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Important Update on Salary Increase Program

Categories: Midd Blogosphere

After careful review and additional research we have decided not to cap maximum salaries.

The SRC/Wage and Salary Committee’s recommendation that we enforce maximum salaries was based on the assumption that caps would free up resources that could be allocated to staff members further down in their salary ranges so they can reach the midpoint of their salary band more quickly. Further review now indicates that the number of staff members who will be at the maximum will be fewer than expected, and therefore the savings gained by enforcing the maximum salary will be relatively small.

However, Human Resources (HR) will still be conducting a market analysis over the next year to ensure that staff positions are placed in the correct career band/level and that our salary ranges are accurately tied to the market. This is very important because beginning in July 2012, we will calculate annual increases on the midpoint—now to be called the “market target”—of the salary range. As we’ve noted in written communications and in open meetings, tying raises to the midpoint rather than individual salaries will enable us to direct more dollars to staff members who are lower in the salary structure. The rest of this memo provides an overview of how this project will unfold over the coming months.

Our first step will be to ensure that we have up-to-date position descriptions for all of our jobs. We know that jobs have changed in the recent past and have been working with managers and supervisors to update job descriptions as the changes occur. This is also a natural part of the performance evaluation process, so some of you are having these conversations right now. In addition, HR will coordinate with managers to ensure that we are working with the most up-to-date job information. We encourage each staff member to take an active role in this process. If you feel that your job description does not reflect your current position, please speak with your supervisor. (You can find the most recent job description that HR has on file for your position online.)

We have set a deadline for updated job descriptions to be received in HR by mid-June, so that we can begin to review positions and make sure they are placed in the correct career bands and levels. Once we have completed the placement process, we will share all of our data with our compensation consultants, Mercer. The professionals at Mercer will research the market data, test and refine the salary structure itself, and confirm range minimums, market targets, and maximums. We expect to have the market analysis back from Mercer in the early part of 2012 and intend to communicate with staff about results of the study by March 2012.

Our primary objective is to confirm that jobs are in the correct career band and level and ensure that our salary structure accurately reflects the market. And we want to conduct this process in a transparent manner. More details about the process will be forthcoming, but in the meantime feel free to contact Human Resources if you would like additional information.

The Difference Made by Capping the Max: Guest Post by Patrick Norton, Vice President for Finance and Treasurer

Categories: Midd Blogosphere

As VP for Administration Tim Spears has mentioned on a few occasions, much work needs to be done between now and July 1, 2012 to ensure: (1) that all staff are in their correct band and level and (2) that all the midpoints (or targets) are calculated correctly. We need time to get this work done, and patience is required.

Some staff colleagues have asked whether enforcing maximum salaries will actually make a difference in the additional amount available to the pool for increases for all staff. I have reviewed the data, and the answer is yes.

If, for the sake of this planning exercise, we assume that the number of staff members who are currently at the max (118) is reduced by 50% as a result of re-pricing jobs and expanding some of the salary ranges, we would still be able to set aside a significant amount of money by enforcing maximum salaries. Below I have itemized the additional resources as a percentage of the overall increase pool, and I have extended this list over the next five years–beginning in 2013, the first fiscal year of the implementation of the new increase process.

  • 2013: 0.00% (obviously, no additional money will be available as the amount of the single sum payment to those over the maximum will equal the money saved as a result of enforcing salary maximums)
  • 2014: 0.23%, or $115,000
  • 2015: 0.45%, or $230,000
  • 2016: 0.67%, or $350,000
  • 2017: 0.88%, or $475,000

Now this is simply a model–the actual proof will be seen after we complete our review of the band and levels, as well as the midpoints (or targets)–but I expect the results to be pretty similar to the percentages and amounts listed above. Significantly, these additional resources would be used to augment the pool for annual salary increases.

More Thoughts About Maxes, Midpoints, Bands, and Levels

Categories: Midd Blogosphere

A number of people commenting on the salary increase plan have expressed concerns or asked questions about the plan to cap maximum salaries and calculate percentage increases on the midpoint of the salary range. I appreciate all this feedback, and want to emphasize the importance of the review that Human Resources will be conducting during the next year to make sure 1) that our salary ranges, bands/levels are accurately tied to the market; 2) that staff positions are placed in the correct band/level. We have undergone a lot of change over two years, and some staff members have seen their jobs change quite a bit as the overall size of the staff has been reduced.

We did not talk in much detail in the open meetings about what this review will look like, but we will certainly be looking at the possibility of expanding the salary ranges, which would shift the minimum, midpoint, and maximum salaries upward. We will pay special attention to the maximum salaries at the bottom end of our wage structure.  It is unlikely that staff members in the lower salary ranges will see their wages capped.

