DAR File No. 27165

Human Resource Management, Administration

R477-6

Compensation

NOTICE OF PROPOSED RULE

DAR File No.: 27165
Filed: 05/14/2004, 03:04
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The proposed amendment clarifies and expands the Incentive Awards and bonus policy, clarifies policy for the FLEX program when an employee's status changes, places an important disclaimer in the policy for employee health insurance, and make various nonsubstantive changes.

Summary of the rule or change:

In Section R477-6-5, new language is added that contains two important additions to this policy; 1) at Subsection R477-6-5(1), a legal disclaimer stating that incentive awards and bonuses are not an entitlement and are subject to agency policy and budget; and 2) at Subsection R477-6-5(1)(b), an option to make payment to a 401K account as an incentive award is provided. Language in this section is reorganized to add clarity to existing policies. Two new types of bonuses are created in policy in Subsections R477-6-5(3) and (4). The first allows an agency to establish policies to reward cost savings proposals and the second provides for certain bonuses to encourage employees with critical job skills to stay with the state or come to work for the state. In Subsection R477-6-6(4), one clause is added to this policy at Subsection R477-6-6(4)(f) setting in rule that an employee who separates from state employment or becomes ineligible for FLEX benefits has 90 days to submit claims or elect COBRA for the health care account. Other changes are a rewriting of current language for clarification. In Section R477-6-8, an important disclaimer is added stating that an employee in certain schedule A appointments must be approved through underwriting in order to receive life insurance benefits. In Section R477-6-9, amendments to this section make it clear that an employee who resigns in lieu of termination is eligible for the severance benefit. This concept is further clarified in amendments to Subsection R477-6-9(2) by limiting the conditions that make one ineligible for the severance. New language at Subsection R477-6-9(1)(b) adds a limited health care benefit to the severance package. Other changes to this section are a reorganization of the language for clarification purposes.

State statutory or constitutional authorization for this rule:

Sections 67-19-6, 67-19-12, and 67-19-12.5; and Subsection 67-19-15.1(4)

Anticipated cost or savings to:

the state budget:

The severance benefit was placed in rule in 1994 to satisfy the requirement of Section 67-19-15.1. The Department of Human Resource Management (DHRM) was required to develop incentives for employees to convert to career exempt status. Severance was one of the three conversion incentives recommended by DHRM and was approved by the Governor's Office. It is designed as a very limited benefit for those few people who are in high risk positions at the highest levels of government and who likely work at wages far below their private sector peers. This amendment is also limited in scope but it has the potential to create some increased costs which will be borne by agencies. The cost per person will be determined by the numbers of years of service (limited to six) and the premium rates for the insurance coverage the employee has at the time of separation from employment (single, two party or family coverage). In actual cost, this will vary from $300 to $5,000 per person. In a typical year, we would not expect there to be more than a few employees statewide who would qualify for this benefit. The cost would be in the range of $10,000 to $15,000. In an election year, if new leadership makes wholesale changes, costs would increase based upon the number of employees separated from state service.

local governments:

By law, Section 67-19-15, this rule has no effect beyond the executive branch of state government.

other persons:

By law, Section 67-19-15, this rule has no effect beyond the executive branch of state government.

Compliance costs for affected persons:

By law, Section 67-19-15, DHRM rules effect only persons employed by the executive branch of state government. Rule amendments that create a cost for an employee will either impose a fee for a choice which an employee may make or will cancel a monetary benefit that an employee currently enjoys because of rule. The amendments to this rule impact contingent benefits where an employee must make a choice but no fees are imposed. No monetary benefits are effected with these changes.

