GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

S	1 

SENATE BILL 48*

Short Title:  Merit Pay System.	(Public)
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Sponsors: Senators Taft, Guy, Hunt of Durham, Marvin, Sherron; and Hunt of Moore.
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Referred to:  State Personnel.
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January 24, 1989

A BILL TO BE ENTITLED
AN ACT TO REVISE THE MERIT PAY SYSTEM IN EFFECT FOR STATE EMPLOYEES SUBJECT TO THE PROVISIONS OF CHAPTER 126 OF THE GENERAL STATUTES.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 126-7 reads as rewritten:
"§ 126-7. Compensation of State employees.
(a)	It is the policy of the State to compensate its employees at a level sufficient to encourage excellence of performance and to maintain the labor market competitiveness necessary to recruit and retain a competent work force.  To this end, salary increases to State employees shall be based, in part, on each individual employee's job performance and, in part, on general increases given to all State employees.
(b)	To guide the Governor and the General Assembly in making appropriations to further the compensation policy of the State, the State Personnel Commission shall conduct annual compensation surveys.  The Commission shall determine the percent of funds appropriated for salary increases to be reserved for a general increase for all State employees and the percent to be reserved for performance-based merit increases for eligible employees.  The Commission shall present its recommendation on the percentages and the results of the compensation survey to the Appropriations Committees of the House and Senate no later than two weeks before the convening of the legislature in odd years and May 1st of even years.  The amount reserved for merit increases shall not be less than twenty-five percent (25%) nor more than seventy-five percent (75%) of the total allocation.
(c)	Merit increases shall be based on performance appraisals of all employees conducted by each employing unit.  The State Personnel Commission, under the authority of G.S. 126-4(8), shall adopt policy and regulations for performance appraisal.  The policy and regulations shall include the following:
(1)	Each employing unit's appraisal system shall be designed and administered to ensure that merit increases reward only performance that is satisfactory and above and are distributed fairly.
(2)	To be eligible to distribute its share of the merit increase allocation, an employing unit shall have an operative performance appraisal system which has been approved by the State Personnel Director.
(3)	The State Personnel Director shall help employing units to establish and administer their performance appraisal systems and shall provide initial and ongoing training in performance appraisal and performance system administration.
(4)	An employee whose performance rating is satisfactory and above is eligible to receive a merit increase.  An employee whose performance rating is below satisfactory shall not receive a merit increase.
(5)	The State Personnel Director shall set the maximum merit increases allowable for levels of performance that are satisfactory and above.  Individual merit increases may vary depending on an employee's job performance and position within salary grade.  A supervisor's performance appraisal plan, evaluation standards for each employee, and individual employee ratings and merit increase amounts shall be reviewed by the immediate supervisor who can approve increases up to the maximums set by the State Personnel Director.  A merit increase to an employee above the maximum set for his level of performance must be approved in writing by the State Personnel Director.
(6)	An employee who believes that his performance was not evaluated fairly, that he was unfairly denied a merit increase, or that he received an insufficient increase based on his performance appraisal must first discuss the problem with his supervisor.  Appeals of the supervisor's decision shall be made only to the employing unit's grievance committee or internal merit review board.  The State Personnel Director shall help an employing unit to establish an internal merit review board or, if it includes employee members, to use its existing grievance committee to hear merit pay disputes.
(7)	The State Personnel Director shall monitor the performance appraisal system and merit increase distribution of each employing unit.  Each unit shall submit data required by the Director on the administration of the performance appraisal system within that unit annually.  The Director shall analyze the data to ensure that merit increases are distributed fairly within individual employing units and across all such units of State government and shall report back to each unit on its appraisal and distribution performance.
(8)	The State Personnel Director shall report annually on the merit pay program to the Commission.  The report shall evaluate the performance of each employing unit in the administration of its appraisal system and the distribution of merit increases within each unit and across State government.  The report shall include recommendations for improving the performance appraisal system and alleviating inequities.  Copies of the report shall be sent to the State Auditor.
(9)	The Commission shall report annually to the Governor, the Lieutenant Governor, the President Pro Tempore of the Senate, the Speaker of the House of Representatives, and the Standing Personnel Committees of the House and the Senate.  The Commission report shall include an evaluation of each employing unit's administration of its appraisal system and distribution of merit increases.  The State Personnel Director shall recommend for approval by the General Assembly sanctions for employing units that have deficient appraisal systems or that do not link merit increases to performance.
(d)	The provisions of subsections (a), (b), and (c) shall not affect the system of longevity payments established by the State Personnel Commission."
Sec. 2.  This act shall become effective January 1, 1990.