Finally, I want to stress that these changes will not go into effect until July 1, 2012, so we have a full year to make sure we get the details right.

Revising the Staff Salary Increase Program: Implementation

Categories: Midd Blogosphere

The College will implement the staff salary increase program in two phases over the next 18 months.

First Phase

This year, all employees who consistently meet expectations or significantly exceed expectations will receive the bi-level percentage increase. However, the percentage increase will be calculated on individual salaries instead of the midpoint. (We will implement increases calculated on the midpoint in the second phase, described below).   During the first phase, we will also begin giving bonuses to employees who do exemplary work.

Second Phase

During 2011-2012, Human Resources will do extensive market research to review bands, levels, and salary midpoints. At the end of this review, a third party will verify the results to ensure we are on target.

Successful completion of the review will allow us to move in to the second phase. By July 2012, the bi-level percentage increases will be calculated on the midpoint of the salary range. We will also cap salaries at the maximum. 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. One-time bonuses for exemplary work will continue.

Read more about the staff salary increase program’s background and plan.

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 vpadmin@middlebury.edu.

Revising the Staff Salary Increase Program: The Plan

Categories: Midd Blogosphere

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 vpadmin@middlebury.edu.

Revising the Staff Salary Increase Program: Background

Categories: Midd Blogosphere

This is the first of three posts aimed at explaining the new salary increase program that the College will put in place during the next two years. Although we are holding open meetings this week to explain the new procedures, I thought it would be useful to put the relevant information online, so people can review the plan and ask questions (you can use the comments section to do that).

There is a lot of information to share about this plan, and the logistics involved are complicated. Therefore, I have divided this overview into three parts. My first post addresses the history behind the plan; the second will describe the plan; and the third will lay out the timeline for implementing the plan.

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 vpadmin@middlebury.edu.

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In the spring of 2010 President Liebowitz asked the Staffing Resources Committee to review the College’s staff compensation program to ensure that we optimize the funds allocated to this very significant budget item. (A similar project is focused on faculty wages). The SRC began the project by reviewing the 2008 findings of the last Wage and Salary Committee and met with Human Resources to understand how the compensation program has been working since its inception. The committee then recommended to the President that the W&S Committee be re-commissioned to advise the SRC on the new project.

The SRC concluded that while the staff compensation program is working well, there are several areas that could be improved. These areas, which the W&S Committee flagged for future consideration in its 2008 review, include 1) the challenge of rewarding strong performance through compensation (merit pay); 2) the fact that a considerable number of staff salaries are below the midpoints of their salary ranges, while others exceed the maximum pay level established for their grades; and 3) the lack of career ladders for staff members interested in professional advancement.

Given the President’s charge, the SRC chose to focus on items 1 and 2. Although the committee agreed that the career ladder issue warrants further consideration, it felt that the challenges surrounding the College’s annual salary increase process—namely, merit pay and salary distribution (salaries below the midpoint and at the maximum)—demand immediate attention. After consulting with the reconstituted W&S Committee, the SRC developed several possible strategies for addressing these challenges. Following considerable debate and discussion, the two groups settled on the approach outlined below. It should be noted that this approach is not meant to overhaul the current staff compensation system. Rather, it is an attempt to fine-tune one aspect of the program: the annual increase process.

For years, the College has been committed to a compensation structure that moves employees toward a salary that compares favorably with market rates–namely, the top 20% of the market. This goal dates back to the establishment of the old benchmark system, which was aimed at bringing staff to the 80th percentile of the given market for their job. At the same time, the College has instituted an evaluation process that is designed to reward superior performance with enhanced compensation. In surveys taken in 2007-2008, staff members expressed a strong preference for merit-based pay.

Like most salary programs, ours is based on a careful delineation of job responsibilities and market rates. Several years ago, the College instituted a system that placed each staff position in a particular band and level, establishing a mid-range and maximum salaries for all positions that are tied to comparable jobs in the market. Not surprisingly, given the years of experience represented on our staff, some colleagues earn salaries that exceed the maximum level established for their band and level. And because our method for determining annual salaries is tied to percentage increases, staff members at the top of their salary ranges draw a disproportionate number of dollars from the pool set aside each year for raises.

The SRC believes this arrangement is unsustainable and that in order to reward the good work of staff members who are further down in the general salary range, we need to rethink our approach to salary increases.

The situation we face is a sensitive one. While we want to recognize the superior performance of all employees, including those at the top of the salary range, we also need to support the compensation needs of staff members at the beginning and middle of their careers.  The solution we pursue will require a delicate balance of priorities and a clear understanding of the trade-offs involved.

Read more about the staff salary increase program.