Comments by the department head on the fiscal impact the rule may have on businesses:

Rules published by DHRM have no direct effect on businesses or any entity outside state government. DHRM has authority to write rules only to the extent allowed by the Utah Personnel Management Act, Title 67, Chapter 19. Section 67-19-15 limits the provisions of career service and this rule to employees of the executive branch of state government. The only possible impact may be a very slight, indirect effect if an agency passes costs or saving on to businesses through fees. However, the potential costs associated with this amendment will be intermittent and absorbed by agencies and not passed on.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Conroy Whipple at the above address, by phone at 801-538-3067, by FAX at 801-538-3081, or by Internet E-mail at cwhipple@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/01/2004

This rule may become effective on:

07/02/2004

Authorized by:

Kim Christensen, Executive Director

RULE TEXT

R477. Human Resource Management, Administration.

R477-6. Compensation.

R477-6-1. Pay Plans.

(1) DHRM shall develop or modify pay plans for compensating employees.

(2) Market comparability salary range [increases]adjustments shall be legislatively approved.

R477-6-2. Allocation to the Pay Plans.

(1) Each job shall be assigned to a salary range on the applicable pay plan, except where compensation is established by statute.

(2) Salary range determination for benchmark jobs shall be based on salary survey data. The salary ranges for other jobs are determined by relative ranking with the appropriate benchmark job.

R477-6-3. Appointments.

(1) All appointments shall be placed on a salary step in the DHRM approved salary range for the job. Hiring officials shall receive approval from their agency head or agency human resource designee before making appointment offers to individuals.

(2) Reemployed veterans under USERRA shall be placed in their previous position or a similar position at their previous salary range. Reemployment shall include the same seniority status, any cost of living allowances, reclassification of the veteran's preservice position, or market comparability adjustments that would have affected the veteran's preservice position during the time spent by the affected veteran in the uniformed services. Performance related salary increases are not included.

R477-6-4. Salary.

(1) Merit increases. The following are applicable if merit increases are authorized and funded by the legislature:

(a) Employees, who are not on a longevity step and who are not at the maximum step of their salary range, who receive a successful or higher rating on their performance evaluations and who have been in a paid status by the state for at least six months shall receive a merit increase of one or more salary steps at the beginning of the new fiscal year.

(b) Employees designated as schedule AJ are not eligible for a merit step increase. Merit increases for employees in schedule AL, AM, or AS are not mandatory unless they are receiving benefits, and the increase is approved in agency policy.

(2) Highest Level Performer.

(a) Employees designated by the agency as a highest level performer consistent with subsection R477-10-1(2) shall receive, as determined by the agency head, either:

(i) a salary step increase; or

(ii) a bonus; or

(iii) administrative leave; or

(iv) other appropriate recognition as determined by the agency.

(b) [Employees]An employee who is on a longevity step or [who are ]at the maximum step of [their]the salary range [are]is not eligible for a salary step increase but may receive a bonus, administrative leave or other appropriate recognition as determined by the agency.

(3) Promotions and Reclassifications.

(a) [Employees]An employee promoted or reclassified to a [position]job with a salary range exceeding the employee's current salary range maximum by one salary step shall receive a salary increase of a minimum of one salary step and a maximum of four salary steps. [Employees]An employee who [are]is promoted or reclassified to a [position]job with a salary range exceeding the employee's current salary range maximum by two or more salary steps shall receive a salary increase of a minimum of two salary steps and a maximum of four salary steps.

(i) [Employees]An employee may not be placed higher than the maximum salary step or lower than the minimum salary step in the new salary range. Placement of [employees]an employee in longevity shall be consistent with subsection R477-6-4(4).

(ii) [Employees]An employee who remains in longevity status after a promotion or reclassification shall retain [their]the same salary by being placed on the corresponding longevity step.

(b) To be eligible for a promotion, an employee shall:

(i) meet the job requirements and skills specified in the job description and position specific criteria as determined by the agency for the position unless the promotion is to a career service exempt position.

(c) [Employees]An employee whose position[s are] is reclassified or [whose position is ]changed by administrative adjustment to a job with a lower salary range shall retain [their]the current salary. The employee shall be placed on the corresponding longevity step if [their]the salary exceeds the maximum of the new salary range.

(4) Longevity.

