Between June and December of 2010, the SRC and the Wage & Salary committee met regularly to consider how best to administer the funds available each year for staff raises. Our discussions focused on 1) finding a way of moving more staff members toward the midpoint or target of their salary ranges and 2) establishing a fair and effective method of rewarding strong work performance (merit pay).
The first objective grows out of the College’s stated goal of paying staff in the top 20% of the market for their jobs. Years ago, this goal was expressed through the benchmark system, which explicitly linked the growth of salaries to the 80th percentile in the market. In 2006, the College modified its compensation structures by grouping similar positions in bands and levels, each one with its own salary range. The ranges were constructed around midpoints, which Human Resources derived from a market analysis of the jobs included in the band/level. In these analyses, HR identified the 80th percentile salaries for the jobs in the band/level, added the salaries together, and then averaged them to determine the midpoint of the range. Then they dipped down 20 to 25% to set the minimum salary and ratcheted up 20 to 25% to set the maximum.
The midpoints are meant to serve as targets. Though they do not correlate precisely with the 80th percentile salary that a given job would command in the market (local, regional, or national). Rather, they represent the salary that an accomplished employee should expect to make at mid career.
When the SRC and Wage & Salary reviewed the spectrum of staff salaries, it discovered that 808 employees were at or below the midpoint of their salary ranges; 366 were between the midpoint and the maximum; and 118 were at the maximum. (Note that these 1292 employees also include part-time workers). In order to move more employees in the lower half of the salary range toward the midpoint, the committee realized that it would need to find a way of redistributing the funds going to the top of range. For instance, while we identify maximum salaries in our ranges, we do not enforce those maximums. Because annual raises are structured as percentage increases on individual salaries, staff at the top of the ranges receive a significant portion of the dollars available in the pool for raises.
To address this situation, the SRC and Wage & Salary proposed the following changes, which President Liebowitz has approved.
- Annual increases will be calculated on the midpoint salary, meaning that all staff members in the same band/level will receive the same raise in terms of dollars. This shift will enable staff to make greater progress toward the target the College has established for staff (that is, salaries in the top 20%) of the market. This change will also slow the growth of salaries for staff between the midpoint and the maximum.
- Maximum salaries will be capped. Employees at the top of the salary range will be eligible for annual increases; however, these increases will be distributed as single sum payments (at the beginning of the fiscal year) and will not be incorporated in the base salary. It is important to note that single sum payments will count toward the College’s retirement plan. Two caveats are worth stressing here. One is that maximum salaries are at or near the 100% of the market for a given position. The other is that HR conducts regular reviews of salary ranges, and when the market for a particular job evolves upward, HR will adjust the ranges (the minimum, midpoint, and maximum) accordingly.
With regard to merit pay, committee also recommended that salary increases be given in three levels:
- A percentage increase will be given to staff who “consistently meet expectations” (we expect that 75% of the staff would fall into this category).
- A higher percentage increase will be given to staff who “significantly exceed expectations” (approximately 25% of the staff).
- A bonus will be given to 5% of the staff for exemplary work. These employees would also receive the higher percentage increase for significantly exceeding expectations. Bonuses will be awarded through a nomination process that the Vice Presidents will oversee. Bonuses will not be incorporated in base salaries.
- All percentage increases will be calculated on the midpoint.
The percentage breakdowns that will guide our annual increase program–75% who consistently meet expectations, and 25% who significantly exceed expectations–are not arbitrary. Rather, they are based on the data available from years of performance evaluations.
In following up on President Liebowitz’s charge, the SRC and Wage & Salary committee worked to develop a plan that balances several institutional priorities and seems fair. We also understand that the success of this plan will depend on an effective evaluation system and salary ranges that are accurately tied to the market. To make sure we get both of these items right, we have decided to roll this compensation plan out in two phases. You can read about the implementation process in my next post.
Again, if you have questions or just want to weigh in, you may use the comments section. Or, if you prefer, you may email questions to me at firstname.lastname@example.org.