Staff Compensation Program – Phase 2 Internal Equity Adjustments October 2005

Staff Compensation Program – Phase 2

Internal Equity Adjustments

October 2005

Today’s Agenda

Background Information

Methodology

Process

Implementation

Staff Employment Value Strategy

Salary levels that are competitive with Lehigh’s competition in the marketplace

Cash based rewards for performance Benefits that are equitable and competitive Career opportunities for employees Professional development that is aligned with

department goals and University’s strategic plan Work that is interesting and engaging Affiliation with a nationally recognized university

20072006

Implement Market Referenced Job Evaluation Program (1/1/05)

Develop process to address internal equity concerns

Develop Job Family Accountability and Skill Guides

Establish Job Family Career Development Resource Guides

January Equity Adjustments

Performance Management

Complete alignment of training and staff development with SEVS

Complete comprehensive benefits allocation review

20052004

January Equity Adjustments

Complete Job Family Accountability and Skill Guides

Complete Job Family Career Development Resource Guides

Begin comprehensive benefits allocation review

Begin alignment of training and staff development with SEVS

Our Timeline

Develop Staff Compensation Program

Staff Compensation Program

Phase 1 – External Equity

Assign positions to salary grades that mirror the pay rates found in the job families and labor markets in which Lehigh competes

Phase 2 – Internal Equity

Determine appropriate position in range for individual staff members

Market Referenced Program

The market for each job family determines the salary grade, and knowledge, skills, experience, and performance determine position in range.

Job Role, Responsibilities

and Skill Requirements

Job Role, Responsibilities

and Skill Requirements

Salary GradeSalary Grade

Knowledge, Skills, Experience and Performance

Knowledge, Skills, Experience and Performance

RecommendedBase Salary

RecommendedBase SalaryPosition in RangePosition in Range+ =

Determining Position in Range

What factors contribute to a recommendation of position in range?

Knowledge, Skills, Experience

Knowledge, Skills, Experience

Overall MeasureOverall Measure

PerformancePerformance

Position in RangePosition in RangeIndividual MeasureIndividual Measure+ =

Possible Approaches

Set targets based on years of service – or years in position

Set targets based on performance appraisal ratings for the current year – or the last five years

Set targets based on individual competencies

Etc.

Back to the Bank --Compare 2 Customer Service Managers (CSM) –

Who should earn more?

Jane Sue

Hire Date January 2000 September 1990

Position History CSM since January 2000 CSM since April 2004 + Teller from January 1990 until March 2004

2004 Performance Appraisal

Rated as “Outstanding” by an easy rater

Rated as “Meets Expectations” by tough rater (new supervisor)

5 year performance history

2004 Outstanding

2003 Outstanding

2002 Above Average

2001 Above Average

2000 Meets Expectations

2004 Meets Expectations

2003 Above Average

2002 Above Average

2001 Outstanding

2000 Outstanding

Based on Hire Date --

Who should earn more?

Jane Sue

Hire Date January 2000 September 1990

Based on Position History

Who should earn more?

Jane Sue

Position History CSM since January 2000 CSM since April 2004 + Teller from January 1990 until March 2004

Based on the 2004 Appraisal

Who should earn more?

Jane Sue

2004 Performance Appraisal

Rated as “Outstanding” by an easy rater

Rated as “Meets Expectations” by tough rater (new supervisor)

Based on 5 years of Performance --

Who should earn more?

Jane Sue

5 year performance history

2004 Outstanding

2003 Outstanding

2002 Above Average

2001 Above Average

2000 Meets Expectations

2004 Meets Expectations

2003 Above Average

2002 Above Average

2001 Outstanding

2000 Outstanding

?

Who should earn more?

Jane Sue

Hire Date January 2000 September 1990

Position History CSM since January 2000 CSM since April 2004 + Teller from January 1990 until March 2004

2004 Performance Appraisal

Rated as “Outstanding” by an easy rater

Rated as “Meets Expectations” by tough rater (new supervisor)

5 year performance history

2004 Outstanding

2003 Outstanding

2002 Above Average

2001 Above Average

2000 Meets Expectations

2004 Meets Expectations

2003 Above Average

2002 Above Average

2001 Outstanding

2000 Outstanding?

And, what about?

Individual competencies

Educational background

Total work experience before the bank

Etc.

What criteria are valid?

Lehigh’s Criteria

Time in Position and Classification

Performance history as supported by merit increases rather than appraisal rating

How to set the targets?