(a) An employee shall receive a longevity increase of 2.75 percent when:

(i) [they have]the employee has been in state service for eight years or more. [They]The employee may accrue years of service in more than one agency and such service is not required to be continuous; and

(ii) [they have]the employee has been at the maximum salary step in the current salary range for at least one year and received a performance appraisal rating of successful or higher within the 12-month period preceding the longevity increase.

(b) [Employees]An employee on a longevity step shall be eligible for the same across the board pay plan adjustments authorized for all other employee pay plans.

(c) [Employees]An employee on a longevity step shall only be eligible for additional step increases every three years. To be eligible, an employee[s] must receive a performance appraisal rating of successful or higher within the 12-month period preceding the longevity increase.

(d) [Employees]An employee on a longevity step who [are]is reclassified to a lower salary range shall retain [their]the current salary.

(e) [Employees]An employee on a longevity step who [are]is promoted or reclassified to a higher salary range shall only receive an increase if [their]the current salary step is less than the highest salary step of [their]the new range.

(f) Agency heads or time limited exempt employees identified in R477-4-11 are not eligible for the longevity program.

(5) Administrative Adjustment.

(a) [Employees]An employee whose [have had their ]position has been allocated by DHRM from one job to another job or salary range for administrative purposes, shall not receive an adjustment in salary.

(b) Implementation of new job descriptions as an administrative adjustment shall not result in a salary increase unless the employee is below the minimum step of the new range.

(6) Reassignment.

When permitted by federal or state law, including but not limited to the Americans with Disabilities Act, management may lower the salary of an employee one or more steps when the employee is reassigned to a job or position with a salary range having a lower maximum step.

(7) Transfer.

[Employees]An employee who transfers from one job or position to another job or position may be offered a salary increase[s] effective the same date as the transfer.

(8) Demotion[s].

[Employees]An employee demoted consistent with R477-11-2 shall receive a salary reduction of one or more salary steps as determined by the agency head or designee. The agency head or designee may move an employee to a position with a lower salary range concurrent with the salary reduction.

(9) Productivity step adjustment.

Agency management may establish policies to reward an employee[s] who assumes additional workloads which result from the elimination of a position for at least one year with a salary increase of up to four salary steps. [Employees]An employee at the maximum step of [their]the salary range or in longevity shall be given a one time lump sum bonus award of 2.75% of their annual salary.

(a) To implement this program, agencies shall apply the following criteria:

(i) either the employee[s] or management can make the suggestion;

(ii) the employee[s] and management agree;

(iii) the agency head approves;

(iv) a written program policy achieves increased productivity through labor/management collaboration;

(v) the agency human resource representative approves;

(vi) the position will be abolished from the position authorization plan for a minimum of one year;

(vii) staff receive[s] additional duties which are substantially above a normal full workload;

(viii) the same or higher level of service or productivity is achieved without accruing additional overtime hours;

(ix) the total dollar increase, including benefits, awarded to the workgroup as a result of the additional salary steps does not exceed 50 percent of the savings generated by eliminating the position.

(10) Administrative Salary Increase.

The agency head [or commissioner ]authorizes and approves administrative salary increases under the following parameters:

(a) [Employees]An employee shall receive one or more steps up to the maximum of [their]the salary range.

(b) Administrative salary increases shall only be granted when the agency has sufficient funding within their annualized base budgets for the fiscal year in which the adjustment is given.

(c) Justifications for Administrative Salary Increases shall be:

(i) in writing;

(ii) approved by the agency head[ or commissioner];

(iii) supported by issues such as: special agency conditions or problems or other unique situations or considerations in the agency.

(d) The agency head [or commissioner ]is the final authority for salary actions authorized within these guidelines. The agency head [or commissioner ]or designee shall answer any challenge or grievance resulting from an administrative salary increase.

(e) Administrative salary increases may be given during the probationary period. These increases alone do not constitute successful completion of probation or the granting of career service status.

