MERCER Human Resource Consulting
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1 MERCER Human Resource Consulting Scott Cook ~ Marsh & McLennan Companies
2 and Key Objectives operate with performance ffective pay-forsupport the n philosophy 2
3 ov05) p Define measures and Esta n pro Create p Timeframe mance/reward linka 3
4 Phase 1: Compensation Program Refinement
5 , ion of Staff Positions,nnaires reviewed and classified into 180 jobs 1. Analyze Positions 2. Classify into Jobs and Title 3. Code Jobs ) ) ) ) ) ) ) ) ) ) ) 5
6 Staff Market Study Multiple surveys used to gather external pay data from general industry - 65 benchmark jobs market priced Higher education pay data compiled from CUPA* surveys - Mid-Level Professional Survey - Administrative Compensation Survey - Special cut of 35 peer institutions Faculty Market Study Higher education pay data compiled from CUPA Faculty Community College Survey - Three educational levels priced CJ CJ CJ Bachelors Masters Doctorate Special cut of 27 peer institutions * College and University Professional Association for Human Resources 6
7 alysis 'titive Assessment TCC's current salary practices, on average, are below median for staff - TCC is paying at 89 ~ of market median when averaged across the 65 benchmark jobs - The majority of benchmark jobs (43 out of 65) are being paid within +/ 15% of the aggregate 89% market position I 40% 55% 70% 85% 100% 115% % 160% Market Competitiveness 7
8 I '<illi!ipi"l!".(i I \1;111(' I' '1"".,1, '1.....!...!.1Pi!!\II!mHlHw..II'I.I... '.'. '~'.."!'!H'IIWlilj.1., i...,) " '. I al 1':.II.!.!.,III'~.I",~lh.:IIIII'i.l!t~llllIl.pe~tiveAssessment SIS 1II',II'~ m.,i'i.11 liiit;;q; '''H! iii 1"'ki,H1!!! tl;!. 11!11ll111ll1il1ll1ll11111iIIIIIIIIIIIIII! TCC's current salary practices, in aggregate, are at median for faculty - TCC is paying at 100 % of market median when assessed for faculty at the Bachelors, Masters, and Doctorate levels - However, market competitiveness does vary by educational degree with the Doctorate being the least competitive 80% 85% 90% 95% 100% Market Competitiveness 105% % 120% 8
9 The proposed pay structure for staff consists of an open range system encompassing 17 grades I 4 $ $ 9
10 , fl ~:.~:Bi~~djnHHHdiBnn[lHHHII!. '. H "'I';"'!!,!' D b ".,".. I'"./";'iil'iHiHlif!!iiIB\'!I'\t H11 '..'.'.. "....'.'.. ". '. '. ",.. '.. "."... 1'. ".., '... '...'.....'..".... ".,'. '. ".. '..'..','.,'..1.',... '.,.,.,.' \ ihi ' :,. fl'm' j!' ure esi n i. i'i~'i~'rin 'l!.lm!pl'i!' i ff St t 'i" ~., H, :a rue ure i'l,n'.!i.!.'.ii.'.i.','.'.'.i.. '..I..' '.' ','.!..!!.:.J;'!H!!li.. i.'.'.'.' ' , i ".,..'"1."",,. I IIIII III It 11'li~11.!! l;!id! I' II, j dl!l!il!illil.!lili!! IIllhl!IIHilili'lillhlIMillillllllllllllllll' LIP!". I Grade Minimum Midpoint Maximum 4 $14,694 $18,000 $21,306 5 $15,935 $19,620 $23,305 6 $17,324 $21,438 $25,553 7 $18,880 $23,482 $28,084 8 $20,626 $25,783 $30,940 9 $22,590 $28,379 $34, $24,801 $31,311 $37, $27,295 $34,630 $41, $30,112 $38,393 $46, $33,302 $42,668 $52, $36,918 $47,532 $58, $41,026 $53,077 $65, $45,701 $59,411 $73, $51,031 $66,659 $82, $57,119 $74,969 $92, $64,087 $84,515 $104, $72,077 $95,502 $118,927 10
11 re Design Staff Jobs to Grades Each benchmark job was assigned to the grade midpoint that best captures its market value Non-benchmark jobs were slotted based on internal equity comparisons and/or where additional market data could be collected $46,674 Grade 12 Market value used to establish overall "job value" Buyer II $40,432 Accountant I $37,215 Maintenance Painter.... $33,920 - ~ Grade 11 $38,393 Computer Operator II. $34,014- ~ Jobs assigned to grade with rang~. midpoint closest to market va'~~ Academic Advisor $31, Accounting Clerk II..... $30, $37,821 Grade 10 $34,630 $30,112 Non-benchmarks slotted based on internal equity and comparison to benchmarks Computer Operator I Grade 10 Accounting Clerk III. Grade 11 Maintenance Carpenter. Grade 12 $31,311 $27,295 $24,801 11
12 The proposed pay structure for faculty consists of an open range system encompassing 7 levels I Doctorate Masters+48 Masters+36 Masters+24 I I Masters+12 I Masters Bachelors $ $ 12
