Benchmark Staff Compensation Study

About 1,200 U of L classified and professional/administrative staff will receive some pay increase as a result of the recently completed PricewaterhouseCoopers LLP compensation study.

Classified and professional/administrative employees should receive a letter from human resources in the next few days that tells them if they are affected and the amount of any adjustment they will receive. Some adjustments will be made immediately. Because of budgetary constraints, some will be phased in over several years.

The study, conducted between April and February, included development of a compensation philosophy, restructuring of pay grades to be more in line with market and comparison of jobs at U of L to those with the same duties and responsibilities in the market.

It found that 453 of U of L's nearly 2,700 staff members are paid below minimum level for their job's new pay grade. For illustration purposes only, if a new pay grade has a minimum annual salary of $20,000, a regular full-time person in that pay grade making less than $20,000 is making below minimum.

The university plans to bring all 453 staff members being paid below minimum up to minimum by the end of March, said Don Bowling, interim associate vice president for human resources.

PwC also conducted a predicted salary analysis that showed where employees' salaries should be within their new pay grades for the number of years they have been in their current jobs. The analysis, according to the study, assumed that it would take satisfactory performers 10 years to reach the midpoint of their new salary grade and 22 years to reach the maximum point.

The study found that 1,077 U of L employees need adjustments to their salaries to bring them up to PwC's predicted amounts. These 1,077 employees will receive adjustments by the end of March, as well.

Their salaries will be increased 45 percent of the amount needed to reach the predicted rate. For instance, Bowling said, if someone is being paid $1,000 below predicted rate, the employee will receive a $450 adjustment.

It is possible, Bowling added, that some employees are being paid below minimum and below predicted rate. In that case, they will receive both adjustments.

The total cost of implementing this first phase of salary adjustment will be about $2.2 million, Bowling said. This includes fringe benefits.

In preparing the 2001-2002 fiscal year budget, about $1.4 million in general fund money was set aside for salary and benefit adjustments, he said. The additional money needed to make the first adjustments will come from the staff reclassification pool. Employees' new pay rates will show up on the March 29 paychecks.

Adjustments are retroactive to July 1 and apply only to current regular staff members.

Employees who are due adjustments and who were in regular pay status as of July 1 will receive a separate check for back pay for July through February.

Staff members whose salary is below minimum and who began regular employment after July 1 will be eligible for adjustments to bring them up to the minimum rate effective with their date of employment, Bowling said.

Future adjustments will be phased in over time as the budget allows, just as those for faculty are being phased in, he said. U of L faculty underwent a compensation study in 2000.

"I think the perception is U of L employees are underpaid," said Denise McKnight, chair of the Commission on the Status of Women, a staff senator and an administrative assistant in the department of accountancy.

"Look at the numbers," McKnight said of the PwC findings. "If 43 percent is underpaid, 57 percent is at market or above. That's good."

"We've been advocating for as many years as I can remember to move salaries to comparable markets," said Melissa Shuter, chair of the Staff Senate. "When the university funded the study, it made it possible to align staff salaries with the market salaries in a fair and equitable way.

"I hope that staff members who find from the study that they have been receiving market salaries are happy to know that they have been adequately compensated," Shuter said.

"PricewaterhouseCoopers is a credible company," McKnight said. "We're getting what we asked for [with this study]."

History and process
U of L selected PricewaterhouseCoopers LLP to conduct the compensation study after issuing an RFP.

The global consulting firm began work on the study in April when human resources consultants from the company convened eight focus groups to ask employees how they felt about working at U of L. PwC wanted to know why people chose to work at U of L and what their impressions were of the compensation system.

PwC also asked that every employee, or at the least that one person in every distinct job, complete a position information questionnaire. Unit heads reviewed the PIQs from their divisions and added any information needed for clarification. The study compared jobs at U of L with jobs in the market and had nothing to do with current employees or their performance. According to the report, PwC received and analyzed about 1,600 PIQs.

A staff advisory committee made up of U of L employees worked on each step of the process with PwC representatives. Among other things, the advisory committee helped ensure the accuracy of the data, set up the pay structure and determined the 181 benchmark positions at U of L that would be compared to jobs in the market that have the same duties and responsibilities.