(f) [Employees]An employee at the maximum step of [their]the range or on a longevity step may not be granted administrative salary increases.

(11) Administrative Salary Decrease.

The agency head [or commissioner ]authorizes and approves administrative salary decreases for nondisciplinary reasons according to the following:

(a) [Employees]An employee shall receive a one or more step decrease not to exceed the minimum of [their]the salary range.

(b) Justification for administrative salary decreases shall be:

(i) in writing;

(ii) approved by the agency head[ or commissioner]; and

(iii) supported by issues such as previous written agreements between the agency and employees to include career mobility; reasonable accommodation, special agency conditions or problems, or other unique situations or considerations in the agency.

(c) The agency head [or commissioner ]is the final authority for salary actions within these guidelines. The agency head [or commissioner ]or designee shall answer any challenge or grievance resulting from an administrative salary decrease.

R477-6-5. Incentive Awards.

(1) Only agencies with written and published incentive award and bonus policies may reward employees with [cash ]incentive awards [and noncash incentive awards]or bonuses. Incentive awards and bonuses are discretionary, not an entitlement, and are subject to the availability of funds in the agency. [Policies shall be approved annually by DHRM and be consistent with standards established in these rules and with Department of Administrative Services, Division of Finance rules and procedures.]

(a) Policies shall be approved annually by DHRM and be consistent with standards established in these rules and the Department of Administrative Services, Division of Finance, rules and procedures.

(b) Policies may provide for payments to a 401(k) program approved by the Utah Retirement System.

(c) Individual awards shall not exceed $4,000 per occurrence and $8,000 in a fiscal year.

(d) All cash incentive awards and bonuses shall be subject to payroll taxes.

(2) Performance Based Incentive Awards.

([1]a) Cash Incentive Awards

([a]i) Agencies may grant a cash incentive award to an employee or group of employees [a cash incentive award ]who:[

(i) propose workable cost savings; or]

([ii]A) demonstrate exceptional effort or accomplishment beyond what is normally expected on the job for a unique event or over a sustained period of time.[

(b) Individual awards shall not exceed $4,000 per occurrence and $8,000 in a fiscal year.]

([c]ii) All cash awards must be approved by the agency head or designee. They must be documented and a copy shall be maintained in the agency's individual employee file.

([2]b) Non[C]cash Incentive Awards

(i) Agency heads may recognize an employee[s] or group[s] of employees with non[-]cash incentive awards.

([a]ii) Individual noncash incentive awards shall not exceed a value of $50 per occurrence and $200 for each fiscal year.

([b]iii) Noncash incentive awards may not include cash equivalents such as gift certificates or tickets for admission.

(3) Cost Savings Bonus

(a) An agency may establish a bonus policy to increase productivity, generate savings within the agency, or reward an employee who submits a cost savings proposal.

(i) The agency shall document the cost savings involved.

(b) Amounts awarded are subject to the cost limits of R477-6-5(1)(c). In exceptional circumstances, an award may exceed these limits upon application to DHRM and approval by the Governor.

(4) Market Based Bonuses

Agencies may give a cash bonus to an employee as an incentive to acquire or retain an employee with job skills that are critical to the state and difficult to recruit in the market.

(a) Retention Bonus

An agency may pay a bonus to an employee who has unusually high or unique qualifications that are essential for the agency to retain.

(b) Recruitment or Signing Bonus

An agency may pay a bonus to a qualified job candidate to convince the candidate to work for the state.

(c) Scarce Skills Bonus

An agency may pay a bonus to a qualified job candidate that has the scarce skills required for the job.

(d) Relocation Bonus

An agency may pay a bonus to a current employee who must relocate to accept a position in a different commuting area.

(e) Referral Bonus

An agency may pay a bonus to a current employee who refers a job applicant who is subsequently selected and is successfully employed for at least six months.

R477-6-6. Employee Benefits.

(1) Agencies shall explain all benefits provided by the state to new hires or rehires within five working days of the hire date.

