USU)
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3.2 Deciding on an appropriate structure

Once positions have been evaluated and enough information collected to rank each position in council's structure, it is necessary to determine the relationship between the differences in the value of each job and the variations in each pay rate. To achieve this, council will need to adopt a salary structure. A salary structure sets out in a comprehensive way in which remuneration is organised by detailing the number of grades and the minimum and maximum pay rates for each of those grades. In relation to the development of the salary structure Clause 7(ii) of the Award states that: The salary system shall have a structure that complements the entry level rates of pay and
skill descriptors in the award by identifying grades. Each grade shall contain a number of salary points/steps for progression that are over and above the entry level rates of pay.
As the Award does not limit the number of salary points/steps in the bands and levels, there are a number of ways to cut the salary pie. Table 1 illustrates how each Award band and level may be cut into grades and each grade may be divided further into steps to allow sufficient salary points to ensure that genuine differences in skill between jobs are fairly rewarded. When determining a salary structure, council should take into account the total cost of structure implementation, in particular salary costs. As with the transfer to bands and levels, this means that employees must be paid at least the entry rate of the grade at which their position has been evaluated or their current salary whichever is the higher. There is no Award requirement to round up employees salaries where they fall between the salary system grades or indeed, steps. Such a rounding up mechanism increases the system's implementation costs and is inflationary. The value of salary increases required to ensure all employees are paid at least the entry rate will vary depending on the adopted grade structure. If after the initial costing is complete, council's salary budget, the system's projected cost and the value to council are not balanced, council may need to consider altering the structure. It is important to keep in mind that this is part of an iterative process. Council may find the following examples helpful when deciding on an appropriate structure. It should be noted that the following examples of salary structures have not identified positions that fall in Band 4 of the Award. There are relatively few executive positions left since the introduction of senior staff positions as defined by the Local Government Act 1993. Executive/senior management positions (that are covered by the Award) should have an identified grade of the salary system, which is at least commensurate with the entry-level rate of pay for Band 4 of the Award.
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Table 1 below shows a comparison of three salary structures with seven (7), fourteen (14) and twenty-one (21) grades respectively. Their link back to the Award bands and levels are also shown. In all cases, Award entry rates of pay are used as grade minimums.
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Table 1: Comparison of three salary structures
Award Band 1/2
7 Grades 1
14 Grades 1 2
21 Grades
1 2 3 2 3 4 1/3 593.80 4 5 6 3 5 7 1/4 or 2/1 663.40^ 6 8 9 4 7 10 2/2 or 3/1 752.30 8 11 12 5 9 13 2/3 or 3/2 900.40 10 14 15 6 11 16 3/3 1048.50 12 17 18 7 13 19 3/4 1271.00 14 20 21 *As at first full pay period to commence on or after 1 November 2004 ^Award rate for Band 2/1 is 656.00
Minimum Award Rates (Weekly)* 541.30
Example 1:
Seven-grade salary structure
In this example, there are seven (7) grades and each grade is divided into four (4) steps. A percentage increase of 3% is given to the attainment of each step. The major advantage of this structure is its flexibility. Employees may perform a number of tasks or use a number of skills and be appropriately paid. It lends itself to the nonspecialised workforce of small councils where it makes sense for employees to be able to perform a variety of tasks. For example, a leading hand may also undertake labouring duties.
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Seven-grade salary structure - rates of pay

Grade 1 2 3 4 5 6 7 Entry $541.30 $593.80 $663.40 $752.30 $900.40 $1,048.50 $1,271.00 Step 1 3% $557.54 $611.61 $683.30 $774.87 $927.41 $1,079.96 $1,309.13 Step 2 3% $574.27 $629.96 $703.80 $798.12 $955.23 $1,112.35 $1,348.40 Step 3 3% $591.49 $648.86 $724.92 $822.06 $983.89 $1,145.72 $1,388.86 Step 4 3% $609.24 $668.33 $746.66 $846.72 $1,013.41 $1,180.10 $1,430.52
Example 2:
Fourteen-grade salary structure
In this example, there are 14 grades and each grade contains 3 steps. A 4% increase is given upon reaching each salary step. This structure offers greater differentiation between positions within the job family than the seven- (7) grade structure. It is suited to larger councils with more specialised roles.
Fourteen-grade salary structure -rates of pay
Grade 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Entry
$541.30 $563.10 $593.80 $627.50 $663.40 $707.80 $752.30 $826.30 $900.40 $974.50 $1,048.50 $1,159.70 $1,271.00 $1,405.60
Step 1 4%
$562.95 $585.62 $617.55 $652.60 $689.94 $736.11 $782.39 $859.35 $936.42 $1,013.48 $1,090.44 $1,206.09 $1,321.84 $1,461.82
Step 2 4%
$585.47 $609.05 $642.25 $678.70 $717.53 $765.56 $813.69 $893.73 $973.87 $1,054.02 $1,134.06 $1,254.33 $1,374.71 $1,520.30
Step 3 4%
$608.89 $633.41 $667.94 $705.85 $746.23 $796.18 $846.24 $929.48 $1,012.83 $1,096.18 $1,179.42 $1,304.50 $1,429.70 $1,581.11
Step 4 4%
$633.24 $658.75 $694.66 $734.09 $776.08 $828.03 $880.08 $966.65 $1,053.34 $1,140.03 $1,226.60 $1,356.68 $1,486.89 $1,644.35
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Example 3:
Twenty-one grade salary structure
Again, this salary structure follows the NSW Local Government (State) Award minimum entry levels for each band and level. It is suitable for larger councils where fine differentiation between jobs need to be made because jobs are more specialised in nature. Twenty-one grade salary structure -rates of pay
Grade Entry
$541.30 $553.90 $572.30 $593.80 $615.60 $639.60 $663.40 $693.10 $723.00 $752.30 $801.60 $851.10 $900.40 $942.70 $999.10 $1,048.50 $1,122.70 $1,196.70 $1,271.00 $1,360.70 $1,444.20
Step 1 5%
$568.37 $581.60 $600.92 $623.49 $646.38 $671.58 $696.57 $727.76 $759.15 $789.92 $841.68 $893.66 $945.42 $989.84 $1,049.06 $1,100.93 $1,178.84 $1,256.54 $1,334.55 $1,428.74 $1,516.41
Step 2 5%
$596.78 $610.67 $630.96 $654.66 $678.70 $705.16 $731.40 $764.14 $797.11 $829.41 $883.76 $938.34 $992.69 $1,039.33 $1,101.51 $1,155.97 $1,237.78 $1,319.36 $1,401.28 $1,500.17 $1,592.23
Step 3 5%
$626.62 $641.21 $662.51 $687.40 $712.63 $740.42 $767.97 $802.35 $836.96 $870.88 $927.95 $985.25 $1,042.33 $1,091.29 $1,156.58 $1,213.77 $1,299.67 $1,385.33 $1,471.34 $1,575.18 $1,671.84
Step 4 5%
$657.95 $673.27 $695.63 $721.77 $748.27 $777.44 $806.37 $842.47 $878.81 $914.43 $974.35 $1,034.52 $1,094.44 $1,145.86 $1,214.41 $1,274.46 $1,364.65 $1,454.60 $1,544.91 $1,653.94 $1,755.43
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Future Award increases The Awards Clause 40 (ix) Area, Incidence and Duration, provides that increases in the award rates of pay shall apply to the rates of pay in council's salary system". Therefore any future Award increases will apply to salary systems. For example, if an Award safety net adjustment increases rates of pay by $10 per week, then councils entire salary structure must also increase by $10 per week.
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However, council may absorb Award increases in limited circumstances outlined below: (a) the Award increases may be absorbed in the case of present occupants only (POO's). This matter is discussed in Section 3.3. (b) Clause 40 (xi) of the Award also provides as follows: "The increases granted by this award may be absorbed into enterprise increases granted since 29 May 1991 exceeding any award increases since that date, that is an $8 safety net adjustment and increases of 6%, 2.5%, 2.5% 3.5%, 3.25%, 3.25%, 2.7%, 3.3%, 3.25% and 3.25% provided that the following increases shall not be absorbed:

placement or progression within the council's salary system; increases in hours of work; incorporation of penalty rates and shift or other allowances into the employee's rate of pay.
3.3 Placement of positions in a salary structure

