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Compensation Budget Challenges: Higher Education Edition

Compensation budgeting can be quite the challenge for higher education institutions: budgets are often tight and HR staffs are lean. Additionally, HR and comp pros in higher ed must hire staff in greater numbers and more varied positions compared to their peers in other industries.     

CUPA-HR 2018’s Staff in Higher Education report found that the overall median percent increase for higher ed staff salaries was just 1.9 percent over the past year. The same report found that among 193,530 staff, there were 152 distinct positions grouped into four areas: office/clerical, service/maintenance, technical/paraprofessional and skilled craft staff. When there are this many jobs, it can be tough to know where all the talent is coming from and how much to pay staff.

One of the top questions PayScale gets from our higher education customers is this: How do I attract top talent, pay fairly and competitively to retain existing staff, when my budget isn’t going up?

This question about strategic budget allocation is a tough one, and there isn’t a one-size-fits-all answer. What makes sense for you will depend on your particular employee population, how you make budget decisions, your pay increase policies, with whom you’re competing for talent and your overall compensation philosophy. But all in all, there are some steps any higher ed institution can take to make better use of their compensation budget to improve talent acquisition and retention. You’ll find them below:   

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1. Understand how your pay compares to the market

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First of all, find out how your pay practices stack up against the market. Completing a market study will tell you whether your ranges are competitive, and whether your current strategy is holding up.

While many organizations simply budget and reward the same amount each year for pay increases, this may not be the best move in your market. You may find that the market hasn’t moved, or that it’s shifted by more than 2 to 3 percent a year. For example, between July 2017 and July 2018, PayScale has seen pay for many jobs in the higher education sector grow faster than 3 percent. In fact, we saw that average pay for a department chair grow by 5.2 percent year over year; pay for a library assistant grew by 4.6 percent and pay for maintenance technicians grew by 4.9 percent.

Each year, PayScale surveys several thousand HR/Business professionals about their compensation practices; our latest Compensation Best Practices Report found that 51 percent of organizations in the education industry in 2017 had completed a market study of job prices within the past 12 months. Additionally, 37 percent of organizations in the education space referenced market data for individual jobs at least monthly.

2. Look for “red-circled” (overpaid) employees

One common issue we’ve observed in higher education is that some departments have employees who are paid above the top of the range while other staff in comparable roles are underpaid. This tends to happen more in higher ed where the average employee stays with an organization a bit longer than those in other industries, as tenure is one of the main drivers of salary growth.

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[Source: PayScale, May 2018]

PayScale looked at the average tenure of employees in various industries, and found that those in higher ed tend to stay longer versus other industries.

One of the things we see is that different departments often have different policies around pay increases. In certain departments that review salaries more often, highly-tenured employers who stay in the same position and receive consistent pay increases over the years may end up with pay that’s over the top of their range.  

To make the most of your budget, you’ll want to know who those “red-circled” employees are and decide what to do about their pay. For example, you might make a choice to freeze the base pay of this group of “above-range employees”, and instead, give them merit- or performance- based lump sum bonuses. This will make room in your budget to adjust the pay of those staff who are paid below-range or at the bottom of their range.

3. Look for duplicate jobs in different departments where staff pay is inconsistent

Do you have duplicate jobs in different departments where staff pay is not consistent? If pay decisions at your university are made at the departmental level rather than centrally, you might notice that you have similar positions in multiple departments (e.g. an admin assistant in your Business School and an admin assistant in your School of Education) with significantly different salaries.

If you see this situation, our recommendation is that you consolidate your job codes into common benchmark-able positions. By doing this, you would ensure that there is internal alignment for the jobs that perform the same core functions in multiple departments. In other words, the same jobs are valued equally.  

4. Re-evaluate Your Talent Market(s)

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Photo by Franki Chamaki on Unsplash

To make sure you’re paying all staff appropriately and competitively, it’s important that you use the right data sources to benchmark your positions. You’re likely already using CUPA surveys to determine ranges for many of your positions. CUPA data can be very useful for revealing how  other higher ed institutions are paying their staff.

However, you might find that for certain positions, especially more technical positions (e.g. IT Systems Specialist), your candidates are coming from outside of the higher education field. For example, IT administrators may be coming from for-profit retailers or tech companies. This means that you won’t find great salary data for these positions in the higher-ed specific surveys. For such roles, consider bringing outside data sources to your benchmarking process to help you attract the talent you need.

To choose the right data for benchmarking, you’ll want to get a good sense of where your talent is coming from (what types of organizations, org size, industries), and where talent is going. For example, one of our clients is a law school. After analyzing their workforce, they found a portion of their staff did come from other law schools. But for several other positions, employees were coming from private law firms. In order to attract the talent they need from law firms, they chose to benchmark their jobs to similar jobs from private law firms. This exercise gave the institution more accurate benchmarks on their jobs so that they could budget appropriately for all their positions.

5. Develop a Plan to Adjust Pay To Address Pay Inequity

Once you’ve determined your talent markets and the relevant data sources for benchmarking your jobs, you’ll get a sense of what pay is in your market. When you look at this information, you may find that certain employees’ pay is below what the market says their range should be or pay is low within the range.

In this scenario, you’ll need to come up with an approach to correct their pay — either adjusting pay right away (if you have budget) or over time. Either way, you’ll also want to develop a solid communication plan to make sure staff understand the situation, your intentions and your rationale for adjusting pay.

To recap, here’s what you can do to make the most of your salary budget:

    1. Make sure you know where your talent is coming from and where it’s going. Some staff will be coming from outside of the higher ed space where typical or median pay for comparable positions is higher than what you’ve allotted. To pay all of your staff competitively, you may need to create multiple talent markets and target a higher percentile of the market for more competitive jobs.
    2. Conduct a market study to see how far you’re deviating from the market. Completing this step will help you identify where you’re overpaying and underpaying. You may find that by halting future overpayment, you have more budget than you would have if you continued to give everyone the same percentage increase.
    3. Consolidate similar jobs into common benchmark-able positions. If you have different positions where the core function of the jobs are the same, group them into the same job family. This will help you ensure internal alignment and you’ll save time in future increase cycles.  
    4. Be clear about your reasons for giving raises. In many higher ed institutions, tenure is the primary factor driving pay increases. While there are advantages to making pay increase decisions based on tenure, this can easily lead to you to pay more than you need for certain positions. You may consider giving raises based on other factors, such as individual performance and results, attainment of certain skills, or when departmental goals have been met.  
    5. Make sure to monitor the pay of your staff during each increase cycle to ensure both external alignment and internal alignment.
    6. Communicate, communicate and communicate. While this isn’t strictly on the topic of salary budgets, getting pay communication right is critical to employee satisfaction. Compensation, done well, is about landing the message that your organization values its employees. If you want your employees to feel valued, you need to tell employees how you make pay decisions and why you pay the way you do.

How PayScale Can Help

PayScale has the salary data, software and compensation expertise to help higher education organizations develop a sound compensation strategy, salary structure and make the best pay decision for each position. We have a Compensation Professional Services Team that can work with you to develop a pay structure and pay ranges for individual positions. We can work closely with you to strike a balance between the market data and the uniqueness of your jobs. 

For examples of how higher ed institutions have used PayScale to create transparent, fair, market-based compensation plans, check out these case studies: Baylor University, Macalaster College, and Texas Woman’s University.

To learn more about how PayScale can help you make the most of your budget, schedule a demo today.


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