(2) Agency payroll or human resource staff shall submit personnel action forms to the appropriate agency levels within ten days of hire date.

(3) [Employees]An employee must elect to enroll in the life, health, vision, and dental plans within 60 days of the hire date to avoid having to provide proof of insurability. [Employees]An employee who does not enroll within 60 days can only enroll during the annual open enrollment period for all state employees. Agencies shall submit the enrollment forms to Group Insurance within three days of the date entered on the enrollment form.

(4) Flex Benefits

(a) A benefits eligible employee may participate in the FLEX benefits program. The annual open enrollment period will be held each November for the following FLEX plan year. Exceptions to this rule are as follows:

(i) [New employees]A new employee wishing to participate in the FLEX benefits program shall enroll within the first 60 days of [their ]employment. Coverage becomes effective on [their]the employment date.

(ii) [Employees]An employee who [have]has a change in family status such as marriage, divorce, or birth of a child, may enroll or make changes within 60 days of such event. [Proper documentation such as marriage license, divorce decree, or birth certificate, plus a completed FLEX family status change form must be received by the PEHP FLEX Plan Department within 60 days of the change in family status.]A completed FLEX family status change form, accompanied by proper documentation such as a marriage license, divorce decree, or birth certificate, must be received by the plan administrator within 60 days of the change in family status.

(b) [Employees]An employee must reenroll each year to participate in the FLEX benefits program.

(c) An employee's designated FLEX payroll deduction shall not be changed during the course of a year unless there is a change in family status.

(d) To be eligible for reimbursement, [employees must submit eligible FLEX claims accompanied by documentation to the PEHP FLEX Office no later than the first Thursday of each pay period]expenses must be incurred during the plan year.

(e) The claim submission deadline for any plan year shall be 90 days following the end of the calendar year.[ To be eligible for reimbursement, the FLEX claim must be received at the PEHP FLEX Plan Department by close of business on the established plan year deadline].

(f) An employee terminating, retiring, or changing from eligible to ineligible status during the plan year may either submit claims incurred during employment no later than 90 days following the date of termination, retirement or status change, or elect COBRA for the health care account only.

(5) [Employees]An employee in a position[s] which normally requires working less than 40 hours per pay period [are]is ineligible for benefits. [Employees]An employee[, except those in positions specifically designated as ineligible for benefits,] in a position which normally requires working 40 hours or more per pay period shall be eligible for all benefits, unless the employee is in a position specifically designated as ineligible for benefits. Leave benefits shall be determined on a prorated basis according to actual hours paid in a pay period.

(6) [Reemployed]A reemployed veteran[s] under USERRA shall be entitled to the same employee benefits given to other continuously employed eligible employees to include seniority based increased pension and leave accrual.

R477-6-7. Employee[s] Converting from Career Service to Schedule AD, AR, or AS.

(1) [Career]A career service employee[s] in a position[s] meeting the criteria for career service exempt Schedule AD, AR, or AS shall have 60 days to elect to convert from career service to career service exempt. As an incentive to convert, an employee[s] shall be provided the following:

(a) a base salary increase of one [(1) ]to three [(3) ]salary steps, as determined by the agency head. [Employees]An employee at the maximum of [their]the current salary range or on longevity shall receive, in lieu of the salary step adjustment, a one time bonus of 2.75 percent, 5.5 percent or 8.25 percent to be determined by the agency head;

(b) state paid term life insurance coverage if determined eligible by the Group Insurance Office to participate in the Term Life Program, Public Employees Health Plan:

(i) Salaries less than $50,000 shall receive $125,000 of term life insurance;

(ii) Salaries between $50,000 and $60,000 shall receive $150,000 of term life insurance;

(iii) Salaries more than $60,000 shall receive $200,000 of term life insurance.

(2) [Employees]An employee electing to convert to career service exempt after [their]the 60 day[s] election period shall not be eligible for the salary increase, but shall be entitled to apply for the insurance coverage through the Group Insurance Office.