Once the structure has been determined, all positions within the organisation will need to be placed within that structure. It is important that positions are placed in grades in accordance with the results of the job evaluation and not in accordance with the salary which the incumbent currently receives. Table 2 provides an example of where positions might be placed within a 7, 14 or 21 grade structure. As an extension of the quality control process and to ensure that council continues to meet the Award requirements, a check should be completed on any positions where the evaluated grade is lower than the band and level to which the position was originally allocated. It is possible that the position's original band and level placement was incorrect. However, if this was not the case and the job evaluation system has failed to adequately capture the requirements of the position, council may need to allocate a band and level which more appropriately reflects the position's requirements. Table 2: Example - Position placement within grade structures This structure has been based on the NSW Local Government Job Evaluation System. It should be noted that these are examples only and placement, as with position responsibilities, will vary from council to council.
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Band/ Level
21-Grade Structure
Grade 1 Position
14-Grade Structure
Grade 1 Position Labourer Const Kitchen Assist. Scavenging Labourer
7-Grade Structure
Grade Position Labourer Const Kitchen Assist. Cleaner Truck Driver Scavenging Labourer Concrete Finisher
B1 L2
Labourer Const. Scavenging Labourer Kitchen Assist. Cleaner Truck Driver Concrete Finisher Child Care Assist Cook Pool Attendant Water Services Att Garbage Collect. Driver Sewer Attend. Street Sweeper Gardener
3 B1 L3
Cleaner Truck Driver Concrete Finisher Child Care Assist Cook Pool Attendant Water Services Att Garbage Collect. Driver Sewer Attend. Street Sweeper Clerical Assistant Sewerage Op Gardener
Child Care Assist Cook Pool Attendant Water Services Att Garbage Collect. Driver Sewer Attend. Street Sweeper Gardener Library Assist Cashier Accounts Clerk Plant Operator Clerical Assist Sewerage Op Ordinance Inspector Ganger (Parks)
Library Assist Cashier Accounts Clerk Records Clerk Plant Operator Clerical Assist Sewerage Op Ordinance Inspector Ganger (Parks) 4
7 B1 L4 B2 L1 8 9
Greenkeeper Plumber
Ordinance Inspector Ganger (Parks) Library Assist. Cashier Accounts Clerk Records Clerk Plant Operator Child Develop. Officer Ganger (Construct) Greenkeeper Plumber
Greenkeeper Plumber Child Develop. Officer Ganger (Construct) Rates Clerk
Child Develop. Officer Ganger (Construct) Rates Clerk
Rates Clerk
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Band/ Level
21-Grade Structure
Grade 10 Position Librarian Personnel Officer
14-Grade Structure
Grade 7 Position District Health/Building Surv. Librarian Personnel Officer
7-Grade Structure
Grade Position Librarian Personnel Officer District Health/Building Surv. Fire Control Officer
B2 L2 B3 L1
11 12 13 B2 L3 B3 L2
District Health/Building Surv. Fire Control Officer Town Planner Accountant
8 9
Fire Control Officer Town Planner Accountant 5
Town Planner Accountant Engineer HR Officer Building Surveyor Technical Services Lib.
14 15
HR Officer Engineer Building Surveyor Child Care Director Technical Services Librarian Internal Auditor
10
16 B3 L3 B4L1 17 18
11
Engineer HR Officer Building Surveyor Child Care Director Technical Services Lib Internal Auditor 6
Internal Auditor Dir Asset/Const Dir Corp Services Dir Envir Services Dir Asset/Const
Corp. Services Mgr
12
Corp. Services Mgr Internal Auditor Financial Services Mgr Envir Services Mgr Development Building Mgr Communications Mgr
19 B3 L4
Communications Mgr Development Building Mgr
13
20 21
Financial Services Mgr Envir. Services Mgr Asset/Const Mgr
14
Asset/Const Mgr
Anomalies Placing positions within a salary structure may highlight a number of salary anomalies. Some employees may currently be paid less than the grade entry rate and as such, require salary increases to bring them up to the new entry rate. Some employees may be paid outside the grade range of their position. Often, these arrangements reflect former Award entitlements. Some common examples are discussed below.
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(i)
Skill-related allowances
As the Local Government (State) Award is based on the application of required skills, it was considered inappropriate to continue to separately pay skill related allowances. When the Award was first introduced in June 1992, councils were required to incorporate former skill related allowances that were regularly received, into employee's transfer rates of pay. The former skill related allowances in question are listed at Appendix 3. It is assumed that council conducted this exercise prior to the development of a salary system. The current Award's entry rates assume payment for the use of a wide range of skills. This can mean that discrepancies may arise between new employees paid at the entry rate for the evaluated grade of their position and employees engaged prior to 1992 who are performing similar duties. (ii) Incremental scales
As progression in the skill-based structure is based on the application of acquired skills and does not depend on service alone, incremental scales are no longer appropriate. However, when the first Local Government (State) Award was introduced, the parties agreed that employees on incremental scales as at 8 June 1992 would not be disadvantaged where councils had no training plan in operation. This meant that employees, who had not been given access to the training needed in order to progress, continued and will continue, to move up the former incremental scales as appropriate. Until a council has given employees access to progression which "catches up" to the rate of pay that they would have been receiving on the incremental scales, employees affected by the incremental scales will continue to receive the associated salary increases. Their position should remain within the allocated grade and only the employees salary will need to be adjusted. Given that the longer employees remain on the incremental scales the greater the salary anomalies, there is benefit in placing incremental staff under the salary system as soon as practicable. The Associations' Award Supply Service includes an Attachment setting out former incremental scales to assist those councils who still maintain such rates for selected employees. Employees engaged after 8 June 1992 should not be placed on incremental scales. (iii) Present occupant only
A present occupant only is a position where and employees rate of pay prior to the transfer to a salary system is in excess of the maximum rate for the grade and salary range within which that employees position has been evaluated under the salary system.
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In November 2004, the Award parties renewed their agreement as follows:
Before an employee is declared a Present Occupant Only (POO), the council shall review the following aspects of the salary system and placement of the employee effected as follows:

review the evaluation of the job to ascertain areas of the job that may not have been evaluated; determine whether the salary range and the nature of the work (including dirty and obnoxious conditions and hours of work) have been considered; review the skills or competencies required for the position at each relevant salary point; review which skills or competencies the employee is required to apply; examine all agreeable job redesign alternatives; offer training to the affected employee as a priority; involve the employee, and the consultative committee, in the review process; at any stage of the procedure, the employee(s) may be represented by the union or its local representatives and the council by the Associations.
No employee shall be deemed to be a POO unless such arrangement is verifiable and has been previously acknowledged by the employee and council in writing." The parties also identified those limited POO arrangements where Award increases may be absorbed into the employee's salary. The Award parties have agreed that a council may only absorb Award increases in the following cases:

Upon replacement in a councils salary system - positions acknowledged and verified as POO in salary systems established prior to 11 November 1995; Where council has developed and implemented a salary system and an employee has been subsequently employed at a rate of pay which is in excess of the maximum rate for the grade and range within which the equivalent position has been evaluated under the salary system; Senior staff - employees who previously held senior staff positions under Section 332 of the Local Government Act 1993 paid in excess of the maximum grade and salary range for the position under the system. In such cases, provisions of the contract of employment shall be taken into consideration; Income maintenance - employees whose income has been maintained by agreement where the rate of pay is above the maximum rate for the evaluated grade and salary range for the position under the salary system.
A council may only absorb Award salary increases to the extent of any amount paid over the maximum rate for the grade for that position under the salary system.
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(iv)
Disability allowances
Up until 23 June 1988, the former Municipal and Shire Council Wages Staff Award (the Wages Staff Award) contained an industry allowance at Clause 5(i) Wages that was payable to employees classified under Division IX - Garbage Service and Division X Sanitary Service. This provision mirrored conditions established under the Transport Industry - Sanitary and Garbage (State) Award. The industry allowance was paid for all purposes of the Wages Staff Award to " ...compensate for the special disabilities associated with the hours worked and the offensive, filthy and obnoxious nature of the duties associated....[with the work of garbage or sanitary services employees]. This industry allowance has been superseded by the disability allowance provided by Clause 13(i)(b) of the Local Government (State) Award. The former Division IX included a range of classifications including scavenging labourer which was defined "... as an employee who is engaged in the removal of garbage or at the garbage tip or removing offensive matter from drains. The former Divisions IX and X did not include the classifications of cleaners, toilet cleaners, disinfectants, pound keepers and parks and garden staff. A second industry allowance applying to classifications other than Divisions IX and X, was inserted into the Wages Staff Award from 23 June 1988. This allowance replaced a large number of Award provisions relating to payment for the conditions under which outdoor employees worked. These conditions included, but were not limited to: wet places, dirty work, cramped spaces, cleaning wells, sanitary disposal sites, exhumation and the removal of dead animals. This industry allowance has been superseded by the disability allowance provided by Clause 13(i)(a) of the Local Government (State) Award. The two, industry allowances, were renamed as disability allowances, when the first Local Government (State) Award was established on 8 June 1992. Both disability allowances may be paid on an hourly basis and are paid for all purposes of the Award. The Award parties intended that the Award's disability allowances should only apply to those employees who would have been entitled to them under the Wages Staff Award. Such advice was provided to councils and employees through (Book 4) "Structure of the New Award of the Local Government Award Restructuring Implementation Kit. Anomalies have arisen where councils have aggregated disability allowances into base salaries. This practice is not recommended for the following reasons:
the disability allowances do not apply to all positions in the Award structure. Therefore, each grade in the salary system must identify two rates: one for staff with the incorporated disability allowance for "wages" employees, and one for the remainder of staff. Clearly, such an arrangement is cumbersome to administer;
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care must be taken that the margin between the employee's skills based rate of pay and the disability allowance is not eroded over time or by progression through the salary system. Where such erosion has occurred, council is liable to rectify the underpayment to the extent of 6 years prior to the date a claim is lodged.
As the obligation to pay disability allowances arises under a separate Award provision to the requirement to introduce a salary system, it is prudent not to aggregate skill based pay and disability allowances. (v) Former senior staff positions
Executive/senior management positions, which were previously covered by the terms and conditions of "senior staff" contracts, may have specific remuneration arrangements such as performance pay, salary packaging and salary sacrifice. When these positions are added to a salary structure, their performance pay arrangements and the like must be identified in the salary system's operating procedures. Subject to the Award parties' agreement with respect to the absorption of Award increases for POO's, these positions are entitled to Award rates of pay and conditions. Further information on remuneration packaging and model executive staff contract provisions can be obtained from the Associations' Executive Staff Kit. (vi) Market premiums
Having a salary system will assist council in paying employees equitably when those employees are compared against other positions within the organisation. However, a salary system does not guarantee that council will be competitive within the relevant markets. Using job evaluation or the Award skill descriptors, council may establish an appropriate pay range but still find it difficult to attract and/or retain suitable employees. Council may choose to offer salaries that reflect market rates from time to time and clearly, these will show up as anomalies in the salary structure. In such cases, council must ensure that the position is placed into the structure in accordance with the evaluated grade of the position and not place the position in a higher grade, which offers a more comparable salary. Where the position is not placed in its substantive grade, distortion of internal relativities will occur. Council should also identify the position as being a POO and consideration should be given to the circumstances under which future Award increases and progression may apply. Council should also review these arrangements when the position next becomes vacant. Factors which should be considered when determining whether or not a market review is warranted will include recent experience in recruitment attempts (such as the number of applications which were received when the position was last advertised), loss of employees from a particular classification to other organisations and reasons for leaving as identified in exit interviews.
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(vi)
Salary Sacrifice
Clause 11 of the Award allows salary sacrificing arrangements to be made where an employee may agree to sacrifice a portion of pre-tax ordinary pay and to receive part of gross salary as a benefit rather than as salary. Benefits that may be salary sacrificed include: motor vehicles supplied by council under leaseback arrangements where the amount to be salary sacrificed for leaseback of a council motor vehicle is that part of the lease back fee that exceeds councils fringe benefit tax liability; child care facilities operated by council on its premises; and additional superannuation. Other provisions of the Award state: the salary sacrifice agreement between the employee and the Council must be in writing and can generally be changed once a year; the employee is responsible for obtaining financial advice about salary sacrifice before entering into an arrangement; the salary sacrifice agreement must comply with taxation and other relevant laws; the value of the salary sacrificed benefit is an approved benefit for superannuation purposes and does not reduce an employees superannuation salary; and an employees pre tax ordinary pay remains unaltered for overtime and exit payments. Note: An example policy, which includes a model salary sacrifice agreement, is contained in the Associations Human Resources Manual
3.4 Determining the method of Progression through the Salary Structure

Clause 7(iv) of the Award is intended to enable council to adopt a salary system that provides for skills based progression alone. Performance can be used as a means of progression where skill based progression is not reasonably available. However, performance cannot replace skill-based progression where it is available, i.e. usually the lower level positions. It would be reasonable to use performance based progression where positions have exceeded the skill requirements for the position (i.e.: topped out) or where additional skills are difficult to define i.e.: Bands 3 and 4 of the Award. Council should review any particular combination of skills based and performance based progression that it has adopted to ensure the method of progression continues to comply with the Award provision. Over time, changing qualifications and technology may lead to the identification of new and reasonable opportunities for skills based progression for some positions, where such progression may not have been available when the salary system was first introduced.
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There are a number of ways of developing a progression through a salary system. While the Award requires identification of salary points (steps) above entry level rates of pay (and this could be interpreted as being at least two steps), it is up to council to determine:

the number of salary points (steps) to be identified above entry level for skills/competency based progression; Whether different positions (which have differing skill requirements) should have the same number of skill/competency based salary points (steps).
The number of salary points (steps) for progression should be consistent with the skill requirements of council and be both affordable and achievable. Council should also ensure that position descriptions are not written in a manner so as to impose artificial barriers that prohibit progression through the full range of skill steps. Types of progression This guide includes examples of salary models where progression is based on skills/the Awards skill descriptors, competencies and performance (where skill based salary progression is not reasonably available). These models can be described as follows: i. Skill Based Model In these examples employees may be assessed against the readily available Award skill descriptors, or skill requirements defined at each salary point/step in accordance with the position requirements. Refer to Section 3.6.1. ii. Competency Based Model - Council may choose to assess competencies acquired and used by employees. Typically, this method requires council to specify a range of competencies that employees need at each salary point/step. Refer to Section 3.6.2. iii. Performance Based Model Council may assess an individuals overall performance as a basis for determining salary progression, where skill progression is not reasonably available. With this option, it will be critical for council to have a performance appraisal/management system in place. The salary progression can then be made on the extent to which an employee has met performance objectives and standards. It should be noted that the Award's Clause 26B(iv) requires that variations to payments under a salary system's performance component shall not affect payments under the salary system's skills component. Refer to Section 3.6.3. Developing progression criteria Either of the following approaches might be of assistance as a starting point in developing the progression criteria:
identifying the total skill/competency requirements for positions, including induction, core training, additional technical skills/competencies, multiskilling
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options, etc, then determining at which step above entry level they are to be acquired and applied; or identifying the skill/competency requirements above entry level (minimum essential skills/competencies for appointment), and determining at which salary step they are to be acquired and applied.
Additional information on how to build skill steps The following diagram suggests criteria that may be of assistance in developing Skill/competency based progression across a three step salary grade structure:
Entry The basic knowledge and skills to undertake the essential requirements of the position Completion of Councils induction Program Council specific skills i.e. policies, procedures and systems Desirable skills (additional competencies) identified in the position description? The desirable skills/competencies or those specific to Council; An enhanced level of existing skills2 Multiskilling (to enable the employee to undertake a wider range of tasks eg. this may include language and first aid skills)Sound knowledge of other functional areas Sound knowledge of other functional areas An enhanced level of existing skills Career path skills/skills related to undertaking higher duties Instruction/training skills? Reviewing and improving work processes/documenting procedures Project management/supervision skills and competencies; Completion of a required qualification (i.e. which was identified on appointment An enhanced level of existing skills Undertaking additional agreed skills/staff development activities
Link the skills/ competencies to the level of tasks to be carried out at each salary step
Step 1
Step 2
Step 3
When determining the method of progression, council must ensure it has the resources and ability to implement and maintain the method chosen. There are benefits in drawing on existing documentation in developing the progression requirements. These might include:

existing position descriptions; outcomes of job evaluation i.e. questionnaires; skills audits; competency standards.
2 Skills/competencies an employee would be expected to acquire and use to enable them to undertake more complex or advanced level tasks at various salary steps Salary System Guide Revised Edition - 2004 Page 24
3.5 Implementing the Salary System

Progression rules The industry parties have developed progression rules as a guide to assist councils in the implementation of their salary systems. This guide appears at Appendix 4 and refers to skills based progression only. Council should ensure that it has formalised the mechanisms for progression under its salary system and as with any procedure, review such progression rules to satisfy changing Award and organisational requirements. Frequency of assessment for progression Clause 7(vi) of the Award requires that council assess employees either annually or when an employee is required to use skills that would entitle them to progress in council's salary system when determining the salary system's method of progression. However, the Award does not require an employee to progress annually. Use of skills There will be occasions when an employee is required to apply skills that fall outside of the normal activities or responsibilities of the position, although not on a permanent basis. In such a case, the Awards Clause 8, Use of Skills, rather than the salary systems progression rules will apply. Clause 8(iii) provides in part as follows: An employee shall be paid the salary system rate of pay that recognises the skills the employee is required to apply on the job... The skills paid for shall not be limited to those prescribed by the job description. In certain circumstances, council may require the use of skills possessed by the employee, such as the use of community language and signing or first aid skills as an adjunct to the employees normal position requirements. Sample Policies for Community Language and Signing Work and First Aid (dated August 2000) are available in the Associations Human Resources Manual. In these circumstances, Clause 13(xi)(c) the Award provides that employees who are required by a council to use such additional skill(s) will have them considered in the evaluation of the position provided that:

the employee will be accredited as appropriate; the employee is prepared to be identified in the council as possessing additional skill(s); the employee is available to use the additional skill(s) as required by the council; the employee is recognised by the council as a regular user of the additional skill(s) as an adjunct to their normal duties.
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For this Award provision to apply, council must establish a minimum level of usage of additional skill(s). As some skills are retained by the employee, such as the knowledge of community languages and signing, the evaluation of the position should be reviewed when the position becomes vacant. The Award also recognises that employees will be required to relieve in different positions altogether. Clause 9(i) entitles an employee who is required to relieve in a position, which is evaluated at a higher level in the salary system, to be paid for that relief. Further, Clause 9(ii) entitles the employee to be paid for the time actually spent relieving in the higher position. In the two scenarios described above, employees may be required to use additional (person specific) skills or higher order skills on an adhoc basis and be paid for such use of skills without needing to progress in the salary system. Where employees are required to relieve on a more frequent or regular basis, council may wish to consider applying the option set out in Clause 9(i) of the Award which allows the relieving employees salary to take into account the higher level of skills applied from time to time. Where council adopts this option, the positions placement in the salary structure may need to be reviewed. Appointment and promotion Employees progression through a salary system will be limited by the Awards provision relating to appointment and promotion. The Awards Clause 28 Appointment and Promotion, requires that an appointment and promotion to a new or vacant position be made on the basis of selecting an applicant on merit. Councils salary system therefore cannot provide for automatic progression through grades that would otherwise apply to separate positions within its salary structure. It should be noted that the Award's Clause 28(v) provides an exception where the circumstances relate to lateral transfer or demotion. Role of the consultative committee The Awards Clause 27 Consultative Committees, identifies salary systems as one of the functions of councils consultative committee. Therefore it is appropriate that matters relating to the introduction, review and variation of salary systems be considered by councils consultative committee. The Award places the obligation to introduce a salary system on council. The Award does not extend the role of decision making or dispute resolution to consultative committees. Committees then, are not expected to have the authority or the resources to adopt and introduce councils salary system, or to deal with daily operational matters regarding salary systems such as carrying out assessments, placement of positions and the like.
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Reviewing the salary system While the Award is silent in this regard, it is prudent for council to allocate time and resources to reviewing its salary system and it components e.g. structure, method of progression and budget. Matters that may trigger a review include: variation to Award provisions, changes to councils structure and services, senior staff returning off contracts, introduction/changes to councils performance management system, introduction of new technologies and qualifications. This list is not exhaustive.
3.6 Salary Models