13 re Design Ity Structure Bachelors $37,059 $47,250 $57,441 Masters $38,416 $49,140 $59,864 Masters + 12* $39,823 $51,106 $62,389 Masters + 24* $41,281 $53,150 $65,018 Masters + 36* $42,794 $55,276 $67,757 Masters + 48* $44,363 $57,487 $70,611 Doctorate $45,989 $59,786 $73,583 * Assumes graduate level course work in teaching field The fact that certain teaching disciplines (e.g. Nursing) are hard to fill because of market conditions may require that TCC consider establishing higher salary ranges or allowing greater flexibility in setting salaries Because these ranges are more competitive than the current ranges, it is recommended no additional adjustment be added at the present time for high demand disciplines However, the situation should be periodically monitored for appropriateness 13
14 ure Design A separate pay structure has been created for the Executives to reflect market and internal equity IE-l $122,182 $168,000 $213,818 1 IE-2 $90,741 $122,500 $154,259 IE-3 $77,004 $102,800 $128,596 1 E-4 $72,453 $96,000 $119,548 1 $ $ 14
15 Implementation Model Purpose - To equitably set individual salaries within the assigned pay ranges - To address existing salary compression Methodology - First priority is to ensure that all employees are paid no less than the range.. minimum - Second priority is to give in-range credit to employees for experience in the job Rationale - Equity pay adjustments are normally not proposed for those employees whose salaries are at or above the new range midpoints o o focus is usually on salaries that are below a competitive market level salaries above the range midpoints are already competitive 15
16 Implementation Model The model grants in-range penetration to: - Staff for their years of experience in their current position - Faculty for their years of teaching experience with TCC For each full year of experience, 1/20th of the range (or 5 % ) is credited Experience is capped at the midpoint (i.e. up to 10 years of experience would be recognized) Range Penetration Illustration 1 yr 2 yrs 3 yrs 4 yrs 5 yrs 6yrs 7 yrs 8 yrs 9 yrs 10 yrs I I I I I I I I I I Minimum $36,918 $42,225 I I I I I I I I I I Midpoint $47,532 I I Maximum $58,146 16
17 ~I, I Implementation Model I ImUI!!, " $ ~Jl!1 pact--. ml Ion IIII1II!i l!lll,...!!,l,!dilhih!!ii'l' II! ~( :t J.~.! ' $965,788 total cost $220,914 raise to minimum only $744,874 in-range adjustments 4.6% of staff payroll 480/0 of employees receive an increase average increase for those receiving an increase 11 % $11,721 total cost $0 raise to minimum only $11,721 in-range adjustments 10J'o of executive payroll 10 % of employees receive an increase average increase for those receiving an increase 14 J'o $420,773 total cost $10,527 raise to minimum only $410,246 in-range adjustments 30/0 of faculty payroll 39%) of employees receive an increase average increase for those receiving an increase 8.70/0 3.5% added to all salaries to reflect anticipated pay increases for July 1 before applying the model In-range credit given for each full year of experience Pay structures set at market median (50th percentile) 17
18 In order to implement within budget, the cost impact can be reduced by j - Setting the pay structures below market median, e.g., 95% - Widening the ranges - Reducing the in-range increase formula - Capping the amount of in-range increase that an individual may obtain, e.g. 10 % - Implementing later in the year or phasing in the implementation over a period of time * * Recommended approach 18
19 Competitive Analysis If 3.5% pay adjustments are granted to employees and if the cost model is applied as described, the competitiveness of TCC's actual pay practices will notably improve - Staff competitiveness improves from 89% to 98% of market median - Faculty competitiveness improves from 100 % to 106% 80% 85% 90% 95% 100% Market Competitiveness 105% % 120% 19
20 Phase 2: Merit System Development
21 The majority of administrative and classified staff favor the concepts and principles associated with a merit based pay system Faculty predisposition toward merit pay is mixed with those having longer tenure generally opposed to most of the concepts supporting merit pay Not surprisingly, those employees with shorter service «8 years) are inclined to support merit pay Respondents have mixed feelings about whether people can be objectively and fairly evaluated by their supervisors 21