Fixed percentages or dollar amounts for each year in the position and classification

Ranges of salary targets for each year in the position and classification

Fixed percentages or dollar amounts for relative merit adjustments

And what are those amounts?

How should we determine the percentages or dollar amounts?

What should they be based on?

Building a Model

The equity model was developed in consultation with University leadership over the spring and summer. We needed answers to these two questions:

What do we want to accomplish with the equity adjustments?

Where will we find the appropriate salary values to use in building the model?

Our Goal –

To define an appropriate salary for each staff member based on time in role and individual performance

Our salary change measures:

Lehigh’s actual staff salary budget history since 1989.

An Example – Back to the Bank

Jane Sue

Hire Date January 2000 September 1990

Position History CSM since January 2000 CSM since April 2004 + Teller from January 1990 until March 2004

2004 Performance Appraisal

Rated as “Outstanding” by an easy rater

Rated as “Meets Expectations” by tough rater (new supervisor)

5 year performance history

2004 Outstanding

2003 Outstanding

2002 Above Average

2001 Above Average

2000 Meets Expectations

2004 Meets Expectations

2003 Above Average

2002 Above Average

2001 Outstanding

2000 Outstanding

New Salary Program at the Bank

Effective January 1, 2005: CSM positions assigned to Grade 3A

Salary range for Grade 3A: $30,000 to $48,000

Jane and Sue have salaries increased to the range minimum of $30,000

Setting salary targets for CSMs

The bank will use their own salary budget history over the last 5 years to determine appropriate salary targets for the Customer Service Managers.

The Bank’s Salary Budget History

Year

Range Movement

Salary Adj. Budget

2005 1.5% 3.5%

2004 2.0% 3.5%

2003 2.0% 4.0%

2002 1.5% 3.0%

2001 1.5% 3.5%

The Bank’s Salary Growth

Year

Range Movement

Salary Adj. Budget

Salary Growth within Range

2005 1.5% 3.5% 2.0%

2004 2.0% 3.5% 1.5%

2003 2.0% 4.0% 2.0%

2002 1.5% 3.0% 1.5%

2001 1.5% 3.5% 2.0%

Moving through a range

Minimum Maximum

Minimum Maximum

Minimum Maximum

Minimum Maximum

2002

2003

2004

2005

Average salary of all Grade 3A employees hired in 2002

At Minimum

3.53% over minimum

2% over minimum

5.6% over minimum

The 2002 Hiring Class

Target for 2002 Hiring Class

Developing Salary Targets for All

Year in Position

Budget Year

Total Growth Over Time

Salary Target

2004 2005 2.0% $30,600

2003 2004 3.5% $31,050

2002 2003 5.6% $31,680

2001 2002 7.2% $32,160

2000 2001 9.3% $32,790

Assume Salary Grade Minimum of $30,000

Targets for Sue and Jane

Year in Position

Budget Year

Total Growth Over Time

Salary Target

2004 2005 2.0% $30,600

2003 2004 3.5% $31,050

2002 2003 5.6% $31,680

2001 2002 7.2% $32,160

2000 2001 9.3% $32,790

Assume Salary Grade Minimum of $30,000

Target for Jane

Target for Sue

What a Target Represents

The salary target represents the average salary that would be paid to all individuals in the salary grade who were hired in the same year.

It does not represent the salary that each individual employee should earn.

Determining Salaries

Jane and Sue both paid $30,000 at 1/1/05

Step 1 – Targets from HR Target for Sue = $30,600 (+/-) for performance Target for Jane = $32,790 (+/-) for

performance

Step 2 – Salary Determined by Branch Manager Salary for Sue = $30,300 Salary for Jane = $33,500

Setting Salary Targets at Lehigh

Applying the Bank Example

Our Goal –

To define an appropriate salary for each staff member based on time in role and individual performance

Our salary change measures:

Lehigh’s actual staff salary budget history since 1989.

Setting the Targets

Targets for individual staff member salaries are determined based on:

Length of time in position and classification

Actual potential for salary growth since assuming that position and classification

Setting the Salaries

Department Heads and Stem Leadership will set actual salaries. They will consider:

Targets provided by HR

Employee performance history as evidenced by actual merit increases received

The Process at Lehigh

Confirmation of position and classification dates by supervisors and staff

Development of targets by HR

Determination of salaries by area leadership and department heads

Communication of salary changes to staff