3.6.1 Skill Based Model Utilising Award prescribed skill descriptors to determine the appropriate salary point for an employee within a councils salary structure is not a new concept. This process was used to transfer employees from the classification-based Awards operating prior to 1992 to the skills based Award structure now used within the industry. The skill descriptors used within the Local Government (State) Award can be summarised as follows:
authority and accountability - the authority or the freedom the employee has for making decisions, the impact of these decisions and the level of responsibility for these decisions; judgement and problem solving - the demand for analysis and evaluation of issues and the need for creative reasoning and innovative decision making; specialist knowledge and skills - the sum total of knowledge and skills that is acceptable for the performance of the job. both breadth and depth of knowledge and the ability to apply the knowledge is necessary; management skills - the scope and complexity of activities involving degrees of planning, organising, performing, coordinating and reviewing; interpersonal skills - the skills required for negotiating, influencing and gaining co-operation from others; qualifications and experience - the education, training and experience required performing the job.
Using this salary progression model, the skill descriptors become the primary determinant for progression from one salary point to the next. The six skill descriptors are not intended to be of equal value. They can, and should be, weighted differently for the various positions within council. In practical terms, the weighting of the skill descriptors is achieved through the greater definition, or expansion, of each skill descriptor. Identifying specific skill and knowledge areas does this and drawing upon work characteristics such as those listed in Book 4, "Structure of the New Award, Local Government Award Restructuring Implementation Kit.
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Within the operational band, for example, position descriptions would normally reflect detail within the specialist knowledge and skills and qualifications and experience descriptors. Position descriptions relating to positions within the Administrative/Technical/Trades Band, Professional/Specialist Band and the Executive Band will reflect a change in emphasis. Whilst continuing to document specialist knowledge and skills and qualifications and experience it may be reasonable to expect that there will be a greater definition of authority and accountability and judgement and problem solving skills required for senior staff positions. Utilising the Award skill descriptor progression model to reward employees as they acquire and apply additional skills can also be used to facilitate multiskilling and career path development. This process involves identifying, and incorporating, within the position description, additional skills of equal or higher level complexity. These are skills used by other employees within the particular work/functional area and which, if acquired, the employee could be called upon to apply at any time as operational requirements necessitate. For example, within a salary structure based upon grades of four steps each, the Award skill descriptors could be enhanced in the following manner:
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Salary Step Entry Level:
Step 1:
Step 2:
Method of Progression The skills and knowledge defined within the skill descriptors at this level would reflect that necessary to undertake the essential requirements of the position. The skills and knowledge defined within the skill descriptors at this level would reflect those necessary to undertake all essential requirements of the position with an emphasis on the acquisition and application of local, or council specific, knowledge and operating procedures. The emphasis at this level would be placed on the demonstrated application of skills and knowledge required of the position in terms of the council specific environment, policies and procedures At this level, the skill and knowledge specification would expand horizontally. It would identify and embrace some of the skills and knowledge, of equivalent complexity, used in other jobs within the employees functional area; the acquisition and application of which would demonstrate the greater versatility or multiskilling of the employee. In the administrative and professional areas, the horizontal expansion of skill and knowledge could also embrace the development of solid working or expert knowledge of other specialised areas within the profession. Employees at this level within any band would be seen as highly skilled in their specific job tasks and responsibilities. The skill and knowledge specified within the skill descriptors at this level may enhance further multiskilling or they could reflect some of the essential entry level skills and knowledge required of the next position within the career path to which the employee would normally aspire and logically progress.
Step 3:
It is the concept expressed in Step 3 above which is reflected within the Awards Clause 9(i) Use of Skills, which provides in part as follows: ... the rate to be paid shall be determined by considering the skills/experience applied by the employee relieving in the position but shall be at least the minimum rate for that position in accordance with the salary system except where the higher level skills have been taken into account within the salary of the relieving employee). The example position descriptions shown at Appendix 5A and B illustrate the approach discussed above.
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3.6.2 Competency Based Model What are national competency standards? National competency standards are a set of broadly based industry and enterprise competency units, which define the full range of workplace requirements across industry sectors that are covered by a National Training Package. The role of a National Training Package is to group competency units together to form the basis of recognised national qualifications. The key features of competency standards are:

each unit of competency identifies a discrete workplace requirement; units of competency will incorporate underpinning skills and knowledge, key competencies, language, literacy and numeracy (LLN) and OHS requirements; must be flexible in application but sufficiently detailed to guide registered training organisations and assessors to provide consistent outcomes.
As can be seen, competency standards may contain a great deal of detail that describes work and identifies the skills and performance required for a person to be assessed as competent against a specific unit and attain recognition. The Award's Clause 25, Training and Development, provides that the training plan shall, where appropriate, provide for training that is consistent with the National Local Government Competency Standards. The Award does not require national competency standards to be used in salary system applications. Therefore, where a council chooses to use competency standards in its salary system, it should only adopt the level of detail that assists council to describe a position's duties and to ascertain whether the employee is able to demonstrate the competent application of additional skills for salary progression purposes. This is a different process altogether too where council and/or the employee seek recognition and nationally portable qualifications. In a competency based salary model, the salary range for each grade is broken into a number of steps and employees are required to achieve a level of competency in defined areas which are additional to the minimum requirements of their positions in order to progress to the next salary step. Council may also wish to identify additional competencies that employees are required to apply, that add value to the organisation. Therefore, in determining which competencies to include in the salary system, council should choose competencies which will best take into account the business plan of the organisation and enable the necessary job growth required to improve productivity.
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Note: It is the Associations' experience that competency based salary systems require a considerable level of resources to administer and maintain. The following discussion will illustrate the range of matters that may be taken into consideration when choosing a competency based salary model. Selecting competencies Council will need to determine which type of competency they intend to base their system upon. There are two (2) types of competencies that can be used: (a) Industry competency standards are one of the endorsed components of national industry training packages and cover a vast range of workplace functions. The Local Government Training Package is available in two formats i.e. Print and CD ROM. Each includes: Qualifications Framework and Assessment Guidelines (Parts 1&2); Competency Standards (Part 3); Imported Units (Part 4). Further information about the Local Government Training Package and other products can be obtained from Australian Local Government Training Tel: 03 9349 3911 or Fax 03 9349 3730. The competency standards covering many of the functions undertaken by Local Government employees may also be included in the training packages of other industries. Council should note that these standards are listed in functional rather than position based streams and additional work will be required to tailor both the competency groupings and hierarchy to positions at the local level. Council may use industry standards when developing competency based progression models. Councils using earlier versions of industry standards in their salary systems are not obliged under the Award to update to the current standards. (b) Enterprise specific competency standards: While these standards may reflect workplace needs, such competencies are not likely to be portable across workplaces or recognised for gaining national qualifications. If council is developing competency standards outside of endorsed industry standards it is important to ensure they are:

related to realistic workplace practices; expressed as an outcome; capable of being demonstrated and expressed; reinforced by performance criteria; clearly understood by both council and employees; well documented.
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If the position has been advertised or filled recently, the job description and selection criteria will assist in determining entry level competencies. In other cases, the council will need to design the required entry-level competencies. Once the entry-level competencies have been determined for each position, it will be necessary to expand on this base to fill out the additional levels of competency required for the job. Additional levels of competency should be arranged to ensure that they represent the application of significant additional skills that warrant payment of the next step in the salary range. Linking competencies to a progression model Once the competencies for each position have been identified, they will need to be aligned to the salary structure. This will include determining the order in which the competencies need to be achieved and grouping them according to the grade structure. For example, if fifteen (15) additional competencies have been identified for a position in grade X and within grade X there are 3 steps, it may be appropriate to allocate the first five (5) competencies to step one (1) and so on. It must not be overlooked that competency standards are not uniform and a single competency may represent significant change in the skills applied to warrant progression to the next step in the salary range. When allocating competencies to salary steps consideration should be given to the realistic ability of employees to achieve these goals whilst carrying out the normal requirements of their positions. In developing a competency model, council should also consider the ability of its existing human resources programs to support this type of progression model. A competency based system will potentially require significantly more training and development, support procedures for recording assessments, as well as appeal and review mechanisms. Assessing the current competency of staff Once the competency steps have been determined, council will need to establish where in the structure current employees are placed. Where staff are paid above the entry level, but below the maximum for the grade, an assessment should be made to identify whether or not their level of competency is commensurate with their current salary. If the employee is not competent in the required areas, development needs should be identified and a plan established to enable the employee to achieve the required level of competency prior to receiving additional competency based salary increases. Where an employee is paid outside the grade range, they may fall into the category of POO.
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Progression of employees through competency levels Competency assessment records should be developed to which employee agreement is gained. The learning plan should clearly specify the competencies the employee is required to achieve and apply in order to progress through the salary system. The learning and assessment methods as well as the timeframe for achieving these competencies should also be clearly identified. Salary increases will only be given after the employee has been assessed as achieving and applying the required competency levels. When this is done depends on the operating rules at each council, however, Clause 7(vi) of the Local Government (State) Award requires that employee must be assessed at least annually or when they are required to use skills that would entitle them to progress in the salary system. Linking competencies to pay Linking competencies to the pay should not be difficult, provided the salary system has already been developed and the competencies have been divided into groupings based on this structure. Most importantly, council needs to calculate the cost of any proposed system to ensure it is within budget constraints prior to implementation. Based on the model shown below the grade entry rate (or that marked as 100%) is the amount paid to employees who are competently performing the minimum requirements of the position. In order to progress through the grade, the employee would need to achieve and apply the additional competencies as discussed above. Based on the model at Figure 2, an employee who satisfactorily achieves all of the additional competencies specified at each step of the grade would receive a 5% salary increase in the first year.
Figure 2 - Competency based salary progression model Step 3 Competency Levels Step 2 Step 1 Competent
(Grade Entry)
115% 110% 105% 100% Grade X Associated Salary Range
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Examples of competency progression Appendix 6 shows examples of competency step progression requirements for a number of different positions, which may be used as a basis for competency/skills, based progression. These examples are based on the 1995 National Local Government Competency Standards and provide a large range of sample competencies and so customisation will be required. Further, there is nothing to prevent a council from adopting a mix of competency standards and other progression criteria, for example, the possession of a particular licence, where such an approach is simpler to administer and relevant to workplace needs. The examples include a complete description of the units, elements and performance criteria for the position of pay clerk. The remaining positions use the following format and numbering system, which is based on the 1995 National Local Government Competency Standards:

Unit Title (or stream) which is the title of a general area of competency; Field which is the occupational grouping of the competency; Unit which is the description of the specific competency; Element which describes the outcomes which contribute to a unit; Performance Criteria which specifies the required level of performance.
Stream/Title
Unit
Element
AF/25/001/01/01
Field Performance Criteria
3.6.3
Performance Based Salary Progression Model
Clause 7(iv) of the Award provides for performance based salary progression as a component of the salary system where skills based salary progression is not reasonably available i.e. employees shall have access to progression based on the
achievement of performance objectives relating to the position. Such performance objectives shall be set in consultation with the employee(s).
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Council should review access to the performance-based progression at regular intervals as the reasonable availability of skills based progression is something that may change over time. The diagram below is based on a salary grade with 6 steps of 2.5% each. It provides an example of the linkage to performance based salary progression where skills based progression is not reasonably available.
Salary Grade Salary Step 6 Salary Step 5 Salary Step 4 Salary Step 3 Salary Step 2 Salary Step 1
Percentage Movement 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Method of Progression Performance Based Salary Progression Skill Based Salary Progression Component
Based on the above model, Salary Step 4 is the maximum amount paid to employees who are competently performing the skills based salary progression requirements of the position. In order to progress through the grade, the employee would need to achieve the agreed performance objectives and standards at salary steps 5 and 6. Setting performance objectives and standards
Clause 7(iv) states that: Where skills based progression is not reasonably available within the salary range for the position, employees shall have access to progression based on the achievement of performance objectives relating to the position. Such performance objectives shall be set in consultation with the employee(s).
Consistent with the provisions of Clause 26B(i) of the Award, the performance objectives and standards could be developed on either an individual or team basis depending on the organisational structure and skill. The performance objectives developed should aim to align individual employee performance with the business goals, values and the operating principles of the Council. They should be:

challenging for the employee whilst adding real value to the business; specific and easily understood; measurable; relevant to both business objectives and employee needs; attainable; agreed by both employee and council;
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well documented.
The example Performance Development Plans in Appendix 7 provide a format for the joint development and assessment of performance at the annual reviews. In these examples the performance development plan for the next 12 months is developed jointly at the annual review by the responsible manager and employee in the following format:

the key output (i.e. the key result area); performance objectives to be accomplished (i.e. what has to be achieved?); performance standards (i.e. how will we know it has been achieved?).
The following methods might be considered in establishing individual performance development plans: Managers/Professional Staff The identification of the performance objectives based on key tasks and responsibilities in the position description, departmental goals, and ongoing or planned activities which relate to the achievement of key enterprise performance indicators in the management plan. Individual Employees The identification of the performance objectives based on the key tasks and responsibilities in the position description, as they contribute to ongoing or planned activities.
The development of individual performance plans will involve:

reviewing the corporate/departmental goals and key enterprise performance indicators and position objectives; identifying the key outputs; joint development (agreement) of the objectives to be accomplished for each of the key output areas; and joint development (agreement) on the performance standards (both qualitative and quantitative).
The performance plans developed should be relevant, identify an agreed number of critical key output areas, and contain realistic and achievable objectives and performance standards. For example:
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Performance Objectives 1. Relevant legislation applied in all construction work.
Performance standards 1) No substantiated complaints received. 2) All construction completed in accordance with legislative requirements.
2. Applies and complies with all Council policies and guidelines, including EEO, OH&S and Harassment.
1)
Able to answer questions regarding general staff policy issues. Has discussed policy requirements with staff at team briefings. Self and staff have attended OH&S and EEO related training. Completion of workplace safety audit. Report submitted to OH&S Manager in accordance with Council standards. Lost-time injuries are reduced by 2%. Effectively manages the rehabilitation of injured workers.
2)
3)
4)
5) 6)
The details should be discussed and clarified with the employee at the time of setting the performance plan. Council should make clear to the employee what resources will be provided to assist in achieving the plan and what the responsibilities of the employee will be in the process. Examples of performance development plans Example performance plans for positions of Greenkeeper, Ganger (Construction), Library Officer, Payroll Officer and Engineer, which may be used as a tool for performance based progression, are contained in Appendix 7. These examples include the specific goals, which must be achieved by the employee in order to gain access to their performance based salary progression. In addition, the examples have included a format for documenting the development goals of the employee together with any action noted from performance planning meetings. A further example of a performance work plan can be found on Page 7 of the Example Skill Progression and Assessment Record for a position of Personnel/Payroll Officer in Appendix 13A. This example includes a format for documenting performance objectives and standards and conducting assessments. Once agreed upon a copy of this document should be given to the employee as clarification of their requirements as well as being kept as a record of their progress by management.
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The Skill and Performance Review Cycle

Stage 1 Identify/review the skill requirements. Reach agreement on performance objectives and performance standards.
Stage 3 Annual skill/performance review Decisions and outcomes Input into Training Plan
Stage 2 Ongoing monitoring of the use of skills and performance; and Progress reviews.
Managers/supervisors should monitor performance and provide feedback to employees on an ongoing basis. Measuring performance Once the performance plan has been set, it will be the responsibility of the manager or supervisor to measure the extent to which the objectives and performance standards have been achieved. Regular assessment of progress toward goals is most effective as it helps to identify and resolve roadblocks and to keep the employees focus on the performance required. An employee's performance can be recorded in several ways. Some of the most common methods include:

rating each of the performance standards as either achieved or not achieved; the use of a generic rating scale or a narrative. Note: A rating scale is used to assess the employees performance against each performance objective and the employee is allocated the appropriate rating, possibly ranging from 1 (excellent) to 4 (unsatisfactory), for example. A narrative is simply a written record of the employees performance.
When the performance levels have been assessed and recorded, this in turn will be used to determine the extent to which a salary increase should be given.
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Provision of feedback Providing feedback to employees on their performance is critical and consistent with the provisions of Clause 26B(ii) and (iii) of the Award. Feedback should be given on all aspects of performance. It should include what was done well and any areas that need improvement. Feedback should be specific, constructive and timely. If managers or supervisors identify areas of performance which are substandard or less satisfactory than expected, it is not necessary to wait until the formal review to discuss this with the employee. Performance management is an ongoing process and issues should be discussed with employees as they arise. Action plans should be developed in conjunction with the employee to improve those areas of performance, which are less satisfactory. It is not enough for a manager to identify what needs to be improved; discussion on how it is going to be improved is also crucial. 3.6.4 Performance Based Pay
In order to provide a means of recognising and rewarding high performance, some councils may wish to include a separate performance based pay component to their salary system. Several factors will influence the way in which any performance based pay component is developed. These include: the need to calculate the cost of any proposed system to ensure that it is within budget constraints prior to implementation (most important); consideration of the relationship between the two systems where the progression requirements of some employees may already include performance based salary progression in accordance with the Award requirements; ensuring the system is seen to be fair and consistently administered across the organisation i.e. in distributing the pool of funds allocated for performance based pay; providing a financial reward which is significant enough to motivate the employees, but is still reasonable in terms of the organisational budget; It should be noted that the Awards Clause 26B(iv) Performance Evaluation and Reward states: "Where a salary system provides for the payment of a performance component separate from a skills component, variations to payment under the performance component shall not affect payments under the skills based component.
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The example model in Appendix 8 provides for performance based pay as a separate component of the salary system, which might be paid as:

an one-off annual allowance; or an one-off individual cash bonus or equivalent.
The advantages of this approach are:

performance pay in any one year can be linked to the overall performance of the organisation, specific programs and sections; performance pay is not a constant budget factor; performance pay is not perceived to be entitlement.
The following table identifies some of the factors to be considered in developing criteria for performance based pay, where it is payable as either a one off an annual allowance, or bonus.
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Factors to Consider Define the Purpose (Objectives)
Comments/Examples It will be necessary to clearly define the purpose (objectives) of introducing performance based pay. For example: Performance based pay is a separate component in the salary system which is designed to recognise and reward outstanding performance contributing to the overall achievement of Councils Management Plan at the individual/team level during the previous twelve months. Determine whether payment will be by way of an annual bonus, paid in weekly instalments, or as a one off annual payment i.e. not a permanent part of a persons salary. Decide whether there will be any limitation on the extent of performance pay available in any one year. For example: Unless otherwise determined by the Council, the overall limit on the total amount of performance based pay in any one year will be the equivalent of 1% of the total salary budget. If the total amount of performance based pay recommended and approved in any one year exceeds 1% of the salary budget, the bonus payable will be adjusted on a pro-rata basis to ensure that the total of the bonuses do not exceed 1% of the total salary budget. It will be necessary to set a limit on the amount of the annual performance payment/bonus which can be achieved i.e. a maximum amount, which might be expressed as a percentage of current gross base salary (eg 2.5% or 5%) or as a fixed amount. Another option is to establish performance pay bands (steps or points): Superior Performance Band 1 = 2.5% performance based pay if 80% or more of the assessment criteria at the annual review are assessed as having exceeded expectations; or Outstanding Performance Band 2 = 5% performance based pay if 90% or more of the assessment criteria at the annual review are assessed as having exceeded expectations. It will be necessary to define eligibility to be considered for performance based pay. For example: To be eligible for consideration for performance based pay staff must be assessed as: Consistently applying the required skills/performance for progression to their current salary step; and Having achieved/exceeded the objectives and performance standards in the agreed performance plan.
Determine the method of payment Decide any overall budget limitation
Set a limit on the amount of performance payments.
Define eligibility to be considered.
Consider trialing the system
Consider the benefits of introducing the performance pay component on a trial basis for a specified period (eg 12 months) with provision for reviewing its continuation or otherwise. Consideration will need to be given to how performance plans (objectives and standards) for individuals/teams will be developed in accordance with the provisions of Clause 24 of the Award. Refer also to Setting performance objectives and standards in Section 3.6.3 At the operational level this might involve an administratively simpler approach the development of generic performance objectives and standards (descriptive statements) in consultation with employees.
Developing performance plans
Related issues, which will need to be considered in the development and implementation of a separate performance based pay component, are briefly summarised below:
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a policy and procedures will need to be developed in consultation and agreement with all of the key stakeholders; Supporting documentation, instructions and procedures will need to be developed; Training requirements for assessors (e.g. supervisors/managers) will need to be identified.
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SECTION 4: OPERATING PROCEDURES

The documentation and communication of operating procedures is essential for the effective implementation and ongoing operation of salary systems. Examples of operating procedures are attached.
Appendix 9 is an example of operating procedures for a skills based salary system in a simple threefold brochure, which is designed for the information of staff. A more detailed document should be contained in council's Human Resources policy and procedures manual; Appendices 10 and 11 provide more detailed examples of operating procedures for competency based and skill based salary systems.
A simple way to develop operating procedures is to address the questions most frequently asked by staff about the operation of the system. The following checklist may be of assistance:
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Topic 1. 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 The Salary System Introduction and Objectives The Salary Grade Structure Job Evaluation Labour Market Premium Placement of New Employees Method of Progression Linkage to the Training Plan
References/Comments
Include
Clause 7(ii) and Clause 5 of the Award Salary System Progression Rules
Use of Skills and Higher Grade Pay 1.9 Present Occupants Only 1.10 Salary Sacrifice 1.11 Adjustment of Minimum Rates 2. 2.1 2.2 Skills/Competency Reviews Introduction and Objectives What is the Purpose of the Annual Skill/Competency Assessment? Who is Assessed? Who are the Assessors? When Will Assessments Take Place? How Objective Will the Process Be? What happens if Agreement is Not Reached on Assessments? What Happens in the Case of Substandard Performance? Confidentiality of the Process
Clause 7 (iv) & (v)of the Award Clause 7(viii) and Clause 25 of the Award Clause 8 and Clause 9 of the Award Salary System Progression Rules Clause 11 of the Award Clause 40 (ix) and Clause 26B (iv) of the Award
Salary System Progression Rules
2.3 2.4 2.5 2.6 2.7 2.8 2.9
Clause 7(vi) of the Award
Clause 30 of the Award Clause 26B(ii) and 31 of the Award
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SECTION 5: DEVELOPING A TRAINING PLAN

Councils are required to develop a training plan and budget in accordance with Clause 25 of the Award, which supports the operation of the new salary system provision to ensure that employees have the ability to attain the skills that councils require them to apply to progress. Clause 25(ii)(b) states:
All employees shall have reasonable and equitable access to education and training, such education and training shall: enable employees to acquire the range of skills they are required to apply in their positions.
Appendix 12 outlines a simple approach and methodology for the development of training plans. It identifies:

the source of the training plan; the responsibility for input into the training plan; and how the training plan is developed.
In this particular example, the annual training plan is developed by the responsible managers and supervisors/assessors in consultation with staff, and having due regard to legislation, management plan objectives, departmental plans, skills/competency and performance assessments. (a) Directors and the responsible managers identify the core/common training needs arising out of legislation/management plan objectives and departmental plans for inclusion in the annual training plan and budget in March each year. The identified training needs will be documented in the training plan format, and referred to the Human Resources Manager, who will co-ordinate the input into the Training Plan. (b) In consultation with staff, supervisors/assessors document the corporate training needs arising out of skills/competency/performance assessments in the space provided on the Position Description and Competency (Skills) Assessment Record (refer to Section 6, Supporting Documentation) for inclusion in the training plan by the Human Resources Manager. (c) Staff submit individual Training Activities Approval Forms, and Applications for Staff Education Assistance by March of each year for inclusion in the annual training plan and budget.
The example training plan There is an example training plan included at the end of this Section. The example training plan has been developed in a format suitable for input/inclusion in the annual budget and identifies:
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1.
The type of training under the following categories:
corporate (common) core training i.e. training which is required by staff across the organisation, such as: induction of all new employees; basic OHS training; and training in the code of conduct. source of training: legislative requirements/management plan objectives/needs analysis; organisational training i.e. training needs which are driven (required) by the organisation, such as traffic control; chainsaw operation; confined spaces training; first aid training etc. source of training: management plan and departmental objectives/needs analysis/skills shortage; individual training i.e. training which is employee driven, and is identified through the competency and performance assessment system. source of training: competency and performance assessments/personal career development activities.
2.
The reason for the training. For example:

achievement of management plan objectives; skill shortages; individual skill gaps; legislative requirements; competency progression requirements; new technology; career development; professional development; other.
3.
The method/resources. The method of training might be:

on-the-job; in-house course; external course; tertiary study; seminars and conferences; self paced learning; field days/workshops; or other staff development activities.
The resources required might include:

access to plant/vehicles; training venue/training equipment; external trainers/consultants; staff time.
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4.
The estimated/actual costs. Training costs might include:

staff time (operational staff); consultant (trainer) fees; course fees; training materials; travel costs; accommodation & meal allowances; or other costs.
5.
The target group/person i.e. the staff to be trained, and the numbers to be trained. For example, the target group might include:

all new employees; individual employees; all staff; specific occupational groups; other.
6.
The target dates and frequency. This will include:

the target date for the training to be completed; and the frequency of the training if ongoing.
7.
The priority. Training will be prioritised as either:

high priority; or low priority.
Note: Low priority training has been defined as training which is beneficial to council, but not essential eg personal career development, and those professional development activities not required by council.
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Example Training Plan

Type of Training Reason "Why?" Method/Resources Estimated/Actual Costs Target Group/Person Target Dates and Frequency Priority
Core (Common) Corporate Training Code of Conduct
Legislative requirement
In-house - formal. Consultant.
Staff time. $4,500 (fees)
All staff
10/9/2004
High
OH&S - Manual Handling.
Improved safety and risk management.
In-house - formal (2 hours Staff time. per group). $4,750 (fees) Consultant.
All staff
5/11/2004
High
Organisational Training . E-mail To ensure that E-mail is fully utilised by all employees with access to computer terminals. Induction Program. To ensure that all new employees are adequately inducted into the workplace.
Half day in-house training Staff time. by computer support staff.
All Internal staff.
1/8/2004
High
On-the-job instruction by Personnel Section and supervisor. Induction kits.
Staff time
All new employees
On appointment
High
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Type of Training Workplace Communication.
Reason "Why?" To enhance customer service and improve internal communication. Workcover requirement.
Method/Resources Half day in-house. Consultant.
Estimated/Actual Target Costs Group/Person Staff time. All internal staff. $3,000 (fees)
Target Dates Priority and 11/12/2004 Low
Traffic Control.
One day in house. Consultant.
Staff time. $1.200 (fees)
First Aid Training
Skill progression requirement for Step 1. Skill progression requirement for Step 2.
External - Ambulance Station Half day in-house.
Chainsaw Training
6 Const'n & Maint. staff and 6 Parks & Reserves staff. Staff time. P.Jones $125 (course cost) Works and Services Staff time. P.Jones Works and Services
16/9/2004 and ongoing. Next available course 1/4/2004
High
High
High
Individual Training Introduction to Rating.
Skills based progression. Personal career development.
MBA Program.
LGSA Learning -2 day external course in Sydney. Course fee. Course attendance. Examination leave.
Managing and Growing Trees Conference.
Professional development.
Three day conference.
$250-00 (course R. Jackson cost) Finance Clerk Staff time. $750-00 I Amkeen (contribution of cost of course) Staff time. $1,145-00 (cost of A Greentree course) Staff time. Fees, travel, Accommodation and meals.
11 & 12/11/04
High
2004 and ongoing.
Low
19to 21/10/2004
Low
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SECTION 6: SUPPORTING DOCUMENTATION

The supporting documentation required for the effective operation of the salary system will include: position descriptions which identify the range of skills, responsibilities, duties and qualifications, and the criteria for progressing through each skill step (may include the training plan); skill/competency records (eg competency log books); assessment/appraisal records Keeping the documentation simple will make your system easy to understand and administer. Appendices 13A, 13B and 13C contain examples of simple multi-purpose supporting documentation which can be easily customised to suit skills/competency/performance based salary progression. The following table provides a comparison of the main features of the example documentation.
Features/Content The example includes: Position Details Position Purpose Appointment Requirements Key Tasks/Units of Competency Skills/Elements of Competency Performance/Assessment Criteria Instructions for completion Provision for Recording Outcomes It outlines: Common skills/competencies which apply to all positions Job specific skills/competencies and the performance/assessment criteria for progression between salary steps. It provides for: Assessments of both the acquisition and application (use) of skills/competencies. Development and assessment of performance objectives and standards (where applicable) The identification of training needs/other agreed actions arising out of assessments. Developing action plans Employee comments Recommendations and decisions about salary progression. It identifies training plan inputs: The training needs are identified for inclusion in Council's Training Plan and budget each year i.e. the type of training, reason method and estimated cost. Included in Examples 13A 13B 13C
Note: the Annual Review Record at Appendix 14 is used in conjunction with the Skill Progression and Assessment Record contained in Appendix 13A.
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SECTION 7: APPENDICES
1. 2. 3. Action Plan Worksheet Revised Local Government Job Evaluation System - Factors and Subfactors Skill Related Allowances incorporated into rates of pay upon transfer to Local Government (State) Award - 8 June 1992 4. Salary System Progression Rules - Award Parties' Guide 5. Position Descriptions Based on Skill Descriptors 6. Competency Based Position Descriptions 7. Performance Development Plan for Sample Positions 8. Model of Performance Based Pay as a Separate Component of a Salary System 9. Operating Procedures for a Skill Based Salary System (Threefold Flyer) 10. Operating Procedures for a Competency Based Salary System 11. Salary and Performance Review System Operating Procedures 12. Model for Developing a Training Plan 13A. Multi Purpose Skill Progression and Assessment Record 13B. Multi Purpose Position Description and Skill Assessment Record 13C. Multi Purpose Position Description and Competency (Skill) Assessment Record 14. Example Annual Review Record
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LOCAL GOVERNMENT & SHIRES ASSOCIATIONS OF NSW

SALARY SYSTEM GUIDE

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

SECTION 1: INTRODUCTION AND OVERVIEW

Salary System Guide

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

SECTION 2: REVIEWING AND ENHANCING YOUR SALARY SYSTEM

Salary System Guide

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

SECTION 3: DEVELOPMENT OF A SALARY SYSTEM

3.1 Determining the relative value of positions

Salary System Guide

Revised Edition - 2004

Salary System Guide

Job evaluation wont:

Salary System Guide

Revised Edition - 2004

3.2 Deciding on an appropriate structure

Salary System Guide

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

Table 1: Comparison of three salary structures

Award Band 1/2

Minimum Award Rates (Weekly)* 541.30

Seven-grade salary structure

Salary System Guide

Revised Edition - 2004

Seven-grade salary structure - rates of pay

Fourteen-grade salary structure

Fourteen-grade salary structure -rates of pay

Salary System Guide

Revised Edition - 2004

Twenty-one grade salary structure

Salary System Guide

Revised Edition - 2004

3.3 Placement of positions in a salary structure

Salary System Guide

Revised Edition - 2004

Greenkeeper Plumber Child Develop. Officer Ganger (Construct) Rates Clerk

Child Develop. Officer Ganger (Construct) Rates Clerk

Salary System Guide

Revised Edition - 2004

District Health/Building Surv. Fire Control Officer Town Planner Accountant

Fire Control Officer Town Planner Accountant 5

Corp. Services Mgr

Communications Mgr Development Building Mgr

Financial Services Mgr Envir. Services Mgr Asset/Const Mgr

Salary System Guide

Revised Edition - 2004

Salary System Guide

Revised Edition - 2004

In November 2004, the Award parties renewed their agreement as follows:

Salary System Guide

Revised Edition - 2004