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II. COMPENSATION MARKET EQUITY and SALARY SETTING The comparable labor market will include those cities that provide full - service, are in the Bay Area job pool, recognized as excellent organizations, and have comparable service outputs. These cities Include Alameda, Berkeley, Hayward, Mt. View, Palo Alto, San Leandro, San Mateo, South San Francisco, and Sunnyvale. The following factors will be included when conducting a market study: 1) base top step salaries and /or control point minus and special performance premiums, and 2) employer paid PERS contributions. The salary range for each Department Head classification in the Executive Management Group Is established by using the lowest salaried city and the highest salaried city comparable classification. Individual Executive Management salaries for Department Heads are reviewed by the City Manager on an annual basis and are set anywhere within the established high /low range based on performance. The salary range for Division Managers within the Executive Management Group shall be established using the same market cities but will be set at the median of the market. Additionally, all Executive Management classifications shall: 1) receive a 2% of base salary city contribution into a deferred compensation program and 2) maintain a minimum differential of 10% above the top step subordinate classifications. Adjustments In salary ranges to maintain the differential will be effective the same date the subordinate class received the adjustment. EXCEPTIONAL PERFORMANCE BONUS The City Council shall establish a bonus program for Department Heads In the Executive Management Group that will offer incentives and commensurate rewards for exceptional service or contributions. Any bonus granted under this program Is at the discretion of the City Manager and Is awarded when previously established stretch goals have been met or when the City Manager deems it appropriate. Department Heads In the Executive Management Group are eligible to receive up to a 5% of their base salary one time each fiscal year. It is not expected that all Department Heads positions will receive bonuses each year since this program is intended to recognize only exceptional performance. This program is not a method of recognizing expected or above average performance. Again, the Bonus program is only for exceptional service to the city or community. Any bonus awarded under this program is not considered part of base salary nor Is there any intention that any bonus serve as the basis for any future compensation. K