This figure represents about 25 percent of the total number of staff positions at the university. According to PwC, the industry standard in studies of this nature is to compare 25 percent to 30 percent of positions within an organization.

The benchmark positions were chosen because of several factors:

• they are common to several different employers,
• they represent the entire range of jobs at U of L,
• they are generally accepted in the labor market for the purpose of setting pay levels, and
• they have multiple incumbents, are difficult to recruit for and to retain someone for once hired, and/or are considered to be especially market-sensitive.

PwC compared the data it collected for the benchmark positions at U of L with 39 published surveys of salaries for the categories of finance and accounting, human resources, information technology, office personnel, professional and scientific personnel, technicians and skilled trades, sales and marketing, supervisory management (middle, top and not-for-profit), hospital and healthcare and legal. (Specific survey titles are contained within the report, which is online at www.louisville.edu/benchmark.)

Generally, the study noted, classified staff positions were compared with those in the Louisville area. Professional/administrative positions were compared with those in the regional market.

Findings
The comparison showed that U of L's staff base salaries are on average 11.7 percent below market rate and that salary structures lag behind those in the market by about 14.5 percent.

Of the 453 staff paid below pay grade minimum, 201 are professional/administrative staff and 252 are classified staff. Of the 1,077 staff being paid below predicted rate, 512 are professional/administrative and 565 are classified.

The salary comparison was only a portion of the study, however.

Study Components
PwC also constructed an internal job evaluation hierarchy that ranks positions (not employees) by their value to the organization and provides a means to set pay rates.

In addition, PwC developed a compensation philosophy for the university that starts by saying: "The University of Louisville strives to offer a competitive and internally equitable total compensation package that consists of base pay, appropriate pay adjustments, market/merit adjustments and benefits. The primary objective is to maintain a compensation system which best enables the university to recruit and retain a high quality employee base."

Within the next few weeks, department and unit heads will receive a "salary administration manual" that explains the philosophy and a person's role as a supervisor and manager, position information questionnaires, the job evaluation process and the salary structure. The manual is intended to help human resources and managers administer salaries consistently.

Among PwC's 15 recommendations is a new pay structure that reduces the number of pay grades from 29 to nine (this restructure did not reclassify jobs).

"The new pay structure and guidelines will provide greater flexibility for unit heads to recommend pay adjustments within ranges," he said. "The structure also will provide more flexibility in setting hiring rates and in making salary decisions, and moving from one pay grade to another will be more of a significant change."

PwC also conducted an internal pay equity assessment based on the new pay structure to determine if there is any pay inequity in terms of gender or race. PwC further recommended that the university continue to monitor internal pay equity and that it conduct regular market comparisons to make sure it is still on track.

Many of PwC's recommendations are in the process of being implemented, Bowling said. Others will take some discussion to determine how to proceed, such as whether the university should adopt a merit matrix.

The goal of the study, he said, was to identify how U of L's overall paid salaries and salary structure compare with the market. Part of the process was development of a compensation philosophy that describes where U of L wants staff salaries to be in the market.

"Once the philosophy was established and we determined where our salaries were compared to market, then we moved to bring the salaries and salary structure to market level," he continued. "That's what we've done. Because of budgetary constraints, that's all not going to be accomplished in 2001-2002. But it's given us that clear vision as to what our salary structure will need to be for the future."

"While it [getting a final product] has taken longer than anyone would like, the time was well taken to ensure the data was clean and correct," Shuter said. "The Staff Advisory Committee to the benchmark staff compensation study worked tirelessly to ensure a fair and equitable product for the University of Louisville staff."

"Our challenge now is to complete the catch-up funding over the next couple of years and then to maintain a competitive salary structure in the years ahead," said Larry Owsley, vice president for finance and administration.

Representatives from PwC will be on Belknap Campus and at the Health Sciences Center all day March 12 to present the study and answer employee questions. They will conduct sessions on each campus at 9 a.m., 10:30 a.m. 1:30 p.m. and 3 p.m. Sessions on Belknap Campus will be in Middleton Theater in Strickler Hall. Sessions at the Health Sciences Center will be at the Kornhauser Library Commons Auditorium, 500 S. Preston St.