22 ! I,~tion to Variable/Merit Pay IIlighlights!AUU mmlli Pay increases should be based on longevity. - Faculty: 330/0 o 16+ years: 430/0 o 8-15 years: 340/0 o 0-7 years: 240/0 Administrative Staff: 150/0 o 16+ years: 190/0 o 8-15 years: 160/0 o 0-7 years: 130/0 Classified Staff: 260/0 o 16+ years: 330/0 o 8-15 years: 380/0 o 0-7 years: 16% Pay increases should be based on performance. - Faculty: 510/0 o 16+ years: 350/0 o 8-15 years: 490/0 o 0-7 years: 65% Administrative Staff: 69% o 16+ years: 560/0 o 8-15 years: 630/0 o 0-7 years: 790/0 Classified Staff: 560/0 o 16+ years:. 460/0 o 8-15 years: 490/0 o 0-7 years: 650/0 22
23 tion to Variable/Merit Pay ghlights Employees should be paid more based on long service with TCC. - Faculty: 430/0 CJ 16+ years: 500/0 CJ 8-15 years: 490/0 CJ 0-7 years: 31 % Administrative Staff: 180/0 CJ 16+ years: 320/0 CJ 8-15 years: 21 0/0 CJ 0-7 years: 100/0 Classified Staff: 310/0 CJ 16+ years: 390/0 CJ 8-15 years: 410/0 CJ 0-7 years: 230/0 Employees should be paid more based on performance. - Faculty: 39% CJ 16+ years: 290/0 CJ 8-15 years: 220/0 CJ 0-7 years: 58% Administrative Staff: 65% CJ 16+ years: 42% CJ 8-15 years: 630/0 CJ 0-7 years: 780/0 Classified Staff: 520/0 CJ 16+ years: 380/0 CJ 8-15 years: 420/0 CJ 0-7 years: 630/0 23
24 ing Merit Pay rd The vast majority of employees endorse the concept of merit pay but there is concern among many that it will not be effectively managed From these findings, it can be inferred that the implementation of a merit based system should be carefully planned out and implemented in an orderly fashion It is for this reason that Phase 1 of the study was conducted in advance of Phase 2 Having the compensation infrastructure in place is critical to laying the foundation for the development of an effective merit system 24
25 For merit pay systems to be effective, they should be carefully designed, employees educated, and managers appropriately trained The higher education environment is characterized as one of "shared governance" in which the constituencies provide input into the area being addressed - While senior management will set the strategy and objective, key college stakeholders will help to shape the design - This helps to increase buy-in and strengthen support - Installing this without involving others will hinder its effectiveness 25
26 Phase 2 The foremost supervisory responsibility An effective supervisory tool Only as effective as the management staff administering it A simple process that can be quickly installed 1000/0 objective although with proper training rater objectivity can be maximized A supervisory practice that can be abused Beneficial to both the employee and the or anization Viewed as an annual event Poorly trained managers Perceived as unfair with no credibility The need to maintain equity and avoid conflict Conflicting and/or inconsistent goals set among employees A forced ranking process is established 26
27 ~ing Merit Pay I p--example Merit could be introduced for faculty with a longevity component, if desired Minimum Midpoint /Market $38,416 $49,140 Maximum $59,864 Masters Range Y-ea-r--4-Y-e-ar--6-Ye-a-r--a-Y-e-a-r Step Step Step Step ' y '' r _/ Experience/Performance Zone Performance Zone 27
28 Compensation Program Refinement Project planning; employee meetings; staff questionnaire completion Job review and classification development Market benchmarking & competitive analysis Pay structure design & job evaluation Costing analysis & implementation plan development Communication & rollout (Sept / Oct 2006) Merit System Development Merit predisposition survey; survey summary System design; performance criteria / performance measures development; rating scale definition Process guidelines & procedures Supervisory training Communication & rollout (June / July 2007) 28
29 Next Steps Finalize grade assignments of staff jobs Reach agreement on pay philosophy and pay policy position Develop compensation program implementation plan Determine appropriate pay policy guidelines Move into Phase 2 (Merit System Development)
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