(3) [Employees]An employee electing not to convert to career service exemption shall retain career service status even though [their]the position shall be designated as Schedule AD, AR or AS. When these career service employees vacate these positions, subsequent appointments shall be career service exempt.

(4) An agency head may reorganize so that a current career service exempt position no longer meets the criteria for exemption. In this case, the employee shall be designated as career service if he had previously earned career service. However, [he]the employee shall not be eligible for the severance package or the life insurance. In this situation, the agency and employee shall make arrangements through the Group Insurance Office to discontinue the coverage.

(5) [Career]A career service exempt employee[s] without prior career service status shall remain exempt. When the employee leaves the position, subsequent appointments shall be [done ]consistent with R477-4.

(6) Agencies shall communicate to all impacted and future eligible employees the conditions and limitations of this incentive program.

R477-6-8. State Paid Life Insurance.

(1) A benefits eligible career service exempt employee on schedule AA, AB, AD, and AR shall be provided the following benefits if the employee is approved through underwriting:

(a) State paid term life insurance coverage if determined eligible by the Group Insurance Office to participate in the Term Life Program Public Employees Health Plan:

(i) Salaries less than $50,000 shall receive $125,000 of term life insurance;

(ii) Salaries between $50,000 and $60,000 shall receive $150,000 of term life insurance;

(iii) Salaries more than $60,000 shall receive $200,000 of term life insurance.

(2) [Employees]An employee on schedule AC, AK, AM and AS may be provided these benefits at the discretion of the appointing authority.

R477-6-9. Severance Benefit.

(1) A benefits eligible career service exempt employee on schedule AB, AD or AR who is [terminated]separated from state service through an action initiated by management, to include resignation in lieu of termination, shall receive at the time of severance a [severance ]benefit equal to: [one week of pay for each year of consecutive exempt service accrued after January 1, 1993, except as provided in R477-6-9(3) and R477-6-9(4).]

(a) one week of pay, up to a maximum of 12 weeks, for each year of consecutive exempt service; and

(b) one month of health insurance coverage, up to a maximum of six months, for each year of consecutive exempt service, at the level of coverage the employee has at the time of severance, to be paid in a lump sum payment to the state's health care provider.

[ (2) A benefits eligible career service exempt employee on schedule AB, AD or AR who accepts reassignment to a position with a lower salary range, without a break in service, shall receive a severance benefit equal to the difference between his current hourly rate of pay and his new hourly rate of pay multiplied by the number of accrued annual leave, converted sick leave and excess hours.

(3) An eligible employee shall not accrue a severance benefit in excess of twelve weeks.

] ([4]2) A severance benefit shall not be paid to an employee:

(a) whose statutory term has expired without reappointment;[

(b) who is voluntarily separating from the executive branch;]

([c]b) who is retiring from state service; or[

(d) who is eligible for retirement without incurring any early retirement reductions; or]

([e]c) who is discharged for cause.

(3) A benefits eligible career service exempt employee on schedule AB, AD or AR who accepts reassignment to a position with a lower salary range, without a break in service, shall receive a severance benefit equal to the difference between the current hourly rate of pay and the new hourly rate of pay multiplied by the number of accrued annual leave, converted sick leave, and excess hours on the date of reassignment.

([5]4) An employee on schedule AC, AK, AM or AS may be provided these same severance benefits at the discretion of the appointing authority.

R477-6-10. Human Resource Transactions.

The Executive Director, DHRM, shall publicize procedures for processing payroll[/] and human resource transactions actions and documents.

KEY: salaries, employee benefit plans, insurance, personnel management

[July 1, 2003]2004

Notice of Continuation June 11, 2002

67-19-6

67-19-12

67-19-12.5

67-19-15.1(4)

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Conroy Whipple at the above address, by phone at 801-538-3067, by FAX at 801-538-3081, or by Internet E-mail at cwhipple@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.